Document of The World Bank Report No: ICR00003818documents1.worldbank.org/.../pdf/ICR3818.pdfApproval: 06/04/2009 Mid-term Review: 07/02/2012 09/10/2012 Closing: 01/31/2015 03/31/2016

Document of

The World Bank

Report No: ICR00003818

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-45990)

ON A

CREDIT

IN THE AMOUNT OF SDR167.2 MILLION

(USD 250 MILLIONEQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR A

THIRD PAKISTAN POVERTY ALLEVIATION FUND (PPAF-III) PROJECT

June 20, 2017

Food and Agriculture Global Practice

Pakistan Country Management Unit

South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance

of their official duties. Its contents may not otherwise be disclosed without World Bank

authorization

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31, 2016)

Currency Unit = PKR

USD 1.00 = PKR104.75

XDR1.00 = USD1.408820

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy LSOs Local Support Organizations

CGAP Consultative Group to Assist the

Poor

MDTF Mid-Term Development Framework

CIG Common Interest Group M&E Monitoring and Evaluation

CLF Community Livelihood Fund MER Monitoring Evaluation and Research

CNIC Computerized National Identity

Card

MIS Management Information System

COs Community Organizations MIV Microfinance Investment Vehicle

CPI Community Physical Infrastructure MF-CIB Microfinance Credit Information Bureau

CRP Community Resource Person MFI Micro Finance Institution

DECRG Development Research Group NADRA National Database and Registration

Authority

DFID Department for International

Development

NyK Naukari Ya Karobar (Enterprise or

Employment) Centre

EIRR Economic Internal Rate of Return ODC Open Defecation Campaign

ESMF Environmental and Social

Management Framework

OSS Operational Self-Sustainability Ratio

F&A Finance and Accounts PDO Project Development Objective

GBV Gender Based Violence PMIC Pakistan Micro Investment Company

GDP Gross Domestic Product PMIFL Prime Minister’s Interest Free Loan

GIS Geographic Information System POs Partner Organizations

GoP Government of Pakistan PPAF Pakistan Poverty Alleviation Fund

GRM Grievance Redress Mechanism PSC Poverty Score Card

HR Human Resources QPR Quarterly Progress Report

IAD Internal Audit Department ROC Risk and Oversight Committee

ICRR Implementation Completion and

Results Report

SCAD Sindh Coastal Area Development

KfW Kreditanstalt für Wiederaufbau TTL Task Team Leader

KP Khyber Pakhtunkhwa UC Union Council

LEED Livelihoods Employment and

Enterprise Development

UCDP Union Council Development Plan

LSE Lahore School of Economics VOs Village Organizations

Senior Global Practice Director: Juergen Voegele

Practice Manager: Shobha Shetty

Project Team Leader: Imtiaz Alvi, Melissa Williams

ICR Team Leader: Pushina Kunda Ng’andwe

PAKISTAN

Third Pakistan Poverty Alleviation Fund Project

Table of Contents A. Basic Information ....................................................................................................... ii B. Key Dates ................................................................................................................... ii C. Ratings Summary ....................................................................................................... ii D. Sector and Theme Codes .......................................................................................... iii E. Bank Staff .................................................................................................................. iii

F. Results Framework Analysis ..................................................................................... iv G. Ratings of Project Performance in ISRs ................................................................. xiii

H. Restructuring (if any) .............................................................................................. xiv I. Disbursement Profile ............................................................................................... xiv 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5

3. Assessment of Outcomes .......................................................................................... 14 4. Assessment of Risk to Development Outcome ......................................................... 29

5. Assessment of Bank and Borrower Performance ..................................................... 31 6. Lessons Learned ....................................................................................................... 33 Annex 1. Project Costs and Financing .......................................................................... 37

Annex 2. Outputs by Component ................................................................................. 38

Annex 3. Economic and Financial Analysis ................................................................. 50 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 68 Annex 5. Beneficiary Survey Results ........................................................................... 70

Annex 6. Stakeholder Workshop Report and Results ................................................... 72 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 76

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 85 Annex 9 - List of Supporting Documents ..................................................................... 86 MAP .............................................................................................................................. 87

ii

A. Basic Information

Country: Pakistan Project Name:

Third Pakistan Poverty

Alleviation Fund

Project

Project ID: P105075 L/C/TF Number(s): IDA-45990

ICR Date: 03/31/2017 ICR Type: Intensive Learning ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF

PAKISTAN

Original Total

Commitment: XDR 167.20M Disbursed Amount: XDR 167.20M

Revised Amount: XDR 167.20M

Environmental Category: B

Implementing Agencies: Pakistan Poverty Alleviation Fund (PPAF)

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 11/13/2008 Effectiveness: 07/09/2009

Appraisal: 04/20/2009 Restructuring(s):

05/28/2014

03/13/2015

09/30/2015

Approval: 06/04/2009 Mid-term Review: 07/02/2012 09/10/2012

Closing: 01/31/2015 03/31/2016

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing

Agency/Agencies: Moderately Satisfactory

Overall Bank

Performance: Moderately Satisfactory

Overall Borrower

Performance: Moderately Satisfactory

iii

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating

Potential Problem

Project at any time

(Yes/No):

Yes Quality at Entry

(QEA): None

Problem Project at any

time (Yes/No): Yes

Quality of

Supervision (QSA): None

DO rating before

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Other Agriculture, Fishing and Forestry 10 10

Vocational training 10 10

Microfinance 36 36

Other social services 34 34

Other Industry, Trade and Services 10 10

Theme Code (as % of total Bank financing)

Income Support for Old Age, Disability & Survivorship 10 10

Micro, Small and Medium Enterprise support 30 30

Participation and civic engagement 19 19

Rural services and infrastructure 31 31

Social Safety Nets/Social Assistance & Social Care

Services 10 10

E. Bank Staff

Positions At ICR At Approval

Vice President: Annette Dixon Isabel M. Guererro

Country Director: Illangovan Patchamuthu Yusupha B. Crookes

Practice

Manager/Manager: Shobha Shetty Adolfo Brizzi

Project Team Leader: Imtiaz Alvi/Melissa Williams Kevin Crockford/Imtiaz Alvi

ICR Team Leader: Pushina Kunda Ng’andwe

ICR Primary Author: Pushina Kunda Ng’andwe

iv

F. Results Framework Analysis

Project Development Objective

Targeted poor are empowered with increased incomes, improved productive capacity and access

to services to achieve sustainable livelihoods.

Revised Project Development Objective

No changes in the project development objective

PDO Indicator(s)

Baseline Value Original Target

Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

PDO

Indicator 1:

At least 60 percent of community institutions are viable1 and sustainable2

Value

(quantitative or

Qualitative)

50% 60% 67%

Date achieved May-6-2009 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: Based on a survey covering 446 community institutions

facilitated by 13 POs in 13 districts across 4 provinces, 67 percent of

community institutions were found to be viable and sustainable assessed by

the maturity index indicators developed for the project. Source: 1st and 2nd

Tier Institutional Assessment - External

PDO

Indicator 2:

At least 60 percent of community members report a minimum of 20 percent

increase in household

incomes and/or assets

Value

(quantitative or

Qualitative)

0 60 percent of

communities

report 20 percent

increase

61 percent of

communities

reported 22 percent

increase in average

household income;

19 percent increase

in average

household income

in treatment group

1 Maturity Index will be used to identify and assess viable community institutions 2 Sustainability defined as being active, financially viable and having a good governance structure. Active being (e.g. regular

attendance at meetings), financially viable being (e.g. taking and repaying loans) and having a governance structure that ensures

independence, representation and operational sustainability - measures of these are detailed in PPAF’s Operations Manual

v

compared to

control group


Comments

(incl. %

achievement)

Fully Achieved: Gallup Pakistan survey sampled 5000 borrowers (2500

treatment; 2500 control) in 33 out of 37 districts where microcredit activities

were implemented. The survey found that 61 percent of community

members reported an increase in average household income of 22 percent

and a 29 percent increase in average personal income. A separate impact

assessment carried out in the Sindh Coastal Area Development covering

2,250 households (1,816 treatment; 434 control) observed a 19 percent

increase in average household incomes for treatment groups compared to

control households. Source: Gallup Survey and SCAD Impact

Assessment - External

PDO

Indicator 3:

At least 33 percent of targeted community groups/institutions report

improved access to

Municipal/loca1 services.

Value

(quantitative or

Qualitative)

20% 33% 76%


Comments

(incl. %

achievement)

Exceeded: Based on a survey covering 446 community institutions

facilitated by 13 POs in 13 districts across 4 provinces, 76 percent

community institutions reported to have improved access to municipal/local

services as linkages were developed at the UC level. Source: 1st and 2nd

Tier Institutional Assessment - External

Intermediate Outcome Indicator(s) – COMPONENT 1

Social Mobilisation and Institution Building


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: At least 60 percent of targeted poor3 and 60 percent of poorest households

are members of

community organizations

Value

(quantitative or

Qualitative)

45 percent of CO

member

households are

poor and poorest

60 percent of

targeted poor and

60 percent of

poorest HHs

68 percent of

targeted poor and

82 percent of

poorest HHs


Comments Exceeded: Based on the Poverty Score Card (PSC) data collected from a

representative sample of 2,187 beneficiaries as part of the institutional

3 Poor and poorest households will be identified using appropriate tools such as the National or other objective measure.

vi

(incl. %

achievement)

assessment survey, it was found that 86 percent of the households earned

less than PKR10,000 per month (one third of the amount required to be

above the poverty line for a household of 7 members) and 68 percent of the

members were either in the lower bands of poverty or transitory vulnerable.

Source: 1st and 2nd Tier Institutional Assessment - External


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 2: At least 30 percent of all CO members are women

Value

(quantitative or

Qualitative)

40% 30% 64%


Comments

(incl. %

achievement)

Exceeded: Out of about 1.3 million total membership of 1st Tier

organizational membership, 827,000 are women representing 64 percent of

total beneficiaries. Source: M&E data. .


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 3: At least 60 percent of COs clustered in Village level Organisations (VO)

and 25 percent of these clustered at Union Council level

Value

(quantitative or

Qualitative)

1 percent of COs

clustered into

LSOs/VOs and 0

percent clustered

at Union Level

60 percent of

COs clustered

into VOs and 25

percent of these

into UCs

69 percent of COs

clustered into VOs

and 80 percent of

these have been

clustered into UCs


Comments

(incl. %

achievement)

Exceeded: 65,448 COs, 5,616 VOs and 380 LSOs had (UC level) were

formed representing 69 percent of COs clustered into VOs and 80 percent

aggregated to the UC level Source: M&E data


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 4: At least 55 percent of Community Institutions are performing satisfactorily

in terms of effectiveness, transparency and accountability

Value

(quantitative or

Qualitative)

50% 55% 57%


Comments

(incl. %

achievement)

Exceeded: Based on a representative sample of 446 community institutions

surveyed across 13 districts and all four provinces, it was found that 57

percent of community institutions were performing satisfactorily based on

their ability to keep savings in verifiable accounts (bank account status);

vii

frequency of financial audits and maintenance of record of meeting

proceedings. Source: 1st and 2nd Tier Institutional Assessment –

External


Livelihood Enhancement and Enterprise Development


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: At least 70 percent of those who have received skills training and or

community livelihood fund (CLF); and/or assets – are using them

productively

Value

(quantitative or

Qualitative)

0 70% 97%

Date achieved May-6-2009 Sep-30-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: A total of 397,000 beneficiaries received skills/entrepreneurial

training and about 96,000 ultra-poor and vulnerable poor received

productive assets. 97 percent of skills training recipients reported using

their training productively while 94 percent of the productive assets

recipients were using them productively. Source: M&E data and

Beneficiary Survey: Internal and External

IO Indicator 2: At least 20 percent of federated organizations report effective linkages with

markets and private sector built

Value

(quantitative or

Qualitative)

0 20% 50%


Comments

(incl. %

achievement)

Exceeded: About 4,200 Common Interest Groups (CIGs) out of 8,300

CIGs established linkages with markets and the private sector, representing

50 percent of federated organizations. Source: M&E data.

IO Indicator 3: At least 50 percent of the new livelihoods platforms formed have developed

productive linkages with markets, input/service provider, service/product

buyer, or technology provider – measured in terms of at least one

transaction/ contract

Value

(quantitative or

Qualitative)

0 50% 96%


Comments

(incl. %

achievement)

Exceeded: 7 NyKs (96 percent) have signed 10 MoUs with local councils;

80 Digital Hubs (95 percent) were trained and linked to “Enclude”, a WB

funded project, for digital market research; and 40 Production Centres (97

percent) participated in Pakistan Arts and Craft Mela in Islamabad (sales of

viii

more than Rs.1,000,000) and linked to Mohenjoz, an online platform:

Source: M&E data

IO Indicator 4: Communities involved in Community Livelihood Fund (CLF) revolve

savings with at least 95 percent repayment rates

Value

(quantitative or

Qualitative)

0 95% 95 percent

repayment

rates

98 percent

repayment rates

Date achieved May-6-2009 Jan-31-2015 Sep-30-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: PKR323.99 million in form of CLF was provided to 120 loan

centres to benefit about 16,200 borrowers. Assessment indicates that 80

percent of loan centres increased their portfolio overtime and 20 percent

have retained the principle amount. Overall repayment rate of all 120 loan

centres was approximately 98 percent with an active portfolio of

PKR.269.41 million reported. Source: M&E data

IO Indicator 5: At least 60 percent of the targeted households where LEED

programming/investment has taken place have developed livelihoods

investment plans and mobilized resources for enhanced income and quality

of life

Value

(quantitative or

Qualitative)

0 0 60% 89%


Comments

(incl. %

achievement)

Exceeded: 296,000 livelihoods investment plans were develop ped,

representing 89 percent of targeted households that have developed

livelihood investment plans to mobilize resources for enhanced income and

quality of life. Source: M&E data.

IO Indicator 6: At least 50 percent of the livelihoods grant recipients are women

Value

(quantitative or

Qualitative)

0 0 50% 46%


Comments

(incl. %

achievement)

Substantially Achieved: Out of 96,000 recipients of productive assets,

about 44,000 were women, representing 46 percent of total number of

recipients. Source: M&E data.


Micro-credit Access

Baseline Value Original

Target Values

(from

approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

ix

IO Indicator 1: The microcredit outreach increased to 8.80 percent from 6.0 percent

average in PPAF-III served districts areas4, with 230,000 new borrowers

Value

(quantitative or

Qualitative)

Total MF

penetration rate

from all sources

5 - 6 percent

Increase from

6% to 8.80%

penetration rate

14.75 percent

penetration rate;

379,284 new

borrowers

Date achieved May-6-2009 Jan-31-2015 Mar-31-2016.

Comments

(incl. %

achievement)

Exceeded: Results achieved in the original 18 districts of Punjab and Sind

provinces.

No discernible increase in penetration rates in Baluchistan and Khyber

Pakhtunkhwa (KP) provinces – 19 districts. Source: M&E data

IO Indicator 2: A minimum annual growth rate of 20 percent in microcredit loans

maintained in one-fourth of PPAF-III served areas

Value

(quantitative or

Qualitative)

416,175 active

borrowers in

targeted 37

districts

20% Growth rate of 20

percent and above

was maintained in

11 of the original

37 districts

Date achieved December 2008 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: Of these 11 districts, 8 were in Punjab and 3 in Sindh provinces:

Source: M&E data

IO Indicator 3: Average repayments of micro-credit loans to POs at least 95 percent and

at least 98 percent from POs to PPAF

Value

(quantitative or

Qualitative)

Repayment rate

of borrowers to

POs was 95

percent

95% from

beneficiaries to

POs and 98%

from POs to

PPAF

Repayment rates

from borrowers to

POs was 97

percent and from

POs to PPAF 100

percent


Comments

(incl. %

achievement)

Exceeded: PPAF-III designed to enhance MF sector commercial focus and

thus, PPAF-III loans were provided at KIBOR+ rates to POs, who

subsequently set market rates of interest for their borrowers. MF lending

at market rates with POs in target districts of Punjab and Sind had

exceptional growth with high repayment rates throughout the period of the

project. PPAF-III also established an internal ratings scheme for POs,

which helped determine their borrowing criteria and repayment schedules

Source: M&E data.

IO Indicator 4: At least 25 percent of all micro-credit loans received by women in PPAF-

III targeted districts

4 The micro-credit component of PPAF-III will be focused on the 37 poor districts that are least developed with microfinance

penetration ratio of less than 5%

x

Value

(quantitative or

Qualitative)

0 – 40 percent in

target districts

with an average

of 20 percent

25% of micro-

credit recipients

are women

Women received

72 percent of loans


Comments

(incl. %

achievement)

Exceeded: A total of about 588,000 active borrowers had accessed

microcredit, out of which about 423,000 were women, representing 72

percent of borrowers that received loans : Source: M&E data.

IO Indicator 5: Institutional review of PPAF microfinance portfolio, management and

governance structure completed and agreed by mid-term of PPAF-III and

made operational by end of project

Value

(quantitative or

Qualitative)

Institutional

Reform Options

presented to

PPAF Board

Preparatory work

for PMIC nearly

completed. Board

formation was

underway and

PMIC was

expected to be

operational in

early FY17

Date achieved May-6-2009 Mar-31--2016

Comments

(incl. %

achievement)

Substantially Achieved: PPAF, Karandaaz (DFID) and KfW agreed to

jointly create PMIC and invest in the newly-formed Investment Finance

Company (Non-Banking Financial Institution) under SECP regulations –

PPAF: 49 percent, Karandaaz: 38 percent, KfW: 13 percent. The necessary

amendments to PPAF’s operations were approved by SECP, PPAF Board

of Directors and government in June 2016. PMIC incorporated as an IFC

in August, 2016; license to operate as an NBFC issued in August, 2016;

PMIC commenced business – 1 September 2016: Source: M&E data.


Basic Services and Infrastructure

Baseline

Value

Original

Target Values

(from

approval

documents)

Formally

Revised Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: At least 50 percent of COs are benefiting from improved infrastructure and

30 percent have accessed other sources of funding for infrastructure/loca1

services

Value

(quantitative or

Qualitative)

12 percent of

COs have

accessed

funding from

other sources

50 percent of

COs benefiting

from improved

and 30 percent

42 percent direct

beneficiaries and

24 percent

accessing other

services

xi

accessing other

services


Comments

(incl. %

achievement)

Substantially Achieved: A total of 6,225 water and infrastructure sub-

projects were initiated and 6,196 completed benefiting about 484,000

households. 42 percent of COs reported improved infrastructure and 24

percent have accessed other sources of funding for other services. Source:

M&E data.

IO Indicator 2: Minimum ERR of 20 percent and FRR of 25 percent of investment in

Water and infrastructure

Value

(quantitative or

Qualitative)

ERR of 26

percent and

FRR of 30

percent

ERR of 20

percent and

FRR of 25

percent

EIRR of 36.1

percent and FIRR

of 33.8 percent

Date achieved February

2009

Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: The economic and financial rate of return on water and

infrastructure sub-projects was found to be 36.1 percent and 33.8 percent

respectively. Source: Impact Assessment of Basic Services and

infrastructure - External

IO Indicator 3: At least 60 percent of the beneficiaries report satisfaction with the PPAF

supported health and education facilities

Value

(quantitative or

Qualitative)

70 percent

satisfaction

rate for

quality of

service

delivery

60% 93%


Comments

(incl. %

achievement)

Exceeded: PPAF supported 896 schools that enrolled over 127,000 and

trained about 3,700 teachers and related staff. 504 health facilities were

supported and about 1,600 health workers were trained. The total number

of patients that accessed health services over the course of the project

totalled 12.6 million individuals. Based on the User Beneficiary Survey

(2014), 93 percent of the respondents reported satisfaction with PPAF

supported education facilities while 79 percent of the HHs reported an

improvement in the quality of their lives as a direct result of PPAF

supported health interventions.: Source: M&E data and User

Beneficiary Survey.

IO Indicator 4: Net enrolment growth rate of 7.5 percent per annum maintained over the

project period

Value

(quantitative or

Qualitative)

11 percent Net

retention rate

per annum

7.5% 7.5%


xii

Comments

(incl. %

achievement)

Fully Achieved: An enrolment growth rate of more than 7.5 percent per

annum was maintained over the project period. Further, total enrolment in

schools supported by the project was 63 percent for Government schools

and 28 percent for community schools: Source: M&E data - POs.

IO Indicator 5: At least 40 percent of beneficiaries of infrastructure, health and education

interventions are women

Value

(quantitative or

Qualitative)

Overall share

of women

beneficiaries

is 54 percent

40% 55%


Comments

(incl. %

achievement)

Exceeded: Of the combined 16,000,000 individuals that accessed both

infrastructure and health and education services, 8.9 million were women,

representing 55 percent of the beneficiaries of infrastructure, health and

education. Source: M&E data


Project Implementation Support

Baseline

Value

Original

Target

Values

(from

approval

documents)

Formally

Revised Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: Project management has satisfactorily addressed statutory audit findings

Value

(quantitative or

Qualitative)

Unqualified

external audit

report for FY

2008

Issues satisfactorily

addressed


Comments

(incl. %

achievement)

Achieved: Satisfactory financial management and audit findings in place:

Source: M&E data and project financial documents

IO Indicator 2: PPAF takes necessary actions related to findings of regular Monitoring,

Evaluation and

Learning reports

Value

(quantitative or

Qualitative)

- Actions taken on

M&E and learning

reports

Date achieved May-6- 2009 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Achieved: Key learnings and lessons learnt from various internal and

external assessments have been used to improve on specific areas such as

inclusion, poverty targeting and deepening and integration. Established

outcome monitoring system and joint monitoring visits were carried out

across four provinces.: Source: Key project documents

xiii

IO Indicator 3: Complaints received by the grievance system have been addressed,

according to agreed

PPAF business standards

Value

(quantitative or

Qualitative)

Complaints

handled at PO

level with

remedial

measures and

reporting to

PPAF

Grievance

complaints are

addressed

Date achieved May-6- 2009 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Achieved: External complaints were handled and investigated under the

external grievance mechanism in place. PPAF has had a working internal

GRM since 2012 overseen by a full time GR Officer. Elections were held

in November 2015 to elect GRO and Grievance Committee. Source: PPAF

project documents and mission documents.

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 11/30/2009 Satisfactory Satisfactory 20.77




5 12/12/2011 Moderately Satisfactory Satisfactory 75.25

6 06/11/2012 Moderately

Unsatisfactory Moderately Satisfactory 119.72

7 12/23/2012 Moderately Satisfactory Moderately Satisfactory 158.32

8 06/12/2013 Moderately Satisfactory Moderately Satisfactory 192.76

9 11/16/2013 Satisfactory Moderately Satisfactory 192.76

10 04/19/2014 Satisfactory Moderately Satisfactory 222.76







xiv

H. Restructuring (if any)

Restructuring

Date(s)

Board

Approved

PDO Change

ISR Ratings at

Restructuring

Amount

Disbursed at

Restructuring

in USD

millions

Reason for Restructuring &

Key Changes Made DO IP

05/28/2014 S S Extension of closing date from

1/31/2015 to 9/30/2015

03/13/2015 S S 237.76

Revise intermediate outcome

indicators and outputs under the

livelihoods component.

09/30/2015 S S Extend closing date to March

31, 2016

I. Disbursement Profile

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. In 2007, Pakistan’s GDP growth rate was 6.4 percent compared to a collective growth rate

of 8.5 percent for the South Asia Region. The country’s key challenge was to sustain economic

growth in the midst of internal and externals shocks that had affected performance in recent past.

Rising food and fuel prices, energy crises including inflationary pressures had pushed the poor

below the poverty line, increasing vulnerability of ultra-poor to unparalleled levels. The rise in

ethnic and religious dissent alongside recurring natural calamities, restricted the country’s capacity

to effectively deal with persistent poverty.

2. Agriculture had long played a pivotal role in Pakistan’s growth and poverty reduction

strategies, contributing 20 percent to GDP, 50 percent to exports and employing 44 percent of the

country’s labor force. However, its contribution to income changes was far less encouraging,

declining back to pre-2000 levels as the sector continued to face significant structural constraints

that directly impacted growth and poverty reduction.

3. Substantial improvements in the rural service delivery system were required to effectively

support proper functioning and development of the rural non-farm sector to generate employment,

ensure income diversification and reduce poverty. This was a primary concern given that 40

percent of Pakistan’s poor were farmers and 45 percent of the rural poor relied on non-farm

activities as key sources of income. Moreover, the country’s microfinance sector was negatively

impacted by the 2008/09 financial crisis, which contracted capital availability, increased risk and

default and further reduced credit availability to both rural and urban areas.

4. Marginalized groups of poor and ultra-poor households such as disabled, landless peasants

and religious minorities continued to be sidelined from participation, which limited effective

demand for public services, hampered efficiency in development programs, thereby limiting the

impact of rural development efforts. Significant gender disparities added to the level of complexity

as higher levels of poverty, landlessness, limited livelihood options and increasing rural-urban

migration by the male household members, placed heavier burdens on women-headed households,

who were more vulnerable to exploitation and food insecurity. Low levels of literacy awareness,

prevalence of high fertility, maternal and child mortality rates with poor access to health services

only served to further aggravate the situation.

5. The Pakistan Poverty Alleviation Fund (PPAF) was created in 1999 with funding and

support from the World Bank. PPAF had successfully completed two phases of programing that

included three additional financings by working through the creation of strong outreach

mechanisms, building partnerships with Partner Organizations (POs) that in turn organized

Community Organizations (COs), Village Organizations (VOs) and Local Support Organizations

(LSOs). These institutions served as a platform for rural poor to access finances, skills,

infrastructure, health, education and participation in the development of their own communities

and interaction with government. Its delivery mechanism was recognized to be an effective

2

approach5 to address an increased emphasis in Government’s poverty reduction programs that

aimed to enhance livelihood services designed to cater to the needs of sub-groups of the poor

through integrated approaches to infrastructure, social services and credit provision.

6. The Government of Pakistan and PPAF approached the Bank for financing a third

operation to consolidate achievements made so far and to expand the program to poorest

households and districts of the country. Support was also requested to assist PPAF evolve fully

from a micro-credit focused organization (financed through the first two phases of PPAF) to a

multi-sectoral organization that could effectively address the many dimensions of chronic poverty

in the country. The proposed request directly supported Pillar III of the World Bank’s Country

Assistance Strategy (CAS) “Improved Lives and Protection of the Vulnerable” and was well

aligned with the Government’s own Poverty Reduction Strategy through: (i) strategic investments

in building social and human capital; (ii) innovative approaches to service delivery; (iii) integrated

community based approaches to development; and (iv) better identification of and responsive

program interventions for the ultra-poor. Policy measures were taken by the Government to place

poor households and communities at the center of development programs through inclusion of

social mobilization as the central pillar of the Government’s Mid-Term Development Framework

(MTDF) that covered the period 2005 – 2010.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

7. The objective of the project was to empower the targeted poor with increased incomes,

improved productive capacity and access to services to achieve sustainable livelihoods.

Key indicators were:

• Community institutions that are inclusive, viable6 and sustainable7

• An increase in household assets and/or income

• Improved access to municipal and local services

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and

reasons/justification

8. The PDO remained unchanged, although revisions were made to intermediate indicators in

the results framework to bring in a better focus on outcomes aligned with the PDO as described in

Section 1.7.

1.4 Main Beneficiaries,

9. Primary beneficiaries of the project were targeted ultra-poor, chronically poor and

transitory poor households that were identified through the Poverty Score Card. PPAF III was

committed to prioritizing vulnerable segments of society in their operations, which included

women, youth, disabled and minorities. Beneficiaries – organized through a three tier structure of

5 Several studies, including third party evaluations and a study (March 2008) commissioned by the Ministry of Finance,

expressed a high degree of satisfaction over effectiveness of PPAF service delivery and recommended enhancement in provision

of additional resources. (PAD, Page 4) 6 A maturity index was to be used to identify and assess viable community institutions (Footnote in PAD, Page 6) 7 Sustainability was defined as being active, financially viable and having a good governance structure. Active being 9e.g. regular

attendance at meetings), financially viable being (e.g. taking and repaying loans) and having a governance structure that ensures

independence, representation and operational sustainability (Footnote in PAD, Page 6)

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COs, VOs and LSOs - were supported through capacity building, asset transfers, skills and

infrastructure development as well as access to finance, markets and local government services for

sustainable livelihood development.

10. Secondary beneficiaries of the project were Partner Organizations/Non-Governmental

Organizations that facilitated project interventions. The organizations received support in

strengthening their organizational capacity to facilitate project interventions and training for social

mobilization, financial management, procurement and monitoring and evaluation.

1.5 Original Components (as approved)

The project consisted of five components.

11. Component 1: Social Mobilization and Institution Building (Orginal-USD38.5 million;

Actual – USD33.95 million) - This component aimed to empower the poor by supporting their

organization into three tiers: i) COs and clustering at higher; ii) Village Organizations (VOs) and;

iii) Union Council area level that could build voice and scale for effective interface with local

government bodies, other development programs and markets. PPAF’s POs were to be entrusted

with intensifying their coverage within Union Council areas and strengthening new and existing

community institutions. It was expected that inclusive COs of the poor would be formed and their

clusters mobilized with capacity to manage their own development, access services through

improved linkages to local government, other development programs and markets for sustainable

service delivery.

12. Component 2: Livelihood enhancement and protection (Original - USD85.3 million;

Actual – USD89.74 million) - The component aimed to develop capacity, opportunities, assets

and productivity of community members, mitigate their exposure to shocks, improve their

livelihoods initiatives and strengthen their business operations. Community members were to be

supported in building up their savings capacity and proficiency in fund management through

internal lending, complemented by grants and technical support to increase assets, productivity

and incomes. Mechanisms were to be developed and implemented that identified and supported

innovative micro-enterprises and value chain systems that led to improved livelihoods. The

component also facilitated and promoted linkages with private, public sector and not-for-profit

service providers.

13. Component 3: Micro-Credit access (Original - USD40.1 million; Actual – USD44.76

million) - The objective of the component was to improve availability and access of the poor to

micro-finance and enhance their capacities, productivity and returns from livelihoods initiatives.

Most areas were to benefit from improved access to existing micro-finance sourced from both

PPAF and other financial organizations. A significant proportion of the funds (82 percent) were

earmarked for micro-credit sub loans and the remaining 18 percent was to support PO operations,

capacity building and technical assistance through PPAF. PPAF was to support POs in facilitating

micro-credit provision to poor borrowers working in areas with minimal access to mainstream

micro-finance sector (areas where potential market penetration was less than 5 percent). Selected

POs were to be supported to improve their ability to work in least developed areas of the country

and provided with training and technical assistance to improve their existing systems in reviewing

and improving their loan and cost recovery mechanisms as well as funding flow with respect to

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PPAF. The component complemented livelihood finance provided in the form of grants for

productive assets and targeted credit worthy community members with viable livelihood

enterprises. Further, the component was expected to support PPAF’s re-organizational strategy to

de-link its micro-finance operations from its grant financing interventions thereby establishing an

autonomous micro-finance entity that would support the expansion of the micro-finance sector in

the country and provide financial services to “unbanked” and under-served communities.

14. Component 4: Basic Services and Infrastructure (Original – USD79.85 million; Actual

USD81.11 million) – The component aimed to establish and upgrade basic services and

community infrastructure for the poor and improve health and education facilities. It built on work

initiated under PPAF I and II using a saturation approach to primarily cover villages where

previous investments were made. Support was given for basic infrastructure, additional productive

and integrated infrastructure projects and innovative interventions such as alternative energy

projects. The component also provided for continuation of the Sindh Coastal Area Development

(SCAD) Program8. The interventions were expected to result in increased access to provisions of

basic needs such as drinking water, irrigation, energy, access to transport, access to markets, health

and education facilities and local government institutions.

15. Component 5: Project Implementation Support (Original - USD6.25 million; Actual –

USD6.25 million) – The component was expected to facilitate various governance,

implementation, coordination, monitoring and evaluation, learning and quality enhancement

efforts that would contribute to effective and transparent project management. Project components

were underpinned by two dimensions to ensure continuous process monitoring: 1) assessment of

community institutions and Union Council area organizations for their institutional growth,

integrity and ability to meet indicators set for maturity, governance, transparency and participation;

and 2) standard monitoring by PPAF to include an integrated Management Information System

(MIS).

1.6 Revised Components

16. The project components remained the same fundamentally, however, there were some

changes in the activities that components 2 and 4 covered:

17. Component 2, Livelihoods Enhancement and Protection (LEP), was expanded somewhat

and named as Livelihoods, Employment and Enterprise Development (LEED). A number of

innovations i.e. – Naukri ya Karobar (Employment or Enterprise) Centers, Youth Centers, Loan

Centers, Production Centers – and efforts were made to reformulate and modernize the training

program, develop market linkages, engage the private sector, and create synergies to ensure long

term sustainability of the project interventions.

8 SCAD Program used best practice and built on work already done under PPAF I and II, by adopting a deepening and saturation

approach and working primarily in villages where previous investments were made. Clustering of community organizations under

PPAF III was expected to support poor communities’ access and leverage external public and private sector financing for

infrastructure projects.

5

18. Under Component 4, the Sindh Coastal Areas Development (SCAD) program activities

were refined to promote holistic development through integrated multi-sectoral financing

agreements with each Partner Organization (PO) in SCAD to identify and implement each village’s

priority needs. Innovative livelihoods interventions, including skills trainings, were introduced

into the area in order to enhance economic growth and productivity of the beneficiary population.

1.7 Other significant changes

The project was restructured three times during implementation:

19. First restructuring. A Level 2 restructuring was carried out in May 2014 to extend the

closing date by 8 months from January 31, 2015 to September 30, 2015.

20. Second Restructuring. A Level 2 restructuring was carried out in February 2015 to revise

intermediate outcomes, intermediate outcome indicators and outputs under the livelihoods

enhancement and Protection Component and outputs under the SCAD program of PPAF III. The

findings from the Mid Term Review carried out in 2013 suggested that livelihood interventions

needed to evolve in response to emerging needs of target communities. For that reason, the

component was re-oriented towards increased community engagement to build productive

institutions and platforms that supported integrated planning and development. Employment

Centers, Digital Hubs and Production Centers were introduced along with improved training

programs to create the required scale to sustain livelihood interventions. Revisions to the SCAD

program introduced innovative livelihoods interventions as well as skills training to enhance target

communities’ growth and productivity. To better reflect the varied activities implemented,

subsequent revisions on intermediate indicators shifted focus from outputs to outcomes.

21. Third restructuring. A second Level 2 restructuring was processed in September 2015 to

extend the closing date of the project from September 30, 2015 to March 31, 2016. This was to

facilitate utilization of additional funds realized through exchange rate gains and to enable the

project fully achieve its development objective.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

22. The World Bank had developed a long term partnership with the Government of Pakistan

to improve public goods delivery through its support of PPAF I and II. PPAF I and II were

implemented in 112 districts of the country with only a small proportions of selected Union

Councils, village or settlement in the districts covered. There was a clear justification anchored in

analytical underpinnings for the Bank’s continued support to the Government through PPAF III.

23. Lessons from earlier operations and regional experiences were incorporated. PPAF III

benefited substantially from experiences derived from implementation of its predecessor

operations as well as interventions from various development partners and similar projects

implemented in the region. The ICR findings of PPAF II were primary inputs into PPAF III’s

design and approach. Some key lessons and findings that were instrumental in the new project’s

design choices were the following:

6

24. Broadening approaches to livelihood finance for the poor that included grants and micro-

credit to expand outreach. This was meant to address gaps in community financing for upstream

investments due to constraints in the original funding categories that limited direct investments to

micro-credit to individuals, grants to fund community infrastructure and capacity building to

support community organizations. The approach required strategic integration to enable

accumulation of assets that would improve creditworthiness of clients in difficult to reach areas.

Livelihoods grants and inter-lending were necessary to support the long term financial viability of

beneficiaries at all levels.

25. Social mobilization not only required continuous facilitation but also a multi-layered

approach towards community empowerment. Clustering groups at higher levels – for voice and

scale – coupled with skills training alongside access to financial resources and wider markets,

would lead to meaningful income opportunities stimulated by increased new business investments.

It was also necessary to continuously engage with communities and POs around the inclusion and

active participation of women, minorities and persons with disabilities so as to ensure community

institutions were truly inclusive and opportunities were being accessed by the most marginalized

households.

26. Embedding flexibility in the design and approach would foster innovation and new tools to

meet changing needs of the poor. PPAF’s unique position in Pakistan could be used to negotiate

the introduction of interventions on a national scale or to targeted beneficiaries.

27. Project design. For the most part, the project design was realistic in that it built on

experiences gained through tested approaches in predecessor operations. Components were

consistent with the PDO and were complementary to enhancing a deeper level of impact envisaged

at conception. While indicators were measurable and attainable, a few were later revised to sharpen

focus on outcomes rather than outputs (see Section 1.7). Flexibility and innovation gave room to

incorporate health and education interventions, even though these could have benefitted from a

clearer consensus on operational strategies for implementation earlier on in the project. The

organizational reform strategy of de-linking PPAF’s micro-finance operations from its grant

activities as well as its country wide focus was a complex undertaking that was well handled during

the implementation period and led to the launch of a new independent microfinance company in

November 2016. The project design instilled greater commercial focus within the micro-credit

component of the project, and moved away from the approach of earlier phases of PPAF, which

provided general support to the microfinance industry in order to bring it to scale with subsidized

credit. Although not exclusively rural, PPAF-III concentrated additional effort on rural and remote

areas that were particularly under-served by micro-credit. POs borrowed from PPAF-III at market

rates and these levels of interest were passed onto customers. PPAF-III continued its semi-

supervisory role of the industry and introduced risk mitigation tools, client protection codes, and

good governance structures within micro-credit Partner Organizations in order to create a more

professional and sustainable industry. Microfinance providers would need to become more adept

at attracting their own funding from commercial markets.

28. The project approach and institutional arrangements were appropriate. The design focused

on saturation of interventions in areas where PPAF was already operational and promoted

innovation and flexibility in scaling up successful approaches

7

29. Risks and mitigation measures. A number of potential risks and mitigation measures were

laid out in the Project Appraisal Document. A Governance Management Framework was also

developed and mainstreamed throughout the various operational processes and institutional

structure for decision making at all levels. With the exception of the security situation in Pakistan

- which proved to be a significant risk during the implementation period - all other risks relating

to the sector, technical design and project components were assessed as moderate. Risks associated

with PO capacity constraints, financial management and related sustainability issues were

adequately addressed through institutional and technical support and strengthening of the

Management Information System (MIS) that enabled PPAF to effectively monitor and address

problems in real time. Security risks that had potential to hamper accessibility to conflict affected

areas were properly identified with appropriate mitigation measures incorporated into the design,

including the use of POs that had strong local presence and incorporating third party validation as

an additional back up measure.

30. Adequacy of participatory process. The project preparation was conducted in a very

consultative manner. The Bank team worked closely with the PPAF project team, POs and

Government of Pakistan counterparts to frame the scope, approach and operational aspects of the

project. There was a high degree of commitment and collaboration amongst stakeholders that

enabled the project to complete the necessary processing steps within the agreed time frame.

2.2 Implementation

31. Managing the shift towards an integrated system. Microfinance and community

infrastructure were PPAF’s core strengths built from previous implementation experiences and so

activities related to these interventions carried through the third phase in a fairly seamless fashion.

At the same time, PPAF sought to introduce newer aspects of project implementation, particularly

approaches to livelihood enhancement and working with ultra-poor households, which, by their

nature, required more time to take root. The expansion to include livelihood activities, for example,

required shifts in the social mobilization approach to not only address processes and procedures of

including vulnerable groups but to also deal with reorganization of beneficiary groups around

private interests in contrast to public goods. Moving towards an integrated system - that aligned

micro-credit, infrastructure and livelihoods – was a necessary consolidation strategy envisioned at

conception and required that PPAF introduce a number of institutional changes and procedures in

order to address these new challenges. Its monitoring system, while providing an overall picture

of PPAF’s work, was initially unable to produce quarterly reports that showed project progress

against specific output and outcome indicators. Environmental monitoring and staffing were also

challenges early on in project implementation These challenges were taken up by new leadership

at PPAF in early 2011 which introduced changes to the institutional structure, systems and

procedures so as to break down organizational silos, encourage integration and improve synergy

and coordination among various PPAF units.

32. Mid-term assessment. At the time of the midterm review, the challenges of the monitoring

system had been addressed and an environmental and social management unit established and

functional. To help ensure that new operating procedures that emerged from PPAF’s strategic

review were aligned with the Financing Agreement and project operational manuals, the Bank and

PPAF agreed to undertake a management performance assessment to ensure that the application

8

of procedures and processes was in compliance with the agreed implementation arrangements of

the project.

33. Other items in the midterm evaluation looked at (i) PPAF’s future role once grant activities

were separated from microcredit; ii) exploring the evolving roles within the three-tier institutional

structure with regard to inclusive participation of women and prevention of elite capture; iii)

addressing the challenges of the livelihoods component; and iv) PPAF’s long term strategy of

sustaining health and education interventions.

34. Streamlining operations for better implementation outcomes. Overtime, PPAF

management prepared a business plan that outlined the organization’s strategy for both credit and

grant operations for the remaining project implementation period. Processes for PO

identification/selection process were further strengthened including the creation of two separate

committees for approval of grant and credit funding. Furthermore, PPAF strengthened its corporate

governance credentials by adopting the Corporate Governance Rules issued by the Securities and

Exchange Commission of Pakistan that required holding regular quarterly meetings of the Board

and its committees (Audit Committee and Risk Oversight Committee). It maintained compliance

with applicable provisions

35. As an organization, PPAF put considerable effort into ensuring best practice for its staffing.

It carried out a staff rationalization exercise aimed at establishing a baseline for effective

deployment of available skills sets and staffing requirements over the remaining implementation

period. The organization embarked on simplification of its recruitment process aimed at improving

effectiveness and increased focus on staff development, training, appraisal, code of conduct,

diversity and benefits and compensation. An HR manual system was acquired to improve

operations and subsequently, HR manual and policies developed and approved by the Board.

36. The review and restructuring exercise, as well as the introduction of improvements for

safeguards and M&E, created some lags in project implementation in their early stages, but two

project extensions provided additional time to fully disburse all funds and in most cases, exceed

project targets.

37. By December 2015, the Board of PPAF and the Economic Affairs Division of the Ministry

of Finance approved the creation of the Pakistan Microfinance Investment Company (PMIC) – a

spin-off for-profit apex microfinance provider. Negotiations with DFID and KfW as anchor

investors, were finalized and the company was registered as an Investment Finance Company

under NBFCs regulations with the Securities and Exchange Commission of Pakistan. The official

launch occurred after project closure in November 2016 with initial funding from the private sector,

KfW and DFID.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

38. Design: A monitoring and evaluation system was already in place, but was improved by

the creation of a monitoring unit (Monitoring Evaluation and Research – MER) in 2011 that

undertook regular monitoring and tracking of project implementation separately from the

operational units. PPAF III further planned to improve on the design through the development of

9

a Management Information System (MIS) that integrated existing unit specific databases to avoid

multiple entries and duplication of data9.

39. Implementation: In the earlier days of implementation, the MIS primarily provided

quarterly reports reflecting a cumulative outlook of project interventions but without an overview

of progress against outputs and outcome indicators. Although operational units interacted with

POs regularly, the MIS did not have a fully integrated system of portfolio monitoring and to

address this challenge, MER was reorganized to enhance its ability to effectively monitor and

assess project progress. The unit took steps to enhance collaboration with other units for collecting

and reporting quality baseline information. Other innovations included improvements to QPR

reports emphasizing results and outcome oriented reporting and analysis. M&E systems were

further strengthened through the introduction of outside partnerships with the Lahore School of

Economics and the Centre for Economic Research in Pakistan (with Development Economics

Research Group (World Bank) already being a long-term partner of PPAF), among others, for

more robust assessments including randomized control trials. MER came under the umbrella of

the Quality Assurance and Compliance Unit, which provided guidance and oversight. Service

standards and procedures for data submission, validation and aggregation for final reporting were

streamlined in the process. Geographic Information System (GIS) was established plotting project

interventions in each project location and linked to the MIS.

40. By project end, QPRs were being generated through MIS and a number of independent

assessments had been conducted based on the project’s M&E data. The project was able to report

on progress towards achieving the PDO with a credible system to validate reported outputs and

results. Data templates for all operational units had provisions for validation and data could be

drilled down to specific interventions, activity profiles, implementers, GPS coordinates for

activities as well as associated costs. At the time of the ICR, the interface for submission of PO

data was in the process of moving towards a web-based system.

41. Utilization: As PPAF improved its monitoring and evaluation system and processes, it also

utilized the data collected to improve activities being carried out under the project and to better

achieve project objectives. For example, after the mid-term review, PPAF began tracking whether

various interventions were being implemented in an integrated approach as per project design. This

exercise led them to realize that the levels of integration were very low, with many interventions

being standalone infrastructure interventions without having mobilized communities. As a result,

PPAF began to consolidate resources and target those villages and UCs where more support was

needed instead of reaching out to newer UCs and villages. This consolidation of resources and

interventions maximized project impact in those areas as can be evidenced from achievements

against project outcomes in Sindh Coastal Areas – one area where this integrated approach was

implemented.

42. The MER Unit developed a Maturity Index to assess the viability and effectiveness of

community organizations supported under the project. This Index helped them in categorizing

9 Almost all PPAF operation units maintained one or other type of database and would perform monitoring and analysis of their

respective operations independently which presented challenges in terms of analyzing overall project outcomes. Operational units

were in charge of tracking outputs and progress against implementation plans for POs.

10

COs/CIGs based on their capacity and strength, which in turn improved targeting of interventions.

For example, Category ‘A’ COs/CIGs were consolidated where possible into Production Centers

under the Livelihoods component, and more training and capacity building support was directed

towards Category B COs/CIGs. The Maturity Index also helped PPAF better report on key PDO

indicators.

43. Improved monitoring processes also helped PPAF assess the sustainability of their

interventions. For example, PPAF implemented over 6000 infrastructure schemes over the course

of this project. PPAF developed a detailed reporting format with which to check which of the

schemes were functional after completion. The reports that were generated using that data

demonstrated that most of the sampled schemes under PPAF 3 were fully functional 2-3 years

post-completion. The data also helped identify key issues which had led to some of the schemes

to malfunction or be abandoned – one of which was weak social mobilization prior to scheme

construction. Subsequently, PPAF used this information to strengthen mobilization processes

where they had been weak.

44. Project Evaluations: To its credit, PPAF expanded its research repertoire to strengthen

links with its operational activities for quality outcomes. A series of independent assessments,

technical research, beneficiary surveys and evaluations were commissioned during the project

period. Project baseline data was based on achievement of indicators captured at the end of the

predecessor project through an impact evaluation and were reflected in the PAD at the time of

preparation of PPAF III. The evaluations, surveys and assessments were used along with M&E

data to evaluate project performance. Some of the key evaluations used in the assessment of

outcomes were carried out in 2013 and 2014 when substantial portions of the loan were already

disbursed (close to 85 percent in 2013 and more than 90 percent by mid-May 2014). Studies were

commissioned at the time to assess the impact of the project.

45. Communication and Media: A strong media and communications team delivered various

prints and electronic products. Knowledge management moved from dissemination of information

to empowerment through information. Immersions programs for journalists to visit project sites

and audience specific communication products were developed.

46. PPAF’s communications team worked to develop media manuals for POs that provided

guidance on dealing with local/vernacular media and gave practical instructions for developing

press releases. The community Open Defecation Campaign (ODC) benefitted from the

communication team’s support to develop message content and delivery. Collaborations increased

with operational units which contributed to high quality materials being used at the community

level. Database of website and social media accounts of POs were developed as well as for some

LSOs. A social media strategy was developed and implemented.

2.4 Safeguard and Fiduciary Compliance

47. Environment: Project was classified as a category B in accordance with Bank policy as

interventions related to community physical infrastructure and service delivery projects were

assessed to have some potential negative impacts. An environmental management framework was

therefore developed. An environmental and Social Management group was constituted although

there were recruitment challenges in filling a number of positions making implementation of

11

related environmental activities slower than expected at the start of PPAF III project

implementation. This included some delay in monitoring and reporting of POs compliance levels

as well as issuance of quarterly environmental reports. Improvements in recruitment led to a fully

functioning ESM unit that was able to provide capacity building to POs to implement the

framework. Environmental and social audits of POs were undertaken and quarterly progress

reports prepared. The first third party validation was conducted in 2012 and revisions made to the

framework to incorporate livelihoods, health, education and microfinance schemes. ESMF was

integrated into all PPAF programs and operational units began reporting on field compliance. POs

were regularly reporting on compliance and information fully reflected in quarterly reports.

Indigenous People’s Planning Framework was prepared as project activities were expanded to

areas with pockets of indigenous groups. Community resource persons were trained in ESMF that

promoted greater environmental and social awareness at the community level. Disaster screening

was also eventually incorporated and a Disaster Strategy prepared.

48. Social: A social assessment was planned early in the project period to focus on issues

around poverty, access of project participants to facilities and services, particularly vulnerable

groups and ultra-poor. There were initial delays in finalizing the assessment due to security

constraints in undertaking field visits to some conflict affected areas. Once completed, this initial

assessment revealed that out of 77 percent representation of village households in the community

organizations, 60 percent were male and only 12 percent were female. It was clear that concerted

effort was required to increase women participation in the project.

49. PPAF used this data to adopt an integrated approach for addressing gender issues in

implementation of various components as well as internally in planning and decision making

processes. Gender focal points were assigned in all operational units and worked in close

collaboration with a Gender Committee that had been established during the 2011-12 re-

organization. Steps were taken to compile gender profiles for POs to assess the level of institutional

and program integration and identify areas where technical support could be provided. A gender

action plan was created and the first gender orientation training delivered to mainstream activities

at the institutional level. The Gender Committee began to collaborate with operational units and

forged partnerships with Government agencies in Punjab (Women Development and Literacy

Department). PPAF initiated 16 days of activism against gender based violence (GBV) at the PO

and LSO levels. 108 field staff and 55 POs participated in the events. Community resource persons

were also trained on gender aspects which helped to enhance sensitivity towards gender related

issues within communities.

50. Grievance Redress Mechanism (GRM): A grievance redress mechanism was already in

place, although not systematized. The project worked towards streamlining the process, paying

special attention to roles and responsibilities. It was recognized that PPAF’s work in conflict

affected areas would require a greater focus on GRM to ensure accessibility and inclusivity of all

groups. There were initial delays in formalizing the system due to security constraints in

undertaking field visits to some conflict affected areas. Despite these difficulties, a three-tier

structure was introduced that involved the use of an external third party to conduct validation of

social aspects. An employee grievance redress mechanism was also put in place to enhance

transparency and trust amongst staff. By project end, a GRM policy was in place and incorporated

in the organization’s HR manual

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51. Financial Management: The project had a very strong financial system in place. All

financial reporting requirements were fulfilled and both Finance and Accounts (F&A), and Internal

Audit Department (IAD) were adequately staffed. The Board’s Audit Committee met regularly

and IAD successfully implemented its work plan. There was a functional PO monitoring system

in place as was a financial management information system. Acceptable audited financial

statements were received well before due dates. The reorganization led to revisions in the operating

procedures of both units. IAD became part of the process for clearing disbursements to POs to

provide an opportunity to highlight ongoing and/or unresolved concerns arising from internal

reviews. A comprehensive financial management checklist was in place to assess the capacity of

POs and differentiated by size of the entity for customized support. A web-based application was

developed for tracking statement of expenses and performance standards fixed for processing.

However, the restructuring and introduction of the new manuals and procedures impacted the

implementation of the project and slowed down disbursement significantly between 2011 and 2012.

This led the Bank to commission a third party management performance review (MPR) to carefully

examine and analyze the extent to which the laid out criteria, steps, standards and procedures of

the Bank’s operational manuals were applied by PPAF between 2010 and 2012. The review found

several gaps, weaknesses and violations in the operational manuals related to financial controls

and organizational management, and recommendations were made for improvement. PPAF

resisted any changes in response to the findings of the review and at the time of the ICR, the

implementing agency had not recognized the recommendations of the report.

52. Both F&A and IAD were actively engaged in capacity building of POs as well as COs.

Training workshops were held and basic financial manual templates prepared to facilitate small

POs. Standard formats for record keeping were also developed to guide COs. Reserves in the form

of endowment was established for grant based interventions. Innovative approaches were taken to

facilitate illiterate community organizations through the development and roll out of pictorial

formatted financial templates. The Auditor General of Pakistan carried out a performance review

of PPAF and issued a clean report with procedures found to be in compliance with financial

standards. In cases where audit observations were made, shortcomings were quickly addressed

including through a reduction in POs and agreed timelines for addressing issues raised. A stringent

monitoring mechanism with clear responsibilities was effected and legal action taken in some cases.

PPAF also adopted Corporate Governance Rules and approved a treasury management policy on

use of surplus funds. Audit committee and Risk Oversight Committee (ROC) of the Board were

in place and meetings held as planned.

53. In spite of the difficulties, the task team continued to work closely with PPAF staff and its

POs, with good physical, financial progress and results on the ground. At project closure, the Bank

identified three (3) ineligible payments to POs. The Bank noted that the determination of

ineligibility was not reflective of PPAF’s performance or results of identified POs, rather, the

criteria for selection was not in line with the categories for re-imbursement. Overall financial

management was deemed satisfactory

54. Procurement: PPAF had adequate staff with experience in implementing procurement

under World Bank guidelines. Procurement portfolio was implemented mainly through POs using

primarily the national shopping method to contract out goods, works and non-consulting services.

The level of technical proficiency of staff assigned to procurement areas at HQ and POs was

sufficient. Ex-post review of contracts was implemented and regular systematic post review

13

exercises were carried on PO procurement plans based on bank standards. PPAF constantly

worked towards streamlining and strengthening procurement system and procedures in line with

Bank guidelines.

55. There were growing concerns about PPAF’s procurement practices, particularly related to

hiring of consultants, weak monitoring and quality of procurement systems and staff. An

independent procurement review (IPR) was commissioned in which some substantive

discrepancies were noted in the procurement process and a few deviations from the Bank’s

procurement guidelines. The review underscored the need for enhanced PPAF monitoring of

PO/CO procurement activities. The Bank had also recommended that the reporting line for the

procurement unit be changed to the appropriate authority. There were revisions made to the

reporting lines of the procurement unit, which were switched to a competent authority to strengthen

checks and balances in the system. A number of critical actions were recommended and addressed

by PPAF. The organization promoted a fair, transparent, traceable and inclusive procurement

system that centered on beneficiary participation in the identification of needs and good

governance principles in the selection of management. The Procurement Unit worked with the

Livelihood unit to jointly prepare guidelines for community driven procurement and a procurement

complaints management system was established. The role of the procurement unit was further

enhanced in the selection process of POs and a placement program established for staff.

Procurement rating was deemed satisfactory at the end of the project.

2.5 Post-completion Operation/Next Phase

56. In terms of long term sustainability, PPAF has PKR.13 billion reserves and a PKR.1 billion

endowment. Its annual income from its reserves and endowment fund is approximately PKR.2.5

billion, while expenses against income are around PKR.600 – 700 million, leaving it with an annual

operating surplus of approximately PKR. 1.5 – 2 billion. Clearly, it is a financially sustainable

entity and has evolved into a viable organization through interests earned from its micro-credit

operations, endowments invested in long term government securities as well as new sources of

financing from donors and the private sector.

57. Since the project closed in March 2016, PPAF has continued to implement the program for

poverty reduction and two projects by KfW as well as a EUR 40 million trust fund supported by

the Italian Government. The World Bank has also remained engaged with PPAF through

management of the Italian support to PPAF through an innovative fee for service agreement. A

MoU was recently signed with FAO to continue technical support on livelihood activities and

discussions are ongoing with KfW for a follow on project and with DFID for a livelihood operation.

PPAF’s strategic focus over the medium term is: (i) improving protection of its social capital (COs)

while instilling mechanisms for peace and conflict resolution, strengthening resilience for climate

change adaptation and reinforcing linkages with local governments for improved coordination and

public service delivery; (ii) leveraging technology platforms for better monitoring and service

delivery; (iii) creating employment and self-employment opportunities for youth; and (iv)

developing and scaling up the eco-system for renewable energy.

58. As PPAF continues its support to community organizations for both public and private

goods delivery, linkages with both local/provincial governments and engagement with the private

sector will be critical for long term sustainability of investments made. Existing linkages with local

14

authorities through LSOs are the first stepping stone for higher level engagement with provincial

governments and efforts have continued in ongoing handover of health and education services to

the government. Currently the Bank is supporting the Governments of KP, FATA and Balochistan

in providing community support, which is important to building state-citizen trust. There is scope

for PPAF to coordinate and /or integrate their activities with these programs as well as in the

provinces of Sindh and Punjab.

59. A key transition for the microfinance industry in Pakistan emanating from PPAF-III is the

creation of a new peak organization, the Pakistan Micro Investment Company (PMIC), through

the separation of the Financial Services Group (the microfinance component) of PPAF. To grow

and expand outreach microfinance providers will need to diversify their sources of funds to meet

their increasing financing requirements in the future. Stakeholders considered that PMIC would

be better placed to attract financing from diverse sources and meet the increased borrowing needs

of MFPs as the industry continues to grow and mature. The Pakistan Microfinance Network

estimated that more than PKR 40 billion of additional debt for on-lending will be routed through

PMIC by 2020, but over PKR 65 billion will still have to be tapped from additional sources like

the capital and money markets and from international lenders.

60. PMIC was created as a unique model; the first-ever national level Microfinance Investment

Vehicle (MIV) in the world and the first-ever MIV in Pakistan. Additionally, PMIC will provide

a wide range of financial services to all MFPs, to promote financial inclusion in order to alleviate

poverty and contribute to broad based development. PPAF is a shareholder of PMIC which will

enable it to pursue its mission to support MFIs reach out to the poor in rural areas.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

61. Relevance of Objectives: The relevance of the project’s objective was rated high. The

project aimed to tackle deep rooted poverty in the country’s most vulnerable areas by addressing

constraints related to access to basic services, markets, health and education, exclusion, violence,

unemployment and livelihood risks and vulnerabilities. The project was fully aligned with key

Government policies as outlined by the national poverty reduction strategy in Pakistan (Vision

2025), the Medium-Term Development Framework (2005-2010), Poverty Reduction Strategy

Paper II (2008-2012) and the New Growth Framework (2010). The Government’s present strategy

outlined in its Vision 2025 is an ambitious plan eliminate extreme poverty in all its manifestations

before 2025. PPAF is perceived as an integral part of this plan and a key poverty alleviation vehicle

at the national level. The Government has relied on PPAF to implement some its most important

initiatives including several of the Prime Minister’s special initiatives like the Prime Minister’s

Interest Free Loan Scheme. In its annual Pakistan Economic Survey, PPAF’s contributions to

poverty alleviation and growth where cited by the Prime Minister as integral to the delivery of

priority social safety net programs.

62. The Government’s Financial Inclusion Strategy includes the role of PPAF in the provision

of microcredit services. The government’s own strategy to increase commercial finance to the

microfinance sector was anchored in the transformation of PPAF’s microfinance operations into a

separate entity under the Pakistan Micro-Finance Investment Company.

15

63. In terms of disaster response and recovery, the Government has continued to rely on PPAF

for assistance, evidenced from PPAF’s role in supporting flood affected communities in 2010 up

to 2014. PPAF has not only played a central role in channeling Government resources, but its own

organizational structure and poverty graduation approach has attracted multiple donors beyond the

World Bank. Asian Development Bank, DFID, IFAD, KfW and the Government of Italy including

several corporate entities have formalized partnerships with PPAF.

64. The relevance of the objective remains aligned with the Bank’s Country Partnership

Framework (2014-2019) and contributes to two strategic results areas of the CFP: i) the role of

inclusion in dealing with the most significant challenge of the medium term: materializing the

population dividend and reaching out to the marginalized, and; ii) the discourse of devolution in

line with the 18th Constitutional Amendment with implications for the development process in

terms of governance and service delivery. Moreover, the relevance of objective is well aligned

with four out of the seven pillars considered to be key enablers in realizing the Government’s 2025

Vision, namely: i) Pillar I: Putting people first – Developing human and social capital; ii) Pillar II:

Achieving sustained, indigenous, inclusive growth; iii) Pillar IV: Water, energy and food security;

and iv) Pillar V: Private sector and entrepreneurship led growth.

65. Relevance of design and implementation: The relevance of design and implementation

arrangements is rated high. The project’s theory of change was anchored in a mobilization strategy

that organized communities around productive and public sector platforms aimed at capacity

enhancement to access public and private services and finance for sustainable livelihoods.

• The goal of empowering the targeted poor was addressed through the social mobilization and

institutional building component and was tracked through PDO indicator 1 along with relevant

intermediate outcome indicators.

• The goal of increased income and productive capacity was addressed through the livelihoods

enhancement and microcredit access components, tracked through PDO indicator 2 (increase

in household assets and/or income) and the respective intermediate outcome indicators

• The goal of improved access to services for achieving sustainable livelihoods was directly

linked to the Basic services and infrastructure component and tracked through PDO indicator

3 and the associated intermediate outcome indicators.

66. While there were some adjustments made to the project design during implementation of

some components, the implementation process remained consistent and was effective and efficient

for achieving the project objectives. The livelihoods component was reoriented to expand

opportunities and to review target groups as agents of change, rather than passive recipients. There

was increased emphasis on strengthening local level institutions for enhancing opportunities and

a number of innovations were introduced such as the Naukri ya Karobar Centers, Youth Centers,

Loan Centers and Production Centers. There were significant efforts made to restructure,

standardize and modernize training programs, develop market linkages, engage private sector and

create synergies to ensure long term sustainability of investments. Changes were made to the Sindh

Coastal Area Development (SCAD) program under the Basic Services and Community Physical

Infrastructure component to expand scope of activities and health and education strategies were

reformulated to focus more on the demand side of interventions. PPAF’s model neutral approach

was instrumental in making these adjustments allowing for greater flexibility and innovation by

16

the POs while maintaining its core principles of development and meeting the project’s

development objectives.

3.2 Achievement of Project Development Objectives

Rating: Substantial

67. The Project Development Objective had three main attributes: i) to empower the targeted

poor; ii) to increase incomes and improve productive capacity, and; iii) to improve access to

services. There were three (3) outcome indicators to measure the achievement of the Project

Development Objective: (i) at least 60% of community institutions were viable and sustainable;

(ii) at least 60% of the community members report a minimum of 20% increase in household

incomes and/or assets and (iii) at least 33% of targeted community groups/institutions report

improved access to municipal local services.

68. PPAF interventions exceeded development outcomes envisaged in the project. Based on a

host of external evaluations and supplemented by monitoring and evaluation data, the project

showed that the targeted poor not only increased their incomes but also enhanced their productive

capacity and access to services. The eventual creation of a separate microfinance entity contributed

to establishing the framework for a sustainable financial ecosystem that would be vital to the long

term sustainability of livelihood activities for poor communities.

Targeted poor were empowered through community institutions that had strengthened capacity

to take forward inclusive and integrated development.

69. Social mobilization and inclusion of the targeted poor and ultra-poor households into

community-based organizations was undertaken through 126 POs under the overall guidance of

PPAF. Based on project data, by the end of March, 2016 the Project had achieved all of it targets

by forming or revitalizing 65,448 COs, 5,616 VOs and 380 LSOs. The Community Organizations

had a total membership of 1.3 million, of which at least 86% belonged to the poor and poorest

households, which exceeded the target set for the project at 60%. Women made up a substantial

proportion of organizational membership with about 827,000 women participating in community

institutions (64% compared to a project target of 30%). The preparation of Village Development

Plans and Union Council Development Plans were the result of intensive consultations with the

membership of these community institutions, which served to identify the needs at the local level

and helped in sharpening the vision of the communities about their future. These plans also

contributed to identification and prioritization of the infrastructure and basic services that the

communities aspired to have, and on which the infrastructure and basic services (Component 4)

investments were premised.

70. By the end of the project, 69% of COs were clustered into VOs, and 80% of the VOs were

aggregated to form higher level institutions of Local Support Organizations at the UC level. The

achievement of aggregation exceeded the project’s targets of 60% for COs and 25% for LSOs.

These institutions also amply demonstrated the key attributes of functionality and viability based

on a set of criteria including records of accounts, active participation and financial audits. 57% of

the community institutions satisfied the criteria, exceeding the project target of 55%.

17

71. An institutional assessment of first and second tier institutions was carried out in 2016

(World in Consulting Private Limited) in which 13 POs were randomly selected across 13 districts

in all four provinces. The sample included 446 community institutions in which 2,187 beneficiaries

were randomly selected for the poverty Score Card Survey. The assessment applied the maturity

index developed by the project to assess the viability and sustainability of community institutions

and found strong participatory processes in decision making with 98% of community institutions

reporting that decisions taken were participatory. About 65% confirmed that decisions regarding

community development were followed through with 57% participation from women in the

decision making process. 84% of community institutions confirmed receipt of managerial and

organizational training, and further analysis of community financial records showed that 71% of

them had increased their financial assets over a 5 year period. Accordingly, based on quantitative

and qualitative analysis of the maturity index, 67% of the community institutions were found to be

viable and sustainable against the end project target of 60%.

72. There was also considerable training of community members in organizational and

financial management and leadership.

73. An impact assessment of PPAF communities and skills training programs conducted in

2015 (AASA Consulting) assessed the outcomes of training programs delivered through PPAF-III.

The survey sampled 14 POs out of a total of 53 POs that were delivering training, covering 420

community organizations and 10 training institutes. The sample selection process was

representative of the types of trainings provided and covered all four provinces. Based on the

assessment, beneficiaries were found to have improved understanding of business development

and health related behavior. About 80% of trainees reported to have utilized their training to

increase incomes. Community organizations were found to have increased access to information

and local markets with stronger ties to members of the local councils.

74. Based on the findings from the evaluations and supported by the performance of associated

component activities, the 67% achievement of the key attribute of empowering the targeted poor

through well-functioning, sustainable social platforms exceeded the 60% PDO 1 indicator target.

Incomes of project households increased through micro-credit; and asset transfers and skill-

building (through the LEED component).

75. Loans through the microcredit component led to an increase in average household income.

The microfinance component was implemented by 22 partner organizations (POs) in 37 selected

districts across the country with finance from PPAF-II reflows and additional USD 33 million

(PKR 3 billion) made available for on-lending. In addition, about USD 5 million (PKR 500

million) were invested in piloting and up-scaling innovative financial products and supporting the

physical expansion of PO into the selected districts, some of them involving higher delivery costs

and riskier portfolios. As a result, the PPAF-III micro-credit component has effectively reached

588,000 clients of which 379,884 were first-time users of formal credit.

76. A Gallup survey (Gallup Pakistan, 2013) that sampled 5000 households from 33 randomly

selected districts in PPAF project areas assessed impact effects of microcredit on both borrowers

and non-borrowers. The survey found that 61 percent of PPAF III borrowers, compared to 59

percent of non-borrowers, experienced a positive change in their personal income over a two year

18

period. The difference between the borrowers and non-borrowers, although small, was statistically

significant. The change in mean personal income for borrowers was a 29 percent increase (22

percent for non-borrowers; 20 percent for project end target). These results were averaged over the

three types of loans provided by POs – agriculture, livestock and enterprise loans.

Absolute and relative increases in incomes for PPAF-III beneficiaries and control group (PKR).

Source: Adapted from Gallup IV, 2013.

77. At the time of the survey, M&E data shows that the project had reached 120,731 new

borrowers out of 230,000 targeted for the project and had a 7.7% market penetration against 8.8%

overall project target. A total of 10 out of 37 districts showed a growth of 20% in active borrowers

and the average repayment rates of loans was 98%. By the end of the project (2016), PPAF’s

microfinance increased its market penetration to 14.75% in all project districts with a total of

379,284 new borrowers, exceeding the project target. 30% of the project districts (11 out of 37),

showed growth of 20% and above in microcredit loans amongst active borrowers, on a cumulative

basis. Repayment rates were maintained well above industry requirements (97%) and a total of

US$91,201,882 of on-lending funds were disbursed against the target of US$33 million (267%

increase). More than 70% of loan recipients were women, exceeding the project target of 25%. An

estimate of the incremental incomes is provided below.

Borrower Non-borrower %

Change

borrowers

% Change

non-

borrowers Items (PKR) Survey year Previous

year Survey year

Previous

year

Average personal income 6,155 4,764 5,824 4,759 29% 22%

Average household income 20,843 17,123 19,680 16,790 22% 17%

Average gross income from

agriculture 198,000 183,601 188,798 178,061 8% 6%


livestock 113,650 89,223 122,679 101,034 27% 21%


enterprise 162,931 132,699 155,779 130,692 23% 19%

Number of

Borrowers

by Sector

Total Funds by

Sector PKR

Average loan

size by sector

PKR

Average

incremental

income of

borrowers relative

to non-borrowers

Aggregated

incremental

income by

sector PKR

Agriculture 117,308 2,553,467,925 21,767 3,662 429,581,896

Livestock 160,001 3,100,090,750 19,375 2,782 445,122,782

Enterprise * 270,186 5,471,416,111 19,185 5,145 1,390,106,970

Total Funds for

Productive

Purposes 547,495 11,124,974,786 2,264,811,648

*Includes Commerce/Trading/Handicrafts/Cottage and Light manufacturing

19

78. Field assessments and data reviewed during the ICR mission showed that the average loan

size during the final year of the project was PKR22,700, slightly higher than the average loan size

at the time of the Gallup survey (PKR22,438). Given that the contributing conditions to income

increases amongst borrowers remained progressively stable from 2013, with marked

improvements in outreach and penetration overtime, the ICR mission determined that the income

changes observed then were likely sustained even at the project’s closure in 2016.

79. The ICR noted that the microcredit study represented about a third of total project

beneficiaries since microcredit was only provided to eligible beneficiaries whose poverty score

ranking was above a specific threshold (24 and above).

80. Asset transfers and skill-building under LEED component contributed to increasing

household incomes. By project end, 95,895 beneficiaries had received productive assets and about

397,000 individuals received skills and/or entrepreneurial training. All key output target indicators

related to productive assets and skills/enterprise training were substantially achieved and/or

exceeded at the close of the project. Major benefits accruing to beneficiaries of the LEED

component included increased household incomes from productive activities carried out with the

transferred assets and enhanced skills and employment opportunities through training and job

placement services.

81. Asset transfers were well targeted towards their intended beneficiaries. A recent study

conducted by the Poverty Group of the World Bank (Gine and Mansuri 2017) employed a

randomization design to test the effectiveness of institutional deepening, community investments

funds and inclusion mandates for women and the poor. The evaluation focused on one of PPAF’s

largest POs that accounted for 60% of the project coverage and sampled 158 villages (108

treatment and 50 control villages) across 5 districts. The evaluation found that income generating

assets were well targeted towards poor individuals and women from inclusion villages were more

likely to be beneficiaries of income generating assets.

82. A separate independent impact assessment of the SCAD program, more reflective of the

broader PPAF program and beneficiaries, was undertaken in 2014 (Sindh Development Studies

Centre). Forty-nine (49) Union Councils in four districts covering 2,250 households (1,816

treatment and 434 control) were surveyed using a combination of quantitative and qualitative

methods. The study found that the average annual income for treatment households that received

assets through livelihoods and enterprise development program (LEED) were higher than control

households by 19% (against a project end target of 20%). The average income of treatment

households was PKR110,467 per annum compared to PKR.92,891 observed in control households.

Alongside higher income levels, the study found that treatment households were able to save

approximately 12% of their income after expenditures. In control households, savings were found

to be negligible.

83. At the time of the SCAD impact assessment, project M&E data showed that 53,020

households received productive assets (51% were women) and 96,893 women were trained in

enterprise skills while 202,880 persons were provided with livelihood training. Further, over 90%

of project funds were disbursed at the time of that evaluation.

20

84. According to the beneficiary survey (2015), 94% of productive asset recipients were using

them productively, and average increase in income was around PKR4,500. Trainings and job

placement services enhanced skills and employment opportunities. 97% of trainees reported

applying the skills they learned through vocational training and realized an increase in monthly

income of at least 52% over the baseline. About 26,400 borrowers were productively and

sustainably using a total amount of PKR366 million as livelihood grant. Their income increase

was estimated to be about 20% with a repayment rate of 98%.

85. Relatedly, the Poverty Group study (Gine and Mansuri, 2017) found that treatment

households that participated in the project were more likely to own or be involved in a non-

agricultural business relative to control households and had a higher average monthly income from

non-agricultural business compared to control households. Treatment households earned

PKR440.40 more than control households. Households in treatment villages also reported higher

business ownership relative to households in control villages.

86. Based on the findings from the evaluations and supported by the performance of associated

component activities, the key attribute of increased incomes was fully achieved as targeted in PDO

2.

Access to basic social and economic services was improved, and contributed to enhancing

sustainable livelihoods through improved well-being of beneficiaries.

87. Based on the institutional assessment covering 446 community institutions facilitated by

13 POs in 13 districts across 4 provinces, 76% community institutions reported to have improved

access to municipal/local services.

88. Access to water (for production and drinking purposes) and other services improved

significantly. According to project data, 6,225 water and infrastructure sub-projects were initiated

and 6,196 (99%) completed by the end of the project. These services covered 479,737 households

in 9,139 COs through 7,169 schemes.

89. A majority of COs across the country prioritized irrigation schemes (30.5%) and drinking

water supply systems (28.9%), and roads and bridges (18.1%), followed by drainage and sanitation,

flood protection works, and technological innovation investments. The benefits emanating from

such improved access to infrastructure and services were wide-ranging: for irrigation: increased

incomes, reduced time for irrigation; for drinking water: reduction in water collection time,

improved personal hygiene and household health; and for roads and bridges: reduction in travel-

related expenses, reduced inputs, market and services access costs. Over 3.4 million people

benefited from improved access to these services, of which about 1.7 million (50%) were women.

21

90. An independent study on the impact of basic services and community physical

infrastructure (CPIs)10 carried out in 2015 (SEBCON) covered 86 infrastructure schemes in 40

Union Councils from 12 districts in all 4 provinces of the country. 1, 014 respondents were

included in the sample (762 Treatment; 252 Control). The assessment showed that 88% of

respondents obtained a stable supply of water throughout the year used for drinking, washing and

bathing. There were positive impacts on health (gains in health for women and children were 77%

and 74% respectively) and declines in water collection time for women. Improvements in

sanitation and drainage systems were found to contribute to declines in malaria and typhoid

incidences. With regard to roads and bridges, 18% of beneficiaries reported a positive impact on

their incomes, 37% reported reduced monthly household traveling expenses, 72% reported

improved accessibility in villages, 49% felt the schemes were effective in improving access to

health facilities and 46% reported positive impact on children’s access to better education services.

91. Access to health and education services improved considerably. Data obtained from the

project’s MIS indicates that the project supported 896 schools where 127,112 students were

enrolled by the end of the project, of which 57, 669 (45%) were girls. PPAF III supported 504

health facilities including 143 community and 361 government health facilities which have all

been handed over to the government or other stakeholders through partner organizations. A total

of 1,611 health workers and related staff were also trained and 12.6 million patients attended to,

including 65% women who have accessed health services.

92. Investments in community-prioritized infrastructure and services impacted on increasing

incomes, improving the quality of the service, and also development of human capital.

Infrastructure sub-projects such as irrigation schemes generated a number of benefits including

increase in incomes from increases in command area, cropping intensity and yield per acre.

Increases in income were reported by 75% of beneficiaries, as a result of which 58% of households

increased the quality and quantity of food consumed, 40% invested more in education and 39%

perceived an improved health status. With respect to health and education, 70%-93% of

respondents in the beneficiary survey (2015) expressed satisfaction with education and health care

services provided and 40% perceived an improvement in the quality of service. According to PO

records, education interventions contributed to the completion of 10,336 students at primary level,

6,261 at middle level and 3,447 at matric level from 2009, significantly enhancing human capital

development. 55% of total students that had completed the different levels were recorded to be

girls.

93. Community institutions’ strengthened capacity contributed to improving access to sub-

national services and private service providers. Community institutions were effective platforms

for encouraging participation of target groups, inclusion of women and poor, implementation of

project activities and lobbying with Government for improved services and establishing links with

the private sector. The institutional assessment (World in Consulting Limited, 2016) found that

76% of community institutions had established linkages and were accessing services from both

10 Impact Assessment of PPAF’s Basic Services and Community Physical Infrastructure (CPI) Schemes, SEBCON, September

2015

22

government and/or municipal and private service providers. The frequency of interactions was

relatively higher with private service providers than with government/municipal services.

94. Similar trends were observed in the Poverty Group’s evaluation (Gine and Mansuri 2017)

where linkages between community institutions and the government had strengthened over time.

The evaluation found that the percentage of community institution members who organized

members to collectively approach government officials for village related problems doubled from

26% in 2013 to 51% at the end of the project. 45% of community institution members helped the

government to better target beneficiaries for government programs compared to 26% in 2013.

Close to 50% of the community institutions took action to manage garbage disposal in the village,

reduce defecation or resolve disputes among villagers.

95. Another key outcome was the manner in which the COs were able to finance the

infrastructure and services sub-projects. Against the 30% target, 24% of the COs accessed other

sources of funding for infrastructure/local services based on the findings of an independent

research study. The study was jointly carried out by Lahore School of Economics, Oxford

University and Duke University to study the activities of LSOs and how they could be better

supported to represent their communities and expand and improve their activities. LSOs were

found to have generated 29% of their funds from donors, 10% from Government sources, and 4%

from member contributions.

96. Based on the above, the project target for (women’s) access to infrastructure, health and

education services (40%) was exceeded as well as other target indicators relating to rates of return

for sub-projects, and the 76% achievement of the key PDO attribute relating to access to services

was about 2.5 times the 33% project target.

97. Overall, all three PDO level outcome indicators were fully achieved and/or exceeded with

significant spillover effects. The achievements were drawn from several assessments11 listed in

Annex 9.

3.3 Efficiency

Rating: Substantial

98. Background and approach: At the time of appraisal, economic and financial analyses for

the various PPAF-III components were not conducted on account of the demand-driven nature of

the proposed interventions. Instead, the PAD referred to the positive results of an EFA undertaken

11 The analysis draws largely from a number of independent assessments that include: (i) Assessment of Outcomes from PPAF

Micro-financing, Phase-IV. Gallup Pakistan. May 2013 (ii) Impact Evaluation SCAD Integrated Project. Sindh Development

Studies Centre, University of Sindh Jamshoro. 2014; (iii) Assessment of 1st and 2nd Tier Community Institutions of the Poor.

World in Consulting. March 2016; (iv) Employment Dynamics in Rural Pakistan: The Employment Impacts of Pakistan Poverty

Alleviation Fund III. Economic Sector Work, World Bank. 2017; (v) Impact Assessment of PPAF III Communities and Skills

Training Programs. AASA Consulting. December 2015; (vi) Social Mobilization for Empowerment (More) Project: End line

evaluation of PPAF III. Gine and Mansuri (2017); (vii) Impact Assessment of PPAF’s Basic Services and Community Physical

Infrastructure (CPI) Schemes. SEBCON. September 2015. In addition to a number of other independent impact and qualitative

assessments (see attached references), MIS data was used to further substantiate the findings.

23

for CPI interventions under PPAF-II and to the outcomes of the Gallup-III survey, which reported

increases in incomes for credit beneficiaries. The PAD also cited other studies to justify the

efficiency and effectiveness of demand driven projects in general. The economic and financial

analysis for this ICR follows a different methodology for each component. It uses the “value for

money” assessments made by the Project Completion Report team for the Social Mobilization and

Institution Building component, the Livelihoods Employment and Enterprise Development

(LEED) component and Health and Education sub-components. For the Water and Infrastructure

subcomponent, the analysis builds on primary data collected through Focus Group Discussions for

a Third Party Assessment 12 and re-calculates key economic indicators. The loan and grant

elements of the Microcredit component are assessed based on MIS data, information from Gallup

IV and illustrative models prepared with data collected during the field visits. Key results are

summarized in this section. Further details can be consulted in Annex 3 of this ICRR.

Returns to Investments

Interventions BCR FIRR (%) EIRR (%) NPV ($mn)

Institutional Building 2.99 58 30.85

Livelihoods activities 5.35 138* 180

Irrigation Schemes 36 - 50 36 – 52 0.7 - 2.1

Health Services 1.30 73 2.1

School Services 1.31 22 4.0 Source: ICRR EFA Computations

99. Returns on Institutional Building: Community Institutions have successfully realized the

main objective of establishing linkages with local governments, markets and other development

programs, especially at the CO and LSO levels. As a result, CO members have benefited from

additional incomes through market linkages and from investments in their communities through

resources leveraged from government and donors. Overall monetary benefits are estimated at

about USD 100 million and the total investment in the component was USD 33.7 million, which

translates into a Benefit Cost Ratio of 2.99. Such investments have led to an Internal Rate of Return

of 58 percent and a Net Present Value of USD 30.85 million. The high efficiency of the

implementation modality is demonstrated by the fact that overall resources channeled through COs

for the implementation of livelihood, community infrastructure and social sector programs are five

times higher than costs of establishing a community organization and sustaining it under PPAF III

for six years (USD 2,500 channeled through CO on average vs. a cost of USD 515 per CO)13. An

analysis of the financial sustainability of LSOs concludes that these institutions rely largely on

12 Impact Assessment of PPAF’s Basic Services and Community Physical Infrastructure (CPI) schemes. SEBCON, September

2015.

* The benefit streams were calculated on the basis of a number of people who were provided different types of assets and vocational

and technical training under PPAF-III. Only those trainings were used in the analysis which were expected to lead to an increase

in income such as technical and vocational trainings; The increase in income for the recipients of the different types of assets and

training was based on data collected through a Third Party survey of 2000 beneficiaries and supplemented by focused data collection

from the field; Benefits accruing to the CLF administered by community institutions were accounted for in the analysis of

institutional building and not included in the analysis of livelihoods activities to avoid double counting; Entire cost of the livelihoods

component was used to calculate the net incremental income, NPV and EIRR 13 Result of the Economic and Financial analysis carried out for the Project Completion Report.

24

external financing sources, predominantly from POs, and that a withdrawal of PO funding would

have more repercussions on viability of larger LSO, which have been found to have a less

diversified pool of income than smaller LSOs14.

100. Returns on Livelihoods activities: The cost benefit analysis of the Livelihoods

Employment and Enterprise Development (LEED) component focuses on the benefits accruing to

poor and ultra-poor households as a result of receiving productive assets and technical training.

Incremental incomes per month range between USD 43 and USD 107 for productive asset

recipients and average USD 70 monthly for technical and vocational trainees 15 . Aggregated

increases in incomes add up to about USD 455 million, against USD 85 million for component

implementation costs, which leads to an Internal Rate of Return of 138 percent and a Net Present

Value of USD 180 million. The delivery modality of the LEED component is deemed to be more

efficient than similar programs 16 implemented by the GoP as transaction costs for both the

implementer and the beneficiary are limited to a one-time transaction. PPAF is also more cost-

effective as the income generated by its beneficiaries is estimated to double the cash amount

transferred by BISP. The various platforms established by the PPAF to ensure the sustainability of

project benefits (namely NyKs, Digital Hubs, Production Centres and Loan Centres) have shown

a moderately satisfactory performance during its short life (2-3 years), except for the Loan Centres,

which have efficiently disbursed PKR 365.38 million with a cost of only PKR 41.4 million and

achieved loan recovery rates of 98 percent17.

101. Returns on Microfinance activities: The PPAF-III micro-credit component has effectively

reached 588,000 clients of which 379,884 were first-time users of formal credit. Based on the

number of loans extended by sector and the average incremental benefits experienced by

borrowers 18 , an aggregated incremental income from productive investments in agriculture,

livestock and various enterprises can be roughly estimated and PKR 2.2 billion. The analysis

shows that for every 1 PKR borrowed, additional 0.20 PKR were generated. These figures are in

line with the Gallup IV results, and provides further evidence that the micro-finance component

has effectively contributed to the achievement of Project Development Objective, which

established a target of 20 percent increase in household incomes. The efficiency of the microcredit

component is evidenced by the balance between grant and credit: for every rupee provided as grant

for capacity building activities of 31 POs, these organizations have been able to provide loans

worth PKR 11.9 billion to the borrowers 19 . An individual assessment of implementing POs

undertaken by PPAF found all the POs except two have an Operational Self-Sustainability Ratio

(OSS) greater than 100 percent, meaning that revenues are higher than their delivery costs. The

sustainability of microfinance operations will depend on the ability of the micro-finance spin-off

of PPAF (PMIC) to attract private funds at a large scale, as well as on the capacity of POs to

maintain high repayment rates (currently at 98 percent), innovate and scale-up cost-effective

delivery mechanisms as they reach out to more underserved areas.

14 Lahore School of Economics, 2015. 15 User Beneficiary Assessment Survey, Apex Consulting 2014 and data collected from the field. 16 Benazir Income Support Program (BISP). 17 Project Completion Report. 18 Gallup (2013). PPAF Micro Credit Financing: Assessment of Outcomes. 19 Project Completion Report

25

102. Returns on Community Infrastructure Projects: The economic and financial analysis of

the Water and Infrastructure component builds on primary data collected through Focus Group

Discussions in 85 schemes across four provinces (Baluchistan. KP, Punjab and Sindh). Financial

and Economic Rates of Returns for irrigation schemes in all four provinces are the higher than

EIRRs for other infrastructure types. Irrigation FIRRs range between a 39 percent and 50 percent

and EIRRs between 36 percent-52 percent, with highest values estimated for Punjab and lowest

for Baluchistan. Drainage and sanitation schemes had the lowest EIRRs, between 19 percent and

34 percent. Rates of Return for drinking water supply systems and roads and bridges are well above

the opportunity cost of capital. The sustainability of the schemes was assessed by calculating O&M

costs and scheme replacement costs as a percentage of the expected economic benefits, at the

household level. Results vary across scheme types and provinces but indicate a higher economic

burden for beneficiaries of drinking water supply systems compared to potential benefits.

103. Returns on health and education interventions: The “value for money” analysis of health

and education interventions is based on the following parameters: (i) savings in transportation

costs and the opportunity costs of lost working days due to illnesses, for beneficiaries of health

facilities, and (ii) wage premiums as a result of higher education for both male and female students

who graduate at different levels, plus monetarized health benefits for a poor households in which

women are educated up to the middle and high school level. The analysis shows a 73 percent EIRR

and a Benefit Costs Ratio of 1.30 for community-based health facilities and a 22 percent EIRR and

1.31 Benefit Costs ratio for community-managed schools. A large majority of community-based

facilities are currently being supported by POs with their own resources, while a very limited

number have been taken up by government or private sector as envisaged at appraisal. Fee systems

were established in a few schools and health facilities. However, evidence from field visits and

internal/external assessments suggest that the funds generated through fees fall considerably short

in covering operating costs (further details in Annex 3). PPAF is currently financing the annual

operating expenses of 86 schools at a total cost of PKR 53.5 million per year, out of its own funds.

104. Institutional Efficiency: The institutional efficiency of the PPAF is demonstrated by the

fact that the project was able to achieve all its targets utilizing its available resources. Funds were

fully utilized and many appraisal targets were exceeded by means of re-investing savings and

exchange rate gains. In addition, PPAF responded promptly to implementation challenges by re-

allocating resources across components/activities when required. The efficiency of the

implementation model was gauged by (i) the capacity of community institutions to deliver the

project activities managing funds which are worth five times their set-up and support costs20; (ii)

the limited transaction costs for implementers and beneficiaries of livelihood activities, compared

to similar government programs21; (iii) the balance between grant and credit: for every rupee

invested in capacity building, POs have been able to extend loans worth 11.9 RS to the borrowers22;

(iv) the lower costs and better quality of community-built infrastructure schemes compared those

20 PCR and PPAF MIS 21 Benazir Income Support Programme (BISP). 22 PCR and PPAF MIS.

26

constructed by the public sector23, and (iv) the positive outcomes of the value for money analysis

undertaken for community-based health and education facilities24.

3.4 Justification of Overall Outcome Rating

Rating: Satisfactory

105. Given that the relevance of objectives, design and implementation is high; achievement of

project development objectives is substantial; and efficiency is rated as substantial, the overall

outcome rating is assessed to be Satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

106. Graduation of households from lower to higher categories of the Poverty Score Card

(PSC): An internal study that used 100 percent census of 4 Union Councils (one form each

province) showed that 26 percent of households that were in the lowest categories of the PSC

moved to higher PSC levels. The result is supported by similar trends observed in an independent

impact study (2015) conducted in Balochistan, where significant declines in poverty were observed

in the target UCs of Kharan and Pishin districts. A comparison of the PSC of households from

2012 and 2015 indicated that more than half of the poor households (54 percent) had experienced

poverty graduation25.

107. Women’s participation in decision making processes: In terms of the impact on women,

the findings of an assessment26 of the first and second tier organizations found that 89.4 percent of

CO members confirmed that women are more actively participating in the decision making process

with similar frequency reported by male COs and female COs. At the LSO level, women’s

representation in the Executive Board varies considerably by province. Sindh and Punjab have a

much better record in this regard compared with Balochistan and KP, which show the lowest level

of participation. However, despite the low level of participation in the higher tier institutions, there

appeared to be an enhancement of women’s role regarding key household decisions like enrolment

in schools, marriage of children and family planning, with a high percentage of CO members

reporting that making a decision on child education was being made jointly by both parents (79.2

percent) as well as decisions regarding the marriage of children (81.1 percent) and family planning

(73 percent) with much greater control of household income (58.6 percent) with women.

23Bottom Up or Top Down? Participation and the Provision of Local Public Goods”, Ghazala Mansuri, The World Bank, and

Immediate Impact Assessment Report of MGPO Community Physical Infrastructure Projects Funded by PPAF”, Mountain and

Glacier Protection Organization, September 2014. 24 EFA for PCR and ICRR 25 In Oct 2015, BRSP conducted an Impact Study (Graduation Survey) Report. The study was conducted by taking a random

sample of 334 households selected among 1718 target HHs in 5 union councils of district Kharan, Balochistan.

Impact Study: Graduation Survey Report (District Kharan). Livelihood Enhancement and Protection Project. Balochistan Rural

Support Program. 26 Assessment of 1st and 2nd Tier Community Institutions of the Poor. World in Consulting (PVT) Limited. March 2016

27

108. Enhancing civic engagement: PPAF III made a meaningful impact on mainstreaming men

and women into civic life. For example, awareness campaigns on social inclusion triggered the

need of registering beneficiaries with the national database system. As a result, thousands of

community members were provided access to National Database and Registration Authority

(NADRA) and issued computerized national identity cards (CNICs). Provision of CNICs

facilitated the physical mobility of individuals who previously could not move due to strict security

checks put in place within and across district frontiers. Moreover, after obtaining their legal

identity, beneficiaries reported increased access to government facilities as well as securing the

right to vote among other benefits.

(b) Institutional Change/Strengthening

109. Community Institutions: Community participation through active participation in financial

and labor contribution, financial management and the procurement of building materials not only

improved the efficiency of expenditures, but ensured stronger community ownership of

community infrastructure projects and empowered participating communities. Communities at the

different tiers have been strengthened to not only implement project interventions but have also

displayed capability to be utilized for interventions by the government or other donor agencies.

LSOs have an increased capacity to sustain in the long run as some have registered under formal

Government laws (Social Welfare Act (1961) and Societies Registration Act) and attempted to

generate resources from other sources as well. An analysis of the registration of the LSOs showed

that 39 percent are have obtained formal registration.

110. Partner Organizations: PPAF’s technical support to its implementing partners has

contributed to their transformation from donor dependent charity driven organizations to MFIs

with clear business plans to become sustainable development partners. There has been a significant

shift in organizational culture, appraisal criteria, governance structure, staffing pattern, financial

management and audit systems, monitoring and evaluation arrangements. Many of the MFIs

continued on their path of institutional development through the opportunity to invest in improved

management information systems, product innovations, links with the private sector and use of the

financial eco-systems offered by the branchless banking platforms to improve operational

efficiency and convenience for clients. PPAF also enforced inclusion mandates in its partnerships

with POs by requiring that the Board of Directors of the POs improve the representation of

technically qualified women. As a result, the proportion of women in the PO Governance

structures has increased to 32 percent. PPAF, itself, has attained 50 percent female representation

in the organization’s management structure.

(c) Other Unintended Outcomes and Impacts (positive or negative)

111. Emergence of political leaders amongst community institution office bearers: Social

mobilization and capacity building efforts have resulted in some beneficiary assuming leadership

roles not only within their respective community organizations, but also in public offices after

participating in the local body election. During recently held local elections, 1347 community

members participated and at least 62 percent of the candidates won seats. Among these, 52 women

representatives were also elected to public office. While there have been discussions and

reservations on the dual role that these members play, others argue that presence of such leaders

within the communities increases their strength to lobby with the government on behalf of the

28

populace. Evidence from the field showed a number of infrastructure projects that were initiated

in target UCs because of the efforts of the elected representatives. PPAF is cognizant of the

potential downside of this outcome and was in the process of developing guidelines that would

define the parameters for engagement of members with dual roles.

112. PPAF-III’s role in the establishment of Microfinance Credit Information Bureau (MF-

CIB): The organization partnered the Pakistan Microfinance Network, the national association of

MFPs, to establish the Microfinance Credit Information Bureau (MF-CIB) in order to help mitigate

risk that was prevalent due to over-indebtedness in the industry. MF-CIB was launched nationally

in mid-2012, with the aim of facilitating MF Partners in managing their credit risk and assessing

the true credit-worthiness of existing and prospective micro-credit clients. It offered POs flexibility

and the ability to offer more favorable rates to good borrowers. MF-CIB developed into a reliable

risk mitigation tool and was used extensively by MF Partners in their client credit assessments.

113. Employment generation effects from PPAF’s interventions: Based on the analysis from

the paper Employment Dynamics in Rural Pakistan: The Employment Impacts of Pakistan Poverty

Alleviation Fund III27, it is estimated that PPAF III activities have directly and indirectly supported

substantial income gain to the beneficiaries. Based on ex-post data, a conservative estimate

suggests that the total income change is equivalent to generating about 211,000 jobs, on an annual

basis. During the six-year period of the project, approximately a total 1.3 million jobs have been

supported. This is suggestive of a significant employment generation effect on account of the

activities carried out by PPAF III. The estimated annual employment represents about 0.5 percent

of rural employment in Pakistan.

114. Product Innovations from microfinance interventions: PPAF-III supported development

of innovative products and delivery mechanisms among MFIs in order to improve outreach in rural

and less penetrated area: (i) Branchless Banking - This resulted in reduced costs (10 percent) in

service delivery, greater convenience for clients through reduced travel costs, increased access and

time flexibility; (ii) Value Chain Development - Women were able to build-on the VC project

support and further develop their skills that added additional income to their households. Working

together as a group, borrowing and sharing machinery helped establish these women as

independent income-earners; (iii) Micro-insurance - activities introduced were intended to

demonstrate the market potential in poorer rural areas, and to impart knowledge about agriculture

so private sector could better understand agriculture and progressively devote more resources to

the sector.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

115. This report is based on the Beneficiaries Assessment Survey (2014) carried out in 21

districts across Pakistan where PPAF interventions were implemented. A total of 2000

27Leao, Izabela; Ahmed, Mansur; Kar, Anuja. 2016. Employment Dynamics in Rural Pakistan: the Employment Impacts of

Pakistan Poverty Alleviation Fund III (PPAF III). This paper is a product of the ongoing Economic and Sector Work (ESW),

namely, Jobs from Agriculture and Rural Development Operations in Afghanistan (P155031).

29

households/beneficiaries were surveyed to collect information about six major components of the

PPAF-III. A summary of the findings are shared below. Details are provided in Annex 5

• Using before and after the intervention technique, it was found that average household

incomes (size 6.7 persons) and savings increased.

• Simple percentage growth analysis showed that on average the income of relatively

poor household increased by around 24 percent, whereas the same increase was around

17 percent for relatively non-poor households

• Overall 91 percent respondents said they were actively involved in the community

activities and social mobilization directly or indirectly.

• For the Livelihood Enhancement and Protection (LEP), the overall beneficiary

satisfaction level was 95 percent. Beneficiaries (94 percent) utilized assets for income

generation and 89 percent confirmed assets were helpful in increasing their incomes. The

estimated average increase in income was PKR.4,500 per month.

• In the microcredit component 70 percent of respondents were women. Around half

of these women were illiterate and 41 percent had educational qualifications from primary

to matriculation.

• A large majority 92 percent termed credit beneficial for them. The average amount

of credit (based on all microcredit beneficiaries) was around PKR.24,800. The average

interest rate charged on microcredit is 20 percent, and the average net income derived was

PKR.30,900.

• 75 percent respondents reported lesser incidence of waterborne diseases in children

and other members of household. Further 83 percent beneficiaries were very satisfied

with sanitation facilities.

• Under the irrigation schemes, on average PKR.780 per crop were paid as charges for

irrigation. Most beneficiaries affirmed increase in the crop yield, especially in rupee

terms.

• In case of link roads/bridges, 93 percent respondents said the facility helped them save

one to three hours daily. Overall 64 percent beneficiaries said because of link

roads/bridges, the prices of imported goods have decreased. Similarly, collectively 60

percent beneficiaries are benefitting from the linkages.

• Overall 83 percent respondents expressed satisfaction with health facilities, which

included pre- and post-natal services, family planning, pharmacy, vaccination for children

under one year old.

• A majority of respondents (93 percent) expressed satisfaction with the education

interventions, saying facilities such as books, uniforms, stationery etc. were provided free

of cost.

4. Assessment of Risk to Development Outcome

Rating: Moderate

116. LSOs are emerging as a critical link to local authorities for accessing basic services on

behalf of communities, however, their weak diversification of financial sources could

compromise their ability to effectively engage at the sub-national level. LSOs rely heavily on

external financing sources, predominantly on POs and to a lesser extent on funds from international

30

donors and the government. The average revenue generated by LSO from different sources in

2013/2014 was PKR 580,000, with a substantial difference across regions. Financial resources

were extremely concentrated within a few LSOs at the time of start-up and remain concentrated

today, to a lesser extent. A withdrawal of PO funding would have more repercussions on the

financial viability of LSOs in the top quintile as they have less diversified sources of income

compared to smaller POs in the bottom quintile. PPAF recognized this risk and commissioned a

number of studies to identify potential strategies for long term sustainability. The studies were not

completed at the time of the ICR, however, PPAF continued to support LSOs in strengthening

their internal management systems, M&E, procurement and financial management. PPAF strongly

advocated for formal registration of LSOs to enable them access external resources and 39 percent

of LSOs were formally registered at the time of ICR completion and advocacy work on registration

has continued.

117. Productive centers are specialized platforms established to ensure sustainability of

project benefits through affordable services to beneficiaries. However, their sustainability is

contingent upon an effective management and oversight by the LSO to which they are linked

and their capacity to generate enough revenues to finance operations without PPAF’s support.

At the moment, PPAF records show that 50 percent of the Digital Hubs make an average monthly

income of about PKR 4,000, which is barely enough to cover salary costs, while 26 percent have

had minimum or no profits since their launch. According to a recent assessment28, out of the 80

NyK established, only 14 have been rated as “excellent” based on the services provided and

revenue generated, while 25 were graded “good” and a majority fell under less satisfactory

categories. Sustainability of farm and non-farm support platforms (Production Centers and

Handicraft Centers) in the long run will be subject to their capacity to generate profits for its

members. However, about 44 percent of members of the Handicraft Centers report not being aware

of the financial situation of the centers, and only 19 percent of the centers reported making profits

higher than 5,000 PKR/month. The low returns are linked to the late initiation of these platforms

(a year and a half prior to project closure) that did not provide sufficient incubation period for

interventions to fully mature. Additional capacity building support will be required over the

medium term to support these structures to reach their potential. PPAF recently formalized a

partnership with FAO for the latter to provide ongoing technical support on developing and

strengthening livelihood interventions in project areas.

118. Creation of a separate micro-finance entity (PMIC) may deviate focus from servicing

the poor in favor of more credit worthy clients in order to meet profit mandates. There is a risk

that PMIC’s profit oriented focus could come at the expense of institutional building support,

industry supervisory role and promotion of innovation and initiatives that POs benefited from

PPAF. The double bottom-line that PPAF-III helped reinforce among partners, and support for

microfinance coverage into under-served rural areas may become of lesser importance for PMIC

as focus shifts to more profitable urban areas to the detriment of rural areas. PPAF is aware of

these concerns and as a major shareholder in PMIC, has ensured that the company’s mission

includes continued focus on the rural poor. It has taken further steps to include pro-poor voices to

the company’s board to ensure that its policy formulation reflects its pro-poor mandate.

28 Assessment of LEED platforms. LEED Unit - PPAF, April 2016.

31

119. Costs associated with health and education facilities were envisaged to be met through

student and patient fees, community support and community institutions’ productive linkages

with the government departments, other development partners and the corporate sector,

however, there is a risk that communities’ inability to afford the fees could affect the long term

viability of these facilities. Evidence from field visits suggests that the poorest communities are

not able to afford schools fees at all, whereas information provided by PPAF’s Health and

Education Unit shows that, in those communities where a fee system was actually put in place, the

income generated covers only about 15 percent of the average running costs, estimated at PKR

24,000/month including teachers’ salaries and other expenses. Average costs of operations and

maintenance for community-based health facilities are not available. However, according to the

latest user beneficiary survey, 64 percent of beneficiaries reported paying no fees when using

health facilities, while the average fee for those centers that charge for their services was as little

as PKR 12 per visit on average.

120. Nevertheless, all the all the community schools and health centers are still functioning. A

large majority of community-based facilities are being supported by POs with their own resources

and some of them have been handed-over to private entrepreneurs and being sustained through

service charges. PPAF is currently covering the annual operating expenses of 86 schools at a total

cost of PKR 53.5 million per year. PPAF is allowed to invest up to 65 percent of its accumulated

surplus in grant-based interventions and the balance of the Grant Fund as of June 2016 stands at

PKR 7.5 billion, which seems to indicate that PPAF can generate enough resources to continue

supporting these 86 schools in a sustainable manner without additional donor or government

financing.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry


121. The project design process was a comprehensive, inclusive and consensus-building

exercise that built on predecessor projects and similar projects within the region. The choice of

components was generally appropriate and relevant. With the exception of livelihoods, health and

education initiatives had previously been piloted and were planned to scale up in the new operation.

The design incorporated a great level of flexibility for innovations and pilots and had ample

intensive technical assistance alongside sharing and learning processes. Important provisions were

incorporated into the design to further develop and strengthen monitoring systems at all levels of

project intervention.

(b) Quality of Supervision

Rating: Moderately Satisfactory

122. The Bank team carried out regular supervision missions and had a fairly good mix of

technical specialists to provide guidance to the implementing agency. The TTL’s presence in-

32

country did ensure that issues requiring urgent attention were handled in real time with more

frequent interaction and follow up with the client. However, more attention could have been paid

to ensuring that health and education specialists were consistently part of the core supervision team

as this would have led to a timely resolution to the lack of consensus around the operational

approach to implementing those interventions. While the problem was identified much earlier in

the project cycle, it was only towards the latter end of implementation that agreements were

reached on the strategic direction of these interventions. Similarly, the restructuring of the

livelihoods component came at a very late stage, even when the challenges of livelihood

integration has been recognized much earlier on. The delays in action impacted implementation

and subsequent results. Even so, the task team was proactive in addressing the most major concerns

raised, instituting a performance management review and independent procurement assessment

and ensuring that the implementing agency followed through on recommendations29. The team’s

strategic approach and prioritization of issues contributed to achieving impressive results despite

the multi-sectoral complexity of the project.

(c) Justification of Rating for Overall Bank Performance


123. With a satisfactory rating for quality at entry and moderately satisfactory for quality of

supervision, the overall Bank performance is rated as Moderately Satisfactory.

5.2 Borrower Performance

(a) Government Performance


124. The Government of Pakistan (GoP) was fully committed to supporting PPAF in meeting

its commitments to the project. GoP consistently showed confidence in PPAF’s ability to deliver

government programs by channeling key poverty reduction programs through the organization.

This elevated PPAF’s status as a premier vehicle for demonstrating and delivering poverty

reduction programs. The Government turned to PPAF to implement the Prime Minister’s Interest

Free Loan scheme and key disaster response and recovery programs. The Government was

extremely supportive of PPAF’s efforts to revolutionize the micro finance sector of the country

evidenced by the Finance Minister’s approval for the establishment of the Pakistan Micro

Investment Company (PMIC).

(b) Implementing Agency or Agencies Performance


29 The Performance Management Review did strain relations between the task team and the implementing agency, however, both

sides maintained a professional approach to their working relationship and did not allow their dissention to affect the overall

implementation of the program.

33

125. PPAF delivered on its mandate as demonstrated by the project outcomes and results

indicators. As an institution, it instituted a strategic review and reorganization to address

implementation issues as they emerged and to increase the sustainability of PPAF at the end of the

project implementation period. The organization demonstrated responsiveness to addressing issues

and followed through on necessary changes. It strengthened its governance system by adopting

and remaining compliant with codes of conduct regulated by the Securities and Exchange

Commission of Pakistan. Its financial management system was consistently rated satisfactory

throughout the project’s life, a notable achievement given the nature of risks associated with its

implementation approach. However, in spite of satisfactory compliance with the Independent Post-

Procurement Review, there were several gaps, weaknesses and violations of the Operations

Manuals agreed with the Bank found in the third party Management Performance Review.

126. PPAF’s Board approved the setup of the new national microfinance investment fund. PPAF

management worked diligently to hire external consultants to facilitate the process of negotiation

amongst stakeholders, design business plans, and devise the investment strategy and organizational

structure for the new entity (PMIC). PPAF, in coordination with stakeholders and consultants, took

all the necessary steps to complete all legal and procedural formalities for the new company. The

efforts resulted in the establishment and launch of the Pakistan Micro Investment Company

(PMIC) which will contribute to the growth of a nationwide microfinance sector and support the

Government’s strategy to increase commercial finance to the sector.

(c) Justification of Rating for Overall Borrower Performance


127. With a satisfactory rating for Government Performance and moderately satisfactory rating

for the Implementing Agency, the overall borrower performance is rated as Moderately

Satisfactory.

6. Lessons Learned

6.1 Lessons on Social Mobilization and Institutional Building

• Effective inclusion of women in a project can be achieved by setting targets, gathering and

actively monitoring sex-disaggregated data. A nuanced approach is required to actively engage

women customized to specific contexts taking factors such as mobility, technical and financial

resources that would enable them to effectively function.

• LSOs have potential to play a vital role in facilitating and sustaining access to basic services

on behalf of communities through linkages with the local authorities but need to be further

strengthened in their organizational and financial management capacity. Acquiring legal

registration will be a key factor in their long term sustainability.

• The Union Council Development Plan was an effective tool for developing a common vision

at the local level and galvanizing communities into action. Given the bottom up process of

identifying needs, the plan is a true reflection of real priority needs by communities and could

be a basis for future collaboration with local government authorities. If mainstreamed into local

34

government budget processing, it has potential to ensure more efficient use of resources that

are targeted to meet the real priority needs of communities.

6.2 Lessons on Livelihood and Enterprise Development

• Livelihood development and innovative access to finance programs can thrive in fragile

conflict violent affected areas when approach is flexible to adapt to unique situations. While

Pakistan is not considered as FCV, it has pockets (in KP and Baluchistan) where FCV issues

apply. The flexibility embedded in the PPAF approach enabled POs to be innovative and

creative in the types of programs and financial products offered in fragile conflict areas.

• Investments in community platforms during periods of peace generally provide positive returns

in times of crisis. PPAF’s service delivery mechanism took a multi-sectoral approach resulting

in a community based model for delivery of microfinance, livelihoods development, health,

sanitation and education interventions that could lend itself to work in fragile, conflict and

violence affected areas. PPAF ably rose to the occasion in times of natural disasters as was the

case between 2010 and 2014, when PPAF used its own funds to support communities affected

by massive floods, providing relief to 171,000 households in over 180 Union Councils across

the country

• The facilitation process for productive platforms should be well aligned with the core business

strengths of the POs supporting them in order to enhance the effectiveness and development

of the groups. Misalignment would likely diminish group’s capacities for growth and heighten

exposure to risk of failure and dissolution.

• A saturation approach towards poverty reduction requires continued innovation in methods of

delivery. Building the capacity of hard to reach localities through the training of young people

like Community Resource Persons can be a successful strategy to engage youth who may

otherwise be marginalized and create a new and energetic network of development actors at

the community level to act as agents of change.

6.3 Lessons on Microfinance

• PPAF’s support to a large range of MFIs and the balance it provided between its growth

objectives and promotion of diversity helped in the overall growth and development of the

sector. PPAF’s role as an advocate for the smaller MFIs was instrumental in enhancing the

sustainability of the microfinance sector.

• PPAF played a positive role in commercializing the industry to try and attract commercial

funding for microfinance. As the MF sector achieved scale and expanded outreach, the share

of PPAF-III funding decreased. A variety of institutions entered the industry or were exploring

options, as ITC technologies facilitated outreach and contributed to reducing costs. New

financial products developed under the microfinance component were instrumental in further

promoting private sector participation in the rural sector.

• Prime Minister’s Interest Free Loan scheme was aimed at including an additional one million

microfinance borrowers in areas where conventional microfinance had little penetration. If not

properly managed, the scheme had potential to significantly overlap the functions of POs

35

between target markets for zero interest loans and their existing client base operating at market

rates. The potential for distortion was real with dire consequences for sustaining the industry

and promoting access to commercial finance. PPAF’s model neutral approach that enabled

POs to be innovative could have been used to leverage different approaches of graduating

borrowers of interest free loans to conventional microfinance customers. .

6.4 Lessons on Infrastructure, Health and Education

• Active participation in financial and labor contribution, financial management and the

procurement of construction materials ensures strong community ownership of infrastructure

projects and empowers participating communities. However, the approach has to be tailored

to specific contexts and may not necessarily be applicable to a fragile, conflict and violence

afflicted area. In those cases, relaxing the condition of upfront cash contribution for remote

and poor communities enabled disadvantaged groups to also benefit from infrastructure

schemes.

• Investments in health and education are long term commitments that require a longer term

strategy involving close collaboration with the respective line departments/ministries. Such

collaborations would provide the necessary flexibility to allow PPAF develop an effective exit

strategy that is sustainable.

6.5 Lesson on Bank’s strategic engagement

• Economic development and poverty reduction are long term commitments and not a one-time

investment or occurrence. In the absence of consistent support and funding of the PPAF

program (including previous investments), the results achieved through PPAF-III interventions

would not have been possible. The Bank’s support of PPAF served as a catalyst for attracting

other donor partners such as the Italian Trust Fund, IFAD, USAID, KfW and DFID.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies

128. PPAF’s communication indicating their disagreement with the rating of Moderately

Satisfactory for Overall Borrower Performance (OBP) is provided as Annex 7 (B). A “Moderately

Satisfactory” rating conveys a positive achievement of the project development objectives, despite

issues with governance and management oversight that were encountered during implementation.

129. The rating system in ICRRs has six levels: Highly Satisfactory; Satisfactory; Moderately

Satisfactory; Moderately Unsatisfactory; Unsatisfactory; and Highly Unsatisfactory. The primary

point of contention for PPAF is that the rating for OBP was revised from Satisfactory to

Moderately Satisfactory. OBP has two components: Government Performance (rated Satisfactory)

and Implementing Agency (rated Moderately Satisfactory). In case of different scores for these

two components, the OBP is assigned the lower score (in this case, Moderately Satisfactory).

130. The implementing agency score was lowered from Satisfactory to Moderately Satisfactory

during the Bank’s final internal review process. This was in line with appropriately documenting

the plusses and minuses of project implementation over the entire course of the project cycle. The

ICRR data sheet indicated a number of “Moderately Satisfactory” ratings for the following

36

shortcomings observed during implementation support missions: (a) delayed operationalization

of the monitoring system which, while providing an overall picture of PPAF’s work, was unable

to produce credible quarterly reports that showed project progress against specific output and

outcome indicators in an integrated manner until Mid-Term Review (three years after

effectiveness); and (b) an environmental and social management unit not becoming operational

until MTR. With time, PPAF worked to overcome these challenges as reflected in the ICRR report.

131. There were two significant issues of concern to the Bank, which led to the review of

PPAF’s procurement activities and an assessment of its management performance. The

Independent Post-Procurement Review identified discrepancies in the procurement process and

deviations from the Bank’s procurement guidelines, including concerns over consultant selection

process and fees. Earlier in implementation, PPAF took a decision to replace approved operational

manuals and Partner Organization selection process, without seeking Bank clearance, which ran

counter to the project legal agreement signed by the Government. Although recommendations that

resulted from the Independent Post-Procurement were followed through by the implementing

agency, several lapses and weaknesses identified in the Performance Management Review were

not given due attention.

132. The Bank team took the necessary precautionary and remediation measures, including

specifically the two independent reviews, which is consistent with the Bank’s fiduciary

responsibility for IDA credits. The measures taken by PPAF to resolve many of the issues and

deficiencies identified did strengthen the organization in some measure – evidence of which

includes the procurement award that it ultimately won. However, unresolved issues remained

regarding the Management Performance Review and in the Bank’s assessment, a Moderately

Satisfactory performance is fully justified.

(b) Cofinanciers

N/A

(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

N/A

37

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD millions)

Actual/Latest

Estimate (USD

millions)

Percentage of

Appraisal

Social Mobilization and Institutional

Building 38.50 33.95 88.82

Livelihoods, Employment and

Enterprise Development 85.30 89.74 105.20

Micro-credit Access 40.10 44.76 111.62

Basic Services and Infrastructure 79.85 81.11 101.58

Project Implementation Support 6.25 6.25 100.00

Total Baseline Costs 250.00 255.81 102.32

Physical Contingencies 0.00 0.00 0.00

Price Contingencies/Cost 0.00 0.00 0.00

Total Project Costs 250.00 255.81 102.32

Front-end fee PPF 0.00 0.00 0.00

Front-end fee IBRD 0.00 0.00 0.00

Total Financing Required 250.00 255.81 102.32

Source: PAD Annex5 and FMR for the period ended March 31, 2016

Excess amount of USD 5.81 million is due to exchange gain

(b) Financing

Source of Funds Type of

Cofinancing

Appraisal

Estimate

(USD millions)

Actual/Latest

Estimate

(USD millions)

Percentage of

Appraisal

Borrower 0.00 0.00 0.00

International Development Association

(IDA) 250.00 255.81 102.32

Source: World Bank client connection portal 12/2/16

38

Annex 2. Outputs by Component

Component 1: Social Mobilization and Institutional Building

1. The objective of this component is to target and empower the poor by supporting their

organization into three tiers namely the (i) COs and clustering at a higher (ii) Village Organization

(VO) and (iii) Union Council area level (into Third Tier Representative Organization), to build

voice and scale for an effective interface with local government bodies, other development

programs and markets. PPAF’s Partner Organizations will be entrusted with the task of

intensifying their coverage within the Union Council area and strengthen new and existing

community institutions.

2. PPAF’s role was two-fold:

(a) Identify poor and ultra-poor using the poverty score card to allow for improved inclusion

in community level organizations and standardization of targeting approaches across POs;

and

(b) Incubate community institutions, which demonstrate a potential to grow through sequential

steps corresponding to the lifecycle and performance of a CO/VO and third tier Union

Council level organization.

3. Expected outcome of this component is that inclusive COs of the poor are formed and their

clusters mobilized, which are able to manage their own development, access services through

improved linkages to local government, other development programs and markets for sustainable

service delivery.

Table1: Social mobilization status of community organizations

S. No. Description of PAD Targets

(Output Indicators)

PAD Physical

Targets (A)

Cumulative Progress

as of Mar-2016 (B)

%

(B/A)

1 CO Formation & Strengthening 50,000 65,448 131

2 VO Formation 3,250 5,616 173

3 UCDO Formation 81 380 469

4. The social mobilization and institutional development component was implemented in

1006 Union Councils. The Community Organizations had a total membership of

1,287,617households and at least 86 percent of beneficiaries belonged to the poor and poorest

households, which exceeded the target set for the project at 60 percent. Women made up a

substantial proportion of organizational membership with about 827,000 women participating in

community institutions (64 percent compared to a project target of 30 percent) These institutions

were the main channel for disbursement of PPAF III resources, which they have undertaken

effectively. The Community Institutions have implemented the infrastructure schemes and played

an important role in other components of the project. These institutions are also beginning to

enhance their scope of work to include activities in the social sectors and livelihoods. The

preparation of Village Development Plans and Union Council Development Plans served to

identify the needs at the local level and help in sharpening the vision of the communities about

their future. By the end of the project 69 percent of Cos were clustered into VOS and 80 percent

of the VOs were aggregated to form higher level institutions of Local Support Organizations at the

UC level. The achievement of aggregation exceeded the project’s targets of 60 percent for COs

39

and 25 percent for LSOs. The community institutions had been assessed based on a set of criteria

including records of accounts, active participation and financial audits. 57 percent of the

community institutions satisfied the criteria, exceeding the project target of 55 percent. There has

been considerable training of community members in organizational and financial management

and leadership. . Overall, all intermediate targets for the social mobilization and institutional

building component were exceeded and the component was rated satisfactory.

Intermediate

Outcome Intermediate Outcome Indicators

Progress

December-2015

Component 1:

Community

institutions

(COs/VOs and

clustered bodies)

mobilized, managing

their own

development and

accessing services

1.1 At least 60 percent of targeted

poor and 60 percent of poorest

households are members of

community organizations

68 percent of the targeted poor and 82

percent of poorest households are

members of the community

1.2 At least 30 percent of all CO

members are women

64 percent of all CO members are

women

(PPAF M&E data)

1.3 At least 60 percent of COs

clustered into Village level

Organizations (VO) and 25 percent of

these clustered at Union Council level

69 percent of COs clustered into VOs

and 80 percent of these (VOs)

clustered at Union Council level

(PPAF M&E data)

1.4 At least 55 percent of Community

Institutions are performing

satisfactory in terms of effectiveness,

transparency and accountability

57 percent of community institutions

are performing satisfactorily in terms

of effectiveness, transparency &

accountability.

(Assessment of 1st and 2nd Tier

Community Institutions of the Poor -

external study, representative sample

from Punjab, KPK, Baluchistan and

Sindh)

Component 2: Livelihoods Enhancement and Protection (LEP) (Restructured as Livelihood,

Employment, and Enterprise Development (LEED))

5. The objective of this component is to develop the capacity, opportunities, assets, and

productivity of community members to reduce their vulnerability to shocks, improve their

livelihoods initiatives and strengthen their business operations.

6. A number of innovations were introduced including a more standardized and modern

training program, a focus on developing market linkages, engaging with the private sector, and

developing platforms to take the livelihoods program forward.

7. Under the supervision of the Local Support Organizations (LSOs), specialized economic

platforms such as Naukari ya Karobar (Employment or Enterprise) centres (NyK), Production

Centres, Loan Centres and Digital Hubs were created. In addition, Community Resource Persons

(CRP) were identified and trained for long term support and sustainability. The Union Council

Development Plan (UCDP) was expanded to include an economic appraisal of the UC. A strong

livelihoods component was also added to the Sindh Coastal Areas Development (SCAD) program

which had been showing slow progress.

40

8. A key achievement under this component were the inclusion of the ultra-poor, women,

youth and persons of disability. Not only did the project ensure that assets were received by the

ultra and vulnerable poor (0-18) but within the target group, 45 percent of the assets and 34 percent

of the trainings went to the ultra-poor (0-11). Women and youth received 47 percent and 39 percent

of assets and 46 percent and 56 percent of trainings, respectively. A total of 397,000 beneficiaries

received skills/entrepreneurial training and about 96,000 ultra-poor and vulnerable poor received

productive assets. Based on the beneficiary survey carried out in 2014, 97 percent of skills training

recipients are using the trainings productively. Out of the 97 percent, 89 percent expressed interest

in advanced training. 94 percent of the productive assets recipients are using them productively.

Skills trainings are helpful in increasing incomes of 93 percent of the respondents 52 percent

increase in monthly income of vocational and skill training beneficiaries. All the achievements

exceeded targets that had been set for the project.

Intermediate Outcome

Indicator

Target

%

Achievement

(March

2016) %

Source Details

At least 70 percent of

those who have received

skills training and or

community livelihood

fund (CLF); and/or

assets – are using them

productively

70 9730 97 percent of skills training recipients are using

the trainings productively. Out of the 97 percent,

89 percent expressed interest in advanced

training.

94 percent of the productive assets recipients are

using them productively.

Skills trainings are helpful in increasing incomes

of 93 percent of the respondents

52 percent increase in monthly income of

vocational and skill training beneficiaries

120 Community Institutions are productively

using an amount of PKR 366 million as CLF

grant

(User/Beneficiary Assessment Survey-II 2014

external study, 2,000 household sample;

SCAD Impact Assessment 2014 (external

study, 2,250 household sample; Findings from

Impact Assessment of Community and Skill

Training 2015; Project Monitoring data,

PCR)


federated organizations

report effective linkages

with markets and private

sector built

20 5031 Around 50 percent of the federated

organizations (Common Interest Groups) have

created effective linkages with market and

private sector.

41 percent of livelihood intervention

beneficiaries have created profitable linkages

with markets and other organization

30 Average of percentages from sources as mentioned in Column 4 31 Average of percentages from sources as mentioned in Column 4

41


Indicator

Target

%

Achievement

(March

2016) %

Source Details

(Project Monitoring Data, PCR;

User/Beneficiary Assessment Survey-II 2014

(external study, 2,000 household sample))

At least 50 percent of the

new livelihoods

platforms32 formed have

developed productive

linkages33 with markets,

input/service provider,

service/product buyer, or

technology provider –

measured in terms of at

least one transaction/

contract

50 9634 10 MoUs with NyK Council representing all 77

NyKs (100 percent achievement). All 80 digital

hubs are trained and linked to Enclude for

digital market research -a project funded by WB

(100 percent achievement). 40 Production

Centers (56 percent achievement) participated

in Pakistan Arts and Craft Mela in Islamabad

(sales of more than PKR.1 million) and linked

to Mohenjoz, an online platform.

(Project Monitoring Data, PCR)

Communities involved

in Community

Livelihood Fund (CLF)

revolve savings with at

least 95 percent

repayment rates

95 98 PKR 366 million in the form of CLF was

provided to 120 loan centers to benefit about

16,200 borrowers. The overall repayment rate

of all 120 loan centers was approximately 98

percent with an active portfolio of PKR 269

million. 80 percent of loan centers increased

their portfolio overtime and 20 percent have

retained the principle amount.

(Project Monitoring Data, PCR, Loan Centre

Assessment Report, LEED Unit, April 2016)


targeted households

where LEED

programming/investment

has taken place have

developed livelihoods

investment plans and

mobilized resources for

enhanced income and

quality of life

60 8935 89 percent of targeted households have

developed livelihood investment plans to

mobilize resources for enhanced income and

quality of life.

(Project Monitoring Data, PCR)


livelihoods grant

recipients are women

50 46 Out of 96,000 recipients of productive assets,

about 44,000 were women, representing 46

percent of total number of recipients Project

Monitoring Data, PCR

9. A total of about 8,300 Common Interest Groups were established, out of which, 4,200

established links with the markets and private sector service providers. Established platforms such

began to show positive potential but came at a much later stage of project implementation. 7 NyKs

32 Common Interest Groups, Youth Centers, Naukri ya Karobar Center, Loan Centers 33 At least one transaction/contract/ MOU 34 Average of 100% (for NYKs), 100% (DHs), and 56% (PCs). 35 Only for LIPs. No data/information on mobilizing other resources.

42

(96 percent) have signed 10 MoUs with local councils; 80 Digital Hubs (95 percent) were trained

and linked to “Enclude”, a WB funded project, for digital market research; and 40 Production

Centres (97 percent) participated in Pakistan Arts and Craft Mela in Islamabad (sales of more than

Rs.1,000,000) and linked to Mohenjoz, an online platform. NyKs, Digital Hubs and Production

Centres have potential for further improvement. However, Loan Centers show considerable

success - 80 percent of Loan Centers have steadily increased their portfolio. A majority of LSOs

are following Standard Operating Procedures (SOP) and recovery rates are currently at 98 percent.

It has been estimated that each center can earn PKR 31,500 per month if it efficiently disburses

loans PKR323.99 million in form of CLF was provided to 120 loan centres to benefit about 16,200

borrowers. The overall repayment rate of all 120 loan centers was approximately 98 percent with

an active portfolio of PKR 269 million. 80 percent of loan centers increased their portfolio

overtime and 20 percent have retained the principle amount. About 296,000 livelihood investment

plans were developed with about PKR366 million released for the community livelihood fund.

There was a strong contingent of Community Resource Persons (CRPs) that were trained to

facilitate continuous support to livelihood beneficiaries, particularly in the SCAD program. Out of

the total number of beneficiaries of productive assets (96,000), about 44,000 were women

representing 46 percent achievement against the 50 percent target set for the project. With the

exception of one intermediate indicator that was substantially achieved, all other indicators were

exceeded and the component was rated satisfactory.

Outputs Targets as per

PAD (p.37)

Revised Targets

(Restructuring)

Achievement

(March 2016)

Livelihood Trainings to individuals 460,000 320,000 397,273

Ultra-poor persons given wage compensation

to facilitate training

142,857 54,315 57,641

Community groups formed around productive

activities

2300 2300 8392

Assets transfers to ultra-poor and vulnerable

poor

57,413 79,756 95,895

Assistive devices to individuals 11,500 11,500 39,481

Skills training for disabled 2875 2875 3,014

Home improvements to provide access to

disabled

4600 4600 30,872

Community Livelihood Fund (CLF) – total

value of loans given (USD mill)

- 3.74 3.67

Loan Centers set up - 122 120

Production Centers formed - 71 71

Naukri ya Karobar (Employment or

Enterprise) Centers formed

- 66 77

Youth Centers formed - 176 196

Digital Hubs formed - 80 80

Component 3: Micro-Credit Access

IO3.1 - The microcredit outreach increased to 8.80 percent from 6.0 percent average in

PPAF-III served districts areas, with 230,000 new borrowers.

10. PPAF-III increased the MF penetration rate to 14.75 percent and added 379,284 new MF

43

borrowers (March 2016). Overall, 266 MF branches were supported in 33 districts, including 123

new branches. To increase outreach in under-served areas, PPAF-III provided 2-3 years coverage

of capital and operation costs for new offices. These lending results were delivered in the target

districts where POs were most active i.e. the 18 districts of Punjab and Sind originally selected

from the 37 districts in the project design. MF coverage in Baluchistan and KP remained low, and

did not discernibly increase during PPAF-III.

Table 1. PPAF-III borrower achievements against targets

11. PPAF-III supported development of innovative products and delivery mechanisms among

MFIs in order to improve MF outreach in rural and less penetrated area. This program encouraged

MFIs to design and offer products more attuned to the demands of their clients, improve delivery

systems, and reduce costs. Some of the innovative products were designed to assist poor

households graduate to mainstream microfinance lending (eg. Social Safety Net). To assist PO

expansion into areas, such as KP, PPAF-III support was critical in the development of sharia-

compliant products. PPAF-III also provided value chain support in an effort to group critical

numbers of like-minded beneficiaries together, which lowered the cost of MF delivery in remote

areas. Support was extended to cost-saving initiatives, such as branchless banking and paperless

offices. PPAF-III also assisted the provision of micro-insurance to poor farmers to help mitigate

risk and demonstrate the business case for insurance provision to poor rural communities to

insurance companies.

Table 2. Microfinance market in Pakistan (Micro Watch, March 2016)

IO3.2 - A minimum annual growth rate of 20 percent in microcredit loans maintained in one-

fourth (nine districts) of PPAF-III served areas

12. An annual borrower growth rate of 20 percent and above was maintained in 11 out of the

original 37 districts for the period of the project. These 11 districts were in the most under-served

rural districts of Sindh and Punjab where MF POs were most active. The districts were mostly

Priority 2 and 3 districts (low to moderate Human Development Index plus food insecurity)

according to PPAF-III’s national prioritization of districts for grant funding and microfinance

Borrowers Program Target

To Completion

(PAD)

Achieved (March 2016)

Number % of Target

New Loans 230,046 379,284 165

Repeat Loans 196,161 209,249 107

Total 426,207 588,533 138

Province Offices Lending Potential

MF

Market

(est.)

Penetratio

n Rate

(%) Fixed Mobile Borrowers

Gross Loan Portfolio

(PKR)

Baluchistan 20 4,965 130,642,494 500,000 1.0

KP 110 109,724 2,771,628,133 5,000,000 2.2

Punjab 2,032 7 2,998,346 79,072,764,807 12,600,000 23.8

Sindh 733 2 790,782 20,628,054,500 2,400,000 32.9

Total 2,895 9 3,903,817 102,603,089,934 20,500,000 19.5

44

provision.

Table 3. Districts with the highest microfinance borrower growth rates P

un

jab

District HDI

Rank*

Baseline 2009 End of Project

Mar. 2016

Total Credit

Disbursed

PKR Potential

Borrower

s

Active

Borrow

ers

%

MF

Cove

rage

Active

Borrowe

rs

% MF

Cover

age

Bhakkar 3 252,453 15,880 6 70,956 28 985,670,000

Bhawalnagar 3 427,843 35,124 8 117,215 27 243,979,000

Khushab 3 235,163 16,217 7 57,447 24 2,064,385,000

Leyyah 3 263,251 14,041 5 93,398 35 639,641,000

Muzaffargarh 2 570,580 7,336 1 90,459 16 497,389,600

Rajanpur 2 260,436 25,319 10 62,991 24 968,999,500

Gujrat 4 446,630 15,978 4 63,422 14 140,712,000

Sialkot 4 501,997 25,585 5 80,688 16 996,714,000

Sin

dh

Tharparkar 1 283,491 11,334 4 37,332 13 1,686,814,000

Thatta 2 245,046 6,917 3 25,358 10 645,892,000

Badin 2 294,781 10,135 3 33,873 11 849,348,000

Total 3,781,671 183,866 5.1 733,139 19.8 9,719,544,100

13. As of March 2016, the total number of active borrowers under PPAF-III were 1,209,740 in

37 target districts. During the period of the project, the level of funding provided by PPAF-III to

the MF sector compared to all funding in the sector dropped from 55 percent to 22 percent.

Similarly, the total number of borrowers within PPAF-III compared to the total number of MF

borrowers in Pakistan decreased from 52 percent to 26 percent. This reflects the growth of the MF

industry in Pakistan and the increasing number of MF providers entering the sector. These new

players are mostly targeting higher populated urban areas that are lower cost and higher profit-

yielding areas, compared to PPAF-III partners mainly focused on poorer, rural districts dependent

on agriculture.

14. Tharparkar provided an excellent example of targeting a Priority 1 district and the demand

for micro-credit among poorer rural communities in remote areas. Tharparkar received the second

highest total disbursement of credit for lending purposes, and was also an area for piloting several

innovative products supported by PPAF-III, such as livestock micro-insurance, branchless banking,

paperless offices.

IO3.3- Average repayments of micro-credit loans to POs at least 95 percent and at least 98

percent from POs to PPAF

15. Repayment rates from borrowers to POs was 97 percent and from POs to PPAF was 100

percent during the project. PPAF-III developed an Internal Rating System (IRS) to assess POs that

covered over 50 indicators, which determined whether POs could immediately revolve their loans

or repay their loan before receiving another loan. Funding to POs from PPAF was a continuous

process based on quarterly disbursements and repayments. POs did not necessarily repay all the

funds before their next disbursement. As soon as a tranche of funding was disbursed to a PO, next

45

funding was considered based on the request from the PO and the repayments of previous funds.

16. Several smaller- and mid-sized POs complained that their financing agreements with PPAF

were overly restrictive and the quarterly loan tenures limited their ability to use funds more

efficiently. The objective of PPAF-III with quarterly schedules was to instill greater financial

discipline regarding loan re-payments, which reinforced the focus on commercial realities, and

shift away from a prevailing mindset of donor-subsidized lending. Moreover, once smaller POs

had repaid their loan by the scheduled date, PPAF immediately provided another, often larger, loan

to the PO, in order not to disrupt their lending activities. Larger MFPs were not restricted by such

loan provisions and could immediately roll-over their loans without recourse to PPAF at the end

of the quarter.

Table 4. PPAF-III Allocation and Roll-over of project funds

Credit Funds

Allocated

Total

Funds

Committed

Funds

Disbursed

Commitment

to Allocation

(%)

Disbursement

to Allocation

(%)

On-lending Funds

(PKR mil.)

2,975 9,400 8,482

316 285 On-lending Funds

(USD mil.)

33.06 105 94.2

Grant Funds (PKR mil.) 500.4 802.7 768.4 154 97

Grant Funds (USD mil.) 5.56 8.63 8.26

Indicator 3.4 - At least 25 percent of all micro-credit loans received by women in PPAF-III

targeted districts.

17. More than 67 percent of loans were provided to women in PPAF-III districts. The 2013

Gallop36 user survey of 2,500 borrowers found women constituted 72 percent of loans under

PPAF-III, and they usually received larger loans than men. Another user survey in 201537 of 2,000

borrowers confirmed that 70 percent of loans were allocated to women. The survey also indicated

that about half of the women borrowers were illiterate, and 40 percent had only primary school

education. These results demonstrated that PPAF-III had effectively targeted the lower echelons

of the socio-economic scale in project districts.

18. Women were the major beneficiaries of several innovative programs supported by PPAF-

III. For example, value chain activities in embroidery, stitching, poultry, and Khairpur mat makers;

business incubation labs; social safety nets for widows and marginalized; women livestock

cooperatives; were targeted at women. The women groups from Haripur (400) and Swabi (180)

districts involved in value chain projects for embroidery and stitching were able to build-on initial

PPAF-III support and further develop their skills that added additional income for their households.

Working together as a group, borrowing and sharing machinery helped establish these women as

independent income-earners.

36 ibid 37 Apex Consulting (2015). User/Beneficiary Survey, Phase II. Islamabad.

46

Indicator 3.5 – Institutional review of PPAF microfinance portfolio, management and

governance structure completed and agreed by mid-term of PPAF-III and made operational

by end of project.

19. All stakeholders agreed that a stronger, more specialized structure was required to meet the

market needs for wholesaling operations and to attract new funding into the industry. This was

demonstrated during PPAF-III as the credit pool for MF funding was insufficient. A shortage of

funds due to high demand effectively restrained growth in the MF industry. The government,

PPAF and the World Bank agreed under PPAF’s third loan agreement to spin-off the microfinance

component into a for-profit company, the Pakistan Microfinance Investment Company (PMIC).

20. In early 2016, PPAF, Karandaaz (DFID) and KfW agreed to jointly create PMIC and invest

in a newly-formed Investment Finance Company (Non-Banking Financial Institution) under the

Securities and Exchange Commission of Pakistan (SECP) regulation, with ownership – PPAF: 49

percent, Karandaaz: 38 percent, and KfW: 13 percent. The necessary amendments to PPAF’s

operations were approved by SECP, PPAF Board of Directors and government in June 2016.

PMIC was due to commence operations in September 2016.

21. Based on the component’s performance in meeting and exceeding its targets and

impressive contributions to the microfinance sector of the country, this component was rated as

highly satisfactory.

Component 4: Basic Services and Infrastructure

4a. Community Physical Infrastructure

22. The objective of this component is (a) to establish and upgrade basic services and

community infrastructure to serve the poor and to support (b) improved health and education

facilities.

23. Performance against Intermediate Outcome Indicators: By the end of the project,

6,225 water and infrastructure projects had been initiated and 6, 196 were completed. The sub-

projects benefitted about 3.4 million people (484,000 households), out of which about 1.7 million

were women. M&E data showed that 42 percent of the 65,448 COs reported improved

infrastructure and 24 percent of them reported to have accessed other sources of funding for sub-

projects and /or local services. The higher level organizations such as LSOs generated 29 percent

of funding from other donors, which was considered to be a substantial achievement (against a

project target of 50 percent access to improved infrastructure and 30 percent access to other sources

of funding).

24. An economic and financial analysis based on the MIS data and Focus Group Discussions

was conducted for 86 schemes across 4 provinces: The analysis estimated that the economic and

financial rates of return for water and infrastructure projects were 36.1 percent and 33.8 percent

respectively. This exceeded the target of the project that had been set at 20 percent ERR and 25

percent FRR.

47


Indicator

Target

%

Achievement

%

Source Details

At least 50 percent of COs are

benefiting from improved

infrastructure and 30 percent

have accessed other sources of

funding for infrastructure/loca1

services

50

30

42

24

Project Monitoring Data,

PCR: 42 percent of the COs

reported benefitting from

improved infrastructure and 24

percent have accessed other

sources of funding for

infrastructure/local services

Findings from 3rd Party

Research Study Baseline:

LSOs have generated 29

percent of their funds from

donors, 10 percent from

Government sources, and 4

percent from member

contributions.

Minimum ERR of 20 percent and

FRR of 25 percent of investment

in Water and infrastructure

20

25

36.1 EIRR38

33.8 FRR for

Irrigation

only39

ICR Economic and Financial

Analysis based on PPAF MIS

Data and Focus Group

Discussions in 85 schemes

across 4 provinces: Only

irrigation schemes have been

found to generate significant

financial returns for its

beneficiaries. Therefore,

Financial Rates or Return have

been calculated for irrigation

only.

Financial and Economic Rates

of Returns for irrigation

schemes in all four provinces

are the higher than EIRRs for

other infrastructure types.

4b. Health and Education

1. .

25. The education sub-component successfully included some of the most marginalized and

vulnerable groups. The target for supporting girls was 40 percent but the program achieved a target

of 45 percent, despite the particularly restrictive gender norms in some of the communities in

which PPAF was working. A few different innovative strategies were employed to increase the

number of girls enrolled in schools. In the schools run by Indus Resource Centre (IRC) in Jamshoro,

38 Average of all scheme types as per Economic and Financial Analysis in the ICR (Annex xx) 39 From Economic and Financial Analysis in the ICR (Annex 3)

48

every boy admitted to the school had to bring a sister or a female cousin and his remaining in the

school was dependent on his sister and/or female cousin also staying enrolled in school. This led

to a dramatic increase in the percentage of girls in these schools.

26. The project made other important achievements such as the support of 3000 out-of-school

children from coal-mining households in the conflict-affected district of Kohlu in Balochistan.

Another innovative and successful strategy adopted by IRC to control dropout rates was to link

teachers’ Annual Confidential Reports (ACRs) and yearly increments to children’s retention rates.

27. Another significant achievement of the education program has been its contribution to

quality education through its teacher-training intervention by providing high-quality training to

3500 teachers.

28. PO reports showed that livelihood opportunities were expanded for the 2000 girls from

rural poor households who completed their matriculation through PPAF supported schools:

these girls were employed as teachers in the same schools and others opted for professions like

nursing, midwifery, Lady Health Visitor (LHV) and engineering. Although boys were not

systematically tracked, there is some evidence that the livelihood opportunities for boys also

improved. More than 200 teachers both women and men, from PPAF supported schools in remote

areas40 who were trained by the POs were inducted in the government education system as they

were able to pass the otherwise difficult National Testing Service (NTS) exam.

29. The health program’s key achievement was providing Primary Health Care (PHC) and

Maternal, Neo-natal and Child Health (MNCH) services through facilities where 12 million

women and men are reported to have visited the public and private health facilities during the

project duration. About 83 percent of the patients (10 million) accessed public health facilities and

17 percent (2 million) used Community Health Centers. The services provided were mostly related

to primary health, with a special focus on mother and child health care services. Overall, 57 percent

of the beneficiaries were women and girls while 62 percent of adults were women. The successful

outreach to women was a result of hiring Lady Health Visitors (LHVs) and midwives.41 Ante-natal

visits increased by 61 percent and child health by 63 percent.

Indicator Target

%

Achievement

%

Source Details


beneficiaries report

satisfaction with the

PPAF supported health

and education facilities

60 93 Semiotics Consultants (Pvt.) Limited October,

2014 Impact Assessment of Sindh Costal Areas

Development (SCAD) Program Final Report,

APEX Consulting, 2015 User / Beneficiary

Assessment Survey, Phase-II, APEX

Consulting, 2011 User / Beneficiary

Assessment Survey PPAF-III Final Report,

Third Party Mid-Term Review of PPAF 3,

2012: Satisfaction levels with PPAF supported

education facilities ranging from 70 percent to 93

40Tharpaker, Bahawalpur, Ziarat, Panjgur, Kharan, Rehri, Sanghar, Jamshoro, Khairpure, Sakhar 41 PCR

49

Indicator Target

%

Achievement

%

Source Details

percent and with health facilities ranging from 70

percent to 83 percent were reported. 79 percent of

beneficiaries of health program supported by the

project reported to have saved money as

combined effect between lower incidence of

illness and more accessible services and

treatment. Previous surveys found that, on

average, beneficiary households saved PKR

1,951 as a result of the services being offered in

the Community Health Centers.

Net enrolment growth rate

of 7.5 percent per annum

maintained over the

project period

7.5 7.5 Project Monitoring Data: Based on analysis of

community and Government school data

provided by POs, an enrolment growth rate of

more than 7.5 percent per annum was maintained

over the project period.42 Further, total enrolment

in schools supported by the project was 63

percent for Government schools and 28 percent

for community schools.


beneficiaries of

infrastructure, health and

education interventions

are women

40 55 Project Monitoring Data, PCR: Total Number

of female beneficiaries: 8,910,895

30. Achievement against Output Targets: All the output targets as per the PAD were met

and exceeded. 201 Community Resource Persons including 22 percent women were trained on the

rights to education, school development plan formulation and establishment of social enterprises.

PO reports show that 65 percent of Community Resource Persons (CRPs) trained in Social

Enterprises opened schools in remote areas such as Panjgur, Awaran and Kharan in Balochistan

and Upper Dir in KPK. Around 203 CRPs (32 percent women) were trained for awareness raising

on preventive health and to provide basic health services including family planning, immunization

and referrals. The health CRPs trained 19,355 community members on preventive health practices

with a special focus on improved hygiene practices.

Outputs (as per PAD) Target Achievement

Community health centers opened 280 504

Beneficiaries (cumulative) 2,242,178 12,581,564

Health workers and related staff trained 1210 1611

Primary schools opened 336 896

Students enrolled (cumulative) 40,081 127,112

Teachers and related staff trained 1680 3659

Overall, the component performance was assessed to be satisfactory.

42 Analysis of microdata from PPAF

50

Annex 3. Economic and Financial Analysis

Component 1: Social Mobilization and Institution Building

Benefits and beneficiaries

1. The component has largely exceeded its appraisal targets, managing to organize over 1.2

million households over the life of the project. The targeting strategy for the component has been

effective in including poor and vulnerable households, as confirmed by a number of external

assessments43. In turn, Community Institutions have successfully realized the main component

objective of establishing linkages with local governments, markets and other development

programs, especially at the CO and LSO levels. As a result, CO members have benefited from

additional incomes through market linkages and from investments in their communities through

resources leveraged from government and donors.

2. An attempt to assign a monetary value to such benefits has been made in the Project

Completion Report. Based on information from project progress reports, the analysis assumes that

(i) about 39 percent of COs have established profitable market linkages for about 25 percent of

their members, (ii) 15 percent of COs have leveraged funds from district Governments, benefitting

at least 50 percent of the community members, and (iii) 23 percent of COs have received financing

from other donors, including NGOs, with benefits accruing to 15 percent of households.

Incremental incomes from the Community Livelihood Fund internal lending activities

administered by the LSOs were also included in estimation of the overall benefits of building

community institutions. The project Completion Report assumes a 20 percent increase in incomes

for households participating in the CLF, based on data collected from the field and various Third

Party Assessment surveys.

Results of the analysis

3. The PCR analysis shows an overall benefit of USD 100 million accruing mostly from

market linkages (USD 56.8 million), followed by government linkages (USD 29.4 million), donor

funds (USD 13.5 million), and incremental incomes generated by the CLF (USD 0.73 million).

The total investment in the component was USD 33.7 million, which translates into a Benefit Cost

Ratio of 2.99. Results show that investments in community institutions have led to an Internal Rate

of Return of 58 percent and a Net Present Value of USD 30.85 million at a discount rate of 10

percent.

4. The efficiency of the institutional development approach was tested in the PCR by

calculating a Fund Management Ratio as the proportion of funds invested in community

institutions vs. the total amount of funds channeled through COs for the implementation of other

PPAF-III components. The costs of establishing a community organization and sustaining it under

PPAF III for six years was estimated at USD 515 per CO, while resources channeled through COs

for the implementation of livelihood, community infrastructure and social sector programs are

43 Assessment of 1st and 2nd Tier Community Institutions of the Poor. World in Consulting (Pvt) Limited. August 2015, and User

Beneficiary Assessment Survey. Apex Consulting. July, 2011.

51

valued at USD 165 million44. This means that COs have managed on average USD 2,500 each

under PPAF, equivalent to five times the funds invested in their formation and support. The 1:5

ratio demonstrates the high efficiency of the implementation modality.

Sustainability

5. The financial sustainability of Local Support Organizations (LSOs) is currently under study

by the Lahore School of Economics based on a sample of 850 LSOs across the country. Initial

research results45 led to the following conclusions: (i) LSOs rely heavily on external financing

sources, predominantly on POs and to a lesser extent on funds from international donors and the

government46; and (ii) financial resources were extremely concentrated within a few LSOs at the

time of start-up and remain concentrated today, to a lesser extent. Despite an apparent advantage

of larger LSOs over smaller LSOs, the study reveals that LSOs in the bottom income quintile enjoy

an extremely well diversified pool of income, and that a withdrawal of PO funding would have

more repercussions on the financial viability of LSOs in the top quintile. Research results also

show that the financial resources available to LSOs increase significantly and consistently

overtime as LSOs mature.

Component 2: Livelihoods Employment and Enterprise Development (LEED)


6. The Livelihood Enhancement and Protection (LEP) component, subsequently renamed

Livelihoods Employment and Enterprise Development (LEED) was specifically targeted at the

poor and ultra-poor and its main areas of intervention included: (i) a Community Livelihood Fund

to promote internal lending, build up savings and financial management capacity within the

community; (ii) provision of skills training to improve livelihoods; and (iii) transfer of productive

assets combined with training for the ultra and vulnerable poor. The design of the component

underwent some changes after mid-term that included a revision of physical targets and the

establishment of specialized platforms in order to promote a more active engagement of the

communities and ensure the sustainability of project benefits.

7. The LEED component reached out to a large number of beneficiaries through its various

interventions. The use of the Poverty Score Card combined with community verification to avoid

exclusion errors was instrumental in targeting the ultra-poor and vulnerable poor at a large scale.

In fact, 45 percent of the assets and 34 percent of the training went to the ultra-poor47 (score 0-11

on the PSC). Furthermore, the project ensured the inclusion of women, youth and persons with

disabilities through specific quotas and targeted activities.

44 Project Completion Report. 45 Funding and Sustainability of Pakistan's Local Support Organizations: Research Brief for Pakistan Poverty Alleviation Fund.

Lahore School of Economics, 2015. 46 56% of total LSO income in 2015 was received through PO, 30 % from international donors and the government while the rest

was mobilized through internal sources such as membership fees, donations from members, service fees on loans and interest on

bank balance. 47 Project Completion Report.

52

8. Major benefits accruing to beneficiaries of the LEED component include:

(i) Increased household incomes from productive activities carried out with the transferred

assets: according to a beneficiary survey48, 94 percent of productive asset recipients are

using them productively, and average increase in income was around PKR 4,500 or USD

45 per month;

(ii) Enhanced skills and employment opportunities through training and job placement

services: 97 percent of trainees reported to be applying the skills they learned through

vocational training and an increase in monthly incomes of at least 52 percent over the

baseline49;

(iii) Improved livelihoods through the productive use of the Community Livelihood Fund: 120

Community Institutions and 26,392 borrowers are productively and sustainably using and

total amount of PKR 366 million as livelihood grant, with an estimated income increase of

20 percent50 and a repayment rate of 98 percent51;

(iv) Increased revenue for member of CIGs and productive platforms: around 50 percent of the

federated organizations have created profitable linkages with markets and private sector

companies52.

Results of the analysis.

9. A value for money analysis of the LEED component was undertaken for the Project

Completion Report with the following parameters and assumptions:

• The benefit streams were calculated on the basis of the number of people who were

provided different types of assets and vocational and technical training under PPAF III.

Only those trainings were used in the analysis which were expected to lead to an increase

in income such as technical and vocational trainings.

• Increase in incomes for the recipients of the different types of assets and training was

based on data collected through a Third Party survey of 2000 beneficiaries and

supplemented by focused data collected from the field53.

• Benefits accruing from the CLF administered by community institutions have been

accounted for in the analysis of Component 1: Social Mobilization and Institution

Building but not included in the analysis of the LEED component in order to avoid

double-counting.

10. The analysis shows that an investment in livelihoods and enterprise development leads to

an Internal Rate of Return of 138 percent and a Net Present Value of USD 180 million at a discount

rate of 10 percent.

48 User Beneficiary Assessment Survey. Apex Consulting, 2014. 49 Ibid. 50 Project Completion Report. 51 PPAF internal monitoring and reporting mechanism. 52 Ibid. 53 User Beneficiary Assessment Survey. Apex Consulting, 2014.

53

11. The PCR also makes an assessment of the efficiency and effectiveness of PPAF’s delivery

mechanism by comparing it with the Benazir Income Support Program (BISP). The BISP is based

on cash transfers of PKR 18,800 per household/year released in quarterly installments on an on-

going basis. In turn, the PPAF model aggregates payment to a beneficiary (an average of PKR

40,350 in asset transfer and PKR 30,000 in training per beneficiary) to achieve an average monthly

income of PKR 4,500, more than twice that given under the BISP safety net program (PKR

1,566/month). Further, the PPAF is deemed to deliver a more efficient way as transaction costs for

both the implementer and the beneficiary are limited to a one-time transaction.

Sustainability

12. Under this component, steps towards ensuring sustainability of project benefits included

the establishment of specialized platforms (NyKs, Digital Hubs, Production Centres and Loan

Centres) and building local capacities by training Community Resource Persons (CRPs) to operate

social enterprises which provide affordable services to the community.

13. NyKs and Digital Hubs have been operating for less than two years, thus it would be

premature to draw conclusions on its sustainability. These centers were set-up at relatively low

costs and their services seem to be highly valued. Their sustainability will depend on an effective

management and oversight by the LSO to which they are linked and their capacity to generate

enough revenues to finance operations without PPAF’s support. At the moment, PPAF records

show that 50 percent of the Digital Hubs make an average monthly income of about PKR 4,000,

which is barely enough to cover salary costs, while 26 percent have had minimum or no profits

since their launch. According to a recent assessment54, out of the 80 NyK established, only 14

have been rated as “excellent” based on the services provided and revenue generated, while 25

were graded “good” and a majority fell under less satisfactory categories.

14. With regards to the farm and non-farm support platforms established for CIGs, i.e.

Production Centers and Handicraft Centers, findings from PPAF assessments and the PCR indicate

that their performance so far has been moderately satisfactory. Their sustainability in the long run

will be subject to their capacity to generate profits for its members. However, about 44 percent of

members of the Handicraft Centers report not being aware of the financial situation of the centers,

and only 19 percent of the centers reported making profits higher than 5,000 PKR/month55. The

PCR identified a number of issues associated with the inclusion of stakeholders with competing

interests in the same CIGs involved in the livestock and dairy Production Centers. The

management and ownership of the collective assets assigned to these groups is also a matter of

concern.

15. Loan Centers have proved to be an efficient mechanism to deliver the Community

Livelihood Fund. The total allocation of PKR 365.38 has been disbursed with a cost of PKR 41.4

million, which means that for each rupee invested in setting up the mechanism, 8.8 rupees were

disbursed and used productively. The CLF has generated a profit of PKR 42.43 million so far, of

which about 13 percent were used to finance operating costs and the rest was reverted back into

54 Assessment of LEED platforms. LEED Unit, April 2016. 55 Ibid.

54

the revolving fund56 . The average interest rate changed was 13 percent, and about 80 percent of

Loan Centers have steadily increased their portfolio57. A majority of LSOs are following Standard

Operating Procedures (SOP) and recovery rates are currently at 98 percent58. The Loan Centre

assessment recommends improving vertical coverage to include poorer segments of the population,

as well as developing new products to cater to different needs and revising the interest rates system

to ensure both greater outreach and sustainability59. It has been estimated that each center can earn

PKR 31,500 per month if it efficiently disburses loans60.

Component 3: Micro-credit Access

Benefits and beneficiaries of micro-credit

16. The microfinance component was implemented by 22 partner organizations (POs) in 37

selected districts across the country with finance from PPAF-II reflows and additional USD 33

million (PKR 3 billion) made available for on-lending. In addition, about USD 5 million (PKR

500 million) were invested in piloting and up-scaling innovative financial products and supporting

the physical expansion of PO into the selected districts, some of them involving higher delivery

costs and riskier portfolios. As a result, the PPAF-III micro-credit component has effectively

reached 588,000 clients of which 379,884 were first-time users of formal credit. According to the

Gallup 61 survey commissioned by PPAF, recipients of financial services have realized the

following benefits:

(i) Increases in average individual and household income (fully realized);

(ii) Increases in average household consumption, including an increase in food consumption

(fully realized);

(iii) Improvements in living conditions (fully realized);

(iv) Increased average incomes from 3 key productive sectors, namely agriculture, livestock

and enterprise (partially realized);

(v) Increased use of agricultural inputs (partially realized);

(vi) Improvement in social status within the household, in terms of control over resources and

key household decisions (partially realized, i.e.- for male members).

17. Relative changes between borrowers and non-borrowers show that average personal

income for beneficiaries grew 7 percent higher than for non-beneficiaries, whereas overall

household income was 5 percent higher. Average income difference from productive sectors

ranged between 2 percent and 6 percent. These differences, although small, were found to be

statistically significant with 90-95 percent confidence levels.

56 Loan Centre Assessment Report, LEED Unit, April 2016. 57 Ibid. 58 Project Completion Report. 59 Ibid. 60 Ibid. 61 Gallup (2013). PPAF Micro Credit Financing: Assessment of Outcomes

55

Table 3: Absolute and relative increases in incomes for PPAF-III beneficiaries

and control group (PKR).

Source: Adapted from Gallup IV, 2013.

18. Reported incremental incomes from agriculture, livestock and enterprise sectors are further

validated by the fact that 91 percent of respondents who took a loan for productive purposes

experienced a nominal positive return on investment (85 percent in the case of women

entrepreneurs). However, only 59 percent of borrowers thought that the credit amount offered was

sufficient to fulfill their investment needs: the preferred value of the loan was PKR 32,481 vs. an

average loan size of PKR. 22,438. Another positive feature of Gallup IV is the correlation between

credit and increases in food consumption, reported to be significant for nutrient-rich products such

as meat, fish, eggs, pulses and fruits, which allow us to assume positive changes in nutritional

status of beneficiary households. Conversely, access to credit seems to have had little impact on

employment generation or empowerment of female borrowers compared to non-borrowers, and

did not lead to increases in household productive assets (except for livestock) or financial assets

(only 5 percent of borrowers have used other financial products).

19. The Project Appraisal Document established the requirement that all borrowers belonged

to the lowest tier/s in terms of their poverty ranking, but excluding the ultra-poor. As pointed out

in the Project Completion Report (PRC), this precondition proved difficult to fulfill given the

demand-based nature of the lending activities and despite the fact that the 37 district originally

selected for implementation were amongst the poorest of the country. Eventually, the component

could only be implemented in 18 district, and recipient profiles show a clear bias towards non-

poor households according to the Poverty Scorecard Criteria: 61 percent of borrowers were not

poor (35-100 PSC) and only 39 percent were ranked as poor, transitory poor or vulnerable (0-34

PSC).

Borrower Non-borrower %

Change

borrowers

%

Change

non-

borrowers Items (PKR)

Survey

year

Previous

year Survey year

Previous

year

Average personal

income 6,155 4,764 5,824 4,759 29 22

Average household

income 20,843 17,123 19,680 16,790 22 17

Average gross

income from

agriculture

198,000 183,601 188,798 178,061 8 6

Average gross

income from

livestock

113,650 89,223 122,679 101,034 27 21

Average gross

income from

enterprise

162,931 132,699 155,779 130,692 23 19

56

Loan portfolio characteristics

20. Total funds used for on-lending as of December 2015 amounted to PKR 11.9 billion,

including reflows from the original capital provided by the World Bank (PKR 3 billion) and

exchange rate gains. Disbursement figures indicate that PPAF had spent the entire allocation

within the first three years of implementation and then revolved it around at least three times. This

quick turnover of funds is one of the main reasons why the project has achieved greater outreach

than originally anticipated. Average loan sizes from POs to beneficiaries have consistently grown

over time at a rate higher than inflation, therefore reflecting real growth62. Larger loan sizes may

be due to an increased creditworthiness of repeat borrowers who are entitled to progressively larger

loans or to a shift of POs from poor to better-off households in order to reduce transactions costs.

21. Sector-wise, most loans were used for commerce or trading activities (35 percent) followed

by livestock/fisheries (27 percent) and agriculture (20 percent). Handicrafts, cottage industries,

manufacturing and consumption represent a small percentage of the total number of loans. Average

loan sizes were higher for agriculture and business purposes as well as the “others’ category, which

includes consumption loans and miscellaneous purposes.

Effectiveness and efficiency

22. Based on the number of loans extended by sector and the average incremental benefits

experienced by borrowers, an aggregated incremental income from productive investments in

agriculture, livestock and various enterprises can be roughly estimated and PKR 2.2 billion. This

is a conservative calculation built only over monetary values from the three key sectors in the farm

and non-farm rural economy which doesn’t include consumption or other non-productive loan

types or quantifiable benefits such as increase in asset value or employment generation, as they

were found to be negligible. The ratio total loan funds from POs to clients used for productive

investment against overall aggregated income is 0.20, which means that for every PKR borrowed,

additional 0.20 PKR were generated. This 20 percent Return on Investment figure is in line with

Gallup IV results, and provides further evidence that the micro-finance component has effectively

contributed to the achievement of Project Development Objective, which established a target of

20 percent increase if household incomes for at least 60 percent of community members.

23. Fund approval processes from PPAF to POs were subject to different financing agreements,

but were found to be quick in general with quarterly payments at most. POs were also assisted in

developing loan approval procedures than ensured a rapid release of funds to borrowers. Financial

discipline was imparted to ensure high repayment rates (97 percent from borrowers to POs and

100 percent from POs to PPAF) and delivery costs for POs were reduced from 24 percent to 19

percent over the life of the project. In turn, efficiency gains were transferred to the clients though

lower interest rates63. The efficiency of the microcredit component is also evidenced by the

balance between grant and credit: for every rupee provided as grant for capacity building activities

of 31 POs, these organizations have been able to provide loans worth PKR 11.9 to the borrowers64.

62 Project Completion Report 63 Source: Project Completion Report 64 Ibid.

57

Table 4: Estimation of incremental benefits from productive loans (PKR).

Grant-financed activities

24. The micro-credit component included a grant for technical assistance and training to

partner MFIs to improve their information systems, enhance efficiency of lending operations,

develop and pilot innovative products and delivery mechanisms. The grant also financed set-up

and initial operational costs of new branches in order to create further incentives for MFIs to

establish themselves in low penetration areas.

25. Innovation under PPAF-III have brought about a wide range benefits both clients and

service providers. Benefits for MFIs include increased outreach and therefore client base, and

reduced delivery costs (branchless banking). Benefits for clients are can be tangible (increases in

incomes and productivity, employment generation, reduced production and transaction costs,

avoided losses, etc) or intangible (female empowerment, improved education, food security and

nutrition). Benefits accruing from selected products are summarized below.

Table 5: Selected innovative products and related tangible and intangible benefits. Enterprise Value

Chain (Embroidery

+ Livestock +

Poultry)

Employment generation, skills enhancement, female empowerment, increased

household income, enhanced food security and nutrition (livestock and poultry).

Agri Value Chain

(Wheat and Cotton)

Increased income from farming through: increased productivity, lower

transaction and financial cost of purchasing inputs, better output prices through

collective marketing and other forward value chain linkages, environmental

benefits more efficient use of fertilizers/pesticides. Enhanced food security

(wheat).

Dairy and

Livestock Value

Chain

Increased income and livelihood opportunities, improved livestock husbandry

and management practices, increased productivity (purchase of better breeds,

linkages with fodder suppliers and veterinary service providers) and prices

(collective marketing and linkages with buyers). Enhanced food security and

nutrition.

Number of

Borrowers

by Sector(1)

Total Funds

by Sector

PKR (1)

Average loan

size by sector

PKR (1)

Average

incremental

income of

borrowers

relative to non-

borrowers (2)

Aggregated

incremental

income by

sector PKR

(3)

Agriculture 117,308 2,553,467,925 21,767 3,662 429,581,896

Livestock 160,001 3,100,090,750 19,375 2,782 445,122,782

Enterprise * 270,186 5,471,416,111 19,185 5,145 1,390,106,970

Total Funds for

Productive

Purposes 547,495 11,124,974,786 2,264,811,648

*Includes Commerce/Trading,Handicrafts/Cottage and Light manufacturing

Sources: (1) PPAF MIS; (2) Gallup IV; (3) Author's calculations

58

Stitching Value

Chain

Employment generation, skills enhancement, female empowerment, increased

household income.

Renewable Energy

Increased incomes from extended business hours, savings alternative lighting

options, improved living standards, education (extended study hours), and

reduced costs/additional benefits when used for productive purposes (i.e. solar

pumps in agriculture).

Livestock and Crop

Micro Insurance

Reduced vulnerability to extreme events, avoided losses, access to larger credit

amounts for farmers with insured animals/crops, potential higher incomes

through investment in more profitable but riskier crops.

Branchless

Banking

Greater outreach in sparsely populated and remote areas, reduced transaction

costs for clients (travel time), reduced delivery cost for service provider (about

10 percent) and increased client base.

Low-Cost Private

Schools

Increased access to education services in rural and semi-urban areas. Improved

quality of education through curriculum improvement and teachers training.

Improved school infrastructure.

Business

Incubation Labs

Increased access to finance and enhanced female entrepreneurship, employment

generation, skills enhancement and empowerment, increased household incomes

Asset Backed

Lending

Access to larger loans through new forms of collateral, especially for MSMEs.

Potential employment generation.

26. The complexity and wide scope of innovative products under PPAF-III makes it difficult

to quantify the aggregated returns of these grant-financed activities. Alternatively, three illustrative

financial models have been prepared in an attempt to assess potential effects of selected products

on beneficiaries’ incomes and cash flows from productive activities. In particular, the models

provide simplified examples of three inter-related agriculture support initiatives, namely: (i) credit

for agriculture, (ii) crop insurance, and (iii) value chain support.

27. Model 1 offers a comparative analysis between traditional sources of farm financing

(moneylenders) and access to formal credit through PPAF products specifically designed for

agriculture. The ‘without project’ situation presents 3 farmers with the same landholding size and

different cropping mixes. At prevailing lending rates in the informal moneylending market (around

100 percent annual interest), net returns after interests turn out very narrow or for rice and cotton,

suboptimal for wheat and even negative for a small area cultivated under sugarcane, a very

profitable but riskier crop. Assuming similar cropping patterns, productivity levels and production

costs, access to formal credit for agriculture with repayment schedules adapted to the crop cycle

and interest rates of about 28 percent would increase net returns of cotton and rice between 66

percent and 84 percent, wheat by 40 percent, and render sugarcane production viable.

28. Model 2 adds yield-based insurance to the formal credit scenario. Farmers who insure their

crops are more likely to have access to larger credit amounts as the MFIs will recover their loans

in the event of crop failure. The ‘with insurance’ scenario shows how Farmer 2 would be able to

choose a more expensive cropping mix involving a slightly larger loan and the costs of insurance

59

premium for sugarcane65. As a result, net incremental incomes after financial costs and insurance

premium would be almost threefold the returns of a credit-only intervention.

29. Model 3 assesses the incremental effect of adding value chain support to access to financial

services. Taking as an example the pro-poor value chain development activities implemented in

Bahawalpur district, the model assumes a 10 percent increase in output prices through the

establishment of forward linkage with institutional and private buyers and through collective

marketing, and 20 percent reduction in production costs owing to collective purchase and more

efficient use of inputs. With similar cropping patterns, the combined effects of lowers costs and

financial burden and increased output value result in about 63 percent higher returns for Farmer 3.

30. These are conservative estimates of the benefits that can be derived from providing farmers

with timely access to easy and cost effective financial and non-financial services, including

training and access to upstream and downstream markets. Recent studies66 indicate that yield

increases averaged 20 percent generating additional monetary gains of PKR 5,000 per acre.

Incremental incomes estimated in the three models at the farm level make a considerable difference

for poor and vulnerable households who also become less exposed to abusive practices and more

resilient to natural shocks. At the project level, aggregated benefits are also substantial, considering

the large number of families and individuals reached by PPAF: it is estimated that under PPAF-III

over 117,000 farmers have taken loans form agriculture, over 13,000 have benefited from crop

insurance, and about 15,000 have participated in pro-poor value chain activities in Bahawalpur.

Summary results are presented in Table 6.

Sustainability of lending and grant operations

31. Microfinance POs under PPAF-III were mostly specialized MFI institutions, although

there were a few NGO combining microfinance with implementation of institutional development,

LEED, community infrastructure and health and education activities, some of which are in the

process of separating their microfinance operations from more socially-oriented activities. A large

share of funds for on-lending and grant funds (34.5 percent and 21.60 percent, respectively) went

to two specialized MFIs. An individual assessment of implementing POs undertaken by PPAF

found all the POs except 2 have an Operational Self-Sustainability Ratio (OSS) greater than 100

percent, meaning that their revenues are higher than their delivery costs. Five POs are barely

above break-even (OSS 100 percent-110 percent), whereas a large proportion show OSS between

110 percent-150 percent. The two largest recipients of funds have a satisfactory OSS and a

Portfolio at Risk (PAR>30) lower than 3 percent, in line with acceptable standards. These

indicators point to the sustainability of strongest, micro-finance banks, and evidence the weakness

of smaller and non-specialized microfinance providers. Financial Sustainability Indicators (FSS)

would be more adequate to assess the financial health of partner organizations, as it eliminates the

effects of subsidies (grants and operational support) provided by the PPAF so far, but they are not

available. The sustainability of PO operations would also depend on their capacity to maintain

high repayment rates in the future and their efforts to continue innovating and scaling-up cost-

effective delivery mechanisms as they reach out to more underserved areas. Specialized MFIs in

65 The model includes the full cost of insurance premium per acre (about 5.2% of net margins) instead of the current subsidized

premiums (total cost for farmers at about 1.56% of net margins). 66 Good Practice Note: Pro-poor Value Chain Development. PPAF 2015

60

the process of becoming bank entities will have relatively easy access to capital markets to finance

their expansion. The liquidity of non-bank MFIs/POs and hence their capacity to increase outreach

will be conditioned by the ability of the micro-finance spin-off of PPAF (PMIC) to attract private

funds at a large scale, assuming that such financing relationships between PMIC and POs will be

maintained.

Component 4: Basic Services and Infrastructure

4.a. Water and Infrastructure


32. The Water and Infrastructure component has benefited 479,737 households in 9,139 COs67

through 7,169 schemes implemented by 38 POs under the direct supervision PPAF’s Community

Physical Infrastructure (CPI) and Water, Energy, Environment and Climate Change Units (WECC)

Units. The schemes were implemented in 641 union councils across 66 districts in some of the

most remote and poor areas of Pakistan. A majority of COs across the country prioritized irrigation

schemes (30.5 percent) and drinking water supply systems (28.9 percent), followed by roads and

bridges (18.1 percent), drainage and sanitation (9.9 percent) flood protection works (6.8 percent)

and Technological Innovation Projects (5.5 percent). The component had a final cost of PKR 4

billion68, of which irrigation works took the largest share in total costs (31 percent).

Figure 2: Scheme types and percentage share in total costs

Source: PPAF CPI and WECC team and Project Completion Report

33. Total beneficiary households were 479,737 and the average number of households per

scheme ranged between 35 for TIP and 128 for roads and bridges. In terms of targeting poverty,

the 2011 User Beneficiary Assessment Survey indicates that the average poverty score of

benefitting households was 31 in the Poverty Score Card ranking, whereas a similar survey carried

out in 2014 shows that 13 percent were in the poor and 27 percent in the transitory poor levels.

67 PPAF M&E Reports and Project Completion Report. 68 CPI and WECC team

9.9%

28.9%

6.8%0.2%

30.5%

0.1%

18.1%

5.5%Schemes

Drainage & Sanitation

DWSS

Flood Protection Works

IAUP

Irrigation

Other

Roads & Bridges

TIP

9%

19%

10%

1%31%

2%

19%

8%

Percentage share in total costs

61

Benefits accruing from different schemes are elaborated below and supported with data from

Impact Assessment of PPAF’s Basic Services and Community Physical Infrastructure (CPI)

schemes and User/Beneficiary Assessment Surveys:

Irrigation:

• Increased in incomes as a result of increases in command area, cropping intensities and

yield per acre. Increases in average incomes were reported by 75 percent of beneficiaries,

as a result of which 58 percent of households increased the quality and quantity of food

consumed, 40 percent invested more in education, and 39 percent perceived an improved

health status.

• Time saving (72 percent reported that less time was now required to water the crops due to

a more efficient and accessible irrigation system).

• Employment generation (seasonal labor).

DWSS:

• Time savings from collecting water form more distant water sources (reported to be

between 1 and 3 hours per day before the project69).

• Improved personal hygiene practices (88 percent reported using water for washing and

bathing).

• Reduction of women’s workload when performing cleaning and sanitation tasks.

• Improved health for the household (reported to be almost 100 percent for the entire family,

77 percent for women and 74 percent children) and related reduction in health expenses.

Roads and Bridges:

• Reduction in education, health, work and social related travel expenses (37 percent

reported a reduction in monthly travel expenses, 49 percent reported improvements in

access to health services and 46 percent to education services)

• Reduced costs of household items and agricultural inputs

• Increases in incomes from increased marketed agricultural output (18 percent reported

positive impacts on income).

Drainage and Sanitation:

• Improved health for the household and related reduction in health expenses (78 percent

reported reduced incidence of malaria and typhoid incidence).

• Savings in expenses related to hygiene and mosquito control.

Flood Protection Works:

• Increased security against intrusion of flood water

• Reduced losses of village and house infrastructure

• Improved access to the community following floods

TIP:

• Increased income from extended business hours.

• Saving from fuel costs (71 percent of households).

• Time saving from collecting firewood (51 percent of men) and cooking (76 percent of

women).

• Benefits for children’s education though extended study hours (43 percent of household).

69 “User/Beneficiary Assessment Survey – Final Report”, Apex Consulting, 2011.

62

• Environmental benefits: reduced use of diesel generator for irrigation and drinking water

pumps.

Methodology and assumptions

34. The economic and financial analysis is based on selected quantifiable benefits for which

primary data was collected through Focus Group Discussions in 85 schemes across four provinces

(Baluchistan. KP, Punjab and Sindh) for the Impact Assessment of PPAF’s Basic Services and

Community Physical Infrastructure schemes and information from PPAF’s MIS. Results slightly

differ from the Third Party Assessment as key economic and financial indicators have been re-

calculated. Only irrigation schemes have been found to generate significant financial returns for

its beneficiaries. Therefore, Financial Rates or Return have been calculated for irrigation only. The

sustainability of all schemes is assess based on regular O&M costs and scheme replacement costs

and expresses as a percentage of the expected economic benefits.

35. Main assumptions and parameters: (i) schemes are assumed to have a useful life on 15

years with zero salvage value; (ii) a standard conversion factor of 0.96 is used to calculate

economic prices from financial prices; (iii) the economic standard wage rate for unskilled labor is

assumed at 0.80; (iv) net incremental returns are calculated as the difference between the benefits

accruing to COs as a result of having access to the new scheme, development costs and regular

O&M costs; (v) net present values are discounted at a rate of 10 percent.

Costs-benefit analysis and sustainability by scheme type

36. Irrigation subprojects comprise a wide array of interventions, including scheme

development and rehabilitation, as well as interventions aimed to improve water conveyance

systems and to increase water use efficiency. The highest scheme development costs were incurred

in Baluchistan, where command areas are usually larger than in the other three provinces (75-100

acres). Regular O&M costs are between 8-18 percent of incremental incomes, indicating that the

concerned COs should be financially capable of carrying out such works provided they have fee

collection systems in place. Beyond regular O&M, other provisions must be made to cover the

costs of extraordinary works and repairs and for the eventual replacement of the schemes at the

end of their productive life. Taking into account these additional annual costs, the total burden for

each beneficiary household would add up to 16 - 27 percent of the mean annual incremental

incomes.

37. Financial and Economic Rates of Returns for irrigation schemes in all four provinces are

the higher than EIRRs for other infrastructure types. FIRRs range between a 39 percent and 50

percent and EIRRs between 36 - 52 percent, with highest values estimated for Punjab and lowest

for Baluchistan.

Table 7: Average costs and benefits if irrigation schemes, by province.

Ave. Values

Capital

Costs

(PKR)

%

O&M/

Cap.

Costs

Ave.

Nr.

HHs

Ave.

Ben.

HH/Yr

(PKR)

Ave.

O&M

costs

HH/Yr

(PKR)

%

O&

M/B

en.

Additi

onal

Prov.

(PKR)

%

Total

Costs

/Ben.

NPV

Financial

(PKR)

FIRR

%

EIRR

%

Punjab 512,143 9 41 7,164 1,073 18 413 24 1,320,965 50 52

63

KP 564,333 6 102 2,171 304 14 369 31 761,630 39 40

Sindh 974,000 5 44 11,374 1,137 10 690 16 2,129,865 46 47

Balochistan 1,155,667 3 33 13,598 1,038 8 2,325 27 1,737,237 36 36

Source: Author’s calculations

38. Drinking water supply systems were the second most popular intervention selected by COs

and has reportedly had a significant impact on women’s workload and time savings for the

household in general, as well as positive impacts on the health status of the family resulting in a

reduction in health related expenses. If households were to make regular contributions to cover the

costs of O&M plus a provision for scheme replacement, they would have to pay an amount

equivalent to between 34 and 74 percent of the potential annual benefits they would obtain in

return. The question whether communities will have the financial capacity to replace the scheme

or not should be studied in more detail. EIRRs are estimated to be between 20 and 37 percent,

which means that water and sanitation schemes meet the minimum requirement of 20 percent

EIRR established in the intermediate outcome indicators for the water and infrastructure

subcomponent.

Table 5: Average costs, benefits and EIRRs, by province.

Ave. Values

Capital

Costs

(PKR)

%

O&M/

Capital

Costs

Ave.

Nr.

HHs

Ave.

benefits

HH/Year

(PKR)

Ave.

O&M

costs

HH/Yea

r (PKR)

%

O&M/

Benefits

Additi

onal

Prov.

(PKR)

%

Total

Costs

/Bene

fits

NPV

(PKR)

EIRR

%

Punjab 364,316 5 88 1,352 190 15 277 35 444,489 33

KP 668,333 3 46 1,619 247 15 965 74 329,931 20

Sindh 267,939 12 57 1,742 585 33 313 52 404,526 37

Balochistan 500,000 4 38 4,263 584 14 885 35 596,276 31


39. About 19 percent of the schemes implemented by COs were roads and bridges, which take

up a similar share in total CPI costs. For the purpose of this analysis, benefits streams accruing

from roads and bridges have been calculated on the basis of (i) savings from education, health and

work-related costs and other travel costs, (ii) reduced costs of basic household items and

agricultural inputs, and (iii) increased volume of marketed agricultural produce. The analysis

shows that average scheme development costs, incremental benefits and O&M are quite similar in

KP, Punjab and Sindh, O&M costs are a bit higher in Punjab, and the total share of costs over

expected benefits remains at reasonable levels between 19 and 34 percent. Results from the FGDs

show that CO members carry out basic maintenance works with their own labour, and only 13

percent of beneficiaries report to have contributed with cash. Economic Internal Rates of returns

are well above the opportunity costs of capital and the minimum threshold established for water

and infrastructure interventions.


Ave.

Values

Capital

Costs

(PKR)

%

O&M/

Capital

Costs

Ave.

Nr.

HHs

Ave.

benefit

s

HH/Ye

Ave.

O&M

costs

%

O&M/B

enefits

Additi

onal

Prov.

(PKR)

%

Total

Costs/B

enefits

NPV

(PKR)

EIRR

%

64

ar

(PKR)

HH/Year

(PKR)

Punjab 555,000 11 226 1,161 221 20 164 34 681,551 34

KP 562,400 8 114 4,635 351 9 328 22 652,096 32

Sindh 696,375 7 76 10,391 576 9 611 19 544,699 27


40. Drainage and Sanitation ranked fourth in terms of number of schemes implemented.

According to the Impact Assessment, 83 percent of beneficiaries perceived PPAF interventions as

effective in improving the overall drainage and sanitation conditions in their communities, and 78

percent reported reduced incidence of malaria and typhoid incidence. Tangible benefits for this

analysis have been calculated taking into account: (i) saving from reduced heath expenses for each

family member over one year, (ii) saving from hygiene and mosquito control related expenses.

O&M works and mostly labor intensive, although 45 percent of respondents in the FGDs claim to

have provided cash contribution on a needs basis. The costs of maintaining and replacing the

scheme are high compared with the estimated benefits. Similarly to drinking water supply systems,

the financial capacity of COs to replace drainage and sanitation schemes should be subject to

further study. Economic Internal Rates of Return a just below 20 percent for Baluchistan due to tis

higher capital costs, and range between 23 and 34 percent for the other three provinces.


Ave. Values

Capital

Costs

(PKR)

%

O&M/

Capita

l Costs

Ave.

Nr.

HHs

Ave.

benefits

HH/Yea

r (PKR)

Ave.

O&M

costs

HH/Yea

r (PKR)

%

O&M/B

enefits

Additi

onal

Prov.

(PKR)

%

Total

Costs/

Benef

its

NPV

(PKR)

EIRR

%

Punjab 600,000 8 91 2,047 494 24 439 46 433,015 23

KP 629,250 5 72 2,840 373 15 579 36 628,071 28

Sindh 277,000 11 101 1,188 297 25 183 41 369,020 34

Baluchistan 1,071,400 2 54 4,399 447 11 1,330 43 454,933 19


4.b. Health and Education


41. PPAF supported 896 schools of which 690 were government schools and 206 were

community schools. Two thousand teachers were trained and placed in public schools and 1,500

teachers were provided to the community and public schools. Under PPAF III, support was

provided to schools in which a total of 127,112 students were enrolled. Of these 98,384 students

or 77 percent were enrolled in the public schools and 28,728 students or 23 percent were enrolled

in community schools70. Under this component, substantial efforts were made to include some of

the most marginalized and vulnerable groups, including children with disabilities (17,589 disables

70 Project Completion Report

65

children received vocational training71). However, most of the respondents in the beneficiary

survey sample belonged to the non-poor of transitory poor category72.

42. Under PPAF-III, support was provided to 504 health facilities, of which 361 were

government health facilities and 143 Community Health Centers. The public health facilities were

mostly primary care facilities, but in some instances support was also provided to secondary level

facilities. Sixteen hundred health personnel, mostly Lady Health Visitors (LHVs), health

technicians and midwives were placed in the public health facilities where staff was not available

and in Community Health Centers established or supported under PPAF-III About 83 percent of

the patients (10 million) accessed public health facilities and 17 percent (2 million) used

Community Health Centers73. Most of the beneficiaries belonged to the transitory vulnerable or

transitory non-poor category in the PSC ranking74.

43. While investing in health and education has an intrinsic value of its own, there are also a

number of monetary and social benefits associated with improved health and education. For

instance, 79 percent of beneficiaries of health program supported by the project reported to have

saved money as combined effect between lower incidence of illness and more accessible services

and treatment. Previous surveys found that, on average, beneficiary households saved PKR 1,951

as a result of the services being offered in the Community Health Centers75.Children who have

received primary and secondary education are likely to obtain higher incomes during their adult

working lives. In addition, other economic benefits accrue to educated women and their families

due to changes in fertility patterns, reduction in infant mortality rates and other health benefits76.

44. A “value for money” analysis of health and education interventions was carried out for the

Project Completion Report of PPAF-III that captures very well the financial and economic benefits

of improved health and education as outlined above. The main assumptions and conclusions of

this exercise are summarized below.

Main assumptions and parameters:

45. Health interventions: (i) the analysis was undertaken only for Community Health Centers

as there was limited information on the increase in patient numbers accessing public sector health

facilities; (ii) it is estimated that around 2.1 million men and women have availed of the health

services in the community facilities; (iii) the overall benefit stream is calculated as a function of a

onetime reduction in transportation cost of USD 15 one day of savings in the opportunity cost of

labor valued at USD 2 for 40 percent of the people who are availing these services; (iv) the cost of

establishing the CHCs is determined to be USD 15,000 per health center.

46. Education interventions: (i) the analysis was undertaken only for community schools; (ii)

according to PO records, PPAF III support to community schools contributed to the completion of

71 Ibid 72 User/Beneficiary Assessment Survey, Phase II – Final Report, Apex Consulting, 2014 73 Project Completion Report 74 User/Beneficiary Assessment Survey, Phase II – Final Report, Apex Consulting, 2014 75 User / Beneficiary Assessment Survey PPAF-III Final Report, Apex Consulting, 2011. 76 Project Completion Report

66

10,336 students at the primary level, 6,261 at the middle level and 3447 at the matric level from

2009, of which 55 percent are recorded to be girls; (iii) the total number of students who completed

their studies are adjusted by a labor force participation rate for men (80 percent) and women (27

percent) based on national survey estimates 77; (iv) wage premium of $ 143 a year is estimated as

the differential wage increase for men completing primary school compared to those never

attending school and incremental increase of $ 104 has been used to estimate the increase in

women’s income for those who complete primary education78; (v) it is estimated that for each

additional year of schooling after primary, there is approximately an 8 percent to 10 percent79

return on the base salary for wage earners. For the purposes of this analysis, these increments have

been added to the wage of children graduating beyond the primary level; (vi) in order to quantify

the additional benefits of education for girls, it is assumed that the health benefits for a poor

household in which women are educated up to the middle and high school level will be able to

reduce their out of the pocket health expenditures by 50 percent, resulting in savings of USD 65

per year (based on National Accounts data).

Results of the analysis

47. The total benefits derived from reduction in transportation costs and aggregated

opportunity costs of labor for 40 percent of patients availing from health services from 2009 up to

2015 amounts to USD 12.6 million, which is greater than the overall costs of establishing and

running the 143 community centers used for this analysis (USD 10.9 million). Economic

indicators for the health subcomponent are highly satisfactory: the Net Present Value of

incremental benefits is USD 2.1 million, the Economic Internal Rate of Return is 73 percent, and

the Benefit Costs Ratio is 1.30.

48. Wage increases as a result of access to education through the 206 schools used for this

analysis are estimated to be over USD 12 million. In addition, reduction in health expenditures for

girls who completed middle and matric adds another USD 2 million to the benefit stream. The

costs of setting up and running the community schools over the project period are estimated to be

about USD 10 million. The Economic rate of Return is 22 percent, well above the discount rate

(10 percent). The Net Present Value is USD 4 million and the Benefit Cost Ratio is 1.31.

49. The above results are based on very conservative estimates, as they don’t include

prospective students in community-managed schools of users of community health facilities, but

only current and future benefits for those who have already availed from the services.

Sustainability

50. The PAD envisaged that overtime, health and education facilities would be managed and

supported by the community and the costs would be met through student and patient fees,

community support and community institutions’ productive linkages with the government

departments, other development partners and corporate sector. The expectation that communities

77 Pakistan Labour Force Survey. 2010-2011 78 Irfan. 2008. Pakistan’s Wage Structure from 1990/91 – 2006/07). 79 Comptroller and Auditor General. HC 69SesSIon 2010–2011 June 2010. DFID Bilateral Support to Primary Education. National

Audit Office.

67

would be able to afford the fees to keep the facilities running proved to be quite unrealistic.

Evidence from field visits suggests that the poorest communities are not able to afford schools fees

at all, whereas information provided by PPAF’s Health and Education Unit shows that, in those

communities where a fee system was actually put in place, the income generated covers only about

15 percent of the average running costs, estimated at PKR 24,000/month including teachers’

salaries and other expenses. Average costs of operations and maintenance for community-based

health facilities are not available. However, according to the latest user beneficiary survey, 64

percent of beneficiaries reported paying no fees when using health facilities, while the average fee

for those centers that charge for their services was as little as PKR 12 per visit on average.

51. The PAD also anticipated that some health and education facilities would be taken over by

government or private sector. The success of this strategy was also limited: only four government

health centres integrated PPAF-recruited staff into their systems. Similarly, only few schools were

integrated in the government education system through the Punjab and Sindh education

Foundations. Nevertheless, all the all the community schools and health centers are still

functioning. A large majority of community-based facilities are being supported by POs with their

own resources and some of them have been handed-over to private entrepreneurs and being

sustained through service charges. PPAF is currently covering the annual operating expenses of

86 schools at a total cost of PKR 53.5 million per year.

68

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending

Javaid Afzal Senior Environmental Specialist GENDR

Naila Ahmed Senior Social Development Specialist GSU06

Zia Al Jalaly Senior Social Development Specialist OPSPF

Asif Ali Senior Procurement Specialist GGO06

Mohammad Imtiaz Akhtar Alvi Senior Rural Development Specialist GFA06 Co-TTL

Anwar Ali Bhatti Financial Analyst SACPK

Kevin John Crockford Senior Rural Development Specialist GFA07 TTL

Afzal Mahmood Program Assistant SACPK

Aized Hasan Mir Local Consultant ST SASGP - HIS

Saeeda Sabah Rashid Sr Public Sector Specialist GGO14

Tahira Syed Senior Rural Development Specialist GFA12

Supervision/ICR

Javaid Afzal Senior Environmental Specialist GENDR

Naila Ahmed Senior Social Development Specialist GSU06

Zia Al Jalaly Senior Social Development Specialist OPSPF

Naveed Saeed Consultant/Financial Management GGO24

Rehan Hyder Senior Procurement Specialist GGO06

Akram El-Shorbagi Senior Financial Management Specialist GGO24

Asif Ali Senior Procurement Specialist GGO06

Saleha Waqar Operations Analyst/Consultant GFA12

Blanca Amado Economist/EFA FAO-CP

Steven Watkins Microfinance Specialist/ FAO-CP

Munazza Zia Institutional Specialist/FAO-CP

Izabela Leao Labor Specialist GFA06

Mohammad Imtiaz Akhtar Alvi Senior Rural Development Specialist GFA06 TTL

John Prakash Program Assistant GFA06

Gizella Diaz Program Assistant GFA12

Anwar Ali Bhatti Financial Analyst SACPK

Melissa Kathleen Williams Senior Rural Development Specialist GFA06 Co-TTL

Winston Dawes Senior Rural Development Specialist GFA06

Pushina Kunda Ng’andwe Senior Rural Development Specialist GFA06 ICR TTL

Afzal Mahmood Program Assistant SACPK

Maqsood Ahmed Consultant GSU06

Mehvish Altaf Team Assistant SACPK

Mohammad Azhar Consultant GSU12

Mohammad Farhan Sr. Water and Sanitation Specialist GWA09

Muhammad Riaz Sr. Agricultural Specialist GFA12

Seenithamby Manoharan Sr. Rural Development Specialist GFA06

Silvia Kaufman Sr. Nutrition Specialist GHN19

69

Mohammed Yasin Sr. Program Assistant SACPK

Saeeda Sabah Rashid Sr, Public Sector Spec. GGO14

Tahira Syed Senior Rural Development Specialist GFA12

Lilac Thomas Program Assistant GFA06

Andrea Vermehren Lead Social Protection Special GSP01

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including

travel and consultant costs)

Lending 205,017.00

Total: 205,017.00

Supervision/ICR: 1,265,046.00

Total: 1,265,046.00

70

Annex 5. Beneficiary Survey Results

1. This report is based on the Beneficiaries Assessment Survey (2014) carried out in 21 districts

across Pakistan where PPAF interventions were implemented. A total of 2000

households/beneficiaries were surveyed to collect information about six major components of the

PPAF-III. For assessment, the 2000 household sample was divided into six types of beneficiaries.

2. Using before and after the intervention technique, it was found average household incomes

(size 6.7 persons) and savings have increased. Although one cannot attribute the income increase

to the interventions completely, they did matter in this regard as opined by beneficiaries. Overall,

the average poverty score of the sampled households is 39, which means that Transitory

Vulnerable group is the major beneficiary group of the interventions. This pattern holds true for

nearly all types of interventions.

3. Simple percentage growth analysis shows that on average the income of relatively poor

household increased by around 24 percent, whereas the same increase was around 17 percent for

relatively non-poor households. Therefore on average the income of poor households increased

more than non-poor households.

4. The results are encouraging vis-à-vis Social Mobilization and households’ participation in

community activities. Overall 91 percent respondents said they were actively involved in the

community activities and social mobilization directly or indirectly. Intermediate outcome

indicator of making 60 percent of the targeted poor household members a part of community

activities/community members seems to have been achieved.

5. For the Livelihood Enhancement and Protection (LEP), the overall beneficiary satisfaction

level is 95 percent. Beneficiaries (94 percent) utilized assets for income generation and 89 percent

confirmed assets were helpful in increasing their incomes. The estimated average increase in

income was PKR.4,500 per month. The beneficiaries were also given relevant skill-training for

better utilizing assets. Beneficiaries (97 percent) who got trainings termed them useful, achieving

the intermediate outcome indicator of training 70 percent beneficiaries. Linkages development is

important for sustainability of income created through assets transferred. Beneficiaries (41

percent) said LEP intervention helped in creating profitable linkages with markets/external

organizations.

6. In the microcredit component 70 percent of respondents were women. Around half of these

women were illiterate and 41 percent had educational qualifications from primary to matriculation.

These findings suggest that females with no or relatively low educational qualifications are able

to access microcredit which can be taken as an encouraging sign of socio-economic development.

7. A large majority 92 percent termed credit beneficial for them. The average amount of credit

(based on all microcredit beneficiaries) is around PKR.24,800. The average interest rate charged

on microcredit is 20 percent, and the average net income PKR.30,900. Beneficiaries (85 percent)

reported loan was intended for business needs. The relative dominance of ‘transitory non-poor’

and ‘non-poor’ in overall sample of microcredit beneficiaries was found. Around 44 percent

maintained their business/enterprise has become self-supporting, while 52 percent said they need

further credit. A total of 168 microcredit beneficiaries received skill-trainings. Of the trained

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beneficiaries, 74 percent were females. Beneficiaries (74 percent) were trained in ‘enterprise

development’ and the rest in ‘financial literacy’. Though the degree of usefulness varied across

trained beneficiaries, 96 percent termed trainings useful.

8. Under the Basic Services and Infrastructure interventions, all beneficiaries expressed

satisfaction with drinking water schemes. Apart from the benefit of time-saving, 75 percent

respondents reported lesser incidence of waterborne diseases in children and other members of

household. Further 83 percent beneficiaries were very satisfied with sanitation facilities.

9. Under the irrigation schemes, on average PKR.780 per crop were paid as charges for irrigation.

Most beneficiaries affirmed increase in the crop yield, especially in rupee terms. In case of link

roads/bridges, 93 percent respondents said the facility helped them save one to three hours daily.

Overall 64 percent beneficiaries said because of link roads/bridges, the prices of imported goods

have decreased. Similarly, collectively 60 percent beneficiaries are benefitting from the linkages.

10. Overall 83 percent respondents expressed satisfaction with health facilities, which included

pre- and post-natal services, family planning, pharmacy, vaccination for children under one year

old. Nearly two-third beneficiaries reported paying ‘no-fee’ for availing health facilities. The staff

was present at the health facility center and their attitude was kind and helpful.

11. A majority of respondents (93 percent) expressed satisfaction with the education interventions,

saying facilities such as books, uniforms, stationery etc. were provided free of cost.

12. Overall results are satisfactory. However, there is need to focus on households with poverty

scores less than 23. Skill training and targeted asset transfer interventions can contribute to move

them out of extreme poverty. In this regard skill training for women can be a vital intervention for

such families. The program interventions on increasing women’s role in the livelihood activities

may be explored to improve socioeconomic outlook of the families. Further the interventions in

education, health and sanitation facilities with women as the main recipients will also indirectly

contribute to improving the families’ poverty status.

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Annex 6. Stakeholder Workshop Report and Results Introduction

1. On November 8, 2016, the Pakistan Poverty Alleviation Fund (PPAF) and the World Bank

participated in a Stakeholders’ Dialogue at the Serena Hotel in Islamabad. The focus of the

workshop was to discuss the main project outcomes with participation from key stakeholders such

as Partner Organizations and Donor Partners. The discussion was meant to stimulate dialogue on

the long term strategy and sustainability of results achieved. This report summarizes the main

takeaways from the deliberations drawn primarily from the presentations and subsequent

discussions that followed.

• PPAF’s outreach capacity and future role related to three key areas. It was acknowledged that

PPAF’s strategies of collective action and capacity building were important factors in reaching

out to the poor. Through the provision of grants and training, PPAF created opportunities for

communities to earn incomes while linking to health and education services. Provision of

infrastructure further improved community productivity. Given these important

accomplishments, sustainability, transparency and governance would be central to PPAF’s

future role as is its ability to build itself into a self-financed agency, independent of donor

support.

• PPAF’s model neutral approach and areas of future interest. It was noted that PPAF’s

approach had great success across PPAF I, II and III. As a pioneer in the microfinance industry,

with only 60,000 clients, PPAF facilitated the establishment of the for-profit-microfinance

company PMIC, which can reach a market of over 2 million. Potential areas of interest for

World Bank support would be in agricultural financing and as such, PPAF would need to

articulate its role in supporting such an agenda and in developing mandates to further

strengthen government development programs.

• PPAF’s re-alignment and shift to an institution and apex of development work. PPAF tightened

its internal systems and processes and developed new strategies for livelihoods focused work.

Simultaneously, the organization liaised with government agencies to deliver interest free

loans schemes to rural districts that grew into a platform for the development sector, which

continues to evolve, albeit, challenging. The institutional focus under PPAF-III began a

systematic thought process about an equitable approach and targeting outreach to poor rural

communities, including women and disabled people. The overlay of interventions to include

health and education demonstrated that economic ecosystem was required to maintain

interventions and make them sustainable. The operational approach was anchored in research

where PPAF opened itself up to third party research and analysis to inform its strategy.

• PPAF’s role in PMIC and its continued focus on the poor agenda. It was noted that PPAF’s

role in the establishment of PMIC would continuously require focus on poor and inclusion in

light of its financial arm’s mandate as a private-sector, for-profit enterprise. It was recognized

that inclusion continued to be a major issue that required PPAF to be more effective, not only

in resource allocation, but also into researching its impacts that would build the foundation for

continued sustainability of community driven programs.

2. A number of lessons emerged from past evaluations as well as beneficiary discussions held

during the ICR field trips. They are summarized below.

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• There was need for innovative approaches to deepening participation in project activities

taking into account incentives and motivation in a context specific setting. This lesson came to

light from a bank evaluation which found that some poorest members in the communities did

not have capacity to join or women were opting not to join Cos even when they had been

established in the villages.

• Encouraging results on community leadership, electoral participation and aspirations.

Specific progressive mandates such as minimum participation requirements for women led to

increased engagement in decision making, participation in the decision making process and

demonstrated more progressive views about women supporting other women as community

leaders.

• Evidence of poverty reduction but little impact on key nutrition and health related parameters.

This was largely on account of contamination of water which required an integrated approach

to raise awareness and advocate for behavioral change around sanitation and hygiene practices.

• LSOs were emerging as potentially strong interlocutors for communities with sub-national

governments but required further strengthening. LSOs demonstrated capacity to advocate for

services from both private and public sector providers but required additional support to

become more financially and technically independent. The majority remained financially

dependent on POs and PPAF funding.

• PPAF requires a more sustained approach to continuing engagement in the health and

education sectors. The challenges of poor communities’ capacities to pay for services meant

that PPAF continued to fund a portion of education and health services which would have

otherwise been halted. There was need for a long term strategy that would enable these

activities continue in the absence of PPAF funding. Greater push towards establishing linkages

with the lines departments would be a possible option.

• PPAF’s support for livelihoods needs continuous engagement and facilitation in the short to

medium term. The interventions were introduced late into implementation and were in their

nascent stages of development. Sustainability of these interventions would require continuous

facilitation from PPAF over the short and medium term with stronger push towards improving

bottom line balance sheets.

• PPAF’s needs to devise strategies that will ensure that the poor continue to access financial

services. PPAF’s stake in PMIC should be used to ensure that part of the latter’s mandate

continue to focus on supporting the poor access finance.

3. A broader discussion was held around the following.

• The meaning of future sustainability. Sustainability had to be viewed in a much broader context

beyond funding requirements and required a dynamic directive beyond the project cycle to

motivate the problem solving process. As part of this deliberation, in working towards greater

sustainability, PPAF would need to examine its current role and review other possible options

including a possible transition from operation to an oversight capacity.

• Government integration as an underlying need to foster sustainability. Increased direct

government funding for PPAF projects would be one way to induce sustainability. However,

more discussion is warranted on the source of resources mobilized. PPAF’s capacity to attract

additional sources of funding demonstrates the need for increased collaboration among

different groups. Related to this was the potential for POs to collaborate with the government

in improving communities’ capacities to effectively lobby for services.

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• Inclusion and governance are hallmarks of effective development work. The meeting

acknowledged that PPAF’s core values were rooted in inclusion and good governance, and that

third party validation verified and tracked progress in those areas. PPAF’s success in the

development sector was demonstrated in its ongoing long term collaboration with partner

organizations. Its work with the World Bank gave it confidence to push forward into new

frontiers of development work.

List of external workshop participants

Type Organization Name Designation

Partner

Organization

Environmental Protection

Society Mr. Akbar Zeb Executive Director

Partner

Organization

Farmers' Development

Organization

Mr. Ghulam

Mustafa Director

Partner

Organization

National Rural Support

Programme Dr. Rashid Bajwa

Chief Executive

Partner

Organization

Participatory integrated

Development Society Mr. Baber Shah

Partner

Organization

Sarhad Rural Support

Programme

Mr. Masood-ul-

Mulk Chief Executive

Partner

Organization

Thardeep Rural

Development Programme Dr. Sono Khingrani

Chief Executive

Officer

PPAF

Donors World Bank Mr. Anthony Cholst Operations Adviser

PPAF

Donors World Bank

Dr. Ghazala

Mansuri Lead Economist

PPAF

Donors World Bank Dr. Shoba Shetty

Sector Manager - Rural

Development

Third Party

Firm AID Mr. Ijaz Hussain

Community

Infrastructure

Asiatic Public Relations

Ms. Shehrbano

Kazim

GoP

Anjum Asad

Ameen

World Bank

Ms.Pushina Kunda

Ng’andwe

Director, PPAF Ahlullah Kakar

RCDS Mr. Qaiser Iqbal

BISP

Kamran Farooq

Ansari Director

BRDS Salman Khan

Muhammad Wsif

Mir Ahmad

SABAWOON Mr. Iftikhar

BRSP Naimat ullah

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Anthony Hoslst

Kashaf Shahzad Iqbal

WB Munib Ansari

UNDP Neil Bunail

PPAF Internal Participants (Staff)

Name Designation

Ms. Simi Kamal Sr. Group Head

Mr. Junaid ul Arooj Tariq Sr. Manager

Mr. Mujahid Trimzi Manager

Mr. M. Shahbaz Shafique Manager

Ms. Tabassum Baloch Sr. Manager

Mr. M. Tariq Rafiq Bhatti Sr. Manager

Ms. Uzma Nomani Sr. Manager

Mr. Mansoor Ahmed Manager

Mr. Imran Siddiqui Sr. Manager

Ms. Munazza Ali Manager

Mr. Sarfraz Ahmed Manager

Mr. Basharat Manager

Mr. Kamal Afridi General Manager

Mr. Mohammad Nadeem General Manager

Mr. Mohammad Fazal General Manager

Mr. Mohammad Riaz General Manager

Mr. Tahir Malik General Manager

Mr. Munzir Elahi General Manager

Mr. Mohammad Nafees General Manager

Mr. Tariq Ashraf General Manager

Mr. Abdul Rehman General Manager

Mr. Atif Raza Kazmi General Manager

Mr. Naeem Siddiqui General Manager

Zahid Hussain Senior Manager

Niaz Hussain SME

Umer

Mobeen

Asadullah Saleem

Col. Asad

Irum Abid

Sadia Farid

Maryam Zahra

Ms. Rabiya Baber

Ahmad Nawaz

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

A. Summary of Borrower’s ICR

Project Context:

1. The Pakistan Poverty Alleviation Fund III (PPAF III) Project is a project financed by a

USD 250 million IDA credit initiated on August 1, 2009 and completed in March 2016. Its

objective was to empower the targeted poor with increased incomes, improved productive capacity

and access to services to achieve sustainable livelihoods. The project comprised of five

components: (i) Social mobilization and institution building; (ii) Livelihoods enhancement and

protection; (iii) Micro-credit access; (iv) Basic services and infrastructure; and v) Project

implementation support. The project built on eight years of previous experience with PPAF and

aimed to improve poverty outcomes through a deepening and saturation approach in targeted areas

and having an even stronger focus on poor households and women.

2. The project adopted strong targeting mechanisms which could more effectively identify

the target groups including minimum targets for the inclusion of women and poor in the results

framework. The project was designed to adopt a saturation approach to improve the impact on

poverty reduction. The project was also designed to enhance more inclusive access of the poor to

markets and local government through building organizations at the community, village and union

council level. To better support these goals, there were some important changes in the project

design during implementation with respect to a few of the components.

3. The Livelihoods component was reoriented to expand the range of opportunities and to

review the target group as agents of change, rather than passive recipients. There was an emphasis

on strengthening local level institutions for enhancing livelihood opportunities and a number of

innovations were introduced such as Naukri ya karobar (Employment or Enterprise) Centres,

Youth Centres, Loan Centres and Production Centres and significant efforts were made to

restructure, standardize and modernize the training program, develop market linkages, engage with

the private sector, and create synergies to ensure long-term sustainability of investments.

4. Under the Basic Services and Community Physical Infrastructure (CPI) component there

was a change in the Sind Coastal Area Development (SCAD) sub-component to expand the scope

of activities to include investments in rural connectivity, protecting and strengthening livelihoods

and increasing household income and resilience in disaster prone communities and implementation

of an integrated program with active participation of all relevant PPAF Units. There was a

restructuring of the health and education programs and revised strategies were formulated which

shifted the focus on mobilizing communities to monitor and support existing government facilities

instead of investing in direct service provision and strengthening of public sector facilities.

5. Under the microcredit component there was an expansion of the geographic coverage to

districts which were previously not included for capacity building support and withdrawal from

areas where the low level of demand did not justify continued presence.

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6. Overall, the initial large number of districts and Union Councils within the scope of the

project were gradually reduced (from 1610 to 1020 UCs) in order to deliver better on the project’s

objective of increasing impact through saturation and deepening.

Relevance and Sustainability

7. Poverty is deep rooted in Pakistan with related problems of malnutrition, ill health,

illiteracy, powerlessness, exclusion, violence, unemployment and underemployment and

livelihood risks and vulnerabilities. The key Government policy documents that outline the

national poverty reduction strategy in Pakistan are Vision 2025, the Medium-Term Development

Framework (2005-2010), Poverty Reduction Strategy Paper II (2008-2012) and the New Growth

Framework (2010). Vision 2025 outlines ambitious plans for poverty reduction and aims to have

“eliminated extreme poverty in all its manifestations much before 2025.” As part of these plans,

Government strongly committed to supporting PPAF, seeing it as a key instrument of its support

to alleviating poverty at the national level. The Government has turned to PPAF to implement

some of its most important initiatives including several of the Prime Minister’s special initiatives

such as the Prime Minister’s Interest Free Loan Scheme. In its annual Pakistan Economic Survey,

the Ministry of Finance cites the contribution of PPAF to achieving overall growth and poverty

alleviation objectives and in the delivery of priority social safety net programs.

8. The Government’s Financial Inclusion Strategy includes the role of PPAF in the provision

of micro-finance services. In particular, the Government’s own strategy to increase commercial

finance to the microfinance sector is dependent on the transformation of PPAF’s microfinance

operations into a separate entity under the Pakistan Micro-Finance Investment Company.

9. In terms of disaster response and recovery, Government has continued to turn to PPAF for

assistance. Between 2010 and 2014 PPAF used its own funds to support communities affected by

the massive floods, providing relief to 171,000 households in over 180 Union Councils across the

country. Similarly, in 2015, PPAF in collaboration with its partner in Tharparkar initiated a drought

recovery program amounting to PKR 40 million which addressed the food, health and nutrition

needs of affected communities. Over 4,500 households benefited from food baskets, mobile health

services, animal fodder, vaccinations and management of acute malnutrition.

10. Not only did PPAF play a central role in helping to channel Government funds, but PPAF’s

own organizational structure and poverty graduation approach attracted a variety of multilateral

and bilateral donors beyond the World Bank including the Asian Development Bank, DFID, IFAD,

KfW, the Government of Italy and including several corporates, like Mari Gas, Shell etc.

Major Accomplishments:

11. Despite the very difficult and challenging circumstances under which the project was

implemented, it fully reached its development objective of ensuring that the targeted poor have

increased their incomes, improved their productive capacity and access to services under PPAF

III. PPAF fully disbursed its project financing and exceeded most of the physical targets specified

under the project. The success of the project is also evidenced by a host of positive external

performance assessments of PPAF and its Partner Organizations (POs).

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12. There are a number of outcomes which are particularly noteworthy including: (i)

supporting the growth of a nationwide microfinance sector into one which is now rated as one of

the best in the world (The Economist Intelligence Unit); (ii) organizing over 120,000 community

institutions (cumulatively from the start of PPAF I to now) with a core focus of inclusion of women

and the poorest; (iii) developing the capacity of 130 civil society organizations; and (iv) taking to

scale its poverty graduation approach that has shown to significantly and positively impact income,

consumption and wealth of the poorest households.

13. Specifically, PPAF and its POs organized 65,448 Community Organizations with a

cumulative membership of over a million households. At project close, around 67 percent of the

organizations met the criteria of viability. An assessment of the number of beneficiaries from the

different components who could have potentially realized an increase in income indicates that there

are estimated to be 1.219 million households who have received training, assets, micro-credit

services and benefitted from infrastructure schemes. Third Party assessments from a range of

different sources report increases of income upwards of 20 percent. Some 127,112 students

benefited from the support to community and public sector schools and more than 12 million visits

were made to community health centers and the basic health units established under PPAF III.

14. Preliminary analysis shows high rates of return of social mobilization, livelihood, physical

infrastructure and the institution based models adopted for the education and health activities under

the project. The Internal Rate of Return shows that each individual component generated

significant value ranging from 21 percent to 138 percent. The Net Present Value for each

component was positive in both economic and social terms. PPAF supports the Government’s

social protection program by providing a poverty graduation approach for the poorest households.

15. A comparative assessment of the Benazir Income Support Program (BISP) that provides a

monthly stipend of PKR 1,500 to households below the score of 16.17 on the poverty score-card

and PPAF’s livelihood strategy, which provides similar households a one off asset transfer

alongside skill training (up to a maximum of PKR 50,000) shows that were BISP to use the

approach taken by PPAF, an additional 2.5 million women could move out of poverty every year.

The PPAF model aggregates payment to a beneficiary over two to three years to achieve an average

monthly income that is more than twice that given under the BISP safety net program (PKR. 4,500

as compared to PKR. 1566). The PPAF model is more efficient and cost-effective as transaction

costs for both the implementer and the beneficiary are limited to a one-time transaction.

16. A hallmark of this last phase of PPAF projects was the ability to realize some significant

successes in introducing innovation and new development approaches to tackle some of the

challenges in identifying and reaching the ultra-poor in a more effective and efficient manner with

higher impact than other programs. Similarly, the Union Council Development Plan has been a

powerful new tool for building local capacities through the training of young people as community

resource persons. Over 1,000 Community Resource Persons were trained and facilitated and a

database of these CRPs can now be utilized by private, public and non-profit organizations to be

on-hand resource persons for a range of technical skills for local communities.

17. PPAF has also assisted its POs in introducing some innovative financing products which

are targeted at meeting some of the critical education and energy needs of the communities. These

products include a low cost school financing product in collaboration with Kashf Foundation (KF)

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and TRDP. The project has reached out to 160 LCPS in Districts Bahawalpur, Multan, Gujarat,

Sialkot, Lahore, Bahawalnagar, Khushab, Layyah and Tharparkar; benefiting 29,618 students (51

percent girl students) and 1,383 teachers who are working in these schools. The product by Kashf

is being implemented in 100 schools and the introduction of this product has resulted in increasing

the total enrolment to 16,824 students, of which 51 percent are girls. Trainings have been delivered

to 697 teachers and 281 entrepreneurs. PPAF has also introduced a product designed to finance a

renewable energy product which finances solar and biogas solutions. Over 2,407 clients have

benefitted from these microfinance based solutions, with loan amount exceeding PKR. 45.28

million. The technical specifications of the solar panels are determined after an analysis of the

electricity requirement of each household and repayments are based on household cash-flows.

18. PPAF has initiated the process of spinning off its micro-finance operations to create a

separate Pakistan Microfinance Investment Company (PMIC) to enable it to expand its sources of

funds and become Pakistan’s leading microfinance investment vehicle. In April 2014, the Board

of PPAF approved the setting up of the new national microfinance investment fund with

investments by the United Kingdom’s Department for International Development (DFID) and

KfW the German Development Bank. External consultants were hired to facilitate the process of

negotiations amongst the shareholders, design business plans, and devise investment strategy and

organizational structure of the new entity along with provision of legal advice on the formation

and other regulatory compliance issues. In September 2015, the Finance Minister gave his approval

in principle for the establishment of PMIC.

19. Innovative approaches were also used to promote women’s inclusion. One example was

the use of a Gender Committee (GenCom) to facilitate a culture of inclusion within PPAF, POs

and communities and to mainstream inclusion in the implementation of PPAF III. This led, for

example, to a successful pilot in South Punjab on overcoming Gender-Based Violence. Innovative

approaches were also introduced to support better implementation of ESMF. For example, an

Indigenous Peoples Planning Framework (IPPF) was introduced under PPAF-III to protect the

indigenous heritage and practices of the people in the Kalash Valley in Chitral.

20. Overall, PPAF’s willingness to continue to be open to new ideas and its willingness to take

on new and difficult tasks has proven to be extremely important for its own sustainability and

relevance.

Project Partnerships:

21. PPAF has had long standing relationships with most of the Partner Organizations that were

used to implement the project and has helped to build their capacity to comply with the financial

management, environmental and social safeguards required under the project.

22. PPAF also fostered a number of partnerships with academia, corporates, and government

entities that supported the work being carried out under the project. For example, PPAF developed

research partnerships with Centre for Economic Research in Pakistan (CERP), Lahore School of

Economics (LSE), Oxford University, and others so as to strengthen the role of research and

evidence-based planning/design for its components. Both the asset transfer / livelihoods

component and the community social mobilization component have benefited from this research.

Similarly, MoUs signed with a variety of corporates and provincial government agencies such as

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the Women Development Department (Punjab Government) helped strengthen the outcomes under

PPAF III. This included the ability to help its borrowers manage the risk in the agriculture sector

and forge commercial links between its clients, insurance companies and value chain actors in the

agriculture and enterprise sectors.

Institutional Efficiency:

23. The unit cost of establishing a community organization and sustaining it under PPAF III

for six years was USD 515 per CO. This investment enabled PPAF and its POs to implement the

livelihood, community infrastructure and social sector components valued at USD 165 million.

The community capacity to manage funds under PPAF was worth almost five times the funds

invested in its own development. Community participation through active participation in financial

and labor contribution, financial management and the procurement of building materials not only

improved the efficiency of expenditures, but ensured stronger community ownership of

community infrastructure projects and empowered participating communities.

24. PPAF also helped to improve the fiduciary systems within the partner organizations

(especially small ones) and to strengthen financial management capacity at the community level.

Within PPAF itself, a corporate governance framework compatible with best national and

international practices was introduced alongside compliance with the statutory requirements and

covenants stipulated in the agreements with the World Bank, other development partners and GOP.

25. Continued improvements in monitoring and evaluation capabilities can be seen throughout

the project implementation period. A Compliance and Quality Assurance Group was set up in 2012

to look after all monitoring, evaluation, research and environment and social management

compliance. A three-tier monitoring system was established to monitor outputs, outcomes and

process. A number of third party assessments were also carried out to measure outcomes/impacts

including The World Bank Development Economics Research Group (DECRG) which managed

the impact assessment of PPAF III. The World Bank’s own reviews of fiduciary arrangements of

PPAF-III demonstrated the adequacy of the control and reporting systems including at all three

tiers of World Bank-financed activities (PPAF, PO and COs). The financial management

arrangements in place were rated as “Satisfactory” throughout the PPAF III implementation period.

Role of the World Bank:

26. PPAF, the Government of Pakistan and the World Bank have been in partnership since the

year 2000. The investment of IDA financing and implementation support for 15 years witnessed

the full delivery of project objectives, a number of important innovations in poverty reduction

approaches with potential global reach and a strengthening of GoP’s poverty reduction mandate.

The completion of PPAF III marks the graduation of PPAF as a mature institution that can

implement complex multi-sectoral projects, absorb substantial resources and work simultaneously

with multiple development partners.

27. Whilst overall the role of the World Bank has been a very positive one, and the considerable

success of PPAF would not have been possible without the support from the World Bank, there

were some instances where the quality of implementation support veered off course into what

could be seen as attempts to interfere in the management of PPAF and some missed opportunities

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to support PPAF to better implement its evolving strategy (particularly in the health and education

sectors) with some negative impact on the implementation of the social sector program in

particular.

Lessons Learned

28. Given the positive learning for development approaches globally, the World Bank

requested that the PPAF Project Completion and Results Report (PCRR) be a more detailed

learning PCRR. Therefore, the lessons learned are an important element of this PCRR. Amongst

some of the most important lessons are the following:

a) The use of the Poverty Score Card to target the beneficiaries for transfer of asset and training

programs and the use of Community Organizations to verify the poverty status of households

to rectify any exclusion or inclusion errors from the scorecards was an essential element in the

improved poverty targeting and deepening that was at the center of the project objectives

Similarly, setting a high standard in collecting and utilizing sex-disaggregated data in of the

ability to judge both satisfaction and impact.

b) Under the project, PPAF did not dictate the political processes that community institutions

were to use. Rather PPAF focused on providing guidelines to ensure that the community

institutions were not hijacked to meet the political interests of one party but reflected the

broader interests of the membership. This was an important evolution in the role of community

organization facilitation which continues to provide solid evidence to global experience that

community driven approaches have the capacity to implement a large number of community

physical infrastructure schemes efficiently and cost-effectively.

c) This project provides many interconnected lessons on how to deliver on a deeper and more

sustainable micro-finance sector and particularly on the ability to reach the ultra-poor. This

includes methods for better use of third party oversight in Community Livelihood Funds. The

lessons also relate to striking a better balance between growth objectives and promotion of

diversity amongst MFIs to get better outcomes. PPAF’s role as an advocate for the smaller

MFIs was instrumental in enhancing the sustainability of the microfinance sector

d) A saturation approach to poverty reduction requires continued innovation in methods of

delivery. Building the capacity of hard-to-reach localities through the training of young people

as community resource persons is a successful strategy to engage youth who may otherwise

have been marginalized and to create a new and energetic network of development actors at

the community level who also act as agents of change. Differentiated strategies are required

for girls and boys.

e) The feedback received from the field by PPAF and its POs indicates that there is strong demand

for quality education and thus a need to invest greater resources in service delivery models

which can provide quality education. Investing in demand creation without the provision of a

supply of quality education is neither efficient nor effective and may be counter-productive.

PPAF has learnt that educating girls is the single most important intervention for women’s

empowerment. Although financing community schools entailed higher costs, it is likely that

such schools would have been the most effective over the longer term. PPAF should have

committed to the community schools for a longer period of time, at least 10 -15 years, as this

is what is required to create and graduate local human resource to sustain those schools.

Moving forward:

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29. Government remains firmly committed to the task of development and poverty alleviation. The

Government has taken over the responsibility for achieving the Sustainable Development Goals

(SDGs) which outline a 15-year agenda to address the 17 issues of the developing world which

include poverty, hunger, quality education, clean water, sanitation and affordable energy etc. With

its wealth of experience and innovation, PPAF is in a strong position to assist the Government of

Pakistan and its current and future development partners in the achievement of the SDGs in

partnership with its Partner Organizations and the community institutions on the ground.

B. Comments on Draft ICR

30. PPAF III was an extraordinarily successful project by every measure. As evidenced by

extensive data collection and analysis, by multiple third party evaluations over the course of the

project, and captured in the Bank’s ICR team’s own analysis, the PDO was fully achieved and

every KPI was met, with the majority of KPIs exceeded. There were many additional positive

outcomes beyond those originally envisioned including innovative and ground breaking

approaches to scaling up microcredit and new ways of reaching the poorest and most excluded –

i.e. eliminating poverty at the “last mile”.

31. Importantly, although the ICR mostly overlooks this, one of the great successes of the project

is that it supported the creation of PPAF as a truly professional and sustainable organization, with

a robust governance structure, wholly supported by the Government and other stakeholders and

independent of the World Bank. This strong and sustainable PPAF, in turn, has been able to help

strengthen dozens of Partner Organizations at the grassroots level. Given that many of the biggest

Community Driven Development (CDD) projects around the globe struggle with sustainability

once the World Bank exits, the success of the PPAF in this regard is all the more remarkable and

should provide opportunities for global learning.

32. Against this background, it is with dismay that we note that the World Bank has rated the

Borrower’s performance as only “Moderately Satisfactory”. To any impartial observer, such a

rating is wholly unjustified and insupportable. Not only is it an inaccurate reflection of the

implementation of the project, it is inconsistent with the Bank’s own ICR analysis. It should be

noted that this “MS” rating appeared only at the very last moment -- in fact long after the ICR

should have been finalized. (The ICR was produced one year after project close rather than after

six months per the Bank’s guidelines.) As recently as March 22, 2017, draft ICRs that had been

shared with the Borrower consistently rated the borrower – both Government and Implementing

Agency -- as Satisfactory. At the last moment, without any explanation, notification to the

Borrower nor opportunity to provide feedback, the Bank decided to downgrade the performance

to “MS”. It is because of this action by the Bank that these comments, as an Annex to the final

ICR, are the only opportunity to set the record straight.

33. A careful reading of the ICR seems to suggest that the “MS” rating has been linked

primarily to a single incident. That is, it is associated with the Project Task Team’s displeasure

with PPAF’s unwillingness to be bullied into accepting a technically inferior and biased

“Management Performance Review” (MPR) covering the period 2012-2014. The ICR incorrectly

reports that the PPAF “resisted” the MPR’s recommendations. In fact, the MPR was never

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completed nor accepted. This is because the PPAF informed the Bank many times verbally and in

writing that there were serious problems with the technical quality of the MPR’s methodology, the

competence of the consultants hired by the Bank to undertake the MPR, lack of independence (and

conflicts of interest) of some key consultants working on the MPR, and interference by the Bank’s

project task team in unilaterally changing the original Terms of Reference for the MPR midstream

and seeking to exert pressure to influence the content and tone of the findings. The Bank’s project

task team did not respond to these issues, nor did Bank Management reply to PPAF’s letter setting

out these concerns and asking for resolution in order to complete the MPR exercise. Therefore,

the MPR was never finalized and the “recommendations” never agreed nor discussed between the

Bank and PPAF.

34. In fact, the MPR should never have been foisted on PPAF. The “recommendations” in the

incomplete and un-finalized report were, at best, immaterial and superfluous to the PPAF’s

operations since, independently of the Bank, PPAF with the full support of its Board and the

Government, was already putting significant energy and resources into continually strengthening

its management, staffing, governance and reporting to address the poverty challenges faced by

Pakistan. The ICR itself takes note of the strategic choices undertaken by PPAF and the positive

impacts these had on the outcomes of the project. With reference to project implementation, the

ICR explains how PPAF managed this: “PPAF sought to introduce newer aspects of project

implementation, particularly approaches to livelihood enhancement and working with ultra-poor

households, which, by their nature, required more time to take root. The expansion to include

livelihood activities, for example, required shifts in the social mobilization approach to not only

address processes and procedures of including vulnerable groups but to also deal with

reorganization of beneficiary groups around private interests in contrast to public goods. Moving

towards an integrated system - that aligned micro-credit, infrastructure and livelihoods – was a

necessary consolidation strategy envisioned at conception and required that PPAF introduce a

number of institutional changes and procedures in order to address these new challenges.”

35. The ICR further highlights several institutional strengthening mechanisms that PPAF put

in place: “PPAF’s technical support to its implementing partners (Partner Organizations) has

contributed to their transformation from donor dependent charity driven organizations to MFIs

with clear business plans to become sustainable development partners. There has been a significant

shift in organizational culture, appraisal criteria, governance structure, staffing pattern, financial

management and audit systems, monitoring and evaluation arrangements…. PPAF also enforced

inclusion mandates in its partnerships with Partner Organizations (POs) by requiring that the Board

of Directors of the POs improve the representation of technically qualified women. As a result, the

proportion of women in the PO Governance structures has increased to 32 percent. PPAF, itself,

has attained 50 percent female representation in the organization’s management structure.”

36. Moreover, PPAF management independently moved ahead with a business plan that

outlined the organization’s strategy for both credit and grant operations for the remaining project

implementation period. Processes for PO identification/selection process were further

strengthened and made more transparent through the creation of a two-tier appraisal process with

the first round of shortlisting done by an internationally recognized consulting firm, KPMG. PPAF

strengthened its own corporate governance credentials by voluntarily adopting the Corporate Code

of Governance issued by the Securities and Exchange Commission of Pakistan. Furthermore, three

Board Committees, including Audit, Human Resources and Risk Oversight, were formed. PPAF

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maintained compliance with these Corporate Governance Rules – far surpassing any corporate

governance requirements expected by the Bank.

37. In a similar vein, the ICR makes some insinuation that an Independent Procurement

Review (IPR) in which PPAF assisted the Bank, might somehow suggest less than satisfactory

performance. In fact, the IPR was related mainly to individual consultancies and an action plan

was prepared by PPAF in consultation with the World Bank Procurement team, and was fully and

successfully implemented. This was confirmed in the Bank’s own Aide Memoire and in the

satisfactory procurement ratings in all but one of the 10 (one was rated MS) World Bank

supervision reports. In addition, PPAF was a winner of the Bank’s own Procurement Innovation

Award in 2016-17. It is illogical, therefore, to insinuate that there were shortcomings in

procurement performance. One must question whether this inconsistency reflects a lack of

objectively in the Borrower performance rating given by the Bank.

38. We can only assume that the Bank’s project task team remained unhappy about PPAF’s

self-sufficiency, about our willingness to point out weaknesses in the Bank’s supervision approach

and attitude when justified, and our determination to set the directions and strategy needed to meet

and exceed the project objectives and to set our own governance requirements and standards

including, as the ICR itself highlights, more transparent processes and improving our

organizational gender outcomes. Shockingly, rather than celebrating a partnership of equals and

shared success, it appears that the Bank chose to take retaliatory action against PPAF, including

one might assume, in this last act of unjustly denigrating the Borrower’s performance in the ICR.

We believe that an objectively written ICR, and one that adhered to the Bank’s own standards,

could not rate our performance as anything less than Satisfactory. We expect that the Bank should

correct for its mistake and revise the rating.

39. In the end, the clear success of the project in meeting the PDO and all KPIs along with

PPAF's ongoing sustainability, evidenced by data, is what truly matters. The acknowledgement

of the many other global organizations who have partnered with PPAF in the past and going

forward, the unstinting support of the Government of Pakistan for which we are most grateful, and

most importantly improving the lives of Pakistan's poor and excluded are what will carry our work

forward.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

N/A

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Annex 9 - List of Supporting Documents

Aide Memoires, Back-to-Office Reports and Implementation Status Reports

AASA Consulting, 2015. “Impact Assessment of PPAF Communities and Skills Training

Programs”.

Associates in Development, 2016. “Project Completion Report – Third Pakistan Poverty

Alleviation Fund PPAF-III”

Apex Consulting, 2015, “User/Beneficiary Assessment Survey, Phase-II”

Gallup Pakistan, 2013. “Assessment of Outcomes from the PPAF Micro-financing, Phase-IV”.

Gine and Mansuri, 2017. “Social Mobilization for Empowerment (MORE) intervention in

PPAF-III”. Washington DC, World Bank

Global Environmental Management Services (Pvt) Limited, 2014. “Third Party Validation:

Environmental and Social Management Framework (ESMF) Compliance – 2014”

Lahore School of Economics, 2015. “Pakistan’s Local Support Organizations: Research brief for

Pakistan Poverty Alleviation Fund”.

Leao, Ahmed and Kar, 2017. “Employment Dynamics in Rural Pakistan: the Employment

Impacts of Pakistan Poverty Alleviation Fund III (PPAF-III)”. Economic and Sector Work

(ESW). Washington DC, World Bank

PPAF Annual Reports

Project Appraisal Document for Pakistan: Third Pakistan Poverty Alleviation Fund (PPAF-III)

Project – Report No. 48299-PK

Project Restructuring Paper – Report No. RES17630

Project Restructuring Paper, September 2015

Semiotics Consultants (Pvt) Limited, 2014. “Impact Assessment of the Sindh Coastal Areas

Development (SCAD) Program”

Socio-Economic and Business Consultants (SEBCON), 2016. “Impact Assessment of Basic

Services and Infrastructure Component of the Third Pakistan Poverty Alleviation Fund Project

Watkins, Steven, 2016. “An analysis of the micro-credit activities under PPAF III”. Working

Paper, FAO-CP

World in Consulting (Private) Limited, 2016. “Institutional Assessment of 1st and 2nd Tier

Community Institutions of the Poor – PPAF-III”

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MAP