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2006Annual Report

Pakistan Poverty Alleviation Fund

Acronyms

AERC Applied Economics Research CenterAJK Azad Jammu and KashmirBME Benefit Monitoring and EvaluationCAP Community Action PlanCECP Committee to Encourage Corporate PhilanthropyCED Credit and Enterprise DevelopmentCPI Community Physical InfrastructureDMPP Drought Mitigation and Preparedness ProgramDWSS Drinking Water Supply SchemeEDF Enterprise Development FacilityERD Evaluation, Research and DevelopmentERRA Earthquake Reconstruction and Rehabilitation AuthorityF&A Finance and AccountsGPS Global Positioning SystemH&E Health and EducationHID Human and Institutional DevelopmentHRC Housing Reconstruction CentersIAD Internal Audit DepartmentIAUP Integrated Area Upgradation ProgramIFAD International Fund for Agricultural DevelopmentIR Islamic ReliefKfW Kreditanstalt fur Wiederaufbau (Reconstruction Credit Institute)M&C Media and CommunicationNRSP National Rural Support ProgrammeNSET National Society for Earthquake TechnologyOAKDF Omar Asghar Khan Development FoundationPO Partner OrganizationR&R Reconstruction and RehabilitationSMT Social Mobilization TeamSRSP Sarhad Rural Support ProgrammeSSDP Social Sector Development ProgrammeTIP Technological Innovation ProgramTOT Training of TrainersUNCDF United Nations Capital Development FundUNDP United Nations Development ProgrammeUSAID United States Agency for International DevelopmentUSDA United States Department of AgricultureWWOP Women Welfare Organization Poonch

Contents

Chairman’s Message .............................................................................................2

Chief Executive’s Statement...................................................................................4

1. Overview.......................................................................................................6

2. Credit and Enterprise Development................................................................8

3. Community Physical Infrastructure ...............................................................14

4. Human and Institutional Development.........................................................18

5. Health and Education..................................................................................22

6. Reconstruction and Rehabilitation ...............................................................26

7. Evaluation, Research and Development ........................................................30

8. Media and Communication .........................................................................34

9. Human Resource, Administration and Procurement .....................................36

10. Finance and Accounts .................................................................................38

11. Directors’ Report .........................................................................................42

Seven Years Financial Summary ...........................................................................49

Financial Statement and Auditors’ Report ............................................................50

Boxes

2.1 PPAF Microcredit Financing: Assessment of Outcomes..................................13

3.1 Sindh Coastal Areas Development Program..................................................17

7.1 Baseline Survey of the Engro Milk Project .....................................................33

Figures

2.1 CED financing disbursed during FYs 2001-2006.............................................9

2.2 Sectoral distribution of CED resources during FYs 2001-2006.......................10

2.3 CED financing outreach ...............................................................................11

3.1 Sectoral distribution of CPI projects FY 2001-2006.......................................15

3.2 CPI financing disbursed during FY 2001-2006..............................................16

4.1 HID financing disbursed during FY 2001-2006.............................................19

5.1 Gender disaggregated data of school enrolment..........................................24

5.2 Gender disaggregated data of beneficiaries in the Health Program ...............24

Board of Directors and General Body Members

Chairman - Board of Directors & General Body

Hussain Dawood Chairman, The Dawood Group

Members - Board of Directors

Mueen Afzal Former Secretary General, Ministry of Finance, Government of PakistanRafiud Deen Ahmad Senior Partner, Orr, Dignam & Co.Rana Assad Amin Joint Secretary, Ministry of Finance, Government of PakistanJunaid Iqbal Ch. Additional Secretary, Economic Affairs Division, Government of PakistanArif Hasan President, Aurat FoundationAbdul Razzaq Kemal Former Director, Pakistan Institute of Development EconomicsAijaz Ahmed Qureshi General Manager, Sindh Irrigation & Drainage AuthoritySyed Ayub Qutub Executive Director, Pakistan Institute of Environment Development & ResearchFareeha Zafar Director, Society for the Advancement of EducationKamal Hyat Chief Executive/Managing Director, Pakistan Poverty Alleviation Fund

Members - General Body

Rashid Bajwa Chief Executive Officer, National Rural Support ProgrammeJaved Burki Former Civil ServantAshraf Muhammad Hayat Former Civil ServantAkmal Hussain Managing Director, Sayyed Engineers Ltd.Maliha H Hussein Independent ConsultantAinullah Khan Kakarr Former Civil ServantMutawakkil Kazi Member, Federal Public Service CommissionShoaib Sultan Khan Chairman, National Rural Support ProgrammeSono Khangharani Executive Director, Thardeep Rural Development ProgrammeRajab Ali Memon EducationistHamayun Murad Managing Director, Orix Leasing Pakistan Ltd.Kaiser H Naseem Manager, Pakistan Corporate Governance Project, International Finance CorporationAisha Ghaus Pasha Former Deputy Director, Social Policy and Development CenterMuhammad Ismail Qureshi Secretary, Ministry of Food, Agriculture & Livestock, Government of PakistanFazlullah Qureshi Former Member, National Electric Power Regulatory AuthoritySadiqa Salahuddin Executive Director, Indus Resource CenterZari Sarfraz Industrialist/Agriculturist/Social WorkerM. Suleman Shaikh Honorary Chief Executive, Sindh Rural Support OrganizationJahangir Tareen Federal Minister for Industries, Productions & New Initiatives, Government of Pakistan

All Members of Board of Directors except Kamal Hyat are also Members of General Body

Company Secretary: Iltifat Rasul KhanAuditors: Ford Rhodes Sidat Hyder & Co. Chartered AccountantsLegal Advisors: Azam Chaudhry Law AssociatesRegistered Office: House No. 1, Street No. 20, Sector F-7/2, Islamabad, Pakistan.

PPAF — Annual Report 2006 1

PPAF — Annual Report 2006

It gives me great pleasure to say that theyear ending June 2006 has seen the PPAFcontinue to grow as an outstandinginstitution. This is because of theprofessional corporate culture which hasevolved and which has been the hallmarkof PPAF operations.

Disbursements reached an inspiring Rs.16billion of which microcredit was the largestcomponent. Starting from a modest baseof six Partners in the year 2000, when theoverall number of borrowers in the sectorwas only 50,000, the PPAF has developedan infrastructure of 38 partners inmicrocredit with 943,370 borrowers.Repayment from the Partner Organizationsremain 100 percent.

Similarly, there has been an exponentialgrowth in the number of communityphys ica l inf rast ructure schemes.Disbursements have increased by 54 percentwhen compared to last year, and thenumber of projects undertaken now exceeds11,350. Most of the projects have beenexecuted in the poorest and remotest areasof the country.

Human Resource Development is one ofthe most important activities of the PPAF.

Investment is continuously made indeveloping the human resource base ofthe PPAF, the partner organizations andtheir communities. There is a strongrealization that without adequatecompetencies part icular ly at themanagement level, the long term growthand expansion of the program would besignificantly compromised.

The institutionalization of the decision-making process, implementation of goodcorporate governance practices, andtransparency have been ensured by theindependent Board of Directors. It is myprivilege to appreciate the outstandingcontributions made by the Directors, andalso the unstinting support of General Body,in the realization of these fundamentalelements of the organization.

The competency and motivation of themanagement team of the PPAF to translatepolicy into action and to creatively developacceptable solutions to difficult problemsdeserves recognition and commendation. With the increase in the activities of thePPAF, the management team possesses thenecessary skills and capabilities to succeedin these new challenges.

Chairman’s Message

2


The encouragement and financial assistancethat has been provided by the international,bilateral and private sector donors in thisphase of the institution’s growth has beencritical. They have facilitated the creationof the foundation for sustainable operations.

Success brings with it opportunities andchallenges. The harnessing of these in aholistic and timely manner is critical to thecontinuity and sustainability of the supportvital to the alleviation of poverty. It isimportant to constantly remind ourselvesthat the focus of our endeavors is to provideopportunities and support for the lessprivileged to lift themselves out of povertywhile reinforcing their dignity and self respect.

The Government of Pakistan’s outstandingsupport, assistance and ownership of thePPAF is gratefully acknowledged. Withoutthe Government’s recognition that the PPAFis the private sector executing arm of itsPoverty Alleviation Strategy, the PPAF wouldnot be able to make a significantcontribution to reduction in poverty. TheGovernment’s continued facilitation isparamount to the success of the efforts ofthe PPAF in fulfilling its responsibilities tothe vulnerable people and communities ofthe country.

Hussain Dawood


This is the sixth year of PPAF operations,and it is gratifying to see that many of thedreams and expectations have been in largemeasure realized, and strong foundationshave been laid to meet the challenges ofthe future.

One of the most significant contributionsin my view has been the accomplishmentof raising the standards of civil societyorganizations to new levels of socialresponsibility and economic discipline. Bothof these are essential ingredients forsustainable development.

The relevantly small outreach of civil societyorganizations has now been extended to108 districts of the country. In terms ofphysical space they are now present in23,000 villages of Pakistan. In terms ofnumbers there are now over 60,000community organizations working jointlywith them in the war against poverty.

If ever proof was required of the strengthand value of community driven projects,the Pakistan Poverty Alleviation Fund andits partner organizations are a livingtestimony of the success of this socio-

economic model. A model that placespeople in the center of development ratherthan development in the center of people.

The Government of Pakistan continues tobe the strongest supporter of the fund,and this is only natural since as sponsor ofthe institution it has played a major role infacilitating the progress and success of thePPAF. I take this opportunity to thank thehonorable prime minister and his teampersonally for their kind assistance andvaluable guidance.

Similarly, I am grateful for the confidencethat multi-lateral, bilateral, and morerecently private sector development partnershave shown in our ability to delivereffectively and transparently at grassrootslevels. Their continued unwavering supporthas been crucial in establishing the PPAFas a world class institution.

Our close relationship with our partnerorganizations and the open natureof equal discourse has been extremely usefulin creating a climate of learning and mutualtrust. We hope to continue this openness andtwo-way communication in the years ahead.

Chief Executive’s Statement


We are fortunate to have a General Bodythat is well-versed in the concept andattributes of social mobilization and whoseinputs have added great value to our efforts.The personal interest of the Chairpersonand the Board of Directors has been amajor factor in introducing best corporatepractices in the institution, and in creatinga climate of shared responsibilities andownership.

The strongest impetus to work howevercomes from the fact that every step wetake could literally be a matter of life anddeath for vulnerable people struggling ina hostile environment for survival.

We care, and will continue to do so.

Kamal Hyat

Overview


Overview

The Pakistan Poverty Alleviation Fund (PPAF)envisions community empowermentthrough poverty focused developmentinitiatives and interventions at the grassroots level. As an apex institution, PPAFoperates through Partner Organizations(POs) with the aim of strengthening theirinstitutional capacities and expanding theiroutreach. In this way, it plays a pivotalintermediary role between donors andcommunities that ensures transparency,efficiency and sustainability.

In six years of its operations, PPAF hasdisbursed over Rs. 16 billion to communitiesspread across 108 districts of Pakistan.During this period, PPAF has been successfulin maintaining organizational transparencythrough rigorous internal and externalmechanisms. This has been complementedby prudent management and qualitymaintenance of an expanding portfolio.

While poverty alleviation strategies basedon microcredit delivery at the grassrootslevel remains the largest operating windowof PPAF, its collaborative efforts in realizingcommunity infrastructure projects and socialsector development schemes have alsogained momentum over time.

During FY 2005-6, PPAF took over theadditional responsibility of assisting in thecountry’s rehabilitation and reconstructioneffort following the devastation wrought

by the October 8 earthquake. In closecoordination with the EarthquakeReconstruction and Rehabilitation Authority(ERRA), PPAF initiated a multi-prongedstrategy for the restoration of lives andlivelihoods, which initially involvedreconstructing 34,000 (now 122,000)housing units, rehabilitating 1,000infrastructure schemes and training over70,000 individuals in the affected areas.

By entrusting PPAF and its partnerorgan izat ions wi th lead ing thereconstruction effort in 34 union councils,ERRA has contributed to fostering greaterconfidence between the private and publicsectors. The role of PPAF’s Reconstructionand Rehabilitation (RnR) Unit willundoubtedly be critical to this evolvingrelationship.

PPAF’s Credit and Enterprise Development(CED) Unit recorded a growth of 19 percentin terms of funds disbursed, whereas theHuman and Institutional Development (HID)Unit remained almost at par with thedisbursement figure in the previous year.The Community Physical Infrastructure (CPI)Unit recorded a much higher increase of54 percent, compensating for the downturnin the previous year.

PPAF operations continue to reflect anequitable gender balance manifest in thegrowing number of female beneficiaries:


Overview

Gallup study showed that PPAF’s microcreditbeneficiaries, among other things, haveexperienced a) increase in personal andhousehold incomes, b) increase inconsumption of key high protein fooditems, c) usage of better household facilities,and d) enhancement in social status ofboth men and women beneficiaries.

By end of June 2006, PPAF fundedmicrocredit loans had reached around943,370 borrowers in approximately 21,741villages of the country. In the process, over60,334 community organizations have beenorganized as a direct result of PPAF support.In addition, approximately 8,357 physicalinfrastructure schemes have beencompleted, while over 39,000 communitymembers were trained by June 30, 2006.

The benefits of PPAF interventions havebeen equitably distributed across all regionsof the country. In the event, they havehelped in raising awareness, creating socialcapital and engineered the basis for a long-term development process with the activeparticipation of the disadvantaged peopleof Pakistan.

The foundations have been laid. PPAF todaystands at the threshold of bringing abouta wholesale transformation in the attitudesof poor people across the length andbreadth of the country. Wherever PPAFsponsored infrastructure schemes, creditfacilities and training programmes areoperative, the poor have started reapingthe benefits of self-help strategies,generating income and reducing theirdependence on external support.

women accounted for approximately 39percent of microcredit loans disbursed and38 percent of the trainings conductedduring FY 2005-6. Additionally, womencomprised an estimated 50 percent of alldirect and indirect beneficiaries of PPAF’sinfrastructure interventions. By the end ofthe financial year, 10 out of PPAF’s 68partner organizations were cateringexclusively or predominantly to women.

As an institution that values research, PPAFis continually refining its capacities andstructures to regularly monitor and evaluateits own performance, in addition to thatof its partners. Within this context, theEvaluation Research and Development (ERD)Unit has initiated the Benefit Monitoringand Evaluation System as an integratedtool for measuring impact, relevance,effectiveness, efficiency and sustainabilityof PPAF supported poverty alleviationinterventions.

PPAF’s Health and Education Unit has alsohad a promising start. The establishmentof 28 new schools and 11 new communityhealth centers in the very first year of itsoperational life augurs well for the futureof the unit. By focusing on quality healthand education facilities, the unit hopes tocreate an enabling environment forfacilitating upward social mobility andassisting meaningful social change in thelong run.

The early signs of a meaningful long-termchange at the grassroots level have alreadybeen empirically validated in independentassessments of PPAF interventions. The


Credit & Entperprise Development

organization. The emphasis on performancebased lending continues to play animportant role in assuring the quality ofthe program.

The CED Unit has sustained its portfoliogrowth and during the period under reviewit has disbursed Rs. 3,705 million againstRs. 3,106 million in the preceding year(Figure 2.1). Correspondingly, the numberof PPAF microcredit borrowers rose from244,342 in FY 2004-5 to 332,030 in FY2005-6.

In line with organizational objectives,funding for microcredit has been equitablydisbursed in urban and rural areas of 78districts of Pakistan through 38 POs, ofwhich 10 are exclusively or predominantlycatering to women. Repayments to PPAFfrom POs continue to be at 100 percent.In contrast to previous years, sectoraldistribution of credit showed significantincrease in income generating activities incommerce and trading, which accountedfor nearly 40 percent of the total portfolio

Entrusted with the responsibility ofmanaging PPAF’s credit portfolio, the Creditand Enterprise Development (CED) Unitfocuses on forging effective partnershipswith organizations working directly withcommunities at the grassroots level. Indoing so, it aims to strengthen partnerorganizations (POs) and communities alike,the former through building a sustainable,transparent and efficient institutionalframework for the delivery of financialservices to the poor, and the latter throughasset creation and improved livelihoods.

As a national apex institution, PPAF hassince inception maintained a diversifiedand healthy portfolio, with specialconsideration for gender and an equitabledistribution of funds across the country.Under this mandate, the CED Unit providesfunding to legally established entities inthe private sector. The extent of fundingto a PO is determined by the rationale ofthe proposal submitted, the strength ofthe POs past track record and absorptionand debt service capacity of the

The CED Unitprovidesfunding tolegallyestablishedentities in theprivate sector

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

FIG - 2.1 CED financing disbursed during FYs 2001 — 2006

332655

1314 1462

31063705

0

1000

1500

2000

2500

3000

3500

4000

500

(Rs. in million)

4500

FIG - 2.2 Sectoral distribution of CED resources during FYs 2001 — 2006



the view that their opinion now matteredin deciding issues regarding the purchaseand sale of property. As an organizationwith the aim of empowering women, PPAFtakes great strength from these findings.

At the same time, PPAF has carefully notedthe observation of the Gallup study withrespect to the limited scale of change asfar as the more empirically verifiableindicators are concerned. This is notsurprising keeping in mind the short periodof time between the financing of the loanfacility and the Gallup study. An additionalfactor suggested by the study is the relativelysmall amount of the loan size.

while agriculture and livestock accountedfor 35 percent and 18 percent share offunds disbursed respectively (Figure 2.2).This was principally on account of fastgrowth of partner organizations workingin a peri-urban environment.

Independent and externally commissionedstudies have concluded that PPAF loanshave brought a positive change in theincomes, assets, lifestyles and, above all,the social status of borrowers. Particularlyrefreshing is the evidence suggesting amuch improved social status of femaleborrowers.

The Gallup study, for instance, has shownthat 64 percent of PPAF female microcreditbeneficiaries interviewed in the sampleperceive their social status to have increased.Similarly, 60 percent of the womeninterviewed stated that they had a greatersay in business decisions than before, 55percent were of the view that they had anincreased role in the purchase and sale ofhousehold items, while 50 percent were of

Studies showPPAF loans

have broughta positivechange inincomes,

assets,lifestyles andsocial status

of borrowers

Agriculture35%

Livestock18%

Commerce/Trading40%

Others7%



KF OCT DAMEN SAFWCO TRDP NRSP

FIG - 2.3 CED financing outreach

3 3

27

2 3

58

133

170.4

14

46

192

Act

ive

Borr

ower

s(o

oo)

0

60

80

100

120

140

160

200

40

180

20

Before PPAF

After PPAF

The Gallup study is very encouraging innoting a positive direction of change, aswell as in its findings regarding the betterstanding of beneficiaries to non beneficiariesin a number of areas including increasedpersonal and household incomes, increasedexpenditure on house repair, as well asincreased household consumption andpossession of consumer durables (See Box2.1).

PPAF is also cognizant of the fact that thedurability of such far reaching achievementsis intrinsically tied to the institutionalstrength and sustainability of its partnerorganizations. The CED Unit thus continuesto work relentlessly with its partners informulating coherent and viable businessplans with mutually agreed performanceparameters.

One of CED’s major contributions has beento broaden the base of the microcreditsector by building capacities of both thebigger and smaller indigenous organizationsfor enhanced outreach especially in the

remote areas of the country. PPAF’sexperience on this front over the years hasbeen very enriching and has enabled it toexponentially increase the outreach of itspartner organizations (Figure 2.3).



The Unit is also in the process of developingand implementing a robust r iskmanagement framework at PPAF forappropriate and timely identification andmitigation of risks emanating from itsactivities. This has become necessary dueto the exponential increase during the lastfew years in the loan portfolio of partnerorganizations.

The value of well targeted microcreditproducts in poverty alleviation has beenwell established. PPAF, in its capacity as thelargest wholesaler of funds to microcreditinstitutions in the country, is leading thefield in this regard. As such, it has assumedthe responsibility of meeting the ‘doublebottom-line’ by making microcredit deliveryboth a sustainable venture as well as aneffective tool for poverty alleviation.

Although microcredit continues to accountfor a major percentage of PPAF’s creditfacility, Rs. 235 million have also beendistr ibuted under the Enterpr iseDevelopment Facility (EDF), which catersto the needs of the ‘missing middle’ of therelatively poor who are neither coveredthrough the conventional poverty programsof civil society organizations nor by formalsector financial institutions. Initiated withthe financial support of the United StatesAgency for International Development(USAID), EDF loans are designed to supportentrepreneurship and local micro-businessesand are thus much bigger than the averagesize of the traditional microcredit loan.

The CED Unit has also managed to forminnovative alliances and partnerships withthe corporate sector to reach out to thepoor under the broader mandate of PPAF.In this regard, PPAF signed a Memorandumof Understanding (MoU) with theGovernment of Pakistan, Engro FoodsLimited (EFL) and three of its POs in 2005.The objective was to jointly evaluate thepossibilities under a pilot project wherebyPPAF through its POs would encouragemembers of targeted communities to investin livestock development for optimizingmilk production and subsequent supply ofmilk at market prices to Engro Foods Ltd.The pilot project has been successfullycompleted and the agreement for the mainproject is in the pipeline with addition ofmore partners to the project.

The CED Unithas also

managed toform

innovativealliances andpartnerships

with thecorporatesector to

reach out tothe poor

under thebroader

mandate ofPPAF



Box 2.1

“PPAF Microcredit Financing: Assessment of Outcomes”“According to our research, there is an adequate evidence to suggest that on theaverage low income households who borrowed from PPAF are better off todaythan they would have been if they had not borrowed. This observation was initiallymade for the first group of borrowers surveyed in 2001, and has been found tobe equally true for the second, and comparatively larger, pool of borrowers surveyedin 2005.

There is overall improvement in the income as well as personal and business assetsof PPAF borrowers. Their lifestyle by way of housing facilities has improved. Thesocial status, particularly of the women borrowers, has undergone a positivechange. Admittedly the scale of change is limited, as is the scope and amount ofthe loan. But the direction of change is, on the whole, positive. Our research showsthat the benefits of PPAF loan appear in terms of poverty alleviation and improvementin the basic lifestyle indicators of the borrower. The direct impact on generatingemployment or the effect on other development indicators is not very significant.However, improvement in the basic lifestyle indicators of microcredit borrowerscan possibly have a second order positive effect on development indicators”

Gallup Pakistan,excerpt (2005)

FIG - 3.1 Sectoral distribution of CPI projects FYs 2005 — 2006


Community Physical Infrastructure

Altogether, the projects initiated so far havebeen estimated to benefit a population of6 million inhabiting approximately 8,067villages of Pakistan. In these villages, asmany as 9,440 community organizationshave been organized for ensuringsustainability and long term developmentprospects in project areas.

The sectoral distribution of initiated projectsdemonstrate PPAF’s emphasis on some ofthe most neglected, yet profoundly crucial,needs of the national population. Irrigationconstitutes 37 percent share of the projects,while Drinking Water Supply and Sanitation(DWSS) constitute a share of 28 percentand 22 percent respectively. The remaining13 percent includes roads and bridges,flood protection works, landscaping, micro-hydel projects etc. (Figure 3.1).

In order to multiply the positive effects ofstand-alone infrastructure projects, PPAFhas conceptualized a more holistic approachto rural infrastructure development. Thishas been subsequently operationalized as

The Community Physical Infrastructure (CPI)Unit provides technical and financial supportto partner organizations for approvedphysical infrastructure interventions. Theprocess of project identification is demanddriven and involves community participationat every stage. Additionally, to fostercommunity ownership for better post-completion project management, theprocess incorporates the principle of costsharing wherein the participatingcommunities contribute either in cash orthrough labor.

The CPI Unit is mandated to implementsmall scale community infrastructureprojects under two broad categories:‘Conventional Projects’ and the ‘NewInitiatives’ category. The latter projectsfocused on Drought Mitigation andPreparedness, Integrated Area Upgradingand Technological Innovations.

As of June 30, 2006, the Unit has initiated11,700 projects, of which 3,171 have beeninitiated in the current fiscal year alone.

The projectsinitiated sofar have beenestimated tobenefit 6millionpeople in8,067 villagesof Pakistan

DWSS28%

Irrigation37%

Link Roads/Bridges8%

Others5%

Sanitation22%



Rs. 801 million have been disbursed to 41partner organizations for implementingWB funded projects whereas Rs. 86 millionhave been disbursed to 8 partnerorganizations for USDA funded CPI projects.

The October 8 earthquake proved to be amajor infrastructure disaster. It was realizedvery early during the rehabilitation processthat housing reconstruction has to becomplemented with rehabilitation ofinfrastructure for meaningful revival ofaffected communities. Consequently, $20million out of the $100 million World BankReconstruction and Rehabilitation Projectwas set aside for the rehabilitation of

the Integrated Area Upgrading Program.Following the successful completion of apilot Integrated Area Upgrading Project(IAUP) in village Dhoke Tabarak Shaheednear Islamabad, PPAF has planned toimplement 300 similar projects in thesecond phase of PPAF. As of June 2006,PPAF Board of Directors has approvedaround 200 such projects to beimplemented in the next two years.

PPAF has also launched a nationwideDrought Mitigation and PreparednessProgram (DMPP) to mitigate the effects ofthe 1997-2002 drought that had laid wastelarge tracts of the country. Under thisprogram, PPAF has so far initiated 12 DMPPprojects. Of these, 4 DMPPs, one in eachprovince, have been funded by the WorldBank and another 8 by the US Departmentof Agriculture. The PPAF Board of Directorshas approved over 1450 sub-projects underthe program to be implemented in the nextone year.

During FY 2005-6, the Unit has disbursedRs. 887 million (Figure 3.2). Of this amount,

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

FIG - 3.2 CPI financing disbursed during FYs 2001 — 2006

202322

265

768

575

887

0

300

400

500

600

700

800

900

100

200

(Rs. in million)

PPAF haslaunchedDrought

Mitigationand

PreparednessProgram to

mitigateeffects of

1997-2002drought



infrastructure schemes in the water supply,sanitation and communication sectors.

In the first phase of the infrastructurerehabilitation process in affected areas,PPAF requested partner organizations tocarry out a survey of damaged infrastructureschemes in their respective areas ofoperation irrespective of their earlier sourceof funding. PPAF has since appraised sixpartner organizations for the reconstructionand rehabilitation of 1000 schemes thatalso include schemes that have not beenpreviously funded by PPAF.

The Sindh Coastal Area DevelopmentProgram in the coastal areas of Badin andThatta districts is another major PPAFventure in which the CPI Unit is expected

to play a major role (See Box 3.1). Theprogram is based on the recommendationsof a World Bank Socio-Economic Study,which highlights the negative effects of aseries of natural disasters that have afflictedthe residents for over a decade, forcing alarge number of people to migrate from thecoastal belt.

The report identifies the most vulnerablesegments of the population; explores theircoping strategies and recommends aprogram of assistance based on the followingobjectives: (i) better access to basic servicesand facilitating infrastructure; (ii) higherincome generation through improved crop,fisheries and livestock production, marketingand microfinance services; and (iii) securingaccess to, and better management of, thenatural resources of the area.

Box 3.1:

Sindh Coastal Area Development ProgramThe Sindh Coastal Area Development Program has been planned after a rigorous participatoryprocess involving social immersions, exhaustive roundtable discussions with stakeholders anddeliberations among the PPAF – World Bank team. The program aims at a phased developmentstrategy involving:

Development of rural growth centers through integrated development of physical infrastructure,followed by the setting up of health and education facilities and promotion of incomegenerating activities through microcreditReducing physical vulnerability through construction of flood protection and sea watercontainment structuresConstruction of directly productive infrastructure such as jetties and wharfsDeveloping transport and mobility through construction of inter and intra-village roads andintermediate modes of transport through infrastructure grants and microcreditPromoting technological innovations, particularly the use of solar and wind energy forpumping of water and electricity generation

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

FIG - 4.1 HID financing disbursed during FYs 2001 — 2006

56

212 198 206

382 398

0

150

200

250

300

350

400

50

100

(Rs. in million)


Human & Institutional Development

The Human and Institutional DevelopmentUnit administers the capacity building andtraining component of PPAF. One of theUnit’s main objectives is to strengthen theinstitutional capacity and the humanresource base of partner organizations forefficient and cost effective service delivery.Additionally, the Unit provides both financialand non-financial services with the aim ofsupporting incremental expansion inoutreach of partner organizations and theattainment of long term financial andinstitutional sustainability.

The HID Unit managed disbursement ofRs. 398 million in FY 2005-6, matching thedisbursement figure of Rs. 382 millionachieved in the last fiscal year (Figure 4.1).However, the number of trainingbeneficiaries increased from 31,339 to39,064 (community training) and from1545 to 1655 (staff training) in thereporting year with an approximately 38percent female participation in both trainingcategories.

In December, 2005, PPAF entrusted theUnit with the task of organizing the secondGlobal Microentrepreneurship Awards incollaboration with UNDP, CitigroupFoundation, Citibank Egypt and UNCDF. Atotal of 110 case studies were receivedfrom different microfinance institutions,which were further short listed by theHarvard School of Business.

The purpose of the event was to recognizeefforts of small entrepreneurs and theircontributions to economic activity at thegrass roots level. Sixteen candidates alongwith their Credit Officers were interviewedin the final round by an esteemed anddiverse panel of judges. The candidateswere evaluated and assessed on the basisof their contribution in four areas: (i) impacton poverty reduction and income andemployment generation, (ii) improved qualityof life (iii) potential for sustainability andprofitability, and (iv) innovation and growthpotential. It was heartening to see that ofthe twenty (20) candidates who were givenawards, fifteen (15) were attached to partnerorganizations supported by the PPAF.

It washeartening tosee that ofthe twentycandidateswho weregiven awards,fifteen wereattached topartnerorganizationssupported bythe PPAF

Sinceinception ofthe programthe numberof internees

that receivedtraining now

stands atmore than ahundred, of

which 85have found

employment



In continuation of the Unit’s internshipprogram, 28 additional internees wereattached with the fund’s partnerorganizations during the year underreview. This particular initiative whichhad been a great success was primarilytaken on account of the realization thatthere was a significant dearth of trainedyoung people for joining the ranks ofthe fast growing civil society partnerorganizations. Since inception of theprogram the number of internees thatreceived training now stands at morethan 100, of which 85 have foundemployment.

Additionally, in the year under review,the Unit engaged 4 internees from thefifth batch to collect data on HIDpre sc r ibed fo rmat s f rom 2 ,548community trainees. The exercise wascarried out to identify possible gaps indifferent training programs such asCommunity Management Skills Training,Vocational Skills Training and EnterpriseDeve lopment Tra in ing. H ID Uni tencourages POs to organize regularfollow-up of community trainings, eitherthemselves or through independentthird parties.

S imi lar ly, the junior profess ionalprogram was launched with the aim oftraining fresh university graduates inorder to address the problems of highstaff turn over and non availability oftrained local professionals in the market.Following the success of the initial

intake of Junior Professionals’ (JPs) batchof 40, a second batch comprisinganother 40 JPs was trained during theyear under review. More than 95 percentJPs were recruited by the POs of PPAF.

As a part of its policy to interface withinternational centers of excellence, theUnit facilitated a twelve-day trainingprogram for partner organizations onthe subject of disaster mitigation. Thiscourse was organized in the month ofSeptember 2005 in collaboration withthe Asian Disaster Preparedness Centre,Thailand. 21 participants from variousorganizations attended the coursewhich covered multiple dimensions ofdisaster management including hazardand vulnerability assessment, emergency



response management, staff welfareand security, community-based riskmanagement and public awareness andcapacity-building.

The HID Unit continued with the strategicreviews, appraisal and monitoring visits ofpartner organizations. During the year,strategic reviews of 21 organizations werecarried out. Similarly, 14 appraisal and 11monitoring and follow-up visits were carriedout in FY 2005-6.

The role of HID unit is integral to the successof all PPAF interventions and this role willbecome crucial in the coming years. In anenv i ronment where c iv i l soc ietyorganizations are expanding rapidly, it isimperative that the competency levels ofvarious partner organizations keep abreastwith the changing times. For this to happen,the HID unit will have to play a proactiverole to cope with new challenges.

The process of participatory developmentat the grassroots is inextricably linked tothe development of a skilled humanresource. Better skills need to be attunedwith the demands of the market. Cognizantof the fact, the HID Unit focuses on marketrelevant community trainings. It furtherencourages partner organizations todevelop strategies for improved marketlinkages for their beneficiaries to maximizeoutput.

Similarly, the HID Unit also caters toinstitutional needs of the its partners with

the objective of transforming them intoviable and sustainable entities. As vehiclesof change at the grassroots, the institutionaldevelopment of PPAF partner organizationsis crucial to the whole process.

The Unit’sfocus is onqualityprimaryhealth careand formalprimaryeducation


Health & Education

The Health and Education (H&E) Unitsuccessfully completed its first year as aviable and credible addition to PPAF’spoverty alleviation strategy. Nine partnerorganizations were taken on board toprovide quality health and educationfacilities in selected communities. Thesepartnerships were established on the basisof a clearly defined eligibility criterion withthe aim of ensuring maximum outreach tomarginalized communities.

The Unit’s focus is on quality primaryhealthcare and formal primary education.Pakistan’s education and health indicatorscontinue to present a challenge, especiallyin the rural areas. Among other factors,lack of access contributes directly to thep e r p e t u a t i o n o f p o v e r t y a n ddisempowerment. By providing qualityhealth care and access to primary education,PPAF supported facilities aim at providingthe necessary framework for better andmore prosperous livelihoods. Additionally,the PPAF social sector strategy seeks tomake this framework sustainable by tryingto build ownership through communityinvolvement and support.

The Unit also contributed in PPAF’s multi-pronged response to mitigate the affects ofthe October 8 earthquake. Commensuratewith its area of operation, the Educationand Health Unit has initiated reconstructionof two high schools (one each for boys andgirls) and a health facility in the remoteareas of Azad Jammu and Kashmir. Suchinitiatives will undoubtedly complement

the more comprehensive interventionsplanned by PPAF’s Reconstruction andRehabilitation (R&R) Unit, laying the seedsof a speedy return to normalcy in theaffected areas. In a similar vein, the Unit’scontribution in the development of aproposal for the Committee to EncourageCorporate Philanthropy (CECP) forreconstructing health and educationfacilities in the affected areas was extremelyuseful.

The Unit has adopted the following strategywith the objective of facilitating change inthe social fabric of disempoweredcommunities:

Establishment of quality health andeducation facilities through theprov i s ion o f h igh s tanda rdinfrastructure and qualified local staff.Active community mobilization throughthe formation of health and educationcommittees to ensure communityparticipation and ownership for longlasting sustainability of interventionsCapacity-building and support forpartner organizations to deliver andmonitor education and healthinitiatives.Targeting long-term community well-being by investing in female education

The above strategy has featured prominentlyin all the initiatives undertaken by the Unitin FY 2005-2006. Following are someexamples:

A total of 28schools and

11 healthfacilities wereestablished insome of the

remotest andunderprivileged

areas ofBaluchistan,

Sindh, Punjaband Northern

Areas


Health & Education

A total of 28 schools and 11 healthfacilities were established in some ofthe remotest and underprivileged areasof Baluchistan, Sindh, Punjab andNorthern Areas.Trainings were imparted to 119 locallyhired education staff and 220 healthstaff, equipping them with requisiteskills for quality service delivery in theirrespective sectors. Training programsfor teachers also capacitated them inthe use of interactive teachingmethods.Particular emphasis on the girlchild,reflected in the 84 percent enrolmentof girls in PPAF supported schools. (Figure 5.1).

Approximately 84,000 community members(including children, adult females and adultmales) benefited from the health facilitiesprovided by the community health centresand the outreach teams. About 43 percentof the beneficiaries were adult females. (Figure 5.2).

All the above achievements have not beenwithout difficulty. Whereas constantdiligence and hard work has enabled PPAFand its partner organizations to meet severalchallenges in the past, several other remain:

FIG - 5.1 Gender disaggregated data of school enrolment FIG - 5.2 Gender disaggregated data of beneficiaries in thehealth program

Female,80%

Male,20%

Male,25%

Female,75%


Health & Education

Although the remoteness of PPAFsupported health and educationfacilities have the advantage of reachingthe most isolated and disadvantagedcommunities, it also raises the difficultyof finding capable local staff. Thechal lenge is one of unfai l ingcommitment in terms of extensive andconsistent capacity building efforts toachieve quality outcomes.Motivating and mobilizing conservativecommunities to break away fromattitudes formed over a long period isanother challenge that has been dealtwith reasonably well so far. However,difficulties of such nature will remainin the foreseeable future.Active involvement of femalecommunity members in the health andeducation committees is anotherchallenge that has to be addressed inthe long run.

In the next year, the Unit plans to focus onmaintaining the quality of establishedfacilities and initiating new facilities inselected areas. A major task for the Unit isto refine and strengthen activities forintensive capacity-building of health andeducation coordinators, health andeducation staff and community members.

This will not only improve the quality ofservice delivery but also assist in setting upgood health and education systems at thecommunity level that can be sustained by

locally developed expertise. The Unit willcontinue to monitor all activities and analyzethe information for further improvementsof the program.

Provision of quality health and educationfacilities has undoubtedly created the spaceand framework for a more holistic andeffective poverty alleviation strategy.

A newReconstructionandRehabilitation(RnR) Unitwasestablishedfollowing theformalinitiation ofthe WorldBank fundedUS $100millionReconstructionandRehabilitationproject inJanuary 2006


Reconstruction and Rehabilitation

The October 8th earthquake in AJK andNorthern NWFP left 80,000 dead and nearlyhalf a million homeless. Within minutes,infrastructure built over decades wasuprooted, while means of livelihood werecompletely shattered. PPAF responded to thecrisis by immediately setting up a DisasterRelief Center to coordinate its relief efforts.

In the early months following theearthquake, PPAF managed to distribute100,000 CGI sheets and truckloads of otherimportant items through its forward officesset up in the disaster zone. For the purpose,PPAF diverted US$5 million from its normaloperations. PPAF also contributed Rs. 1million to the “President Relief Fund” fromits own resources. The PPAF staff furthervoluntarily contributed a day’s salary to therelief fund.

A new Reconstruction and Rehabilitation(RnR) Unit was established following theformal initiation of the World Bank fundedUS$100 million Reconstruction andRehabilitation Project in January 2006. PPAFappraised 6 POs for the reconstruction of34,000 housing units (the number has sinceincreased to 122,000), rehabilitation of 1,200CPI schemes and training of over 75,000individuals in 34 union councils of AJK andNorthern NWFP. POs were selected on thebasis of institutional capacity and pre-earthquake presence in the affected areas.

PPAF’s RnR Unit works in close coordinationwith the Earthquake Rehabilitation &Reconstruction Authority (ERRA), assignedby the government with the task of

rebuilding the lives and livelihoods ofsurvivors. PPAF has remained consistentwith its philosophy of incorporatingparticipatory development and communitymobilization as the cornerstones of itsoverall strategy. Rehabilitation andreconstruction program is guided by twofundamental objectives.

Assist people in rebuilding their livesby providing safer and better housesand restoring basic infrastructure servicesthrough a community driven approach.Build capacities of affectees with thepurpose of enabling them to take controlof their lives on a sustainable basis.

For purpose of planning and dedicatedfocus, the RnR Unit has been divided intofour main components: ( i) SocialMobilization, (ii) Damage Assessment,(iii) Re-construction, and (iv) Training.

Social mobilization forms the core of theR&R project. The aim is to transform thedisintegrated post-earthquake communitiesinto a well-knitted whole through betterorganization and participation at the grassroots level. The process of socialmobilization demands skill development atboth POs and community level. PPAF hasfocused on both areas:

Training POs staff in disastermanagement skills for effectiveoperationalization of rehabilitation andreconstruction efforts.Imparting vocational skills to affectedcommunities for long term survival andsustainable livelihoods.

The need tocomplete the

damageassessment

forms inkeeping withERRA policy

guidelineswas an

extremelychallenging

aspect of thereconstruction

efforts



The social mobilization staff of the RnR projectcarried out a comprehensive exercise to:

Ident i fy vulnerable segments.Develop a Community Action Plan(CAP) jointly with the communitymembers in order to obtain theirconsent to assist the vulnerable inconstructing their homes andrevitalizing their lives.Develop a collective village leveldevelopment plan for communitymembers, covering all aspects of therehabilitation and reconstruction effort.

The need to complete the damageassessment forms in keeping with ERRApolicy guidelines was a challenging aspectof the reconstruction effort. Initially, 12damage assessment training workshopswere conducted for existing and newlyrecruited staff of POs (Table 1). These werecoordinated by PPAF, PO staff andEmergency Architects (A French NGOengaged by UN HABITAT for the purpose).The workshops had following objectives:

To familiarize participants with differenthousing construction models andstructures such as wooden, RCC frames,stone masonry, brick masonry, plumb

concrete and katcha houses.To develop skills related to identificationof the extent of damage.To familiarize and develop expertise indata collection for damage assessmentand on-field usage of GPS (GlobalPositioning System).To familiarize participants with the dataentry process and the data base.

Damage Assessment was carried out onforms provided by ERRA. The exercise wascarried out by 110 Social MobilizationTeams (SMTs) of six POs in the 34 UnionCouncils allocated to PPAF.

Skill development through staff andcommunity trainings was an important partof the re-construction phase. UN HABITATengaged a team from National Society forEarthquake Technology (NSET) to imparttrainings in construction related skills.Accordingly, five training events wereorganized for engineers and social organizersfrom all participating POs (Table 2).

NSET in collaboration with PPAF, conductedfive Training of Trainers (TOT) workshops forcraftsmen for developing a pool of mastertrainers who will train community membersat village level (Table 3).

Table I: PO staff trained for Damage Assessment

Region Engineers Social Mobilizers TotalMale Female Male Female

AJK 65 0 75 26 166NWFP 66 0 157 27 250G. Total 131 0 232 53 416



PPAF’s housing subsidy follows the ERRApr inc ip les for const ruct ion anddisbursement. Rs 150,000 will be availablein three tranches to each eligible beneficiary.The first tranche of Rs. 75,000 wasdisbursed in April 2006 to 50 affectees ata ceremony held at village Ghani Abad ofunion council Thub in District Bagh.Technical assistance for seismically safehouses would be provided at Housing

Reconstruction Centers (HRC) and by mobiletraining teams of PPAF.

The initial PPAF successes in developing awell balanced restoration program in theaffected areas has stimulated additionalfunding from reputable donor organizations.KfW, a German government-owneddevelopment bank, has committed 14 millionfor housing and is considering provision ofanother 2.6 million for training, whereasIFAD has appraised PPAF for US $ 26 million.

PPAF’s RnR project aims at an effective,well focused and well coordinatedrehabilitation and reconstruction programsynchronized with the broader nationaleffort. It reconfirms the strength ofcommunity driven projects and closecoordination among all stakeholders.

Table 2: Engineers & Social Organizers trained

PO Engineers Social Organizers

AJK NRSP 59 11IR 23 -WWOP 6 2

Sub total 88 13NWFP SUNGI 5 -

OAKDF 6 -SRSP 16 7

Sub total 27 7G. Total 115 20

Table 3: Craftsmen trained by NSET

Region Masons Carpenters Steel Fixers TotalAJK 105 75 14 194NWFP 27 15 3 45 Total 132 90 17 239


Evaluation, Research & Development

The Evaluation, Research and Development(ERD) Unit at PPAF has initiated a set ofpromising activities and processes that areexpected to grow into a sustainable andstandardized performance monitoring andevaluation system.

The Unit was initially restructured with aview to formulating an integratedStandardized Monitoring and PerformanceMonitoring System focused on gaugingprogram outcomes and impacts, as well ason plugging gaps and shortcomings in datacollection and assessment methodologiesat the grassroots level.

Considering PPAF-supported povertyalleviation interventions spanning 96 districtsof the country, operationalization of thesystem is perceived to greatly assist in povertymapping and, consequently, better povertytargeting at the national level.

As part of the restructuring process, theBenefit Monitoring and Evaluation (BME)system was shifted to the ERD Unit. Themove was aimed at integrating themonitoring and evaluation of PPAF’s credit,health, education, training and infrastructurecomponents. In parallel, a number of youngprofessionals with clearly defined roles andresponsibilities under the supervision of asenior economist were inducted to streamlinethe new monitoring and evaluation systemwith PPAF’s vision of real time monitoringand evaluation.

A standardized minimum number ofperformance M&E indicators were

developed as the first step in the shifttowards results-based M&E. A pool ofmaster trainers from the PPAF, partnerorganizations and from national andinternational universities and organizationswas formed to train M&E representativesfrom POs on the Standardized PerformanceMonitoring and Evaluation System.

The system, apart from incorporatingbaseline/benchmark data, will also providefor the collection of data on evaluationrelating to program relevance, effectiveness,efficiency, impact and sustainability of PPAFsponsored poverty alleviation interventions.

During the year, three ToT Workshops onStandardized Performance Monitoring andEvaluation System were held across thecountry. Nominated PO M&E personnelwere trained on the new evaluation systemin workshops held at Karachi, Lahore andBhurban. This was followed by a series offormal meetings with the chief executivesof the POs.

Simultaneously, the Unit initiated asystematic follow-up plan aimed at theinstitutionalization of the system withinpartner organizations. The follow-up planinvolves facilitating POs through hands-ontraining sessions, on-field testing of surveyinstruments, capacity-building of socialorganizers and other PO staff, and theinstallation/troubleshooting of the softwareespecially prepared for the StandardizedPerformance Monitoring and EvaluationSystem.



The first phase of the exercise was carriedout in Baluchistan where five organizationswere initially selected for the purpose.Similar exercises covering all partnerorganizations are planned to be completedwithin FY 2006. When fully operational,the system will generate the data requiredto measure impact of PPAF supportedinterventions on a regular basis.

During the year, the ERD Unit preparedseparate quarterly progress reports for theWorld Bank, PPAF Board of Directors andthe United States Agency for InternationalDevelopment (USAID). Regular quarterlyreports were also submitted to theconcerned secretariats and departments ofthe Government.

In 2006, the ERD Unit has started a newline of annual thematic reports on currentissues and discourses in the developmentfield. This year’s thematic report on genderwas outsourced to an independentconsultant working closely with the ERDteam. The report is expected to contributepositively to the economic, political andsocial discourses on the subject.Additionally, the report has been designedto analyze the situation of gender in thecountry. The gender sensitivity of PPAFinterventions will also receive thoroughscrutiny. Ending with a set of keyrecommendations for the PPAF. This reportis likely to be of critical use not only to thePPAF but also to other organizations.

The ERD Unit recorded a surge of 100 new

“Expression of Interest” documents receivedfrom non-governmental developmentorganizations in the year 2006. These havebeen stored in a database that nowcumulatively consists of an impressive 417such documents. Owing to PPAF’s stricteligibility criteria, overall policy and fundsposition, only a few select cases are presentlyunder consideration.

The ERD Unitrecorded a

surge of 100new

“Expressionof Interest”documents

received fromnon-

governmentaldevelopmentorganizations

in the year2006

Box 7.1

Baseline Survey of the Engro Milk ProjectThe Engro project, a joint venture between PPAF, Engro Foods Ltd.,and the Government of Pakistan, is designed to encourage investmentin the livestock sector, increase farmer incomes and decrease theburden of poverty in the target areas. The pilot program waslaunched in five localities of the Punjab and Sindh provinces withthe help of 3 partner organizations. On its part, PPAF agreed toprovide financial/technical assistance for capacity-building of poorcommunities, improvement of milk supplies and linkage to acorporate sector entity for marketing and long term sustainability.The PPAF also decided to under take a survey in the target villagesfor collecting baseline data to assess the long term potential of theproject as well as potential for replication in other areas.The baseline survey was conducted under the supervision of anindividual consultant from the Applied Economic Research Center(AERC). Ten villages in three districts were selected to representboth with-project and without-project samples. In these villageshousehold level data was collected on a large number of indicatorsincluding household composition, occupation, education, availabilityof services, income, expenditures, assets and borrowings. Similarly,village level data on population, number of households, access toservices, average number of animals and loans disbursed was alsocollected.

District Project Area HHs Non – Project Area HHsRahimyar Khan 85 35Shikarpur 70 35Nawab Shah 35 35




Media & Communication

The Media and Communication (M&C) Unitfacilitates the corporate image building ofPPAF at grassroots, national andinternational levels. It focuses on effectiveutilization of various media tools andactivities for information dissemination.The Unit formulates necessary strategies toengage media support and attention ofstakeholders, policy makers and opinionleaders.

In FY 2005-2006, the Unit also focused onrelief and rehabilitation activities in theaftermath of the October 8 earthquake. Itfacilitated in the launch of the relief andrehabilitation program, prepared a varietyof information materials for variousaudiences and disseminated a number ofoperational guidelines and reconstructionmanuals to the affected communities.Special flyers and leaflets were printedunderlining different aspects of PPAF reliefand reconstruction activities. The Unit alsoprepared a 10 minute documentary, “TheFirst Step”, on the distribution of temporaryshelters to affected communities.

In response to the government's plea toprovide victims with information access,PPAF started a regular radio program onrelief, rehabilitation and reconstruction.Information dissemination, however, wasnot the sole objective: Raising awarenessand getting direct community feedback forbetter management of the relief andreconstruction effort was also of primaryvalue. The program, Azm-e-Nau, wasformally initiated on 20th February, 2006

and has been air ing regularly inMuzaffarabad, Abbottabad, Islamabad andBagh. The radio program has facilitated agreater understanding of the problemsconfronting communities at the grassrootlevel.

With the range and scope of PPAFinterventions increasing manifold over theyears, greater emphasis is being placed onbuilding PPAF’s public image. Regularcoverage and exposure of PPAF in electronicand print media has accordingly becomea part of the overall strategy.

Printing and dissemination of case studiesreflecting the achievements of PPAFbeneficiaries, as well as the lessons learntin the process, is a regular activity of theUnit. These are conducted in closecoordination with the Evaluation, Researchand Development Unit for greater empiricalvalidity and research value.

The Unit organized a series of InteractiveTheater performances across the countryin collaboration with PPAF partnerorganizations. These performances exploreintra-household and intra-communityrelationships and situations.

The challenging task of the Unit in thecoming years will be to proactively engagewith all other units of PPAF, keeping abreastof the important developments anddisseminating information at national andinternational forums.

The radioprogram hasfacilitated agreaterunderstandingof theproblemsconfrontingcommunitiesat grassrootlevel


Human Resource, Procurement & Administration

Human Resource, Procurement &Administration Unit is facilitating the fastergrowth of the organization by managingthe human resource and generaladministration of PPAF as well as providinglogistics support and procurementassistance. The Unit further assists inrecruitment, training, disciplinary issuesand grievance handling. It has played animportant role in providing an enablingwork environment to PPAF team members.

During the financial year, two new officepremises were acquired for the newlyformed Rehabilitation & ReconstructionUnit and the Water Management Centre.During the hectic schedule following theOctober 8 earthquake, the task ofadministration and procurement proved tobe more challenging than ever. This isreflected in the substantially increasedprocurements and travel arrangements forfield visits and various other logisticarrangements for internal and externalmeetings made during the year.

Additionally, 33 consultancy contracts and144 cases for goods procurement wereprocessed by the Unit. These includeprocurement of relief goods including CGIsheets, bedding sets, tents, blankets, basictools and food supplies for the earthquakeaffected areas. The Procurement Unit alsoremained active in providing continuousguidance, capacity-building and monitoringof procurement functions at the PO level.In all such activities, steps were taken toensure transparency, efficiency and regularcompliance with procurement proceduresof donors.

One of the Unit’s primary responsibilitiesis to fulfil the staffing needs of theorganization through an expeditious, fairand transparent process of hiring newemployees. During the year, 50 new staffmembers were recruited, including 20 staffmembers for the head office, 7 for theWater Management Center and 23 for theRehabilitation and Reconstruction Unit.

In order to further develop the competencyand skill of the existing PPAF executives, six(6) PPAF employees were sent abroad toattend international training courses inareas relevant to their functions. Another27 team members attended differenttrainings courses at various reputablenational training institutions.

Job satisfaction is an essential prerequisitefor effective utilization of human resourcesavailable to any organization. The Unitstrives to achieve the same by ensuring anenabling work environment for betterprofessional output and greater efficiency.The Unit also has the important task ofconducting orientation sessions for newemployees in order to increase their comfortlevel and facilitate them in settling in asquickly and easily as possible.

The Unit also plays a proactive role inensuring compliance with organizationalpolicies and regulations. It regularly assessesPPAF employees and ensures that they areaware of the rules and regulations.

As the outreach and interventions of PPAFexpand, the Unit will have a critical role inensuring that the competence levels withinthe organization are keeping pace with thegrowing demand for higher efficiency andprofessionalism.

The Unitstrives toensure anenablingworkenvironmentfor betterprofessionaloutput andgreaterefficiency


Finance & Accounts

As a custodian of public funds, PPAF isconscious of the need for prudence andappropriate control in the management offinances. In pursuance of this objective,the Finance and Accounts (F&A) Unit hasbeen assigned responsibility for executingand recording all financial transactions ina systematic and transparent manner. TheUnit ensures compliance with theregulations of Securities and ExchangeCommission of Pakistan and covenantscollectively stipulated in the agreementswith Government of Pakistan (GoP) andwith donors such as the World Bank (WB),US Agency for International Development(USAID) and US Department of Agriculture(USDA).

F&A Unit works closely with otheroperational and support units of PPAF inorder to ensure adherence to the dueprocess and facilitates their fundingrequirements. The activities of the Unit arecarried out in an automated computerizedenvironment through customized softwarededicated to PPAF requirements. Acomprehensive manual for financialmanagement has been developed, whichgoverns the work processes of the Unit.Books of accounts are being kept inaccordance with the statutory requirementsand agreements with GoP and donors. Therecords are subject to both internal andexternal audit as well as the review ofsupervision missions.

The Unit places high priority ontransparency, fair presentation and timely

issuing of its periodic financial statementsfor information of management, donorsand stakeholders. The relevant internalreports are submitted to management onmonthly basis to facilitate timely decisionson the important aspects of PPAFoperations. External reports to stakeholdersinclude quarterly, half yearly and ninemonthly un-audited financial statementsand annual audited financial statements.In addition, donor specific periodic reportsand audited financial statements are alsocompiled on a regular basis.

Operations of PPAF for the year endingJune 30, 2006 were audited by its externalauditors Messers Ford Rhodes Sidat Hyder& Co., Chartered Accountants. The externalauditors furnished unqualified opinionsconcluding that the financial affairs of thecompany were being conducted inaccordance with approved accountingstandards and requirements of CompaniesOrdinance 1984 and the financialstatements prepared by the managementpresent a true and fair view of theCompany’s state of affairs. These opinionswere based on the inspection and reviewof records of the Company and the fundsreleased to partner organizations. Theaudited financial statements along withAuditors’ and Directors’ Reports for theyear 2006 were finalized and approved bythe Board of Directors within two and a halfmonths of the close of the financial year.Disbursements to PPAF under the WorldBank Project were on the basis of FinancialMonitoring Reports. Withdrawal applications

The Unitplaces highpriority ontransparency,fairpresentationand timelyissuing of itsperiodicfinancialstatements


Finance & Accounts

as a “welfare institution” for the next twotax years i.e. upto June 30, 2008. As aconsequence of this, there was no taxliability for the year under review.

The Unit looks after the corporate affairsof PPAF and is committed to high standardsof corporate governance. The Head of theUnit also acts as Company Secretary andensures full compliance with the mandatorysecretarial responsibilities as envisaged bythe Companies Ordinance, 1984. The Unitalso complies with the best practices setout in the code of corporate governance.Adequate records of statutory meetingsand other formal requirements are beingmaintained while reports to the Securitiesand Exchange Commission of Pakistan aresubmitted well in time.

The F&A Unit also assist the operationalunits in financial evaluation of PartnerOrganizations, as well as taking active partin monitoring the financial flows to thepartner organizations. It also ensures thatPOs observe all legal covenants.

Internal Audit DepartmentReporting directly to the Chief Executive,the Internal Audit Department (IAD)provides an independent channel formonitoring of activities. The department isguided in its work by the approved “InternalAudit Manual”.

IAD works for qualitative improvement inthe maintenance and disclosure of financialand operational information as well as

submitted to the World Bank were foundto be eligible for reimbursement orreplenishment. Information and datasubmitted were also in compliance withdisclosure requirements and formats.

The World Bank Mission of May 2006concluded that the financial managementarrangements including financial controlsfor the project continue to be “highlysatisfactory”; effective controls were inplace; and that the audited financialstatements and quarterly FMRs weresubmitted to WB on time.

Donors approved/committed financialresources worth US$ 155 million as grantduring the financial year 2005-06 for therehabi l i tat ion and reconstruct ionprogramme. This includes funding of US$100 million by World Bank; US$ 26 millionby International Fund for AgriculturalDevelopment (IFAD); €14 million (equivalentto US$ 17 million) by KfW; and US$ 12million by Committee to EncourageCorporate Philanthropy (CECP) of USA. TheF&A Unit was actively involved innegotiations for these projects and finalizinglegal as well as financial modalities.

In addition to the above, IFAD approvedfunding of US$ 26 million for MicrofinanceInnovation and Outreach Programme. TheF&A Unit played a major role in finalizationand execution of project agreements.As a result of the combined efforts of F&Ateam and PPAF tax advisors, the CentralBoard of Revenue renewed PPAF’s status

The F&Alooks after

the corporateaffairs of

PPAF and iscommitted to

highstandards of

corporategovernance


Finance & Accounts

internal control systems of the PPAF andits partner organizations. It seeks to ensurereliability and integrity of financialinformation, in addition to compliance withlegal regulations, PPAF policies and WorldBank requirements.

The responsibilities of the Unit include auditof yearly outflows and inflows of funds,review of bank reconciliation statements,audit of all PPAF procurements and physicalverification of PPAF assets. Additionally, theUnit also strives to ensure quality accountingand internal control systems at the PO level.In order to achieve the latter, regular visitsare paid to POs with the dual objective ofensuring transparency and capacity-building. During the year under review,Internal Audit Unit has paid audit visits to20 POs. The particular focus of the auditvisits was concentrated on the small andmedium level organizations so that theymay strengthen their internal controlmechanisms.


Director’s Report

The Board of Directors of Pakistan PovertyAlleviation Fund (PPAF) is pleased to presentthe sixth Annual Report along with theaudited financial statements of theCompany for the year ended June 30, 2006.

The positive trend in the Company’sperformance established over the pastseveral years has been sustained in thefinancial year ended June 30, 2006 withresults adding further strength to thefinancial position and interventions makinga difference in the lives of vulnerable peopleacross Pakistan. PPAF has been successfulin addressing needs of the poor by followinga poverty alleviation strategy which engagesdiverse instruments for effective deliveryand impact. While poverty alleviationstrategies based on credit delivery at grassroots level remains the largest operatingwindow of PPAF, its collaborative efforts incommunity infrastructure projects as wellas human resource development activitieshave gained strong momentum over time.Plans for up-scaling PPAF’s capacity havebeen operationalized for better servicedelivery in the social sectors (health andeducation).

One of the major achievements of the yearunder review was real time and effectiverelief operations being carried out inearthquake affected areas. PPAF was quickto respond to this tragedy. A Disaster ReliefCenter was setup at Islamabad, whichstarted functioning by the second day ofthe crisis. Initially, PPAF focused onimmediate relief through provision of

shelter, food, medicines and related itemsfor the affectees and leveraged aviationcapabilities of Pakistan and U.S. armedforces and United Nations agencies/organizations for airborne on-site deliveryof more than 100,000 CGI sheets at thealtitude above the snowline. The reliefoperations were carried out through PPAFexisting partner organizations and therelevant government, non-governmental/civil society agencies. In order to ensureeffective and targeted interventions, fieldcoordination units were also set up in theearthquake affected areas of North WestFrontier Province (NWFP) and Azad Jammuand Kashmir (AJK) for swift delivery in acoordinated manner. PPAF was successfulin addressing immediate needs of affectedcommunities as seven of its partnerorganizations were already working at theselocations with well established communities.

Extensive grassroots presence in theearthquake affected areas, execution ofmassive and well organized relief operationsand presentation of a coherent and viablerehabilitation and reconstruction plan madePPAF an obvious choice for EarthquakeReconstruction and Rehabilitation Authorityto assign dedicated responsibility forunde r tak ing r ehab i l i t a t i on andreconstruction in 34 Union Councils (18 inNWFP and 16 in AJK). PPAF is now followingup relief efforts with the rehabilitation andreconstruction activities to allow people inaffected areas to rebuild their lives andhomes.


Director’s Report

During the year, PPAF also achievedimpressive progress in implementing itsmainstream programs in credit & enterprisedevelopment, community physicalinfrastructure, education, health andcapacity building. PPAF performance andachievements were acknowledged by theWorld Bank (WB) regular SupervisionMissions.

Additionally, the WB President, Mr. PaulWolfowitz, during his visit to Pakistan(August 13-15, 2005) dedicated a specialsession to PPAF, its partner organizationsand community members of Dhok TabarakShaheed village where PPAF supportedIntegrated Area Upgrading Program hasbeen initiated. He remarked “It is wonderfulto see how people have come together totransform their lives. This is a model worthemulating.”

In his letter of appreciation, Mr. Wolfowitzreiterated that PPAF was an excellent modelof public-private partnership which wasworking towards community empowermentand development. He ensured continuedsupport of World Bank to the PPAF in thecoming years for implementing a scaledup poverty alleviation program in Pakistan.

The Supervision Mission of WB that visitedPPAF in May 2006 concluded that theSecond PPAF Project was on track,partnering with the right kind of institutionsto achieve its development objectives andwas meeting its targets set at appraisal

for its various components includingdisbursements.

By the end of June 2006, PPAF funding hadbeen equitably disbursed in urban and ruralareas of 108 districts of the country through68 partner organizations of which 10 werecatering exclusively/predominantly towomen. PPAF credit interventions hadreached 947,000 individuals of which394,000 (42 percent) were womenborrowers. 11,700 infrastructure projectswere initiated and 12,300 communityorganizations formed, benefiting 823,000households. In addition 155,600 staff andcommunity members were trained, ofwhom 40 percent were women.

PPAF financial and non-financial serviceshave been estimated to be benefiting over5.5 million individuals from credit programand over 6 million individuals frominfrastructure interventions, directlyor indirectly, across the country.

Operational and Financial ResultsDuring the period under review, theCompany exhibited impressive growth. Therecord operational results achieved duringthe year allowed the Company to maintainstrong financial position which is key to itssustainability.

Total disbursements during year were Rs.6,246 million compared to Rs. 4,063 millionin the preceding year, indicating an increaseof 54 percent. Credit disbursements wereRs 3,705 million as compared to Rs 3,106million; infrastructure disbursements were

H&E

870

3000

4000

1000

2000

CED CPI HID ER/RNR

0

1169

0398 382

887575

37053106


Director’s Report

Rs 887 million as compared to Rs 575million; and capacity building disbursementswere Rs 398 million against Rs 382 millionduring the preceding year. In addition, Rs87 million was disbursed for education andhealth; and Rs 1,169 million for relief,rehabilitation and reconstruction inearthquake affected areas (Figure 11.1).

By the end of June 2006, cumulativedisbursements crossed the Rs 16 billionmark and stood at Rs 16,338 million. Creditand enterprise development, the largestcomponent of the PPAF, accounted for 65percent of total disbursements followed bycommunity physical infrastructure (19 percent);capacity building assistance and health &education had a share of 9 percent and reliefrehabilitation and reconstruction activities hada share of 7percent (Figure 11.2).

Provincial distribution of funds remainedmore or less consistent with previousallocations - 44 percent going to Punjab,28 percent to Sindh, 10 percent to NWFP,9 percent each to Balochistan and NorthernAreas/AJK (Figure 11.3).

The total amount of endowment fundincreased by Rs 150 million to Rs 800 milliondue to receipt of second installment ofGovernment of Pakistan (GoP) contribution.Under second project, PPAF has receivedfrom GoP endowment of Rs 300 millionout of the total committed amount of Rs500 million.

During the period, PPAF received grant fundof Rs 240 million in respect of USDepartment of Agriculture (USDA) project

FIG - 11.3 Province wise distribution of funds

FIG - 11.2 Share of funds disbursed

FIG - 11.1 Total disbursements (Rs. in million)

FY 2006 FY 2005

HID/H&E,9%

MC,65%

ER/RNR,7%

CPI,19%

Punjab,44%

Sindh,28%

Balochistan,9%

NWFP,10%

Northern Areas/AJK,9%

58

0

600

200

400

Service chargeson MC

Profit onST / LT inv

CB Grants

44

507

171197

88

FY 2006 FY 2005


Director’s Report

from GoP. Cumulative receipts under thisproject were Rs 640 million out of totalfunding of Rs 1,521 million.

The Central Board of Revenue vide itsnotification C.No. 1(8)SS(A/ITR)/05 datedJune 30, 2006, renewed approval for PPAFas welfare organization till June 2008. Asa consequence of this, there was no taxliability for the year under review.

Total Company’s net assets (total assets lesscurrent liabilities) on June 30, 2006 crossedRs 13 billion mark and stood at Rs 13,162million against Rs 8,689 million as at June30, 2005 – an increase of 51 percent.Similarly loans receivable from partnerorganizations were Rs 4,120 million asagainst Rs 2,679 million as at June 30,2005. During the FY 2006, PPAF continuedto maintain 100 percent recovery rate inrespect of its lending operations.

Total income generated during the yearwas Rs 763 million compared to Rs 305million last year – an increase of 150percent. Service charges on loan to partnerorganizations increased by 124 percentdue to high credit disbursements. Profit onshort term and long term investmentsincreased by 196 percent due to increasein the level of investments and improvedprofit rates. During the year, capacitybuilding grant increased by 32 percent dueto the availability of financing fromGovernment of Pakistan and donor agenciesfor PPAF operational support (Figure 11.4).

The general and administrative expensesfor the period increased by 38 percent due

to relief, rehabilitation and reconstructionoperations in the earthquake affected areasas well as rapid expansion in nature andscale of existing activities and executingnew interventions under different donors’projects.

Future OutlookAs a part of its broader poverty alleviationm a n d a t e , P PA F e n d e a v o r s t ocomprehensively address the long termneeds of reviving social, physical andeconomic structures in earthquake affectedcommunities through revitalized andintensive social mobilization processes aswell as asset building of vulnerablehouseholds through smal l sca leinfrastructure projects revolving around theprovision of water, sanitation and link roadsas well as low cost housing.

In order to carry out the necessaryrehabi l i tat ion and reconstruct ionprogramme, PPAF has so far been approved/committed financial resources of US$ 155million as grant. This includes funding ofUS$ 100 million by World Bank; US$ 26million by International Fund for AgriculturalDevelopment; Euro 14 million (equivalentto US$ 17 million) by KfW (Development

FIG - 11.4 Total Income (Rs. in million)


Director’s Report

Bank of Germany); and US$ 12 million byCommittee to Encourage CorporatePhilanthropy (CECP) of USA.

PPAF is gradually moving beyondconventional programming approach andbringing in second generation innovationsthat offer inclusive financial and businesssolutions to the poor. In this spirit newinitiatives are being undertaken. Theseinclude integrated village developmentprojects, drought mitigation andpreparedness plan, enterprise developmentfacility for the missing middle and linkageof communities with a corporate sectorentity (Engro Pakistan) for milk productionand marketing facility. This would enablepoor to access and benefit from the widerprivate sector markets and opportunitiesof value addition.

PPAF envisages a holistic, systematic andintegrated approach in addressing all waterrelated issues encountered by the poor andmarginalized communities of the country.In this regard it will work towards theident i f i ca t ion , fo rmu la t ion andimplementation of special high impact andintegrated programmes and projects relatedto drought mitigation, integrated waterefficient irrigation systems, flood protection,organized drinking water supply and sanitation.For this purpose a Water ManagementCenter has been set up at Islamabad.

The growth in PPAF’s outreach andresources has increased its sense ofresponsibility. PPAF is mindful of the highexpectations of partner organizations and

participating communities. It is alsoconscious of the growing trust reposed init by donors. PPAF is continually refining itscapacities and structures to regularlymonitor and evaluate its own performance,in addition to that of its POs.

AuditorsThe external auditors of the Company,Messer’s Ford Rhodes Sidat Hyder andCompany, Chartered Accountants, havecompleted their assignment for the financialyear ended June 30, 2006 and shall retireat the conclusion of 10th Annual GeneralMeeting. Being eligible for re-appointment,they have offered their services as Auditorsof the Company for the financial year 2007.

ConclusionPPAF is well aligned with the Government’sPoverty Reduction Strategy Programme andits medium Term Development Framework.PPAF considers itself as the private sectorarm of the Government for povertyalleviation. As a demand driven apexorganization, it has been quick to respondto crises faced by the country, whether interms of interventions for droughtmitigation or most recently earthquakerelief and rehabilitation.

The broadening of its scope of activities toinclude enterprise development, integrateddevelopment, education, health, relief andrehabilitation has, in no manner, distractedPPAF from its mandate of targeting thepoor. On the contrary, it has helped manygraduate out of poverty, particularlywomen. This was made possible by building


appropriate capacities within the partnerorganizations and their communities andenduring relationship with them ontransparent and equitable basis.

AcknowledgementI am extremely thankful for the continuedsupport of the Directors whose policies,vision and consistent efforts contributedsignificantly towards achieving excellencein all strategic and operational spheres.Their leadership has been the driving forcewhich navigated the Company throughanother successful year.

The Board is grateful for the trust and faithreposed by the Members of General Body.Their support gives confidence andencouragement in achieving the targetsand strategies formulated by the Board.The Board would also like to commend thepartner organizat ions and the i rcommunities for their support whichcontributed to our present success.

The Board takes this opportunity to thankthe new donors, international agencies andorganizations that are forging partnershipswith PPAF. The Board would also like toexpress its profound gratitude to theGovernment of Pakistan and The WorldBank for their continued assistance andoutstanding support extended to theCompany in matters relating to itsoperations.

The Board places on record its appreciationfor the management team and all the

employees for taking the Company’sperformance to new heights. Their loyalty,dedication and professionalism has resultedin achieving significant results during theyear.

PPAF has continued successfully to negotiatenew challenges and address emergingstrategic issues. The institution is well poisedto go beyond the limits of traditionalcommunity driven projects by broadeningand deepening the scope of interventions.

Hussain DawoodChairman

IslamabadSeptember 13, 2006

Director’s Report

49

Seven Years’ Financial Summary

(Rupees in million)

2006 2005 2004 2003 2002 2001 2000

Operational Results

Total Disbursements 6,246 4,064 2,436 1,777 1,189 598 59

Total Income (including other income) 763 305 222 230 145 73 28

Surplus before provisions for taxation and loan loss 572 152 133 149 94 47 3

Surplus after provisions for taxation and loan loss 501 196 81 92 59 44 3

Balance Sheet

Total assets (less current liabilities) 13,162 8,689 3,496 2,703 1,656 931 472

Micro credit loans receivables 3,996 2,598 1,081 1,201 695 285 36

Total investments 7,096 4,401 2,287 1,465 833 588 211

Equity and reserves 1,788 1,137 791 710 618 559 216

Long term and deferred liability 11,374 7,552 2,705 1,993 1,038 372 256

Disbursements

Microcredit Loans 3,705 3,106 1,462 1,314 655 332 36

Grants 2,541 958 974 463 534 266 23

Financial Ratios

Surplus before tax and loan loss ratio 75% 50% 60% 65% 65% 64% 11%

Return on assets 5% 3% 3% 4% 4% 6% 1%

Return on equity 34% 20% 11% 14% 10% 11% 2%

Repayment rate (micro credit) 100% 100% 100% 100% 100% 100% 100%

General and admin. expenses/average total assets 1% 1% 2% 3% 3% 3% 5%

Income on loans/General and admin. expenses 164% 101% 97% 89% 68% 46% 2%

Debt/equity 85:15 85:15 77:23 73:27 63:37 41:59 38:62

Current ratio 288:1 125:1 23:1 32:1 18:1 80:1 35:1

The PPAF logo represents two parallel themes

Inverting the Income PyramidThe larger outer triangle shows the traditionaldistribution of income, which counts thenumber of people at different income levelswith the top of the pyramid being high incomebands and the bottom being low incomebands. Since there are very few people at thetop and a great many people at the bottom,hence a broad big base converging into anarrow peak. The two together translate intoa pyramid shape. The inner triangle representsPPAF goal: inverting the pyramid, so that thereare fewer people at the lower levels of income,and a much greater number of people at thehigher income level.

Window of OpportunityThe central triangle is also a window ofopportunity; an opening that leads out ofpoverty, towards sustainable growth anddevelopment.

Pakistan Poverty Alleviation FundHouse 1, Street 20, F-7/2, Islamabad, Pakistan.

Tel: 92-51-2653304, 2653305, 2653597, 2653598, 2652731, 2652734 | Fax: 92-51-2652246UAN: 111-000-102 | Email: [email protected] | Website: www.ppaf.org.pk

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