Inclusive financial services for the rural poor
Access to financial services is essential to lift people out of poverty as it allows them to seize economic opportunities and increase their welfare. It is seen as an important component of the inclusive rural transformation agenda of IFAD, which, since 1981, has financed over 1,000 projects, worth US$3.4 billion.
The Independent Office of Evaluation (IOE) has prepared an evaluation synthesis report on IFAD’s Inclusive Financial Services for the Rural Poor. The evaluation synthesis draws information from evaluations undertaken between 2008 and 2017.
In 2007, IOE conducted a corporate-level evaluation of rural finance in IFAD, which paved the way for a new Rural Finance Policy that was introduced in 2009. The synthesis found that the mix of financial instruments in the portfolio has not changed since 2009. Loan guarantee funds, lines of credit and matching grants are overly represented in the mix. Projects still tend to use traditional financial services, mainly savings and borrowing. New types of services promoted by IFAD, such as leasing, insurance, warehouse receipts and value-chain financing, were rarely used or, when included at the design stage, they were found less feasible during implementation. The transition to new types of financial services requires significant investments in technical assistance, market studies and capacity, for which governments were often hesitant to use loan funds. The availability of qualified financial services, their capacity and their presence in rural areas were the main factors determining IFAD's approach on the ground.
The principles of the revised Rural Finance Policy emphasize the need to move towards market-led and demand-oriented approaches, offering a diverse set of services and products. While the diversity of instruments, services and products has increased, they have been offered within traditional supply-led approaches, leading to a lack of demand orientation on the part of country interventions. A key related issue is in the weak implementation capacity on the ground. These issues must be addressed for IFAD to remain relevant and be in demand as an Inclusive Financial Services player.
Plurinational State of Bolivia Country Programme Evaluation (2015)
This country programme evaluation is the second one carried out in Bolivia by the Independent Office of Evaluation of IFAD. It covers the partnership between IFAD and the Government from 2005 to 2012. Overall, the results of the IFAD-Government partnership were positive.
The main achievements include the adoption by families of soil and water conservation techniques, improved crop and livestock farming practices, and the development of new production activities. The participatory and open competition approach - with direct cash transfers managed by the communities - clearly led to enhanced human capital. The programme impact was however less than expected because most supported businesses are not sustainable; the introduction of environmental management practices did not reverse the desertification process; and the planned private market for technical assistance did not materialize.
Main programme limitations were weak relations with the territories where it was implemented and with public programmes; inability to define the target population and overreliance on short-term technical assistance.
Democratic Socialist Republic of Sri Lanka Country Strategy and Programme Evaluation
In a context characterised by the end of a long standing conflict and recovery from the Indian Ocean Tsunami, IFAD-supported projects have contributed to improved agricultural production and productivity in several districts throughout the Democratic Socialist Republic of Sri Lanka. Such outcomes were achieved through activities including support to smallholder farmers to establish or upgrade tea and rubber plantations, rehabilitate irrigation schemes and access improved technologies. These achievements were the main contributing factors for increased incomes and assets. The projects also succeeded in improving access to markets and finance and in income diversification.
On the other hand, the improvements in agricultural production were not necessarily driven by improved and innovative technologies which promoted resource use efficiency (e.g. water) or strengthened climate resilience. Furthermore, in pursuing partnerships with agribusinesses, there was scope for more careful consideration on how to ensure added value of public funding.
The report recommends that future operations pay greater attention to promoting innovative technologies which also strengthen climate resilience and that IFAD and its partners explore ways to innovate and leverage more systemic improvements in the rural finance sector in Sri Lanka. The evaluation also underlines that IFAD should look to play a more catalytic role, going beyond individual investment projects.
Rural Financial Services and Agribusiness Development Project
The Independent Office of Evaluation of IFAD has prepared a performance evaluation report on the "Rural Financial Services and Agribusiness Development Project" in the Republic of Moldova. The project, implemented between 2011 and 2016, responded to important challenges in the country's rural sector. The main goal was to provide credit and develop value chains for small and medium-sized enterprises, thereby indirectly benefiting the poor through increased and decent employment opportunities.
The evaluation found improved access for both small and medium-sized enterprises and new target groups such as young entrepreneurs and microentrepreneurs thereby addressing an existing financing gap. The project was less successful in improving pro-poor value chains because of mistrust between buyers and producers and volatile market prices, which resulted in contracts not being adhered to.
The report highlights the need for explicit targeting strategies as well as careful ex ante examination of the assumed "trickle down" effects. It also notes that projects should monitor the linkages between investments in enterprises and the direct and indirect benefits, to ensure they help reach poor farmers. IFAD has successfully provided loans through lines of credit to small and medium-sized enterprises, however, there is a need to strengthen the savings culture, which is currently not very strong in Moldova.
Finally, this evaluation recommends that future IFAD projects focus on agribusiness and agro-processing development for smallholders. This would enable them to add value to their primary products, build their capacity to deal with different value chains, and shift swiftly from one value chain to another.
Read more: Approach paper
IFAD’s independent evaluation ratings database
The Independent Office of Evaluation of IFAD (IOE) is making publicly available all the ratings on the performance of IFAD-supported operations evaluated since 2002. As such, IOE joins the few development organizations that currently make such data available to the public at large. The broader aim of disclosing such evaluation data is to further strengthen organizational accountability and transparency (in line with IFAD’s Disclosure and Evaluation Policies), as well as enable others interested (including researches and academics) to conduct their own analysis based on IOE data.
All evaluation ratings may be seen in the Excel database. At the moment, the database contains ratings of 315 projects evaluated by IOE. These ratings also provide the foundation for preparing IOE’s flagship report, the Annual Report on Results and Impact of IFAD operations (ARRI).
As in the past, IOE will continue to update the database annually by including ratings from new independent evaluations conducted each year based on the methodology captured in the IFAD Evaluation Manual. It might be useful to underline that IOE uses a six-point rating scale (where 6 is the highest score and 1 the lowest) to assess the performance of IFAD-funded operations across a series of internationally recognised evaluation criteria (e.g., relevance, effectiveness, efficiency, rural poverty impact, sustainability, gender, and others).
Moreover, in 2006, IOE’s project evaluation ratings criteria were harmonized with those of IFAD’s operations, to ensure greater consistency between independent and self-evaluation data (Agreement between PMD and IOE on the Harmonization of Self-Evaluation and Independent Evaluation Systems of IFAD). The Harmonization agreement was further enhanced in 2011, following the Peer Review of IFAD’s Office of Evaluation and Evaluation Function. The aforementioned agreements also allow to determine any ‘disconnect’ in the reporting of project performance respectively by IOE and IFAD management.
Kirehe Community-based Watershed Management Project
Project performance evaluation
The Independent Office of Evaluation of IFAD has prepared a performance evaluation report on the "Kirehe Community-based Watershed Management Project" in Rwanda. The project was successful in achieving its objective of fostering increase of traditional crops such as rice, maize, vegetables and milk production. Women beneficiaries were not left behind economically, and innovations such as the flexi-biogas system freed the time they had spent in fetching firewood.
Yet, the lack of effective marketing linkages and competitive prices for producers meant that the attempt at integrating farmer beneficiaries into complete value chains remained incipient. The project also failed to link beneficiaries with rural financial institutions – linkages which would have been important for financing production and value addition.
The evaluation highlights the need to adopt a longer-term programmatic approach in the case of development projects that involve a simultaneous, coordinated and comprehensive approach to rural poverty alleviation in a particular area. It also recommends ensuring that value chain development is truly demand-oriented by involving market actors such as traders and private companies when integrating value chain components in principally supply-side projects.
Kenya Country Strategy and Programme Evaluation
This is the second country strategy and programme evaluation carried out in Kenya by the Independent Office of Evaluation of IFAD. It reviews the past seven years of work that IFAD has undertaken together with the Kenyan government. Since 1979, IFAD has invested in 18 projects and programmes in the country for a total cost of US$813.3 million, of which US$376 million was financed by IFAD.
The evaluation found that IFAD has been innovative in bringing solutions around credit delivery, agro-processing and environmental management. Such interventions have boosted agricultural productivity, and improved food security. The evaluation highlights remarkable achievements in gender equality and natural resources management.
The report also mentions the issues that still need to be addressed. For example, the IFAD programme made a modest contribution to the social and economic empowerment of youth. Activities related to marketing and processing have been less successful and the expected synergies between rural finance and value chain projects were not realized.
Furthermore, recurrent design and institutional issues undermining programme efficiency need to be addressed within the ongoing devolution process - by which Kenya's central government transferred responsibilities to regional governments.
The evaluation also recommends that IFAD should continue focusing on the areas where it has worked successfully in the past: natural resources management, pro-poor value chains and rural finance.