Issue 13 - November/December 2006
PBAS:
looking beyond the resource allocation system
In this issue
Message
from the director of the Asia and the Pacific Division
In line with ‘industry standard’ in all other major
international development finance institutions, in 2003 member
countries brought the performance-based allocation system (PBAS)
to IFAD. The main purpose of the PBAS was twofold: to increase
the effectiveness of the use of IFAD’s scarce resources and
to establish a more transparent basis and predictable level of
future resource flows.
Prior to the PBAS, IFAD allocated its resources for financing
country programmes on the basis of perceived strategic opportunities
for rural poverty reduction, somehow weighted by the absorptive
capacity of countries. There was an understanding that this system
could lead to country allocations that were imbalanced and unpredictable,
and that it was insufficiently conducive to development effectiveness
of IFAD.
The organization seeks to increase the poverty reduction dividends
from the resources it lends and grants. It seeks to support effective,
innovation-oriented programmes that lead to sustainable replication
and scaling up and provide inputs for pro-poor policy and institutional
change. Leading research has indicated that effectiveness of investment
programmes is actually pre-conditioned by a pro-poor
policy and institutional framework and its enforcement. It also
showed that development programmes do not systematically and significantly
succeed in firmly establishing such a conducive pro-poor policy
framework, where it does not pre-exist.
IFAD, with its rural poverty-focused mandate, aspires to the system
that allocates resources on the basis of need, and particularly
on the probability of transforming the resources into lasting poverty
reduction. The system apportions resources on the basis of numbers
of poor rural people and their per capita incomes, which are indicators
of need. It also allocates resources on the basis of a pre-existent
supportive environment reflected by pro-poor macro and sectoral
policies, with inclusive rural policies and institutions, and past
country programme performance – the heart of the PBAS.
This newsletter presents the edifying experience of introducing
the PBAS into IFAD and into its country programmes. The learning
process is enabling IFAD to improve the system and deepen its usefulness.
Indeed, the PBAS is growing beyond its initial resource allocation
vocation. As some of the following country experiences illustrate,
it has become a process, a dialogue with IFAD’s developing
member countries on the pro-poor policy and institutional transformation
requirements that would lead to enhanced effectiveness and sustainability
of poverty reduction programmes. This dialogue is experience-driven
and increasingly evidence-based. It shapes in concrete terms the
agenda for institutional transformation that is inherent in so
many country programmes.
While countries with high scores are being allocated significant
levels of resources to be effectively invested in a more programmatic
manner, countries with lower performance scores are being supported
with resources to help them address the institutional and policy
constraints that limit the effectiveness of their poverty reduction
programmes. An important result of the PBAS is that all countries
now have a comparative basis for predictable access to poverty
reduction resources from IFAD.
Annual PBAS reviews of country programme performance and the related
consultations with our in-country partners ensure that the PBAS
assessment remains a continuous dialogue on substantive enabling
conditions rather than a one-off resource allocation exercise.
While the journey of IFAD’s PBAS has been well embarked
upon, close collaboration with member countries and other development
partners, particularly in the context of country-owned poverty
reduction strategies, policies and institutions, will allow IFAD
to develop the PBAS into a key instrument for country-owned management
for poverty reduction results and for enhanced development effectiveness.
Thomas Elhaut, director, Asia and the Pacific Division
Back to top
Introduction and evolution of the PBAS in IFAD
IFAD introduced the PBAS to ensure more effective use
of development resources. The PBAS is based on the allocation
of financial resources according to borrowing countries’ performance,
population and gross national income (GNI) per capita. Since
its introduction, the PBAS has been a continuous learning process
for IFAD. Some changes in the methodology were introduced to maximize
the effective implementation of the system.
Following discussions with donors during the Seventh Replenishment
in 2003 and 2004, IFAD developed the new system called the PBAS
to allocate resources among its borrowing member countries. The
system is rules-based, using a formula that incorporates measures
of country need and country performance.
The PBAS introduces an approach to allocate IFAD’s loan
and country grant resources to country programmes on the following
bases:
- country performance (broad policy framework,
rural development policy and portfolio performance)
- population
- GNI per capita
All financing agencies, including the World Bank and the Asian
Development Bank, have introduced a similar system of resource
allocation. The system is a response to the desire of donors
to ensure that their financial contributions, approved by their
governments and usually provided by taxpayers, are effectively
used for poverty alleviation.
The PBA systems and processes in these various institutions
reflect distinctive institutional mandates, policies, governance
structures and client groups. For example, the Caribbean Development
Bank’s system makes special provision for countries that
are vulnerable to natural calamities such as seasonally endemic
hurricanes.
Uniquely, IFAD’s approach includes special provision for
rural sector performance, which is weighted heavily in the overall
assessment of country policies and institutions. The rural sector
performance review has given IFAD the basis for policy dialogue
and for emphasizing the rural and agricultural focus of IFAD.
The first PBAS-based allocation was made in 2004 for the three-year
period 2005-07. At the time, IFAD also noted that the PBAS would
continue to evolve to reflect operational experience. The initial
design was to be a starting pointfor an ongoing process of refinement
relative to the methodology of assessment and the weighting of
the separate factors of the formula.
Last year a series of technical issues that limited the effective
implementation of the system were identified. For example, IFAD
noted that the large variations in population among IFAD’s
member states had resulted in wide differences in country scores
and allocations. This was principally because of population levels
that made it necessary to introduce maximum and minimum allocations.
The influence of the population factor reduced the system’s
responsiveness to changes in performance indicators.
In April 2006 the Executive Board agreed to reduce the influence
of the population factor in the formula. The new level was regarded
as a ‘point of balance’ at which population still
carried significant influence as a determinant of ‘needs’ in
the formula but at the same time allowed performance and GNI
per capita to have a strong role.
|
New PBAS formula |
|
|
Country sectoral policy and institutional policy score
is calculated by means of the following formula:
Needs factors Performance
factors |
Result |
Rural POP0.45 x GNIpc-0.25 x {0.2 IRAI + 0.35 PAR +
0.45 RDSR}2.0 = |
Total
country
score |
POP – population; GNIpc – GNI per capita;
IRAI – IDA resource allocation index; PAR – project
at risk; RDSR – rural development sector rating |
|
Following the successfully concluded replenishment discussions,
it was also agreed that fixed regional allocations would no longer
apply. This means that IFAD regions would no longer receive pre-determined
allocations of funds for lending and grants. However, the ‘uniform’ system
would need to reflect strategic priorities in terms of the regional
distribution of development assistance. In addition, IFAD would
continue to direct at least the current percentage share of resources
to sub-Saharan Africa, provided that the performance of individual
countries warrants it.
Brian Baldwin, senior
operations management adviser, Programme Management Department
Back to top
Country governments help to shape the PBAS process
To
date IFAD has organized a number of national consultations
on the PBAS in the region. The objective was to discuss the
PBAS assessment with country governments and to identify key
areas that need improvement. The Philippines and Viet Nam provide
examples of countries where such consultations took place.
Their governments made recommendations which are helping to
shape the PBAS process in these countries. Such recommendations
and an increased sense of ownership over the PBAS make the
PBAS a more effective tool in determining country allocations.
The Philippines
When the PBAS was introduced in preparation for the first PBAS
cycle of 2005-07, the first challenge was to explain its rationale
and the scoring process thoroughly to concerned government departments.
Fortunately it was easy to demonstrate the advantages of a system
that will enable a transparent and scientific allocation of IFAD
resources to country programmes.
In an official reaction to the first sectoral policy and institutional
policy scoring done by IFAD, the director of the Public Investment
Staff, one of the sections of the National Economic and Development
Authority (NEDA), stated in a letter dated 28 October 2004, “…From
our review of the document, we generally have no major objections
to the assessment made by IFAD. Moreover, we find the scoring
system useful and applicable for when we later do a performance
evaluation of the Medium-Term Philippines Development Plan (MTPDP).”
Such encouraging comments emerged from a broad-based consultative
process jointly managed by the NEDA Secretariat and the IFAD
country programme manager. Working closely with the director
of the Public Investment Staff of NEDA, IFAD succeeded in sharing
all relevant background documentation and the preliminary country
scores widely within the government.
IFAD also held a half-day validation seminar, which took place
at NEDA on 11 October 2004. The seminar was attended by the following
government departments:
- Department of Agriculture
- Department of Agrarian Reforms
- Department of Trade and Industry
- Department of Social Welfare and Development
- National Anti-Poverty Commission in the Office
of the President of the Republic of the Philippines
- NEDA Secretariat, including the Public Investment
Staff
After the seminar all departments were invited to provide comments,
which were subsequently compiled by NEDA and submitted to IFAD.
The conclusions of the consultative process, which were shared
with IFAD on 28 October 2004, turned out to be quite thorough.
While generally agreeing with IFAD’s overall assessment
and scores, the government partners made several proposals for
improving the system and process.
In particular, the government recommended refining the scoring
form and enhancing the assessment, as follows:
- The assessment should be more comprehensive.
It should include the performance evaluation of emerging
key players other than the government departments.
- Together with NEDA, IFAD should conduct a
rapid assessment/study on the relevant aspects of the PBAS
scoring framework. This would ensure that narratives and
scores are supported by more comprehensive and reliable statistics
and are not entirely subjective.
- Because some of the questions in the scoring
form might be considered offensive, their wording should
be revised. For example, regarding procedures for registering
a small and medium enterprise or private trading business
indicator, it was suggested that the phrase “occasionally
involve bribing” be changed and that “bureaucratic
procedures” be used instead.
The government also identified a number of existing policies
that should have been captured in the PBAS narratives. Some of
these policies include:
- the Agriculture and Fisheries Modernization
Act
- the Philippines Fisheries Code
- the dialogue with rural organizations as
demonstrated by their role in preparing the Comprehensive
Agriculture and Fisheries Modernization Plan
- the Self Employment Assistance Programme
of the Department of Social Welfare and Development
Some key experiences that emerged from the PBAS consultations
in the Philippines are worth noting.
A major challenge facing IFAD is how to accommodate the comments
received from governments. This especially applies to comments
recommending revision of the format of the scoring form and to
comments concerning the need to ensure the objectivity in the
scoring that is based on the results of a detailed survey and
study. If accepted by IFAD, the recommendations will result in
revision of the corporate scoring forms. They will also have
significant cost implications. But it is important to address
them to ensure the continued constructive engagement of government
partners in the PBAS process.
There are significant cost implications for the country programme
management teams if the PBAS assessments are to be done in a
comprehensive manner that involves all key stakeholders. They
include the cost implications of doing a thorough rural sector
study even though the IFAD Executive Board had anticipated the
use of secondary data for this purpose. Governments may believe
that sector studies by other organizations such as the World
Bank may have addressed insufficiently the policy concerns raised
in IFAD’s PBAS scoring forms.
The validation seminars with all concerned departments can also
become quite time- consuming. But without them IFAD might be
seen as being subjective in its assessment, with potential negative
consequences on the perceptions of country governments.
In view of the successful conclusions at
the end of the 2004 consultative process, the country teams
and the government felt it unnecessary to revise the country
scores in 2005 and 2006 in the same exhaustive manner as
in 2004. The changes in the three-year cycle are considered
insignificant in their effect on the scores. It is probably
more useful to assume that the scoring should be done only
once during each three-year PBAS cycle. The scores should
be reviewed at any time only if something major occurs that
might have significant impact on the policy framework. Otherwise
the revision should be made mandatory only at the end of
a cycle, in preparation for the following PBAS cycle.
Sana F. K. Jatta,
country programme manager
Read more about the Philippines
Viet Nam
A number of representatives from various departments of the
Government of Viet Nam met in IFAD’s PBAS consultation
on 11 July 2005 at the Ministry of Planning and Investment. The
consultation was chaired by the Ministry of Planning and Investment
and included representatives from the Ministry of Finance, Ministry
of Foreign Affairs, Ministry of Agriculture and Rural Development,
the Central Institute for Economic Management and IFAD.
Because PBAS has an important role in the development process,
the government representatives made the following recommendations
to IFAD:
- The PBAS narrative should be constantly updated.
- An ad hoc working group should be formed
in the future to ensure that the PBAS narrative information
is accurate.
- There should be a more participatory process
in the finalization of the document with the Government of
Viet Nam.
- Although the PBAS is an IFAD document,
the Government of Viet Nam should have more ownership,
to ensure that it is as accurate as possible and that it can
be used as a reference for other donors.
- The objectives, rationale, purpose
and methodology of the PBAS should be clearly stated at the
beginning of the document.
- The policy areas with particular relevance
to the IFAD-supported country programme should be identified.
The government representatives further suggested that an analysis
of rural development in Viet Nam should be added to the
beginning of the PBAS narrative in the form of an executive summary.
Furthermore, conclusions and recommendations should be included
at the end of the document to make the PBAS narrative a more
effective tool.
Atsuko Toda,
country programme manager
Read more about the Viet
Nam
Back to top
New results-based COSOP integrates the PBAS: experience from Bangladesh
In September 2006 the Executive Board approved IFAD’s
new approach to the Country Strategic Opportunities Programme
(COSOP). The approach uses a methodology for integrating IFAD’s
PBAS analysis into the COSOP. It focuses on assessing pro-poor
rural sector policies and strategies at the country level and
on the performance of ongoing projects. Both types of analyses
provide a basis for calculating the ‘country score’,
which is a proxy indicator for the resources available for implementation
of the country programme.
The new approach implies undertaking a PBAS analysis as part of
the COSOP preparation exercise. The methodology used in the approach
was designed with reference to IFAD’s experience and the
experience of IFAD’s partner international financing institutions.
The approach includes preparation of a rural sector analysis to
obtain a ‘rural sector score’ and an analysis of ongoing
project performance to obtain a ‘project-at-risk score’.
Both scores are then inputted into the PBAS formula to produce
the overall ‘country score’.
The rural sector analysis identifies the key areas where improvements
are needed in pro-poor rural sector policies and strategies at
the country level. The analysis also ensures that the COSOP can
provide focused assistance to the country in these areas. In the
case of Bangladesh, the PBAS rural sector analysis highlighted
the need for:
- a more pro-poor agricultural research and extension
system
- increased access to productive natural resources
(particularly fisheries) for poor people
These needs were translated into concrete strategic objectives
in the design of the new COSOP for Bangladesh.
The project-at-risk analysis uses a pre-defined check list to
help identify key areas where improvements are needed in the implementation
of ongoing IFAD projects in the country concerned. This ensures
that the COSOP can include a programme of support to improve project
performance in the identified areas. For example, in the case of
Bangladesh, an analysis highlighted the need for:
- improved project level financial management
- improved monitoring and evaluation (M&E)
As a result, an action plan to improve performance in these areas
was included in the COSOP for Bangladesh. IFAD has already begun
implementing this action plan, and it has launched missions to
provide technical support in financial management and M&E.
Once the rural sector and the project-at-risk scores are known,
they can be included in the PBAS formula. This produces a country
score, which translates into an annual allocation for year one
of the COSOP. In the case of Bangladesh the allocation for year
one was calculated at US$16.55 million. The allocations for subsequent
years of the COSOP can only be calculated on a year-by-year basis
upon completion of the annual PBAS exercise.
To indicate the importance of the PBAS in determining the overall
volume of resources available for implementation of the country
programme, hypothetical high case and low case scenarios are included
in the COSOP. Both scenarios are calculated by modelling the effect
of an increase or decrease in the rural sector score and in the
project-at-risk score. This provides a highly indicative illustration
of the effect of these variables on the country score. In the case
of Bangladesh, in a high case scenario, with an increase of 0.3
in the rural sector score and an increase of 1.0 in the project-at-risk
rating, the country score would increase by 20 per cent. In a low
case scenario, the country score would decrease by the same amount.
Once all the calculations are completed, the PBAS data is included
in the draft COSOP document and discussed at a wrap-up meeting
chaired by the government. A wrap-up meeting on the draft COSOP
for Bangladesh was held on 15 February 2006. The PBAS calculations
in the COSOP were endorsed at the meeting.
Ms Nargis Islam, joint chief, Economic Relations Division,
Ministry of Finance, Government of Bangladesh and Nigel
Brett, country programme manager
Back to top
Farmers in Sri Lanka and the Philippines
make their voices heard
The Farmers’ Forum is an emerging bottom-up process
of consultation and dialogue among organizations of small rural
producers, their governments and IFAD. Last year IFAD organized
two consultations with farmers’ organizations (FOs) in
Sri Lanka and the Philippines. Through these experiences, the
Asia and the Pacific Division has seen that FOs have the potential
to become valuable partners in the PBAS national consultations.
They can help voice the concrete constraints faced by poor rural
producers and alert both IFAD and the government to specific
legal or policy issues.
As a follow-up to the Farmers’ Forum initiative, in 2005
IFAD organized two national consultations with FOs in Sri Lanka
and the Philippines. To take advantage of this initiative and “get
two birds with one stone”, the division focused the consultation
with participating representatives of FOs on selected policy issues
in the PBAS.
The objectives of the two consultations were to:
- strengthen IFAD’s understanding of the
role, mission, strengths, needs and aspirations of FOs and
of the type of partnership that may be developed with them
- get FOs’ feedback on the way they perceive
the legal and policy framework in their respective countries
The consultations were successful in meeting both objectives.
IFAD has deepened its understanding of the specific policy issues
that are perceived by the FOs in Sri Lanka and the Philippines
as constraints to agricultural and rural development. IFAD has
also recognized some of the opportunities that may exist to improve
the legal and policy framework.
FOs in Sri Lanka have pointed out that the Agrarian Development
Act is providing a sound framework for the establishment and work
of the organizations (one of the 12 rural sector framework assessment
criteria). This especially applies to the participation of FOs
in the Agrarian Development Councils at the provincial and district
level.
But such provisions have not been fully implemented. Overall,
the farmers’ representatives found government support to
their organizations to be insufficient. They recommended an amendment
of the Agrarian Development Act that would introduce provisions
for representation of FOs at the district level. This would be
accomplished through an elected farmers’ representative entrusted
with authority equal to that of the district assistant commissioner.
In the Philippines, IFAD asked FO representatives about their
views on the legal and policy framework governing access to land.
The FOs indicated that the Indigenous People’s Rights Act
was in principle guaranteeing indigenous peoples the right to protect
and use their ancestral domains for their own benefit. But other
laws enacted to protect the environment were in direct contrast
with the Act.
For instance, ancestral lands that are proclaimed national parks
cannot be tapped to generate income for poor upland dwellers. FOs
recommended full implementation of the Indigenous People’s
Rights Act. In particular they proposed a free and prior informed
consent provision spelling out that indigenous people should be
consulted and should approve any type of outsiders’ interventions
on their ancestral domains.
Maria Donnat,
results management specialist
Back to top
Managing the PBAS in the Asia and
the Pacific Division
The Asia and the Pacific Division has developed a number
of useful mechanisms in its work with the PBAS. Written narratives
and national consultations enabled country programme managers
to initiate policy dialogue with borrowing countries. Annual
divisional comparative analysis of all country assessments has
allowed managers to identify possible discrepancies and inconsistencies
in scoring. But some issues related to the PBAS process remain
pending.
In 2003 IFAD’s Executive Board approved the document entitled The
structure and operation of a Performance-Based Allocation System
for IFAD. Initially there was widespread uncertainty
among staff members and their country counterparts about a
system that was perceived to ‘reward’ good performers
with an increased lending envelope and, conversely, to ‘penalize’ poor
performers. Many argued that countries with a ‘poor’ institutional
and policy framework were precisely the types of countries
that needed the most support from IFAD. The system was perceived
as going against both basic common sense and IFAD’s firm
conviction.
Another reason for the initial discomfort of staff members and
their country partners regarding the initiative was related to
the scoring guidelines spelled out in Annex I of The structure
and operation of a Performance-Based Allocation System for IFAD.
Many staff members were hesitant about the uniformity of market-
and private sector-oriented guidelines. They feared that it would
unjustly penalize countries that do not adhere to these principles
although their different, elected ‘path’ could be successful
in reducing poverty.
Now, as the preceding article shows, three years later IFAD has
produced its third round of PBAS sectoral policy and institutional
policy scoring. Most of the staff and their country counterparts
now recognize the virtue of a system that has fulfilled its primary
purpose: to provide a transparent basis for making decisions about
the allocation of lending resources. But a number of methodological
issues remain a source of concern.
Lessons learnt
Accurate documentation
The Asia and the Pacific Division has written narratives to back
up sectoral policy and institutional policy scoring as an important
measure to safeguard the integrity of the entire system and to
increase the transparency of the scoring exercise. Detailed written
narratives have proved extremely useful in allowing country programme
managers to enter into an informed policy dialogue with borrowing
countries. For the first round of the scoring, most of the narratives
were prepared by external consultants. Since then country programme
managers have gained full ownership of the exercise, and they
update narratives annually.
Intradivisional annual harmonization exercise
To ensure the consistency of individual assessments with the basic
principles of the PBAS and the uniformity of individual scoring
decisions, it is important to compare individual country ratings
across all countries. The Asia and the Pacific Division does
this annually. Country programme managers perform a preliminary
comparative analysis of all country assessments to identify possible
discrepancies or inconsistencies in scoring. The managers then
discuss these discrepancies and inconsistencies at a divisional
meeting.
National PBAS consultations
IFAD is committed to consulting with borrowing countries each year
to get their feedback on the performance assessments performed
by IFAD and to validate them. All borrowing countries in Asia
and the Pacific with an active portfolio have been consulted
at least once since 2004. Although the approach to this dialogue
needs to be systematized, most country programme managers find
this exercise useful because:
- it increases the transparency of the scoring
exercise
- it helps borrowing countries understand the
criteria by which performance is assessed
- it allows IFAD and its partners to enter into
a fruitful dialogue about performance issues
Pending issues
Policy versus enforcement
The current intention of the PBAS is to assess country performance
in establishing a policy and institutional framework that is
conducive to sustained rural poverty reduction. But it is easily
arguable that no matter how perfect policies and institutions
may seem ‘on paper’, it is possible that they are
not being implemented. The fact that a sound institutional and
policy framework is in place is a necessary but insufficient
condition for poverty reduction. IFAD needs to ensure that these
policies are effectively being implemented and that they have
a positive impact on poor people.
For example, IFAD should not only be satisfied that the legal,
institutional and market frameworks in a given country provide
the basis for rural poor people’s access to land, but it
should also ensure that this access is, in fact, equal. This continues
to be a challenge for the PBAS process.
Increased measurability
The system would gain considerably from the introduction of more
rigorous quantitative indicators that would measure the impact
of the implementation of a given policy and institutional framework.
For example, to measure actual access or lack of access to land
by rural poor people, proxy indicators such as the average land
plot size per farmer household, the number of landless farm workers
and the percentage of the rural population who are landless would
strengthen the comparability of assessments.
Such indicators would also help reduce the subjectivity of the
scoring exercise, facilitate comparisons of scores across countries
and regions, and establish performance benchmarks.
Relevant assessment criteria
In many instances, some of the 12 main criteria and 59 subcriteria
for assessing national policy frameworks are less relevant to
specific country contexts. For example, while the need for sound
policies in the water sector may be of paramount importance in
countries faced with water scarcity, this might not be the case
in countries with abundant water for agriculture. The same applies
to countries where no cultural biases against women exist, where
women have enjoyed the same rights and privileges as men for
decades, and where boys and girls have been participating equally
in primary and secondary education for years. In such countries,
the subcriteria ‘organization of active campaigns for girls’ education’ is
irrelevant and should not be taken into account in the scoring
exercise.
Maria Donnat,
results management specialist
Useful links
PBAS
documents:
- Performance-Based
Allocation System of IFAD – comments of List C members
on the Third Draft of the PBAS Document, September 2003
- IFAD
policy for grant financing, December 2003
- Progress
report on the implementation of the Performance-Based Allocation
System, December 2003
- Report
of the Panel on the Performance-Based Allocation System,
December 2003
- The
structure and operation of a Performance-Based Allocation
System for IFAD, September 2003
- Progress
report on the implementation of the Performance-Based Allocation
System, April 2004
- Information
note to the IFAD Executive Board Members, December 2004
- 2004
Progress report on the implementation of the Performance-Based
Allocation System, February 2004
- Information
paper on the Performance-Based Allocation System, April 2005
- Progress
report on the implementation of the Performance-Based Allocation
System, December 2005
- Progress
report on implementation of the Performance-Based Allocation
System, February 2006
- Proposed
modifications to the IFAD Performance-Based Allocation System
(PBAS), April 2006
|