Portfolio Performance Report 2006/07

This fourth Portfolio Performance Report (PPR) of IFAD provides information on the performance of loans and grants for the year ending 30 June 2007. For the performance assessment of ongoing projects, the report relied on information contained in project status reports prepared for 198 loan projects and 47 grants, and on 104 progress reports submitted under the Results and Impact Management System (RIMS) framework. For impact assessment of completed projects, the report used 27 project completion reports. This year’s PPR report assesses the variances between the findings of the PPR report and the Office of Evaluation’s Annual Report on Results and Impact of IFAD Operations (ARRI), and includes a preliminary report on the new IFAD Results Measurement Framework approved by the Executive Board in September 2007.

Portfolio operations
During the period under review (1 July 2006-30 June 2007), the Board approved 28 projects for a total of US$496 million in IFAD financing. Approvals for sub-Saharan Africa were higher than in the past, both in terms of numbers of projects (15) and the amount financed (US$259 million). As at 30 June 2007, IFAD’s total current portfolio consisted of 222 projects, with IFAD financing of US$3.6 billion, and of 282 grants worth US$156 million. As 38 projects and 63 grants were awaiting effectiveness at that date, the ongoing portfolio thus contained 184 projects and 219 grants. Effectiveness delays have decreased overall, albeit marginally. During 2006/07, the disbursement performance of investment projects improved remarkably, setting a new record of US$426 million. Disbursements of grants also increased. The share of projects ‘at risk’ decreased from 22 per cent of ongoing projects to less than 19 per cent and the share of ‘actual problem’ projects went from 20 per cent to 16.7 per cent. IFAD’s proactivity in resolving problems was high, reflecting the new emphasis that is being placed on project supervision.

Project Impact
An analysis of baseline surveys of areas covered by IFAD-financed projects, undertaken under the RIMS, shows that in about 25 per cent of all project areas more than half the children are underweight; in another 25 per cent of the project areas, 30-49 per cent of children are underweight. Most project areas where IFAD works report widespread poverty, food-insecure households and rampant child malnutrition. The performance of IFAD projects should be interpreted in the light of the extreme poverty and hardship that characterizes the areas where the organization’s projects are located.

In preparing the PPR report, the reliability of the impact assessment of completed projects has been enhanced by choosing a relatively large sample in 2006 and including the entire cohort of 27 projects completed between 1 July 2005 and 30 June 2006. The comparison, however, is between two cohorts; thus, in terms of annual trends, the results are indicative rather than definitive. The consistency of results seen across indicators, and a relatively small difference between the selfevaluation and the Independent External Evaluation (IEE) of IFAD findings, enhance the validity of the findings, however.

Against IFAD’s project performance criteria, about 81 per cent of the projects were rated satisfactory for relevance in 2007. In terms of effectiveness, defined as the extent to which projects met the stated objective, 78 per cent of the completed projects reported satisfactory performance. Against efficiency, defined as the ratio between economic cost and benefit, satisfactory achievements were seen in 68 per cent of projects. Significant performance improvement was noted in both these indicators. Overall, this resulted in a project performance rating of 76 per cent against the IEE finding of 71 per cent and the target of 80 per cent set in IFAD’s Action Plan for Improving its Development Effectiveness. Against sustainability, only 63 per cent of the projects reported satisfactory performance. This, however, is significantly better than the PPR finding for 2006 (48 per cent) and the IEE finding (40 per cent). When compared with findings for 2006, performance improved for innovation and replicability/scaling up; remained at the same level for gender; and decreased slightly on targeting and relevance, albeit from a more satisfactory level.

With respect to the impact domains, the 2007 cohort of projects reported over 80 per cent satisfactory performance for physical asset creation, and 70-80 per cent satisfactory impact for food security, financial assets, and institutions and services. For environment and common resources, and agricultural productivity, satisfactory performance was reported in over 65 per cent of projects. For human assets and social capital and empowerment, satisfactory impact is documented in over 60 per cent of projects. Performance with respect to markets was, however, lower at 42 per cent. Compared with that for 2006, markedly better performance was noted in the current year’s cohort with regard to physical and financial assets, environment and common resources, social capital and empowerment, and institutions and services.

The overall rating for rural poverty impact was satisfactory for 70 per cent of the completed projects, which represents a significant improvement over 50 per cent reported by the IEE.

The comparison of two-year pooled figures for the ARRI and PPR reports shows relatively small differences, i.e. the reports show considerable convergence. Overall, the ARRI report finds slightly better performance against relevance, efficiency, innovation, and rural poverty impact, while the PPR report does the same for effectiveness and sustainability. The PPR report also finds slightly better performance against most impact domains. While, with the current data set, it is not possible to reach a definitive conclusion on trends, both ARRI and PPR data sources indicate greater sustainability, although from a low level.

Since the IEE was undertaken, performance has improved in terms of effectiveness, efficiency and sustainability. Compared with targets set for 2009 under IFAD’s Action Plan, the 2007 performance levels are satisfactory with regard to effectiveness and are higher for efficiency. Sustainability continues to give rise to concern, although it is an area where performance has improved.

Proposed action
To sum up, IFAD has achieved significant and broad-based amelioration in the performance of its portfolio during the period under review but will need to address a number of issues if further advances are to be made. In this light and in terms of portfolio management, IFAD intends to: (i) work towards early fulfilment of effectiveness conditions and thereby reduce effectiveness delays; (ii) consolidate the portfolio of projects by reducing extensions of loan closings; (iii) further increase its proactivity and thereby reduce the portfolio ‘at risk’; and (iv) lower the number of grants in the portfolio, mainly by completing and closing grants on time.

Every effort will be made to ensure that projects are ‘ready for implementation’ prior to presenting them to the Executive Board for approval, thereby reducing delays in effectiveness. Country programmes and projects will set more realistic and specific objectives; new quality enhancement and quality assurance systems have been designed to that end. Performance will be enhanced by more effective use of direct supervision and country presence. Both of these arrangements will enable better linkages among innovation, knowledge management, partnership-building and policy dialogue with a view to increasing the possibility of replication and scaling up of innovations. Sustainability will be improved, mainly by helping to strengthen the capacity of government/project institutions, increasing efficiency, responding more promptly when weaknesses are noted, defining a sustainability strategy during design and comprehensively addressing the issue at various stages of the project cycle.

IFAD faces inherent performance risks given the type of interventions it supports – targeting the poorest rural people in the weakest institutional environments, and often in areas with poor natural resources. In this light, IFAD will work towards enhancing the capacity of its borrowing Member States, since a sustained improvement in performance can be achieved only with better institutional performance at the project and country levels. This will be achieved by instituting systems that facilitate: (i) more precise elaboration of expected results and results-oriented annual work programmes and budgets; (ii) project monitoring and evaluation systems that facilitate timely reporting and prompt decision-making; and (iii) mid-course correction systems responsive to the needs of the target groups and to the context in which projects and
programmes operate.