V. OPTIONS

89. On the basis of the preceding considerations, the ECP suggests that IFAD could consider for its future activities in Honduras a "portfolio of diversified interventions", including projects, programmes and rural poverty alleviation policy proposals:

90. Projects: One alternative is to continue with area development projects. However, the design of these projects should take into account the lessons learned included in this Report (and its annexes). This projects could function at local level and could be used to try out new forms of rural intervention which could later be replicated at national level. Therefore, it is important to include in this type of projects mechanisms or modalities with a high replicability potential.

91. It is also important to consolidate actions already taken or being executed in the Western region and find ways of making them sustainable. For example, the Intibucá-La Paz project has been extended to operate for 18 additional months. This is not enough time to establish and consolidate in Intibucá a local organisation incorporating private and public entities, to ensure the continued use of credit from the trust under the conditions established by the loan contract once the project finishes in 1998. But this kind of support could be included as a component of future projects, even if these were to be established in areas other than Intibucá. Or it could be part of a programme such as those discussed below.

92. Programmes: A second (complemen-tary) option involves widening the scope to include critical areas of intervention at a national level and this could make an important difference to future rural development.

93. Policy proposals. The scale of rural poverty in Honduras is such that the relatively small resources of individual rural development projects are not enough to reduce rural poverty substantially. In the current political climate of the country, the peasants are not receiving priority treatment since other social groups have greater influence over important decisions. In order that the rural poor be given the importance they deserve and require, IFAD and other agencies interested in promoting rural development should encourage the GOH to support and take more positive actions. Discussions on policy options for rural development should form the basis of a future IFAD strategy for Honduras. An agenda must be drawn up for discussions and studies should be carried out to synthesize what has been learnt about rural development which could help define a wider range of options than those offered by isolated programmes.

94. At national decision levels, an attempt must be made to develop a wider vision which goes beyond the limits of the current period, to identify policies and programmes which could promote the development of the rural poor. IFAD could make an important contribution by discussing with the Government alternative development policies for the rural poor. A National Forum on Rural Poverty Alleviation, supported by IFAD, could play a catalyzer role, allowing for an enrichment of the policy dialogue on this issue, extending it to related fields such as rural education, rural health, rural electrification, etc., which could produce far more important and long lasting results in the long run than isolated rural development projects.

95. Given its specific mandate focused on rural poverty alleviation, and its worldwide experience, IFAD is entitled to initiate an inter-institutional. One instrument which IFAD could use to develop these proposals are the technical assistance grants (TAGs) already existing, such as those of RUTA and IICA, as well as other new initiatives in this field.

Proposals for improving project implementation

96. Incorporating long term sustainability measures. In the ongoing projects, there is as yet no clear vision on how to transfer functions and assets to local organisations effectively capable of continuing operating once the project finishes (PLANDERO). Since the role of public institutions for promoting rural development is gradually being reduced, and local and private development organisations have a limited capacity for taking over these functions, then in order to obtain true sustainability of organisational models for carrying out the projects have to be revised. IFAD should face up to the challenge of making a careful diagnosis of the actual institutional capabilities and the respective strengths and weaknesses of private and public entities. It should also be prepared to consider different kinds of organisations to ensure that the continuation of 'sustainable' rural development activities is viable.

97. Promote the systematic exchange of experience among ongoing projects, as a way to support rural development projects in coping with the scarcity of trained human resources for administrative and technical tasks. To begin with, the informal exchanges between the Intibucá-La Paz and the PLANDERO projects should become more frequent, and this information sharing process should be extended to other non-IFAD financed rural development projects (the National Forum, proposed by the ECP, could be one of the ways of operationalizing the meeting of all rural development projects).

98. Agricultural credit should play an important role as an instrument for capitalizing producers. However, credit should only be given to those who are in a position to make correct use of it. That is, credit is not necessarily the best way to help all producers (many do not need or want financing) and neither is directed agricultural credit suitable for solving the credit needs of the rest of the rural population which are not farmers. Even though resources allocated for credit in the project budget are high, this does not mean that they all have to be placed. If an overestimation of credit demand has been made in any project, the possibility of a reallocation should be pursued rather than exerting excessive pressure to disburse the loans.

99. In the case of the Intibucá-La Paz project, there is a need to incorporate other bank(s) to improve flexibility and efficiency in making loans available to beneficiaries.

100. The agricultural extension currently offered by the projects is directed almost exclusively to credit support. But the functions of extension and credit must be differentiated since not all peasants need or ask for financing but many do require extension. Projects under way should include, among their specific goals, the possibility of working with groups which only require technical assistance. In reality, this does in fact take place to some extent but it is not clear in the annual programmes.

101. In the face of the low profitability of the production of cereals on mountainous land, agricultural extension should focus on ways of promoting greater diversification of productive activities, both agricultural and non agricultural. This is one way of overcoming the tremendous limitations which traditional agriculture has to face.

102. As far as agricultural technical assistance is concerned, rules and mechanisms have to be set to guarantee that members of peasant families (men and women) involved in production activities have access to new information.

103. The approach followed to date for strengthening the position of rural women needs to be changed. The tendency has been to organise separate activities for men and women but this should be modified so that both are involved in project activities. A first step in this direction should be the appropriate training of project staff in gender issues.

104. Supervision by Cooperating Institutions (CIs) of ongoing projects needs to be substantially strengthened. The Fund has to specify, jointly with the CIs in far more detail than has been done up to the present, the terms of reference for supervision missions. It should be stated explicitly that these should not be limited to the compliance with loan agreement closes. There also needs to be mutual agreement on the supervision of certain technical and social aspects. The kind of information which should be submitted to the Fund and its periodicity are other aspects which IFAD needs to define together with the CIs.

 A. Recommendations for the design of new programmes and/or projects

105. All new IFAD initiatives in Honduras should be based on a careful analysis of current macroeconomic and sectorial policies as well as on expectations for continuity and change. In this way, IFAD can judge whether it would be better to channel its resources towards a specific programme or project. The more IFAD manages to open up a dialogue on rural development policy with the Government, the higher the chances of obtaining its support, as well as that of other external financing agencies, for developing programmes and projects with greater impact at national level.

106. Higher participation by national personnel during preparation of projects. Up to now, the design of rural development projects has, for the main part, been in the hands of international financing agencies (including IFAD). This has limited the development of a national capacity for formulating and evaluating projects. The lack of participation by national personnel in project preparation means that it is difficult for local staff implementing project to seek clarification of points which were insufficiently detailed in the appraisal documents.

107. Time necessary to achieve aims in rural development projects is much longer than has previously been allowed for in project design. This means that in future projects:

(a) In areas in which IFAD and the GOH agree to work jointly, long term commitments should be drawn up (12 to 15 years). During this period, a commitment should be made to give continuous support to these areas though projects consisting of different stages. Continuity and modalities of execution of the project will be contingent upon the results of interim evaluations.

(b) More time must be given to each stage. The project formulation stage should be progressive to avoid the present situation where a detailed design is drawn up but often based on unreliable information and at a very high cost. Some of the resources currently assigned to formulation and appraisal could be reallocated to strategic and operative planning during the initial implementation phase.

(c) The execution phase should be designed more in line with reality (seven to eight years) instead of the current five years which has been the rule in Honduras up to now.

108. The definition of beneficiaries should be clarified. An heterogeneous group of rural inhabitants is grouped together under this term. However, they all have very different levels of access to means of production (land, knowledge, capital, labour) and they all have different needs, even though they all fall under IFAD’s definition of rural poor. The different types of beneficiaries for each project should be made explicit, including a gender differentiation. The strategies and activities proposed for each type of beneficiary should be clearly established. The most important thing is to specify clearly who will benefit from which type of action and how benefits will be shared among the target population. The present situation is inadequate in that it treats everyone as part of the target group. In practice, some are much more so than others.

109. Faced with a large percentage of landless peasants, explicit measures should be incorporated into future designs for coping with the serious problems of this very needy population. Experience outside the IFAD financed projects indicates that a large demand exists for land on the part of the landless and that successful direct buying mechanisms have been set up with the support of local intermediaries. The Fund should explore alternatives to supply land to project beneficiaries.

110. The role of technical assistance should be widened so as to include technical support for management and administration of small agricultural industries and agroindustries as well as for product marketing and for improved vertical integration in the productive activities which are being promoted.

111. The importance given to rural credit should be thoroughly revised so that it reflects more adequately the needs of a rural financing system. First and foremost, the conditions must be established under which credit provides effective help for certain types of producers, while avoiding the problem of overextending it to all presumed beneficiaries. Secondly, a wider financial vision is required, focusing the demand for resources on rural credit rather than just on agricultural credit. The focus of the project design on seeing financing problems merely in terms of lack of credit must be changed. It should envisage mobilizing rural savings and giving greater sustainability to institutions which give credit services, thereby increasing its responsibilities to include a wide range of rural financing services. The principle of increasing progressively the amounts lent, up to a certain ceiling, should be incorporated in project design whenever possible.

112. The commercialization of agricultural and other products is still a bottleneck for development strategies based on increased production. An improved analysis of how peasant markets work is required, so that this topic can be handled in a more adequate way in future projects.

113. The needs of ethnic communities should be explicitly identified in documents right from projects preparatory stages.

114. The scheme of working with groups to provide services is cost effective. Up to now, groups have been formed more as useful instruments for credit delivery. But groups can also play a role for promoting participation and sustainability. First, they must become participation mechanisms for the beneficiaries in the process of planning and monitoring of the projects. Secondly, once grouped into second level organisations, they could be able to effectively defend the interests of rural populations. And thirdly, they should come to form part, together with public entities and non-governmental organisations, of the overall organisation for the sustainability of the investment generated by the projects.

 B. Subregional approach for IFAD’s operations

115. For IFAD's operations in the Central American Subregion (Nicaragua, Guatemala, Honduras, El Salvador, Costa Rica and Panama), the ECP and IFAD's evaluations for projects in the other countries, suggest the convenience of adopting a subregional rather than a national approach. In different evaluations similar problems have been found, and some of them might be more likely solved by a subregional approach. In addition, the homogeneity of physical conditions, the common historical roots, the concentration of the rural poor in neighbouring areas and their similar strengths and weaknesses, are further factors that support this recommendation.

116. By adopting a subregional approach, there could be an improved use of the information and experiences corresponding to similar environments. Currently the responsibility for IFAD's operations in the 6 countries are divided among four Project Controllers (and the supervision among 4 Cooperating Institutions). Of particular relevance is the case of Western Honduras, North of El Salvador and Western Guatemala, where currently there are 5 ongoing projects, physically separated only by the frontiers of the three countries. A subregional approach could facilitate the sharing of experiences among those projects, which have credit and extension as their core.

117. In fact there are interactions among the project areas, but these are not acknowledged in the project design documents. And because of this there is both a risk of market saturation and an opportunity for synergies among the projects. A subregional, explicit approach could help to minimize the former and to promote the latter.

118. Furthermore, this type of approach could also contribute to a rationalisation of the use of resources for project supervision, given the proximity among projects supervised by the same CI and the common needs and problems of the different projects, which could allow for developing common solutions at a lower cost per project, given economies of scale and scope. In addition, the CI could help in identifying project's needs that could be satisfy by the staff of other projects in the subregion, thus promoting horizontal cooperation among the projects. Funds already included in the budget of the projects could be use to complement the efforts and resources of the CI. A further source of support could be provided by a technical assistance grant, deepening the work already started by RUTA III.

119. Another important aspect has to do with the possibility of making greater use of subregional institutions. There are specialised organisations in the subregion, such as CATIE in the field of natural resources, the Panamerican Agricultural School (for training), and INCAP (for nutrition) that could eventually receive grants from IFAD to devote systematic attention to design and/or implementation aspects which could be better serviced for a set of projects than on a case by case basis.

120. Last but not least, IFAD could become a leader in the promotion of subregional activities aimed at rural poverty alleviation. Even though IFAD's projects in Honduras have been pioneers in addressing key issues such as environmental protection and the development of native indigenous populations, their results have been rather limited, given the restricted area in which they have been operated. There could be scope for multinational programmes focused on specific issues. These could range from training and support to ongoing projects to advising governments on the design monitoring and evaluation of rural poverty alleviation policies and programmes. A second dimension in which IFAD could cooperate with the countries in the subregion is by acting as a catalyzer in the discussion of themes and approaches to rural poverty alleviation, contributing to the generation and dissemination of useful knowledge to be applied in the struggle against rural poverty in Honduras.

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