Portfolio review: 2002
During 2002, IFAD continued to manage its project portfolio based on two principles – maintaining the size of the portfolio while improving the quality of projects. There were some changes in the relative regional allocations of newly approved loans, but the largest part of resources (36%) was again directed to the two Africa regions. A total of 25 projects were approved.
Regional divisions continued their efforts to accelerate loan effectiveness, but frequently met with administrative and legal difficulties beyond their control. Thus the average pre-effectiveness period was 16.5 months. Efforts to strengthen project implementation, on the other hand, succeeded in reducing both the average extension period and the percentage of extended loans during 2002.
IFAD maintained its focus on close monitoring of project performance through an integrated process of reporting and analysis based on project status reports and the Project Portfolio Management System. Assessment of the progress of individual projects is placed within the context of the country situation and the objectives of the corporate and regional strategies. This allows for better understanding of the positive and negative factors impacting project implementation.
Among the cross-cutting issues affecting portfolio performance, weak management capacity and inadequate monitoring and evaluation (M&E) systems remained prominent. In addition to providing management training through loans and grants, IFAD launched a number of case studies to identify good practices in project management. It also completed a guide for project M&E.
Efforts continued to strengthen supervision and implementation support through workshops, follow-up missions, technical assistance grant programmes and regular consultations with cooperating institutions. In this context, IFAD’s lack of in-country capacity and presence is a deterrent to better performance, and pilot activities in selected countries were continued to overcome this constraint. During 2002, IFAD also undertook several studies to analyse pilot activities and the practices of other development organizations and international financial institutions and, on this basis, has been reviewing options for strengthening its in-country capacity.
The year under review marked the launching of the Strategic Framework for IFAD 2002-2006, aimed at realizing IFAD’s vision of “enabling the rural poor to overcome their poverty”. This was reflected not only in the design of the projects approved during the period, but also in efforts to strengthen the Fund’s catalytic role by participating in policy dialogue at the country level and contributing knowledge on rural poverty issues to the international debate.
In line with IFAD’s mandate of mobilizing additional resources for rural poverty-reduction, efforts continued to attract cofinancing for IFAD-initiated projects and to contribute IFAD funding to the activities of other financiers, with a view to strengthening their poverty orientation. The Fund’s absence from borrowing countries and a reduced number of interesting opportunities that supported its vision and approach were among the deterrents to maintaining relative cofinancing shares. IFAD’s contribution to the costs of the projects approved in 2002 was, at 45%, above average.
As of end 2002, the ongoing portfolio was supervised by nine cooperating institutions and IFAD. The United Nations Office for Project Services (UNOPS) retained its predominant position and was responsible for nearly 60% of the portfolio, followed by the World Bank with nearly 12%. Fourteen projects were directly supervised by IFAD, but for these loans also, UNOPS was entrusted with the functions of loan administration and procurement review. The Office of Evaluation and Studies initiated an evaluation of IFAD’s supervision arrangements that is also reviewing the most mature of the directly supervised projects. The outcome of this evaluation, expected for end-2003, will help IFAD improve future supervision arrangements and, in particular, the relative role that IFAD itself should play.
It is too early to draw general conclusions from the experience of the 15 directly supervised projects (one of which has already been completed). A clear correlation between supervision input (time and resources) and project performance has been observed, but influences external to a project, of a political or other nature, are as difficult to defend against as in the case of interventions supervised by cooperating institutions. On a preliminary basis, it can be concluded that IFAD’s main comparative advantage lies in its in-depth knowledge of targeted, participatory development in favour of the rural poor, as opposed to the loan administration function, which is being satisfactorily fulfilled by UNOPS.
Twenty of the ongoing projects are being financed under the flexible lending mechanism (FLM), introduced in 1998. A review of the experience with this innovative mechanism was undertaken during 2002. It revealed that FLM projects: (i) can be an interesting learning tool, provided that all IFAD units concerned are closely involved; (ii) require additional resources for implementation support; and (iii) have a specific need for a well-functioning M&E system. As anticipated, most of the FLM projects promote institution-building and thus justify their longer implementation periods and more flexible implementation arrangements.
During the period under review, IFAD launched special initiatives in three areas: project completion reports; project management case studies; and a gender action plan.
Seventeen project completion reports (PCRs) were produced: one for West and Central Africa , three for East and Southern Africa , three for Asia and the Pacific, three for Latin America and the Caribbean and seven for the Near East and North Africa. Most of the reports followed the standard IFAD format introduced two years ago and provide interesting insights into the various aspects of project performance. While they illustrate very diverse country situations, design expectations and implementation arrangements, they also underline the importance on project outcome of a number of recurrent themes, including project management, M&E, targeting, the participatory approach, sustainability and capacity-building, and the quality of supervision arrangements.
Emphasis on targeting has always been a reflection of IFAD’s specificity – that is, of its clearly defined target group. Project completion reports reveal the difficulties encountered in implementing this approach and the need to find an equilibrium between identification of the categories targeted by an investment project and the intrinsic difficulties in operationalizing the approach.
Participation as a strategic principle is a given throughout the portfolio and has generally produced positive results in terms of impact and sustainability. Project experience illustrates the importance of promoting this approach throughout the project cycle and at all levels of implementation. In particular, the active involvement of beneficiaries in planning and managing activities has permitted investments to respond to the expressed needs of the target group and thus to have an enhanced and sustained positive impact on their socio-economic situation.
The concept of sustainability has been interpreted in various ways in PCRs, covering situations in which: a project has created the institutions and capabilities required for future activities; economically viable investments have led to an enduring improvement in the economic situation of the beneficiaries; or the positive outcome of project investments has opened up an avenue for future public resource input. Usually only part of the initiatives supported by a project can be considered sustainable and, in the majority of cases, this refers to the inputs channelled towards the strengthening of grass-roots institutions and capacities.
Given the crucial role of project management in the progress and outcome of an investment intervention, IFAD is analysing different cases of more or less successful project management experiences. While this activity is ongoing, a first inventory of lessons points to the need for a clear and realistic design of the project management structure, taking into account the institutional baseline situation; the importance of selecting, training and maintaining well-qualified management staff; and the fact that the use of adequate management tools (e.g. for communication and knowledge sharing) can help overcome constraints appearing suddenly during project implementation.
As a first step towards operationalizing the gender aspects of the strategic framework, a plan of action was elaborated during 2002 in a participatory process. Implementation progress will be reported regularly in the annual Progress Report on the Project Portfolio from 2004 onwards.
