document of the world bank report no: icr00003818 · nyk naukari ya karobar (enterprise or...

Document of

The World Bank

Report No: ICR00003818

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-45990)

ON A

CREDIT

IN THE AMOUNT OF SDR167.2 MILLION

(USD 250 MILLIONEQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR A

THIRD PAKISTAN POVERTY ALLEVIATION FUND (PPAF-III) PROJECT

June 20, 2017

Food and Agriculture Global Practice

Pakistan Country Management Unit

South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance

of their official duties. Its contents may not otherwise be disclosed without World Bank

authorization

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31, 2016)

Currency Unit = PKR

USD 1.00 = PKR104.75

XDR1.00 = USD1.408820

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy LSOs Local Support Organizations

CGAP Consultative Group to Assist the

Poor

MDTF Mid-Term Development Framework

CIG Common Interest Group M&E Monitoring and Evaluation

CLF Community Livelihood Fund MER Monitoring Evaluation and Research

CNIC Computerized National Identity

Card

MIS Management Information System

COs Community Organizations MIV Microfinance Investment Vehicle

CPI Community Physical Infrastructure MF-CIB Microfinance Credit Information Bureau

CRP Community Resource Person MFI Micro Finance Institution

DECRG Development Research Group NADRA National Database and Registration

Authority

DFID Department for International

Development

NyK Naukari Ya Karobar (Enterprise or

Employment) Centre

EIRR Economic Internal Rate of Return ODC Open Defecation Campaign

ESMF Environmental and Social

Management Framework

OSS Operational Self-Sustainability Ratio

F&A Finance and Accounts PDO Project Development Objective

GBV Gender Based Violence PMIC Pakistan Micro Investment Company

GDP Gross Domestic Product PMIFL Prime Minister’s Interest Free Loan

GIS Geographic Information System POs Partner Organizations

GoP Government of Pakistan PPAF Pakistan Poverty Alleviation Fund

GRM Grievance Redress Mechanism PSC Poverty Score Card

HR Human Resources QPR Quarterly Progress Report

IAD Internal Audit Department ROC Risk and Oversight Committee

ICRR Implementation Completion and

Results Report

SCAD Sindh Coastal Area Development

KfW Kreditanstalt für Wiederaufbau TTL Task Team Leader

KP Khyber Pakhtunkhwa UC Union Council

LEED Livelihoods Employment and

Enterprise Development

UCDP Union Council Development Plan

LSE Lahore School of Economics VOs Village Organizations

Senior Global Practice Director: Juergen Voegele

Practice Manager: Shobha Shetty

Project Team Leader: Imtiaz Alvi, Melissa Williams

ICR Team Leader: Pushina Kunda Ng’andwe

PAKISTAN

Third Pakistan Poverty Alleviation Fund Project

Table of Contents A. Basic Information ....................................................................................................... ii B. Key Dates ................................................................................................................... ii C. Ratings Summary ....................................................................................................... ii D. Sector and Theme Codes .......................................................................................... iii E. Bank Staff .................................................................................................................. iii

F. Results Framework Analysis ..................................................................................... iv G. Ratings of Project Performance in ISRs ................................................................. xiii

H. Restructuring (if any) .............................................................................................. xiv I. Disbursement Profile ............................................................................................... xiv 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5

3. Assessment of Outcomes .......................................................................................... 14 4. Assessment of Risk to Development Outcome ......................................................... 29

5. Assessment of Bank and Borrower Performance ..................................................... 31 6. Lessons Learned ....................................................................................................... 33 Annex 1. Project Costs and Financing .......................................................................... 37

Annex 2. Outputs by Component ................................................................................. 38

Annex 3. Economic and Financial Analysis ................................................................. 50 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 68 Annex 5. Beneficiary Survey Results ........................................................................... 70

Annex 6. Stakeholder Workshop Report and Results ................................................... 72 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 76

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 85 Annex 9 - List of Supporting Documents ..................................................................... 86 MAP .............................................................................................................................. 87

ii

A. Basic Information

Country: Pakistan Project Name:

Third Pakistan Poverty

Alleviation Fund

Project

Project ID: P105075 L/C/TF Number(s): IDA-45990

ICR Date: 03/31/2017 ICR Type: Intensive Learning ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF

PAKISTAN

Original Total

Commitment: XDR 167.20M Disbursed Amount: XDR 167.20M

Revised Amount: XDR 167.20M

Environmental Category: B

Implementing Agencies: Pakistan Poverty Alleviation Fund (PPAF)

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 11/13/2008 Effectiveness: 07/09/2009

Appraisal: 04/20/2009 Restructuring(s):

05/28/2014

03/13/2015

09/30/2015

Approval: 06/04/2009 Mid-term Review: 07/02/2012 09/10/2012

Closing: 01/31/2015 03/31/2016

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing

Agency/Agencies: Moderately Satisfactory

Overall Bank

Performance: Moderately Satisfactory

Overall Borrower

Performance: Moderately Satisfactory

iii

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating

Potential Problem

Project at any time

(Yes/No):

Yes Quality at Entry

(QEA): None

Problem Project at any

time (Yes/No): Yes

Quality of

Supervision (QSA): None

DO rating before

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Other Agriculture, Fishing and Forestry 10 10

Vocational training 10 10

Microfinance 36 36

Other social services 34 34

Other Industry, Trade and Services 10 10

Theme Code (as % of total Bank financing)

Income Support for Old Age, Disability & Survivorship 10 10

Micro, Small and Medium Enterprise support 30 30

Participation and civic engagement 19 19

Rural services and infrastructure 31 31

Social Safety Nets/Social Assistance & Social Care

Services 10 10

E. Bank Staff

Positions At ICR At Approval

Vice President: Annette Dixon Isabel M. Guererro

Country Director: Illangovan Patchamuthu Yusupha B. Crookes

Practice

Manager/Manager: Shobha Shetty Adolfo Brizzi

Project Team Leader: Imtiaz Alvi/Melissa Williams Kevin Crockford/Imtiaz Alvi

ICR Team Leader: Pushina Kunda Ng’andwe

ICR Primary Author: Pushina Kunda Ng’andwe

iv

F. Results Framework Analysis

Project Development Objective

Targeted poor are empowered with increased incomes, improved productive capacity and access

to services to achieve sustainable livelihoods.

Revised Project Development Objective

No changes in the project development objective

PDO Indicator(s)

Baseline Value Original Target

Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

PDO

Indicator 1:

At least 60 percent of community institutions are viable1 and sustainable2

Value

(quantitative or

Qualitative)

50% 60% 67%

Date achieved May-6-2009 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: Based on a survey covering 446 community institutions

facilitated by 13 POs in 13 districts across 4 provinces, 67 percent of

community institutions were found to be viable and sustainable assessed by

the maturity index indicators developed for the project. Source: 1st and 2nd

Tier Institutional Assessment - External

PDO

Indicator 2:

At least 60 percent of community members report a minimum of 20 percent

increase in household

incomes and/or assets

Value

(quantitative or

Qualitative)

0 60 percent of

communities

report 20 percent

increase

61 percent of

communities

reported 22 percent

increase in average

household income;

19 percent increase

in average

household income

in treatment group

1 Maturity Index will be used to identify and assess viable community institutions 2 Sustainability defined as being active, financially viable and having a good governance structure. Active being (e.g. regular attendance at meetings), financially viable being (e.g. taking and repaying loans) and having a governance structure that ensures

independence, representation and operational sustainability - measures of these are detailed in PPAF’s Operations Manual

v

compared to

control group


Comments

(incl. %

achievement)

Fully Achieved: Gallup Pakistan survey sampled 5000 borrowers (2500

treatment; 2500 control) in 33 out of 37 districts where microcredit activities

were implemented. The survey found that 61 percent of community

members reported an increase in average household income of 22 percent

and a 29 percent increase in average personal income. A separate impact

assessment carried out in the Sindh Coastal Area Development covering

2,250 households (1,816 treatment; 434 control) observed a 19 percent

increase in average household incomes for treatment groups compared to

control households. Source: Gallup Survey and SCAD Impact

Assessment - External

PDO

Indicator 3:

At least 33 percent of targeted community groups/institutions report

improved access to

Municipal/loca1 services.

Value

(quantitative or

Qualitative)

20% 33% 76%


Comments

(incl. %

achievement)

Exceeded: Based on a survey covering 446 community institutions

facilitated by 13 POs in 13 districts across 4 provinces, 76 percent

community institutions reported to have improved access to municipal/local

services as linkages were developed at the UC level. Source: 1st and 2nd

Tier Institutional Assessment - External

Intermediate Outcome Indicator(s) – COMPONENT 1

Social Mobilisation and Institution Building


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: At least 60 percent of targeted poor3 and 60 percent of poorest households

are members of

community organizations

Value

(quantitative or

Qualitative)

45 percent of CO

member

households are

poor and poorest

60 percent of

targeted poor and

60 percent of

poorest HHs

68 percent of

targeted poor and

82 percent of

poorest HHs


Comments Exceeded: Based on the Poverty Score Card (PSC) data collected from a

representative sample of 2,187 beneficiaries as part of the institutional

3 Poor and poorest households will be identified using appropriate tools such as the National or other objective measure.

vi

(incl. %

achievement)

assessment survey, it was found that 86 percent of the households earned

less than PKR10,000 per month (one third of the amount required to be

above the poverty line for a household of 7 members) and 68 percent of the

members were either in the lower bands of poverty or transitory vulnerable.

Source: 1st and 2nd Tier Institutional Assessment - External


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 2: At least 30 percent of all CO members are women

Value

(quantitative or

Qualitative)

40% 30% 64%


Comments

(incl. %

achievement)

Exceeded: Out of about 1.3 million total membership of 1st Tier

organizational membership, 827,000 are women representing 64 percent of

total beneficiaries. Source: M&E data. .


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 3: At least 60 percent of COs clustered in Village level Organisations (VO)

and 25 percent of these clustered at Union Council level

Value

(quantitative or

Qualitative)

1 percent of COs

clustered into

LSOs/VOs and 0

percent clustered

at Union Level

60 percent of

COs clustered

into VOs and 25

percent of these

into UCs

69 percent of COs

clustered into VOs

and 80 percent of

these have been

clustered into UCs


Comments

(incl. %

achievement)

Exceeded: 65,448 COs, 5,616 VOs and 380 LSOs had (UC level) were

formed representing 69 percent of COs clustered into VOs and 80 percent

aggregated to the UC level Source: M&E data


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 4: At least 55 percent of Community Institutions are performing satisfactorily

in terms of effectiveness, transparency and accountability

Value

(quantitative or

Qualitative)

50% 55% 57%


Comments

(incl. %

achievement)

Exceeded: Based on a representative sample of 446 community institutions

surveyed across 13 districts and all four provinces, it was found that 57

percent of community institutions were performing satisfactorily based on

their ability to keep savings in verifiable accounts (bank account status);

vii

frequency of financial audits and maintenance of record of meeting

proceedings. Source: 1st and 2nd Tier Institutional Assessment –

External


Livelihood Enhancement and Enterprise Development


Values

(from approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: At least 70 percent of those who have received skills training and or

community livelihood fund (CLF); and/or assets – are using them

productively

Value

(quantitative or

Qualitative)

0 70% 97%

Date achieved May-6-2009 Sep-30-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: A total of 397,000 beneficiaries received skills/entrepreneurial

training and about 96,000 ultra-poor and vulnerable poor received

productive assets. 97 percent of skills training recipients reported using

their training productively while 94 percent of the productive assets

recipients were using them productively. Source: M&E data and

Beneficiary Survey: Internal and External

IO Indicator 2: At least 20 percent of federated organizations report effective linkages with

markets and private sector built

Value

(quantitative or

Qualitative)

0 20% 50%


Comments

(incl. %

achievement)

Exceeded: About 4,200 Common Interest Groups (CIGs) out of 8,300

CIGs established linkages with markets and the private sector, representing

50 percent of federated organizations. Source: M&E data.

IO Indicator 3: At least 50 percent of the new livelihoods platforms formed have developed

productive linkages with markets, input/service provider, service/product

buyer, or technology provider – measured in terms of at least one

transaction/ contract

Value

(quantitative or

Qualitative)

0 50% 96%


Comments

(incl. %

achievement)

Exceeded: 7 NyKs (96 percent) have signed 10 MoUs with local councils;

80 Digital Hubs (95 percent) were trained and linked to “Enclude”, a WB

funded project, for digital market research; and 40 Production Centres (97

percent) participated in Pakistan Arts and Craft Mela in Islamabad (sales of

viii

more than Rs.1,000,000) and linked to Mohenjoz, an online platform:

Source: M&E data

IO Indicator 4: Communities involved in Community Livelihood Fund (CLF) revolve

savings with at least 95 percent repayment rates

Value

(quantitative or

Qualitative)

0 95% 95 percent

repayment

rates

98 percent

repayment rates

Date achieved May-6-2009 Jan-31-2015 Sep-30-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: PKR323.99 million in form of CLF was provided to 120 loan

centres to benefit about 16,200 borrowers. Assessment indicates that 80

percent of loan centres increased their portfolio overtime and 20 percent

have retained the principle amount. Overall repayment rate of all 120 loan

centres was approximately 98 percent with an active portfolio of

PKR.269.41 million reported. Source: M&E data

IO Indicator 5: At least 60 percent of the targeted households where LEED

programming/investment has taken place have developed livelihoods

investment plans and mobilized resources for enhanced income and quality

of life

Value

(quantitative or

Qualitative)

0 0 60% 89%


Comments

(incl. %

achievement)

Exceeded: 296,000 livelihoods investment plans were develop ped,

representing 89 percent of targeted households that have developed

livelihood investment plans to mobilize resources for enhanced income and

quality of life. Source: M&E data.

IO Indicator 6: At least 50 percent of the livelihoods grant recipients are women

Value

(quantitative or

Qualitative)

0 0 50% 46%


Comments

(incl. %

achievement)

Substantially Achieved: Out of 96,000 recipients of productive assets,

about 44,000 were women, representing 46 percent of total number of

recipients. Source: M&E data.


Micro-credit Access

Baseline Value Original

Target Values

(from

approval

documents)

Formally

Revised

Target

Values

Actual Values

Achieved

at Completion or

Target Years

ix

IO Indicator 1: The microcredit outreach increased to 8.80 percent from 6.0 percent

average in PPAF-III served districts areas4, with 230,000 new borrowers

Value

(quantitative or

Qualitative)

Total MF

penetration rate

from all sources

5 - 6 percent

Increase from

6% to 8.80%

penetration rate

14.75 percent

penetration rate;

379,284 new

borrowers

Date achieved May-6-2009 Jan-31-2015 Mar-31-2016.

Comments

(incl. %

achievement)

Exceeded: Results achieved in the original 18 districts of Punjab and Sind

provinces.

No discernible increase in penetration rates in Baluchistan and Khyber

Pakhtunkhwa (KP) provinces – 19 districts. Source: M&E data

IO Indicator 2: A minimum annual growth rate of 20 percent in microcredit loans

maintained in one-fourth of PPAF-III served areas

Value

(quantitative or

Qualitative)

416,175 active

borrowers in

targeted 37

districts

20% Growth rate of 20

percent and above

was maintained in

11 of the original

37 districts

Date achieved December 2008 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: Of these 11 districts, 8 were in Punjab and 3 in Sindh provinces:

Source: M&E data

IO Indicator 3: Average repayments of micro-credit loans to POs at least 95 percent and

at least 98 percent from POs to PPAF

Value

(quantitative or

Qualitative)

Repayment rate

of borrowers to

POs was 95

percent

95% from

beneficiaries to

POs and 98%

from POs to

PPAF

Repayment rates

from borrowers to

POs was 97

percent and from

POs to PPAF 100

percent


Comments

(incl. %

achievement)

Exceeded: PPAF-III designed to enhance MF sector commercial focus and

thus, PPAF-III loans were provided at KIBOR+ rates to POs, who

subsequently set market rates of interest for their borrowers. MF lending

at market rates with POs in target districts of Punjab and Sind had

exceptional growth with high repayment rates throughout the period of the

project. PPAF-III also established an internal ratings scheme for POs,

which helped determine their borrowing criteria and repayment schedules

Source: M&E data.

IO Indicator 4: At least 25 percent of all micro-credit loans received by women in PPAF-

III targeted districts

4 The micro-credit component of PPAF-III will be focused on the 37 poor districts that are least developed with microfinance penetration ratio of less than 5%

x

Value

(quantitative or

Qualitative)

0 – 40 percent in

target districts

with an average

of 20 percent

25% of micro-

credit recipients

are women

Women received

72 percent of loans


Comments

(incl. %

achievement)

Exceeded: A total of about 588,000 active borrowers had accessed

microcredit, out of which about 423,000 were women, representing 72

percent of borrowers that received loans : Source: M&E data.

IO Indicator 5: Institutional review of PPAF microfinance portfolio, management and

governance structure completed and agreed by mid-term of PPAF-III and

made operational by end of project

Value

(quantitative or

Qualitative)

Institutional

Reform Options

presented to

PPAF Board

Preparatory work

for PMIC nearly

completed. Board

formation was

underway and

PMIC was

expected to be

operational in

early FY17

Date achieved May-6-2009 Mar-31--2016

Comments

(incl. %

achievement)

Substantially Achieved: PPAF, Karandaaz (DFID) and KfW agreed to

jointly create PMIC and invest in the newly-formed Investment Finance

Company (Non-Banking Financial Institution) under SECP regulations –

PPAF: 49 percent, Karandaaz: 38 percent, KfW: 13 percent. The necessary

amendments to PPAF’s operations were approved by SECP, PPAF Board

of Directors and government in June 2016. PMIC incorporated as an IFC

in August, 2016; license to operate as an NBFC issued in August, 2016;

PMIC commenced business – 1 September 2016: Source: M&E data.


Basic Services and Infrastructure

Baseline

Value

Original

Target Values

(from

approval

documents)

Formally

Revised Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: At least 50 percent of COs are benefiting from improved infrastructure and

30 percent have accessed other sources of funding for infrastructure/loca1

services

Value

(quantitative or

Qualitative)

12 percent of

COs have

accessed

funding from

other sources

50 percent of

COs benefiting

from improved

and 30 percent

42 percent direct

beneficiaries and

24 percent

accessing other

services

xi

accessing other

services


Comments

(incl. %

achievement)

Substantially Achieved: A total of 6,225 water and infrastructure sub-

projects were initiated and 6,196 completed benefiting about 484,000

households. 42 percent of COs reported improved infrastructure and 24

percent have accessed other sources of funding for other services. Source:

M&E data.

IO Indicator 2: Minimum ERR of 20 percent and FRR of 25 percent of investment in

Water and infrastructure

Value

(quantitative or

Qualitative)

ERR of 26

percent and

FRR of 30

percent

ERR of 20

percent and

FRR of 25

percent

EIRR of 36.1

percent and FIRR

of 33.8 percent

Date achieved February

2009

Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Exceeded: The economic and financial rate of return on water and

infrastructure sub-projects was found to be 36.1 percent and 33.8 percent

respectively. Source: Impact Assessment of Basic Services and

infrastructure - External

IO Indicator 3: At least 60 percent of the beneficiaries report satisfaction with the PPAF

supported health and education facilities

Value

(quantitative or

Qualitative)

70 percent

satisfaction

rate for

quality of

service

delivery

60% 93%


Comments

(incl. %

achievement)

Exceeded: PPAF supported 896 schools that enrolled over 127,000 and

trained about 3,700 teachers and related staff. 504 health facilities were

supported and about 1,600 health workers were trained. The total number

of patients that accessed health services over the course of the project

totalled 12.6 million individuals. Based on the User Beneficiary Survey

(2014), 93 percent of the respondents reported satisfaction with PPAF

supported education facilities while 79 percent of the HHs reported an

improvement in the quality of their lives as a direct result of PPAF

supported health interventions.: Source: M&E data and User

Beneficiary Survey.

IO Indicator 4: Net enrolment growth rate of 7.5 percent per annum maintained over the

project period

Value

(quantitative or

Qualitative)

11 percent Net

retention rate

per annum

7.5% 7.5%


xii

Comments

(incl. %

achievement)

Fully Achieved: An enrolment growth rate of more than 7.5 percent per

annum was maintained over the project period. Further, total enrolment in

schools supported by the project was 63 percent for Government schools

and 28 percent for community schools: Source: M&E data - POs.

IO Indicator 5: At least 40 percent of beneficiaries of infrastructure, health and education

interventions are women

Value

(quantitative or

Qualitative)

Overall share

of women

beneficiaries

is 54 percent

40% 55%


Comments

(incl. %

achievement)

Exceeded: Of the combined 16,000,000 individuals that accessed both

infrastructure and health and education services, 8.9 million were women,

representing 55 percent of the beneficiaries of infrastructure, health and

education. Source: M&E data


Project Implementation Support

Baseline

Value

Original

Target

Values

(from

approval

documents)

Formally

Revised Target

Values

Actual Values

Achieved

at Completion or

Target Years

IO Indicator 1: Project management has satisfactorily addressed statutory audit findings

Value

(quantitative or

Qualitative)

Unqualified

external audit

report for FY

2008

Issues satisfactorily

addressed


Comments

(incl. %

achievement)

Achieved: Satisfactory financial management and audit findings in place:

Source: M&E data and project financial documents

IO Indicator 2: PPAF takes necessary actions related to findings of regular Monitoring,

Evaluation and

Learning reports

Value

(quantitative or

Qualitative)

- Actions taken on

M&E and learning

reports

Date achieved May-6- 2009 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Achieved: Key learnings and lessons learnt from various internal and

external assessments have been used to improve on specific areas such as

inclusion, poverty targeting and deepening and integration. Established

outcome monitoring system and joint monitoring visits were carried out

across four provinces.: Source: Key project documents

xiii

IO Indicator 3: Complaints received by the grievance system have been addressed,

according to agreed

PPAF business standards

Value

(quantitative or

Qualitative)

Complaints

handled at PO

level with

remedial

measures and

reporting to

PPAF

Grievance

complaints are

addressed

Date achieved May-6- 2009 Jan-31-2015 Mar-31-2016

Comments

(incl. %

achievement)

Achieved: External complaints were handled and investigated under the

external grievance mechanism in place. PPAF has had a working internal

GRM since 2012 overseen by a full time GR Officer. Elections were held

in November 2015 to elect GRO and Grievance Committee. Source: PPAF

project documents and mission documents.

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 11/30/2009 Satisfactory Satisfactory 20.77




5 12/12/2011 Moderately Satisfactory Satisfactory 75.25

6 06/11/2012 Moderately

Unsatisfactory Moderately Satisfactory 119.72

7 12/23/2012 Moderately Satisfactory Moderately Satisfactory 158.32

8 06/12/2013 Moderately Satisfactory Moderately Satisfactory 192.76

9 11/16/2013 Satisfactory Moderately Satisfactory 192.76

10 04/19/2014 Satisfactory Moderately Satisfactory 222.76







xiv

H. Restructuring (if any)

Restructuring

Date(s)

Board

Approved

PDO Change

ISR Ratings at

Restructuring

Amount

Disbursed at

Restructuring

in USD

millions

Reason for Restructuring &

Key Changes Made DO IP

05/28/2014 S S Extension of closing date from

1/31/2015 to 9/30/2015

03/13/2015 S S 237.76

Revise intermediate outcome

indicators and outputs under the

livelihoods component.

09/30/2015 S S Extend closing date to March

31, 2016

I. Disbursement Profile

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. In 2007, Pakistan’s GDP growth rate was 6.4 percent compared to a collective growth rate of 8.5 percent for the South Asia Region. The country’s key challenge was to sustain economic

growth in the midst of internal and externals shocks that had affected performance in recent past.

Rising food and fuel prices, energy crises including inflationary pressures had pushed the poor

below the poverty line, increasing vulnerability of ultra-poor to unparalleled levels. The rise in

ethnic and religious dissent alongside recurring natural calamities, restricted the country’s capacity

to effectively deal with persistent poverty.

2. Agriculture had long played a pivotal role in Pakistan’s growth and poverty reduction strategies, contributing 20 percent to GDP, 50 percent to exports and employing 44 percent of the

country’s labor force. However, its contribution to income changes was far less encouraging,

declining back to pre-2000 levels as the sector continued to face significant structural constraints

that directly impacted growth and poverty reduction.

3. Substantial improvements in the rural service delivery system were required to effectively support proper functioning and development of the rural non-farm sector to generate employment,

ensure income diversification and reduce poverty. This was a primary concern given that 40

percent of Pakistan’s poor were farmers and 45 percent of the rural poor relied on non-farm

activities as key sources of income. Moreover, the country’s microfinance sector was negatively

impacted by the 2008/09 financial crisis, which contracted capital availability, increased risk and

default and further reduced credit availability to both rural and urban areas.

4. Marginalized groups of poor and ultra-poor households such as disabled, landless peasants and religious minorities continued to be sidelined from participation, which limited effective

demand for public services, hampered efficiency in development programs, thereby limiting the

impact of rural development efforts. Significant gender disparities added to the level of complexity

as higher levels of poverty, landlessness, limited livelihood options and increasing rural-urban

migration by the male household members, placed heavier burdens on women-headed households,

who were more vulnerable to exploitation and food insecurity. Low levels of literacy awareness,

prevalence of high fertility, maternal and child mortality rates with poor access to health services

only served to further aggravate the situation.

5. The Pakistan Poverty Alleviation Fund (PPAF) was created in 1999 with funding and support from the World Bank. PPAF had successfully completed two phases of programing that

included three additional financings by working through the creation of strong outreach

mechanisms, building partnerships with Partner Organizations (POs) that in turn organized

Community Organizations (COs), Village Organizations (VOs) and Local Support Organizations

(LSOs). These institutions served as a platform for rural poor to access finances, skills,

infrastructure, health, education and participation in the development of their own communities

and interaction with government. Its delivery mechanism was recognized to be an effective

2

approach5 to address an increased emphasis in Government’s poverty reduction programs that

aimed to enhance livelihood services designed to cater to the needs of sub-groups of the poor

through integrated approaches to infrastructure, social services and credit provision.

6. The Government of Pakistan and PPAF approached the Bank for financing a third operation to consolidate achievements made so far and to expand the program to poorest

households and districts of the country. Support was also requested to assist PPAF evolve fully

from a micro-credit focused organization (financed through the first two phases of PPAF) to a

multi-sectoral organization that could effectively address the many dimensions of chronic poverty

in the country. The proposed request directly supported Pillar III of the World Bank’s Country

Assistance Strategy (CAS) “Improved Lives and Protection of the Vulnerable” and was well

aligned with the Government’s own Poverty Reduction Strategy through: (i) strategic investments

in building social and human capital; (ii) innovative approaches to service delivery; (iii) integrated

community based approaches to development; and (iv) better identification of and responsive

program interventions for the ultra-poor. Policy measures were taken by the Government to place

poor households and communities at the center of development programs through inclusion of

social mobilization as the central pillar of the Government’s Mid-Term Development Framework

(MTDF) that covered the period 2005 – 2010.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

7. The objective of the project was to empower the targeted poor with increased incomes, improved productive capacity and access to services to achieve sustainable livelihoods.

Key indicators were:

• Community institutions that are inclusive, viable6 and sustainable7

• An increase in household assets and/or income

• Improved access to municipal and local services

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and

reasons/justification

8. The PDO remained unchanged, although revisions were made to intermediate indicators in the results framework to bring in a better focus on outcomes aligned with the PDO as described in

Section 1.7.

1.4 Main Beneficiaries,

9. Primary beneficiaries of the project were targeted ultra-poor, chronically poor and transitory poor households that were identified through the Poverty Score Card. PPAF III was

committed to prioritizing vulnerable segments of society in their operations, which included

women, youth, disabled and minorities. Beneficiaries – organized through a three tier structure of

5 Several studies, including third party evaluations and a study (March 2008) commissioned by the Ministry of Finance,

expressed a high degree of satisfaction over effectiveness of PPAF service delivery and recommended enhancement in provision

of additional resources. (PAD, Page 4) 6 A maturity index was to be used to identify and assess viable community institutions (Footnote in PAD, Page 6) 7 Sustainability was defined as being active, financially viable and having a good governance structure. Active being 9e.g. regular

attendance at meetings), financially viable being (e.g. taking and repaying loans) and having a governance structure that ensures

independence, representation and operational sustainability (Footnote in PAD, Page 6)

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COs, VOs and LSOs - were supported through capacity building, asset transfers, skills and

infrastructure development as well as access to finance, markets and local government services for

sustainable livelihood development.

10. Secondary beneficiaries of the project were Partner Organizations/Non-Governmental Organizations that facilitated project interventions. The organizations received support in

strengthening their organizational capacity to facilitate project interventions and training for social

mobilization, financial management, procurement and monitoring and evaluation.

1.5 Original Components (as approved)

The project consisted of five components.

11. Component 1: Social Mobilization and Institution Building (Orginal-USD38.5 million; Actual – USD33.95 million) - This component aimed to empower the poor by supporting their

organization into three tiers: i) COs and clustering at higher; ii) Village Organizations (VOs) and;

iii) Union Council area level that could build voice and scale for effective interface with local

government bodies, other development programs and markets. PPAF’s POs were to be entrusted

with intensifying their coverage within Union Council areas and strengthening new and existing

community institutions. It was expected that inclusive COs of the poor would be formed and their

clusters mobilized with capacity to manage their own development, access services through

improved linkages to local government, other development programs and markets for sustainable

service delivery.

12. Component 2: Livelihood enhancement and protection (Original - USD85.3 million; Actual – USD89.74 million) - The component aimed to develop capacity, opportunities, assets

and productivity of community members, mitigate their exposure to shocks, improve their

livelihoods initiatives and strengthen their business operations. Community members were to be

supported in building up their savings capacity and proficiency in fund management through

internal lending, complemented by grants and technical support to increase assets, productivity

and incomes. Mechanisms were to be developed and implemented that identified and supported

innovative micro-enterprises and value chain systems that led to improved livelihoods. The

component also facilitated and promoted linkages with private, public sector and not-for-profit

service providers.

13. Component 3: Micro-Credit access (Original - USD40.1 million; Actual – USD44.76 million) - The objective of the component was to improve availability and access of the poor to

micro-finance and enhance their capacities, productivity and returns from livelihoods initiatives.

Most areas were to benefit from improved access to existing micro-finance sourced from both

PPAF and other financial organizations. A significant proportion of the funds (82 percent) were

earmarked for micro-credit sub loans and the remaining 18 percent was to support PO operations,

capacity building and technical assistance through PPAF. PPAF was to support POs in facilitating

micro-credit provision to poor borrowers working in areas with minimal access to mainstream

micro-finance sector (areas where potential market penetration was less than 5 percent). Selected

POs were to be supported to improve their ability to work in least developed areas of the country

and provided with training and technical assistance to improve their existing systems in reviewing

and improving their loan and cost recovery mechanisms as well as funding flow with respect to

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PPAF. The component complemented livelihood finance provided in the form of grants for

productive assets and targeted credit worthy community members with viable livelihood

enterprises. Further, the component was expected to support PPAF’s re-organizational strategy to

de-link its micro-finance operations from its grant financing interventions thereby establishing an

autonomous micro-finance entity that would support the expansion of the micro-finance sector in

the country and provide financial services to “unbanked” and under-served communities.

14. Component 4: Basic Services and Infrastructure (Original – USD79.85 million; Actual USD81.11 million) – The component aimed to establish and upgrade basic services and

community infrastructure for the poor and improve health and education facilities. It built on work

initiated under PPAF I and II using a saturation approach to primarily cover villages where

previous investments were made. Support was given for basic infrastructure, additional productive

and integrated infrastructure projects and innovative interventions such as alternative energy

projects. The component also provided for continuation of the Sindh Coastal Area Development

(SCAD) Program8. The interventions were expected to result in increased access to provisions of

basic needs such as drinking water, irrigation, energy, access to transport, access to markets, health

and education facilities and local government institutions.

15. Component 5: Project Implementation Support (Original - USD6.25 million; Actual – USD6.25 million) – The component was expected to facilitate various governance,

implementation, coordination, monitoring and evaluation, learning and quality enhancement

efforts that would contribute to effective and transparent project management. Project components

were underpinned by two dimensions to ensure continuous process monitoring: 1) assessment of

community institutions and Union Council area organizations for their institutional growth,

integrity and ability to meet indicators set for maturity, governance, transparency and participation;

and 2) standard monitoring by PPAF to include an integrated Management Information System

(MIS).

1.6 Revised Components

16. The project components remained the same fundamentally, however, there were some changes in the activities that components 2 and 4 covered:

17. Component 2, Livelihoods Enhancement and Protection (LEP), was expanded somewhat and named as Livelihoods, Employment and Enterprise Development (LEED). A number of

innovations i.e. – Naukri ya Karobar (Employment or Enterprise) Centers, Youth Centers, Loan

Centers, Production Centers – and efforts were made to reformulate and modernize the training

program, develop market linkages, engage the private sector, and create synergies to ensure long

term sustainability of the project interventions.

8 SCAD Program used best practice and built on work already done under PPAF I and II, by adopting a deepening and saturation

approach and working primarily in villages where previous investments were made. Clustering of community organizations under

PPAF III was expected to support poor communities’ access and leverage external public and private sector financing for

infrastructure projects.

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18. Under Component 4, the Sindh Coastal Areas Development (SCAD) program activities were refined to promote holistic development through integrated multi-sectoral financing

agreements with each Partner Organization (PO) in SCAD to identify and implement each village’s

priority needs. Innovative livelihoods interventions, including skills trainings, were introduced

into the area in order to enhance economic growth and productivity of the beneficiary population.

1.7 Other significant changes

The project was restructured three times during implementation:

19. First restructuring. A Level 2 restructuring was carried out in May 2014 to extend the closing date by 8 months from January 31, 2015 to September 30, 2015.

20. Second Restructuring. A Level 2 restructuring was carried out in February 2015 to revise intermediate outcomes, intermediate outcome indicators and outputs under the livelihoods

enhancement and Protection Component and outputs under the SCAD program of PPAF III. The

findings from the Mid Term Review carried out in 2013 suggested that livelihood interventions

needed to evolve in response to emerging needs of target communities. For that reason, the

component was re-oriented towards increased community engagement to build productive

institutions and platforms that supported integrated planning and development. Employment

Centers, Digital Hubs and Production Centers were introduced along with improved training

programs to create the required scale to sustain livelihood interventions. Revisions to the SCAD

program introduced innovative livelihoods interventions as well as skills training to enhance target

communities’ growth and productivity. To better reflect the varied activities implemented,

subsequent revisions on intermediate indicators shifted focus from outputs to outcomes.

21. Third restructuring. A second Level 2 restructuring was processed in September 2015 to extend the closing date of the project from September 30, 2015 to March 31, 2016. This was to

facilitate utilization of additional funds realized through exchange rate gains and to enable the

project fully achieve its development objective.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

22. The World Bank had developed a long term partnership with the Government of Pakistan to improve public goods delivery through its support of PPAF I and II. PPAF I and II were

implemented in 112 districts of the country with only a small proportions of selected Union

Councils, village or settlement in the districts covered. There was a clear justification anchored in

analytical underpinnings for the Bank’s continued support to the Government through PPAF III.

23. Lessons from earlier operations and regional experiences were incorporated. PPAF III benefited substantially from experiences derived from implementation of its predecessor

operations as well as interventions from various development partners and similar projects

implemented in the region. The ICR findings of PPAF II were primary inputs into PPAF III’s

design and approach. Some key lessons and findings that were instrumental in the new project’s

design choices were the following:

6

24. Broadening approaches to livelihood finance for the poor that included grants and micro-credit to expand outreach. This was meant to address gaps in community financing for upstream

investments due to constraints in the original funding categories that limited direct investments to

micro-credit to individuals, grants to fund community infrastructure and capacity building to

support community organizations. The approach required strategic integration to enable

accumulation of assets that would improve creditworthiness of clients in difficult to reach areas.

Livelihoods grants and inter-lending were necessary to support the long term financial viability of

beneficiaries at all levels.

25. Social mobilization not only required continuous facilitation but also a multi-layered approach towards community empowerment. Clustering groups at higher levels – for voice and

scale – coupled with skills training alongside access to financial resources and wider markets,

would lead to meaningful income opportunities stimulated by increased new business investments.

It was also necessary to continuously engage with communities and POs around the inclusion and

active participation of women, minorities and persons with disabilities so as to ensure community

institutions were truly inclusive and opportunities were being accessed by the most marginalized

households.

26. Embedding flexibility in the design and approach would foster innovation and new tools to meet changing needs of the poor. PPAF’s unique position in Pakistan could be used to negotiate

the introduction of interventions on a national scale or to targeted beneficiaries.

27. Project design. For the most part, the project design was realistic in that it built on experiences gained through tested approaches in predecessor operations. Components were

consistent with the PDO and were complementary to enhancing a deeper level of impact envisaged

at conception. While indicators were measurable and attainable, a few were later revised to sharpen

focus on outcomes rather than outputs (see Section 1.7). Flexibility and innovation gave room to

incorporate health and education interventions, even though these could have benefitted from a

clearer consensus on operational strategies for implementation earlier on in the project. The

organizational reform strategy of de-linking PPAF’s micro-finance operations from its grant

activities as well as its country wide focus was a complex undertaking that was well handled during

the implementation period and led to the launch of a new independent microfinance company in

November 2016. The project design instilled greater commercial focus within the micro-credit

component of the project, and moved away from the approach of earlier phases of PPAF, which

provided general support to the microfinance industry in order to bring it to scale with subsidized

credit. Although not exclusively rural, PPAF-III concentrated additional effort on rural and remote

areas that were particularly under-served by micro-credit. POs borrowed from PPAF-III at market

rates and these levels of interest were passed onto customers. PPAF-III continued its semi-

supervisory role of the industry and introduced risk mitigation tools, client protection codes, and

good governance structures within micro-credit Partner Organizations in order to create a more

professional and sustainable industry. Microfinance providers would need to become more adept

at attracting their own funding from commercial markets.

28. The project approach and institutional arrangements were appropriate. The design focused on saturation of interventions in areas where PPAF was already operational and promoted

innovation and flexibility in scaling up successful approaches

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29. Risks and mitigation measures. A number of potential risks and mitigation measures were laid out in the Project Appraisal Document. A Governance Management Framework was also

developed and mainstreamed throughout the various operational processes and institutional

structure for decision making at all levels. With the exception of the security situation in Pakistan

- which proved to be a significant risk during the implementation period - all other risks relating

to the sector, technical design and project components were assessed as moderate. Risks associated

with PO capacity constraints, financial management and related sustainability issues were

adequately addressed through institutional and technical support and strengthening of the

Management Information System (MIS) that enabled PPAF to effectively monitor and address

problems in real time. Security risks that had potential to hamper accessibility to conflict affected

areas were properly identified with appropriate mitigation measures incorporated into the design,

including the use of POs that had strong local presence and incorporating third party validation as

an additional back up measure.

30. Adequacy of participatory process. The project preparation was conducted in a very consultative manner. The Bank team worked closely with the PPAF project team, POs and

Government of Pakistan counterparts to frame the scope, approach and operational aspects of the

project. There was a high degree of commitment and collaboration amongst stakeholders that

enabled the project to complete the necessary processing steps within the agreed time frame.

2.2 Implementation

31. Managing the shift towards an integrated system. Microfinance and community infrastructure were PPAF’s core strengths built from previous implementation experiences and so

activities related to these interventions carried through the third phase in a fairly seamless fashion.

At the same time, PPAF sought to introduce newer aspects of project implementation, particularly

approaches to livelihood enhancement and working with ultra-poor households, which, by their

nature, required more time to take root. The expansion to include livelihood activities, for example,

required shifts in the social mobilization approach to not only address processes and procedures of

including vulnerable groups but to also deal with reorganization of beneficiary groups around

private interests in contrast to public goods. Moving towards an integrated system - that aligned

micro-credit, infrastructure and livelihoods – was a necessary consolidation strategy envisioned at

conception and required that PPAF introduce a number of institutional changes and procedures in

order to address these new challenges. Its monitoring system, while providing an overall picture

of PPAF’s work, was initially unable to produce quarterly reports that showed project progress

against specific output and outcome indicators. Environmental monitoring and staffing were also

challenges early on in project implementation These challenges were taken up by new leadership

at PPAF in early 2011 which introduced changes to the institutional structure, systems and

procedures so as to break down organizational silos, encourage integration and improve synergy

and coordination among various PPAF units.

32. Mid-term assessment. At the time of the midterm review, the challenges of the monitoring system had been addressed and an environmental and social management unit established and

functional. To help ensure that new operating procedures that emerged from PPAF’s strategic

review were aligned with the Financing Agreement and project operational manuals, the Bank and

PPAF agreed to undertake a management performance assessment to ensure that the application

8

of procedures and processes was in compliance with the agreed implementation arrangements of

the project.

33. Other items in the midterm evaluation looked at (i) PPAF’s future role once grant activities were separated from microcredit; ii) exploring the evolving roles within the three-tier institutional

structure with regard to inclusive participation of women and prevention of elite capture; iii)

addressing the challenges of the livelihoods component; and iv) PPAF’s long term strategy of

sustaining health and education interventions.

34. Streamlining operations for better implementation outcomes. Overtime, PPAF management prepared a business plan that outlined the organization’s strategy for both credit and

grant operations for the remaining project implementation period. Processes for PO

identification/selection process were further strengthened including the creation of two separate

committees for approval of grant and credit funding. Furthermore, PPAF strengthened its corporate

governance credentials by adopting the Corporate Governance Rules issued by the Securities and

Exchange Commission of Pakistan that required holding regular quarterly meetings of the Board

and its committees (Audit Committee and Risk Oversight Committee). It maintained compliance

with applicable provisions

35. As an organization, PPAF put considerable effort into ensuring best practice for its staffing. It carried out a staff rationalization exercise aimed at establishing a baseline for effective

deployment of available skills sets and staffing requirements over the remaining implementation

period. The organization embarked on simplification of its recruitment process aimed at improving

effectiveness and increased focus on staff development, training, appraisal, code of conduct,

diversity and benefits and compensation. An HR manual system was acquired to improve

operations and subsequently, HR manual and policies developed and approved by the Board.

36. The review and restructuring exercise, as well as the introduction of improvements for safeguards and M&E, created some lags in project implementation in their early stages, but two

project extensions provided additional time to fully disburse all funds and in most cases, exceed

project targets.

37. By December 2015, the Board of PPAF and the Economic Affairs Division of the Ministry of Finance approved the creation of the Pakistan Microfinance Investment Company (PMIC) – a

spin-off for-profit apex microfinance provider. Negotiations with DFID and KfW as anchor

investors, were finalized and the company was registered as an Investment Finance Company

under NBFCs regulations with the Securities and Exchange Commission of Pakistan. The official

launch occurred after project closure in November 2016 with initial funding from the private sector,

KfW and DFID.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

38. Design: A monitoring and evaluation system was already in place, but was improved by the creation of a monitoring unit (Monitoring Evaluation and Research – MER) in 2011 that

undertook regular monitoring and tracking of project implementation separately from the

operational units. PPAF III further planned to improve on the design through the development of

9

a Management Information System (MIS) that integrated existing unit specific databases to avoid

multiple entries and duplication of data9.

39. Implementation: In the earlier days of implementation, the MIS primarily provided quarterly reports reflecting a cumulative outlook of project interventions but without an overview

of progress against outputs and outcome indicators. Although operational units interacted with

POs regularly, the MIS did not have a fully integrated system of portfolio monitoring and to

address this challenge, MER was reorganized to enhance its ability to effectively monitor and

assess project progress. The unit took steps to enhance collaboration with other units for collecting

and reporting quality baseline information. Other innovations included improvements to QPR

reports emphasizing results and outcome oriented reporting and analysis. M&E systems were

further strengthened through the introduction of outside partnerships with the Lahore School of

Economics and the Centre for Economic Research in Pakistan (with Development Economics

Research Group (World Bank) already being a long-term partner of PPAF), among others, for

more robust assessments including randomized control trials. MER came under the umbrella of

the Quality Assurance and Compliance Unit, which provided guidance and oversight. Service

standards and procedures for data submission, validation and aggregation for final reporting were

streamlined in the process. Geographic Information System (GIS) was established plotting project

interventions in each project location and linked to the MIS.

40. By project end, QPRs were being generated through MIS and a number of independent assessments had been conducted based on the project’s M&E data. The project was able to report

on progress towards achieving the PDO with a credible system to validate reported outputs and

results. Data templates for all operational units had provisions for validation and data could be

drilled down to specific interventions, activity profiles, implementers, GPS coordinates for

activities as well as associated costs. At the time of the ICR, the interface for submission of PO

data was in the process of moving towards a web-based system.

41. Utilization: As PPAF improved its monitoring and evaluation system and processes, it also utilized the data collected to improve activities being carried out under the project and to better

achieve project objectives. For example, after the mid-term review, PPAF began tracking whether

various interventions were being implemented in an integrated approach as per project design. This

exercise led them to realize that the levels of integration were very low, with many interventions

being standalone infrastructure interventions without having mobilized communities. As a result,

PPAF began to consolidate resources and target those villages and UCs where more support was

needed instead of reaching out to newer UCs and villages. This consolidation of resources and

interventions maximized project impact in those areas as can be evidenced from achievements

against project outcomes in Sindh Coastal Areas – one area where this integrated approach was

implemented.

42. The MER Unit developed a Maturity Index to assess the viability and effectiveness of community organizations supported under the project. This Index helped them in categorizing

9 Almost all PPAF operation units maintained one or other type of database and would perform monitoring and analysis of their

respective operations independently which presented challenges in terms of analyzing overall project outcomes. Operational units

were in charge of tracking outputs and progress against implementation plans for POs.

10

COs/CIGs based on their capacity and strength, which in turn improved targeting of interventions.

For example, Category ‘A’ COs/CIGs were consolidated where possible into Production Centers

under the Livelihoods component, and more training and capacity building support was directed

towards Category B COs/CIGs. The Maturity Index also helped PPAF better report on key PDO

indicators.

43. Improved monitoring processes also helped PPAF assess the sustainability of their interventions. For example, PPAF implemented over 6000 infrastructure schemes over the course

of this project. PPAF developed a detailed reporting format with which to check which of the

schemes were functional after completion. The reports that were generated using that data

demonstrated that most of the sampled schemes under PPAF 3 were fully functional 2-3 years

post-completion. The data also helped identify key issues which had led to some of the schemes

to malfunction or be abandoned – one of which was weak social mobilization prior to scheme

construction. Subsequently, PPAF used this information to strengthen mobilization processes

where they had been weak.

44. Project Evaluations: To its credit, PPAF expanded its research repertoire to strengthen links with its operational activities for quality outcomes. A series of independent assessments,

technical research, beneficiary surveys and evaluations were commissioned during the project

period. Project baseline data was based on achievement of indicators captured at the end of the

predecessor project through an impact evaluation and were reflected in the PAD at the time of

preparation of PPAF III. The evaluations, surveys and assessments were used along with M&E

data to evaluate project performance. Some of the key evaluations used in the assessment of

outcomes were carried out in 2013 and 2014 when substantial portions of the loan were already

disbursed (close to 85 percent in 2013 and more than 90 percent by mid-May 2014). Studies were

commissioned at the time to assess the impact of the project.

45. Communication and Media: A strong media and communications team delivered various prints and electronic products. Knowledge management moved from dissemination of information

to empowerment through information. Immersions programs for journalists to visit project sites

and audience specific communication products were developed.

46. PPAF’s communications team worked to develop media manuals for POs that provided guidance on dealing with local/vernacular media and gave practical instructions for developing

press releases. The community Open Defecation Campaign (ODC) benefitted from the

communication team’s support to develop message content and delivery. Collaborations increased

with operational units which contributed to high quality materials being used at the community

level. Database of website and social media accounts of POs were developed as well as for some

LSOs. A social media strategy was developed and implemented.

2.4 Safeguard and Fiduciary Compliance

47. Environment: Project was classified as a category B in accordance with Bank policy as interventions related to community physical infrastructure and service delivery projects were

assessed to have some potential negative impacts. An environmental management framework was

therefore developed. An environmental and Social Management group was constituted although

there were recruitment challenges in filling a number of positions making implementation of

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related environmental activities slower than expected at the start of PPAF III project

implementation. This included some delay in monitoring and reporting of POs compliance levels

as well as issuance of quarterly environmental reports. Improvements in recruitment led to a fully

functioning ESM unit that was able to provide capacity building to POs to implement the

framework. Environmental and social audits of POs were undertaken and quarterly progress

reports prepared. The first third party validation was conducted in 2012 and revisions made to the

framework to incorporate livelihoods, health, education and microfinance schemes. ESMF was

integrated into all PPAF programs and operational units began reporting on field compliance. POs

were regularly reporting on compliance and information fully reflected in quarterly reports.

Indigenous People’s Planning Framework was prepared as project activities were expanded to

areas with pockets of indigenous groups. Community resource persons were trained in ESMF that

promoted greater environmental and social awareness at the community level. Disaster screening

was also eventually incorporated and a Disaster Strategy prepared.

48. Social: A social assessment was planned early in the project period to focus on issues around poverty, access of project participants to facilities and services, particularly vulnerable

groups and ultra-poor. There were initial delays in finalizing the assessment due to security

constraints in undertaking field visits to some conflict affected areas. Once completed, this initial

assessment revealed that out of 77 percent representation of village households in the community

organizations, 60 percent were male and only 12 percent were female. It was clear that concerted

effort was required to increase women participation in the project.

49. PPAF used this data to adopt an integrated approach for addressing gender issues in implementation of various components as well as internally in planning and decision making

processes. Gender focal points were assigned in all operational units and worked in close

collaboration with a Gender Committee that had been established during the 2011-12 re-

organization. Steps were taken to compile gender profiles for POs to assess the level of institutional

and program integration and identify areas where technical support could be provided. A gender

action plan was created and the first gender orientation training delivered to mainstream activities

at the institutional level. The Gender Committee began to collaborate with operational units and

forged partnerships with Government agencies in Punjab (Women Development and Literacy

Department). PPAF initiated 16 days of activism against gender based violence (GBV) at the PO

and LSO levels. 108 field staff and 55 POs participated in the events. Community resource persons

were also trained on gender aspects which helped to enhance sensitivity towards gender related

issues within communities.

50. Grievance Redress Mechanism (GRM): A grievance redress mechanism was already in place, although not systematized. The project worked towards streamlining the process, paying

special attention to roles and responsibilities. It was recognized that PPAF’s work in conflict

affected areas would require a greater focus on GRM to ensure accessibility and inclusivity of all

groups. There were initial delays in formalizing the system due to security constraints in

undertaking field visits to some conflict affected areas. Despite these difficulties, a three-tier

structure was introduced that involved the use of an external third party to conduct validation of

social aspects. An employee grievance redress mechanism was also put in place to enhance

transparency and trust amongst staff. By project end, a GRM policy was in place and incorporated

in the organization’s HR manual

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51. Financial Management: The project had a very strong financial system in place. All financial reporting requirements were fulfilled and both Finance and Accounts (F&A), and Internal

Audit Department (IAD) were adequately staffed. The Board’s Audit Committee met regularly

and IAD successfully implemented its work plan. There was a functional PO monitoring system

in place as was a financial management information system. Acceptable audited financial

statements were received well before due dates. The reorganization led to revisions in the operating

procedures of both units. IAD became part of the process for clearing disbursements to POs to

provide an opportunity to highlight ongoing and/or unresolved concerns arising from internal

reviews. A comprehensive financial management checklist was in place to assess the capacity of

POs and differentiated by size of the entity for customized support. A web-based application was

developed for tracking statement of expenses and performance standards fixed for processing.

However, the restructuring and introduction of the new manuals and procedures impacted the

implementation of the project and slowed down disbursement significantly between 2011 and 2012.

This led the Bank to commission a third party management performance review (MPR) to carefully

examine and analyze the extent to which the laid out criteria, steps, standards and procedures of

the Bank’s operational manuals were applied by PPAF between 2010 and 2012. The review found

several gaps, weaknesses and violations in the operational manuals related to financial controls

and organizational management, and recommendations were made for improvement. PPAF

resisted any changes in response to the findings of the review and at the time of the ICR, the

implementing agency had not recognized the recommendations of the report.

52. Both F&A and IAD were actively engaged in capacity building of POs as well as COs. Training workshops were held and basic financial manual templates prepared to facilitate small

POs. Standard formats for record keeping were also developed to guide COs. Reserves in the form

of endowment was established for grant based interventions. Innovative approaches were taken to

facilitate illiterate community organizations through the development and roll out of pictorial

formatted financial templates. The Auditor General of Pakistan carried out a performance review

of PPAF and issued a clean report with procedures found to be in compliance with financial

standards. In cases where audit observations were made, shortcomings were quickly addressed

including through a reduction in POs and agreed timelines for addressing issues raised. A stringent

monitoring mechanism with clear responsibilities was effected and legal action taken in some cases.

PPAF also adopted Corporate Governance Rules and approved a treasury management policy on

use of surplus funds. Audit committee and Risk Oversight Committee (ROC) of the Board were

in place and meetings held as planned.

53. In spite of the difficulties, the task team continued to work closely with PPAF staff and its POs, with good physical, financial progress and results on the ground. At project closure, the Bank

identified three (3) ineligible payments to POs. The Bank noted that the determination of

ineligibility was not reflective of PPAF’s performance or results of identified POs, rather, the

criteria for selection was not in line with the categories for re-imbursement. Overall financial

management was deemed satisfactory

54. Procurement: PPAF had adequate staff with experience in implementing procurement under World Bank guidelines. Procurement portfolio was implemented mainly through POs using

primarily the national shopping method to contract out goods, works and non-consulting services.

The level of technical proficiency of staff assigned to procurement areas at HQ and POs was

sufficient. Ex-post review of contracts was implemented and regular systematic post review

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exercises were carried on PO procurement plans based on bank standards. PPAF constantly

worked towards streamlining and strengthening procurement system and procedures in line with

Bank guidelines.

55. There were growing concerns about PPAF’s procurement practices, particularly related to hiring of consultants, weak monitoring and quality of procurement systems and staff. An

independent procurement review (IPR) was commissioned in which some substantive

discrepancies were noted in the procurement process and a few deviations from the Bank’s

procurement guidelines. The review underscored the need for enhanced PPAF monitoring of

PO/CO procurement activities. The Bank had also recommended that the reporting line for the

procurement unit be changed to the appropriate authority. There were revisions made to the

reporting lines of the procurement unit, which were switched to a competent authority to strengthen

checks and balances in the system. A number of critical actions were recommended and addressed

by PPAF. The organization promoted a fair, transparent, traceable and inclusive procurement

system that centered on beneficiary participation in the identification of needs and good

governance principles in the selection of management. The Procurement Unit worked with the

Livelihood unit to jointly prepare guidelines for community driven procurement and a procurement

complaints management system was established. The role of the procurement unit was further

enhanced in the selection process of POs and a placement program established for staff.

Procurement rating was deemed satisfactory at the end of the project.

2.5 Post-completion Operation/Next Phase

56. In terms of long term sustainability, PPAF has PKR.13 billion reserves and a PKR.1 billion endowment. Its annual income from its reserves and endowment fund is approximately PKR.2.5

billion, while expenses against income are around PKR.600 – 700 million, leaving it with an annual

operating surplus of approximately PKR. 1.5 – 2 billion. Clearly, it is a financially sustainable

entity and has evolved into a viable organization through interests earned from its micro-credit

operations, endowments invested in long term government securities as well as new sources of

financing from donors and the private sector.

57. Since the project closed in March 2016, PPAF has continued to implement the program for poverty reduction and two projects by KfW as well as a EUR 40 million trust fund supported by

the Italian Government. The World Bank has also remained engaged with PPAF through

management of the Italian support to PPAF through an innovative fee for service agreement. A

MoU was recently signed with FAO to continue technical support on livelihood activities and

discussions are ongoing with KfW for a follow on project and with DFID for a livelihood operation.

PPAF’s strategic focus over the medium term is: (i) improving protection of its social capital (COs)

while instilling mechanisms for peace and conflict resolution, strengthening resilience for climate

change adaptation and reinforcing linkages with local governments for improved coordination and

public service delivery; (ii) leveraging technology platforms for better monitoring and service

delivery; (iii) creating employment and self-employment opportunities for youth; and (iv)

developing and scaling up the eco-system for renewable energy.

58. As PPAF continues its support to community organizations for both public and private goods delivery, linkages with both local/provincial governments and engagement with the private

sector will be critical for long term sustainability of investments made. Existing linkages with local

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authorities through LSOs are the first stepping stone for higher level engagement with provincial

governments and efforts have continued in ongoing handover of health and education services to

the government. Currently the Bank is supporting the Governments of KP, FATA and Balochistan

in providing community support, which is important to building state-citizen trust. There is scope

for PPAF to coordinate and /or integrate their activities with these programs as well as in the

provinces of Sindh and Punjab.

59. A key transition for the microfinance industry in Pakistan emanating from PPAF-III is the creation of a new peak organization, the Pakistan Micro Investment Company (PMIC), through

the separation of the Financial Services Group (the microfinance component) of PPAF. To grow

and expand outreach microfinance providers will need to diversify their sources of funds to meet

their increasing financing requirements in the future. Stakeholders considered that PMIC would

be better placed to attract financing from diverse sources and meet the increased borrowing needs

of MFPs as the industry continues to grow and mature. The Pakistan Microfinance Network

estimated that more than PKR 40 billion of additional debt for on-lending will be routed through

PMIC by 2020, but over PKR 65 billion will still have to be tapped from additional sources like

the capital and money markets and from international lenders.

60. PMIC was created as a unique model; the first-ever national level Microfinance Investment Vehicle (MIV) in the world and the first-ever MIV in Pakistan. Additionally, PMIC will provide

a wide range of financial services to all MFPs, to promote financial inclusion in order to alleviate

poverty and contribute to broad based development. PPAF is a shareholder of PMIC which will

enable it to pursue its mission to support MFIs reach out to the poor in rural areas.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

61. Relevance of Objectives: The relevance of the project’s objective was rated high. The project aimed to tackle deep rooted poverty in the country’s most vulnerable areas by addressing

constraints related to access to basic services, markets, health and education, exclusion, violence,

unemployment and livelihood risks and vulnerabilities. The project was fully aligned with key

Government policies as outlined by the national poverty reduction strategy in Pakistan (Vision

2025), the Medium-Term Development Framework (2005-2010), Poverty Reduction Strategy

Paper II (2008-2012) and the New Growth Framework (2010). The Governm