Portfolio review: 2004

This portfolio performance report provides a strategic review and assessment of IFAD’s portfolio of programmes and projects, particularly impact assessed against a range of development indicators. The report looks at the current composition of the portfolio, and at emerging issues, challenges and opportunities, and actions taken in response.

Highlights
The following are some of the portfolio highlights for 2004:

• USD 436 million in IFAD financing for 25 projects approved, with an additional USD 316 million mobilized from domestic resources and USD 176 million from non-domestic partners
• 22 projects became effective
• 27 projects completed
• 192 projects ongoing at year-end, with IFAD financing of USD 2 822 million
• USD 315 million disbursed, the highest ever
• USD 33.3 million for 87 grants approved under the new grants policy
• 85% of ongoing projects rated above or mostly on target
• two-thirds of projects rated with a satisfactory performance by cooperating institutions Portfolio Management

Portfolio performance improved in 2004, with loan approvals and disbursements at their highest levels for the past five years. The time required for programmes and projects to be declared effective is being reduced. As well, IFAD is improving its performance in effecting timely cancellation and closing of loans. Further improvements are needed in both areas, however, to ensure better use of financial resources.

The number of programmes and projects in the portfolio has declined in the past five years, with 140 projects completed against approval of 125. This underlines the need for a longer-term perspective in portfolio planning and an emphasis on renewing the portfolio.

The decline in cofinancing seen in 2002 and 2003 was reversed in 2004. Closer partnerships must be built with both donors and domestic financiers to consolidate this gain. Supervision and Field Presence

There is a steady concentration of projects to fewer cooperating institutions. Implementation of the Field Presence Pilot Programme gained momentum by the end of the year. IFAD understands the need to take a holistic, integrated and coherent approach to cooperation arrangements for supervision, direct supervision, field presence and implementation support. Portfolio Performance

Ratings by country programme managers showed overall improvement against all indicators in 2004. Ratings against implementation indicators showed strong availability of counterpart funds and good compliance with procurement procedures. Performance was relatively weak in the areas of disbursements, and monitoring and evaluation. Against impact indicators, performance was rated best for poverty focus and participation. Performance ratings for gender focus and achieving development objectives were lower relative to other indicators, but were better in 2004 than in 2003.

Portfolio Impact
Emerging issues in terms of the portfolio’s impact on poverty reduction, and IFAD’s response, are summarized as follows:

• Targeting has become more inclusive, particularly of vulnerable people. However, further work needs to be done to improve geographic targeting when disaggregated statistical data are lacking, and to ensure participation of the poorest and most disadvantaged people.
• Satisfactory results have been achieved in ensuring access to appropriate technology and improving agricultural production and productivity. However, the lack of adequate, appropriate technology in disadvantaged areas has not been fully addressed.
• Greater attention is being given to developing microenterprises, and to developing market linkages and processing facilities to reduce the disconnect between production and income. This focus needs to be maintained and expanded.
• Household food security programmes have had a positive impact. Access to microfinance has helped improve income and smooth out consumption, thus contributing to household food security.
• The degradation of natural resources is being addressed through lending and non-lending programmes, and through a partnership with the Global Mechanism and the Global Environmental Facility. However, IFAD’s performance in this area needs to be strengthened.
• Gender issues have been addressed satisfactorily in most projects designed in recent years. There is a need to more fully integrate women into mainstream development activities, to be more strategic in promoting women’s access to productive resources, and to influence the broader political and cultural context through partnerships and improved field presence.
• Performance has been strongest in the use of participatory approaches. The use of participatory methods has meant more democratic project design, and a better sense of ownership by project participants.

IFAD’s focus has shifted towards a broader poverty reduction and empowerment agenda, leading the organization to achieve satisfactory results in addressing unequal power relations and strengthening organizations of the poor.

Innovation and Knowledge Management
IFAD needs to develop a knowledge management strategy that enables it to scale up successful innovations. Such a strategy needs to address: the attrition of knowledge within the project cycle; the knowledge required to support the organization’s shift towards more policy-oriented and programmatic approaches; and the empowerment of rural poor people through access to knowledge.

Institution-Wide Initiatives
Satisfactory progress was made during the year in defining processes and activities required at the corporate and project levels to compile and aggregate information for the results and impact management system. More than 85% of projects that were required to report did so on time.

Among other institution-wide initiatives, progress has been generally satisfactory. Priority activities for 2005 should include:

• a review of the performance-based allocation system as planned, with possible improvement in how it functions
• implementation of the remaining field presence initiatives and a preliminary assessment of impact
• action following the study by the Office of Evaluation on direct supervision

New Operating Model
IFAD will change its business processes, or operating model, to achieve greater development effectiveness. This will include work to develop more results-based country strategic opportunities papers, which will be the core instruments for managing country programmes. The new operating model will also allow for:

• enhanced support at the country level
• improved quality assurance at both entry and implementation stages
• more flexible supervision arrangements
• better integration of supervision findings into knowledge and performance systems