Issue 3 - March/April 2005

Donor harmonization

In this issue

To reach the Millennium Development Goals, the development community needs to double Official Development Assistance (ODA) to reach US$ 100 billion per year. But it must also enhance its effectiveness. Increased aid effectiveness could reduce the need for additional resources.

Donor-specific strategies, policies, development programming, procedures and reporting requirements can dilute the integrity of national strategies and policies, increase transaction costs of development assistance and dissipate the limited human and financial resources of national institutions. Donor harmonization that leads to common arrangements, simplified procedures and information sharing would help donors align themselves with partner-country priorities and lead to increasing use of country systems. This in turn would enhance partner-country ownership of the development agenda and action, enabling them to define their own priorities and development effectiveness.

IFAD seeks to adopt programme-based and policy-oriented approaches while integrating itself into country-owned poverty reduction, policy and strategy frameworks. It aims at a partnership-focussed operating model, a stronger country presence and robust management for development results. IFAD's value added consists of innovations to be up-scaled by others and mainstreamed by governments. We are well on track, but have some way to go in partnership with others, especially our partner countries at the centre of managing for development results and increased aid effectiveness. Managing for development results remains one of our primary concerns.

Thomas Elhaut, Director, Asia and the Pacific Division

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IFAD and harmonization

IFAD and harmonization The Second High-Level Forum on Harmonization will be held in Paris from 28 countries, ministers and heads of donor institutions to review progress in harmonization, alignment and Managing for Development Results.

IFAD will take part in the Forum, building on commitments made at the First Forum on Harmonization held in Rome in February 2004. IFAD has since contributed to the alignment and harmonization agenda through its participation in the Regional Workshop on Harmonization, Alignment and Managing for Development Results, held in Bangkok in October 2004 and hosted by the Asian Development Bank; at the r ound-table meeting on Harmonization and Alignment in Marrakech in February 2004; and at the OECD Development Assistance Committee on aid effectiveness.

IFAD has also adopted policies and procedures, such as the Performance-Based Allocation System (PBAS) and the Results and Impact Monitoring System (RIMS), that foster closer links with country processes and review progress on managing for results. IFAD has taken important steps to integrate harmonization standards in procurement and financial management, and identify ways to amend policies as appropriate.

In the run-up to the Forum, this newsletter focuses on the broader harmonization agenda, reporting on current initiatives in the Asia and the Pacific Division as well as the division's plans to enhance development effectiveness in the future.

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IFAD and the poverty reduction strategies process in Asia

IFAD and the poverty reduction strategies process in AsiaNational poverty reduction strategies (PRS) and the processes for their development and implementation are at the centre of IFAD's development assistance. They are becoming a key instrument in reducing poverty at the national level and contributing to the achievement of the Millennium Development Goals (MDGs). Experience shows that PRS processes have contributed to:

  • a stronger focus on poverty within governments
  • the engagement of civil society in poverty debates
  • more attention to donor alignment and harmonization at international and national levels

IFAD plays a key role in national PRS processes in Asia and the Pacific by:

  • promoting broad-based participatory processes that enable rural civil society to contribute to the PRS process
  • supporting partner governments in developing PRS processes and investment programmes to eradicate poverty
  • establishing partnerships with other donors for more efficient and effective work towards meeting the MDGs targets

Some IFAD-supported national PRS processes constitute international best practices, such as:

  • promoting decentralization, rural private-sector development and grassroots democracy in Viet Nam
  • multi-donor partnership for rural finance innovation in Bangladesh

Impact of decentralization and rural private sector development in Viet Nam

Impact of decentralization and rural private sector development in Viet Nam Viet Nam has a large number of donors implementing projects in the country, a strong government, national ownership over policy, and a donor harmonization agenda for national poverty reduction strategies and programmes.

The challenge for the IFAD-supported country programme in Viet Nam is to maximize the impact of development efforts by integrating project and programme interventions with government sector policies and medium-term financing.

The Decentralized Programme for Rural Poverty Reduction, approved by IFAD's Executive Board in December 2004, is designed to put into effect the Government's vision of decentralisation in line with its grassroots democratization legislation. The programme builds on IFAD's experience in decentralizing management and financial authority from the district level to commune and village levels, and in moving away from supply-driven extension approaches to demand-driven service delivery. The proposed activities present practical and replicable implementation modalities of highly decentralized community-driven development.

IFAD grant support is expected to reinforce the impact of the programme by:

  • starting province-led process dialogue
  • improving local capacities for projecting priorities and strengthening consensus among stakeholders for a concerted effort to address poverty reduction
  • establishing a field presence as a bridge between province-level implementation of decentralization and national-level policy

The establishment of partnerships and an IFAD field presence within existing government-donor relationships is critical in the execution of activities. A debt swap agreement between the Governments of Viet Nam and Norway will provide additional financing to the programme of US$ 5.26 million (available in local currency), harmonized through IFAD procedures.

Multi-donor partnership for innovations in rural finance in Bangladesh

Multi-donor partnership for innovations in rural finance in Bangladesh A group of donors comprised of the UK Department for International Development, the Canadian International Development Agency, the Swiss Development Cooperation, the Swedish International Development Corporation and IFAD are exploring the potential for a programme to encourage innovations in the microfinance sector in Bangladesh. The idea for the programme, entitled Promoting Financial Services for Poverty Reduction (PROSPER), came from the recommendations of a joint donor microfinance review carried out in 2003-04.

The review indicated that, although Bangladesh's microfinance sector has grown enormously, it is still mainly targeting landless households and follows a group-based model. Major opportunities remain to develop financial services for the very poor, microentrepreneurs and marginal farmers, without distorting market forces. Providing such services, combined with further organizational and management capacity building, is important if the microfinance sector is to extend its reach and depth and ultimately become an integral part of the financial services industry.

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Moving towards Programme-Based Approaches (PBAs)

Moving towards Programme-Based Approaches (PBAs) Countries are increasingly participating in Programme-Based Approaches (PBAs) rather than project approaches. PBAs are a new mechanism for development cooperation which puts donor harmonization and local ownership into practice and focuses on outcomes at a higher programme level than a project. Some of the modalities of PBAs are Sector-Wide Approaches (SWAPs), which represent action programmes for sectoral PRS implementation.

PBAs grew out of criticism of project-type development cooperation. However, project-type development is still effective within PBAs when it is implemented with the following new features:

  • insertion of projects in locally-owned development programmes
  • collaboration with other donors
  • partnership at the programme level
  • increased focus on local institutional development
  • use of local procedures such as financial management systems, calendars, approval procedures and reporting requirements to manage projects wherever possible
  • focus on programme-level results

IFAD is progressing towards the adoption of PBA principles to achieve greater impact on policy by:

  • using its comparative advantage in targeting the poorest of the poor
  • piloting innovative approaches through project-type financing
  • participating in the higher strategic and policy dialogue with other donors

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Managing for Development Results

 What is it all about?

Managing for Development Results Managing for Development Results (MfDR) is a management approach aimed at achieving important changes in the way organizations operate, improving their results and impact. Result-based Management (RBM) provides the management framework and tools for strategic planning, risk management, performance monitoring and evaluation. Its purpose is, firstly, to improve efficiency and effectiveness through organizational learning; and secondly, to fulfill accountability obligations through performance reporting. The key to the success of an MfDR approach at IFAD is the involvement of stakeholders in defining realistic expected results, assessing risk, monitoring progress, reporting on performance and integrating lessons learned into management decisions.

But hasn't IFAD always been interested in results?

Yes, IFAD has always focused on achieving results and impact from its interventions. But with the increased challenges now facing institutions, IFAD needs to be able to demonstrate how it is contributing to development results. MfDR provides a more strategic, results-orientated approach to improving management systems.

 What are the core principals of MfDR?

At the second international roundtable on MfDRs held in Marrakech in February 2004, the following core principals were endorsed:

  • At all phases - from strategic planning through implementation to completion and beyond - focus the dialogue on results for partner countries, development agencies and other stakeholders
  • Align programming, monitoring and evaluation activities with agreed and expected results
  • Keep the reporting system as simple, cost-effective and user-friendly as possible
  • Manage "for" not "by" results.
  • Use results information for management learning and decision-making, as well as for reporting and accountability.

What are the implications for IFAD in adopting an MfDR approach?

As previously outlined, adopting MfDR involves planning, monitoring, feedback, learning and continuous improvement. The adoption of this approach will mean adapting business processes to facilitate a culture of learning and feedback, transparency and participation.

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New directions in the Asia and the Pacific Division

Results and Impact Monitoring System

New directions in the Asia and the Pacific Division In December 2003, IFAD's Executive Board gave approval for the introduction of a Results and Impact Monitoring System (RIMS). This consists of a common set of indicators to measure and report on project results and impact. Since then, the Asia and the Pacific Division has undertaken consultations and capacity building with stakeholders to define processes at the project level to obtain data on results, and at the corporate level to compile and aggregate RIMS information.

Monitoring and Evaluation

A desk study commissioned in late 2004 to assess the Monitoring and Evaluation (M&E) capacities of the Asia and the Pacific Division provided strong evidence that project staff required M&E capacity building. In response, IFAD has approved a grant to increase project M&E capacity in the division. The programme will be piloted in three countries in Asia and will have the broad objective of defining a hands-on M&E capacity programme at all stages of the project life cycle, for wider replication across projects within the region.

MfDR Readiness Assessment

In the context of the harmonization agenda and particularly, management for development results, the Asia and the Pacific Division has initiated an assessment of its capacity to adopt and integrate results-based management approaches and business practices into its work. The assessment will review the division's current frameworks and business processes, providing a clear roadmap on how it can become an MfDR-focused team.

The overall rationale for this consultancy is to enhance the management of the division's portfolio. In comparing results-based management systems, a distinction is made between managing "by" development results and managing "for" development results. The former is principally orientated towards accountability and external reporting, while the latter focuses on a cycle of planning, periodic performance assessments and organizational learning. The consultancy will, where necessary, restructure priorities and organize efforts to maximize impact towards results on the ground.   

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Martina Spisiakova
Tel: 3906-54592295

Making a Difference in Asia and the Pacific
Issue 2: January/ February 2005

Issue 1: November/ December 2004

About IFAD

The International Fund for Agricultural Development (IFAD) is a specialized agency of the United Nations, dedicated to eradicating poverty and hunger in developing countries. Its work in remote rural areas of the world helps countries achieve the Millennium Development Goals. Through low-interest loans and grants, IFAD develops and finances projects that enable rural poor people to overcome poverty themselves.

IFAD tackles poverty not just as a lender, but as an advocate for the small farmers, herders, fisherfolk, landless workers, artisans and indigenous peoples who live in rural areas and represent 75 per cent of the world’s 1.2 billion extremely poor people. IFAD works with governments, donors, non-governmental organizations, local communities and many other partners to fight the underlying causes of rural poverty. It acts as a catalyst, bringing together partners, resources, knowledge and policies that create the conditions in which rural poor people can increase agricultural productivity, as well as seek out other options for earning income.

IFAD-supported rural development programmes and projects increase rural poor people’s access to financial services, markets, technology, land and other natural resources.

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Upcoming events:

The Second High-Level Forum on Harmonization, in Paris from 28 February to 2 March 2005

Microfinance in the global strategy for meeting the Millennium Development Goals , in Dublin, 14 March 2005

Workshops on RIMS in Bangladesh and the Philippines, April 2005

Pro-poor Policy Regional Workshop organized by IFAD in Bangkok , 26-28 April 2005, to undertake a needs assessment on policy analysis and dialogue, and contribute to developing a concept note for a grant-funded project.

Useful links

Aid Harmonization

Managing for Development Results

High-Level Forum on Harmonization

Asian Development Bank