Portfolio review: 2005

This Portfolio Performance Report provides the Executive Board with an overview of the performance of the portfolio in delivering results to the Fund’s target groups. It also supplies the response of IFAD management to the findings of the 2005 Annual Report on Results and Impact of IFAD Operations (ARRI) and presents the current status of the portfolio.

Portfolio Management
In 2005, IFAD achieved record levels of approvals and disbursements. It also closed a larger number of projects1 than it had in previous years, improved on loan cancellations, increased cofinancing and stabilized the number of projects in the portfolio. In numerical terms, it:

• approved 31 projects, with a total financing amount of USD 485 million;
• approved 66 grants, with IFAD financing of USD 37 million;
• mobilized cofinancing of USD 569 million;
• declared 23 projects effective;
• completed 32 projects; and
• disbursed USD 343 million under loans and USD 23 million under grants.

Since its establishment, IFAD has approved 707 investment projects, with USD 9 billion approved from its own resources and USD 15.8 billion contributed by cofinanciers. The current portfolio now stands at 232 investment projects, with approved IFAD financing of USD 3.6 billion, and 274 grants, with IFAD financing of USD 119 million. Of these, 184 investment projects and 178 grants are now being implemented.

The recent trend of ‘portfolio rejuvenation’ persisted in 2005, and, as a result, the portfolio contains a younger set of projects. At the same time, delays in effectiveness have increased, reversing the gains made in 2004, and this is an area that requires attention. Meanwhile, the average loan size has decreased, raising the prospect that the portfolio faces diseconomies of scale.

Portfolio Impact
The results of the self-assessment generally concur with the ARRI report findings of a satisfactory performance in terms of relevance and effectiveness. However, there is some disconnect between the results of the self-assessment by the Programme Management Department and the ARRI findings with respect to efficiency. This should therefore be analysed. As measured against the Fund’s three strategic objectives, the performance is satisfactory in terms of increasing access to financial services and markets and strengthening the capacity of rural poor people and their organizations. Its impact is lower in improving equitable access to productive natural resources and technology, although it is satisfactory in more than half of the projects.

The portfolio review looked closely at the ARRI finding that a significant number of projects do not benefit the poorest and identified some disparity between this and the results of the selfassessment. However, the results of the self-assessment show the scope for sharpening IFAD’s approach to targeting during both project design and implementation. In this light, IFAD management will submit a targeting policy to the Executive Board in September 2006. In addition, the new operating model will introduce other elements to sharpen the Fund’s focus on rural poverty.

In terms of impact domains, high or substantial impact on physical assets was reported in both the ARRI report and the self-assessment. Extending financial services to the rural poor is an ongoing challenge, and recent rural finance programmes have supported a variety of rural financeinstitutions devoted to reaching the rural poor. As a result, the share of microfinance services, which focus more on poverty than do conventional credit programmes, is on the increase.

Overall, the impact on food security is positive, according to the ARRI report and the selfassessment, largely as a result of improvements in agricultural technologies and practices. Similarly, although there is room for improvement in terms of the impact on human assets, the impact in this area is also rated high or substantial in the projects evaluated during the last three years. Since its establishment, IFAD has relied heavily on increasing and making full use of social capital to empower rural poor people. It has gained valuable experience, particularly in creating and strengthening poor people’s organizations and reinforcing the role of communities in decisionmaking processes. This is the principal strategy that IFAD has pursued in building local ownership. The findings of the evaluations undertaken in 2004 in this regard reverse the findings of the evaluations undertaken in 2002 and 2003 and therefore call for further analysis.

While IFAD realizes that influencing policy making is crucial in establishing the institutional frameworks or rules of the game that favour or at least do not work against the poor, its activity in this area has been constrained by a number of factors. The shortcoming in terms of impact on institutions and policies are being corrected by using grants and country-specific analytical work and related capacity-building. The self-assessments of the Programme Management Department also show shortcomings in addressing environmental risks, perhaps as a result of a lower proportion of investments in this area.

The self-assessment system rated the performance in institution building as satisfactory. Sustainability of project impacts, however, depends on many other elements, some of which are being addressed through the ongoing portfolio. In the longer term, IFAD’s understanding of the causes of sustainability among grass-roots institutions needs to be deepened, together with its understanding of the relationship between institutional sustainability and the empowerment process. IFAD is putting more emphasis on building federations of grass-roots institutions and on involving farmer organizations in national and international policy. A number of measures are also being undertaken to enhance the local ownership of projects.

Women’s participation in decision-making bodies, while showing improvement over time, requires constant attention. The mid-term review of the Gender Plan of Action shows some progress and recommends scaling up efforts during the remainder of the plan period. Follow-up actions have been identified, and these will be implemented. The challenges in knowledge management and innovation will be addressed through the development and implementation of a knowledge management strategy under the action plan.

Improvements in Processes and Instruments
Major achievements in 2005 include:

• (i) development of a comprehensive manual for impact surveys under the Results and Impact Management System: actual results in 2005 were reported for 86 projects, a 30% increase over 2004;
• (ii) completion of the evaluation of the Direct Supervision Pilot Programme by the Office of Evaluation, the decision to continue with the 12 ongoing directly supervised projects, and the amendment of the Agreement Establishing IFAD and the Lending Policies and Criteria to allow greater flexibility in the choice of supervision partners;
• (iii) implementation of 14 of 15 field presence pilot initiatives; and
• (iv) undertaking of inter-phase reviews for 5 of 18 ongoing programmes under the Flexible Lending Mechanism.