Poverty Reduction Funds-Is there Lessons Learn of Poverty Alleviation Fund? Impact of the Poverty Alleviation Fund (PAF): Lessons from Nepal

The Impact of the Poverty Alleviation Fund, Nepal (PAF-N)

Lessons to be learnt from the Poverty Alleviation Fund[1]

by; Nahakul K.C.

1. Introduction:

What is PAF-N?

Poverty Alleviation Fund, Nepal is a programme created by the Government of Nepal to reduce extreme poverty in Nepal and to build a democratic, just, equitable and sustainable society. It is also part of the governments overall strategy to achieve Sustainable Development Goals of the United Nations.

Initially established by an ordinance in 2003, PAF Nepal has been governed by an Act since 2006. PAF is therefore an autonomous, independent and professional organization governed by a separate law.

PAF is an umbrella institution and works through Partner Organizations (POs), such as community-based organizations (CBOs), civil society organizations (CSOs), NGOs, private sector, and local government agencies - Village Development Committees (VDCs)/ District Development Committees (DDCs). An 12 members governing board, chaired by the Rt. Honorable Prime Minister, is responsible for policy guidance and programme approval.

2. Key Approaches:

Targeting the Poorest ( Antodaya): For PAF, the last household in the local socio-economic hierarchy is the  first on PAF’s priority list. To achieve this, PAF uses an inclusive bottom-up approach rather than an exclusive top-down approach.

The first approach is geographically based and targets underserved districts and VDCs and within these the target groups.  The second approach, which is not geographically based, provides financial support to organizations representing target groups for programs to address their needs or to initiatives with particular innovative ways of addressing the needs of the target population.

Social Inclusion (Samabeshi): PAF is in line with the government’s top priority of inclusive development. This requires the proportionate participation of different categories of households, and the equitable involvement of those previously alienated from the development mainstream. Dalit, Janajati, women and other disadvantaged households below poverty level are groups who have historically received far less than a proportionate share of development resources, but are now targeted by PAF.

Transparency (Pardarshita): All the activities of PAF, including those of its partners and the COs, are transparent. Transparency is promoted through social and public audits. . Regular auditing mechanisms are used at the CO’s level.

Demand Driven (Mang Anusar): PAF recognizes that the best judge of how a household will lift itself out of poverty is the household itself. Hence, the final decision on what activity to choose lies with the household.

Direct Payment (Sojhai Bhuktani): PAF believes that people are empowered, if they can make economic decisions and transactions by themselves. So, PAF involves  it’s clients  in direct procurement.

Community Institutions:  PAF works with Community Organizations (COs). Over 27, 000 COs are currently receiving support from the national poverty alleviation programme and this directly benefits 675,000 poor households or a population of 3,000,000 individuals.

Empowerment: PAF uses a demand led community-driven development (CDD) approach to empower poor and marginalized groups to drive their own development. PAF seeks to improved living conditions, livelihoods and empowerment amongst the poor with particular attention to those who have traditional been excluded by reason of gender, ethnicity, caste and location.

Partner Organizations as Facilitators;
Based on the eligibility criteria set by PAF, qualified and eligible Partner Organizations (POs) are selected from among Community-Based Organizations (CBOs), Non Governmental Organizations (NGOs), Private Sector Organizations (PSOs), and Local Government Organizations for social mobilization, technical assistance, and capacity building activities. The partner organizations carry out  social mobilization and capacity building for the community organizations and facilitate the community organizations in preparing proposals and implementing the sub-projects.

Participation and Self-help groups;

Under PAF, the selection of beneficiaries is done through a participatory social assessment followed by social mapping in the community. During project planning and design stage, communities themselves carry out resource mapping, project demand collection, project feasibility/market studies, procurement planning, among others. At the project implementation stage, the community performs procurement of goods and labors by procurement sub- committee, management and monitoring of works by monitoring sub-committee, account keeping, asset management by account sub-committee, and volunteer labor contribution and cash contribution are provided for the execution of income generating and infrastructure schemes.

3. Strategies:

The strategies of PAF will be:

I.                   To develop programmes with specific target of reducing poverty in its areas of operations within a given timeframe;

II.                   Promote community based demand driven approach using rigorous social mobilization techniques in order to reduce poverty by bringing poor at the center of development and by treating poor as subjects instead of objects;

III.                   Ensure holistic development intervention and partnership building that guarantees positive impact on the livelihood of the poor;

IV.                   Enable rural people to obtain quality basic services in cost-effective and sustainable manner with their direct involvement in identification planning, designing, executing and operating & maintaining the schemes; and

V.                   PAF as an independent, autonomous and a professional organization sensitive to the needs and aspirations of the poor.

4. Defining Levels of Poverty

PAF defines poverty based on the level of food sufficiency, as well as criteria set by the communities themselves. Those with food sufficiency of less than three months are categorized as ‘hardcore poor’. Those with food sufficiency of more than three months but less than six months are categorized as ‘medium poor’, while those with food sufficiency of over six months but less than a year are categorized as ‘poor’.

5. Major Successes in Reaching the Poor and Addressing Poverty

5.1 Up-Scaling to Cover More Districts

Using the above structure and approach PAF has successfully up-scaled its programme to cover more disadvantaged districts and communities.

Village Development Committees (VDCs)/Municipalities within the selected districts are prioritized based on district level poverty information. PAF launches its programs from the most backward VDCs/municipalities of the district. In this districts, PAF organizes interactions and hold discussions with various stakeholders in the districts, including DDC officials, government officials, representatives of NGOs and donor community, leaders of various political parties, social workers and eminent personalities, providing orientation to them on PAF’s policy, strategy, programs and program implementation procedures. They are also informed about the VDC ranking and interactions and discussions are held on it as well.

PAF has facilitated the establishment of around 27,000 Community Organizations (COs) in 55 districts out of 75 districts where it is operating. There are almost 400 local and national NGOs as partner organization of PAF.

Beginning with the poorest six districts in 2004, fund has helped a total of 6,75000 beneficiaries’ households, of which approximately 75 percent are women, and 55 percent come from communities that have been marginalized traditionally or excluded due to harsh topography, caste, and ethnicity. It is great success of inclusiveness in Nepal.

5.2. Contribution to Poverty Alleviation - Poverty falls to 33.1 percent in six districts:

There are indications that PAF is contributing to poverty reduction in Nepal. For example, the incidence of poverty has come down by 17.40 percentage points in the last seven years in six districts where the Poverty Alleviation Fund (PAF) is operating its programmes. Poverty rate, on average, stood at 50.7 % of the population in Doti, Dailekh, Jumla, Rolpa, Rautahat and Humla districts in 2007. That rate fell to 33.1 per cent in 2014, according to the report, entitled ‘Socio-economic Changes in PAF Intervention Households in Nepal’, which was prepared by the Centre for Economic Development, and Administration (CEDA) of Tribhuvan University (TU) based on survey conducted in 3000 households.

This means that the poverty rate in the six districts declined at an average of 2.49 per cent per year between 2007 and 2014, as against national average poverty reduction rate of 0.8 per cent per annum. The national poverty rate stood at 25.2 per cent of the population in 2010-11, as per the National Living Standard Survey conducted by the Central Bureau of Statistics.

When the survey was conducted, it was found that per capita consumption had largely gone up in the six districts where the programmes of PAF were operating, indicating a rise in income level. According to the report, per capita consumption in the six districts stood at NRs 14,826 per year in the year 2007-08.. The amount went up to NRs 36,440 in 2013-14, marking a rise of 145.78 per cent in the seven-year period, or 20.83 per cent, on average, per year. Between 2003-04 and 2010-11, average per capita consumption in the country had gone up from Rs. 15,848 per year to Rs. 34,829 — up 119.76 per cent or 17.10 per cent per year.

5.3 Findings of the Office of Auditor’s General (OAG) Nepal:

The Office of Auditor’s General (OAG) Nepal conducted internal audits to see the impact of the Poverty Alleviation Programme for Nepal. Periodic performance audits from the Office of Auditor General have been carried out as usual--together with different technical audits and sustainability studies of infrastructure schemes. Periodic beneficiary assessment,-Rotating Fund status and Social Re-assessment are continuing in order to ensure and update the level of income and livelihood of the community. Social Audit/Public Hearings are in place and are continuing.

The Auditor General’s report highlights the PAF programme focused on the reconstruction and/or renovation of damaged rural infrastructure during the last decade. According to audits, the poverty level was reduced 31% to 25.4 %. The gap between rich and poor was reduced from 0.41 to 0.46 among the remote areas and tribal communities.

A study report highlights major changes at household income as follows;

     More than 68% of the HHs have increased their income by 15% or more and Average income at HH level increased by 68.2% (in real term)

Source: CEDA-TU Report 2012

5.4. Success at the Community Level - Community Organization (CO) from Bajhang Receives an Award

Many COs have been successful in improving incomes and livelihoods with support of PAF and have also successfully implemented infrastructure subproject which have both social and economic benefits for their communities. The following is one example.

The Directorate of Agriculture Marketing, Ministry of Agriculture, Nepal has recognized "Betal Krisak Samuha", a CO from Melbisaunee-4, Velata, Bajhang with an Award.  The group had been recommended for the award by the District Agricultural Office (DAO)-Bajhang.  The Award was for being the best performing farmer’s groups in high hill category for the year 2015 and included a cash prize of Rs 10,000 and a certificate.

The President of the CO, Mr Dhanlal Bhandari took a loan of Rs 60,000 to establish a Vegetables Collection Center in Khaula. He is providing vegetables to community members at cheaper prices. He has also paid back the loan taken from his Community Organization.

PAF provided Rs 107, 198 to the "Betal Krishak Samuha" for vegetable farming and orange cultivation. The same CO received Rs 744,786 from PAF for drinking water and irrigation schemes. This included the establishment of an 8,000 liter water tank. The CO members are now using sprinkle irrigation for their vegetable nursery and are producing seasonal and off-seasons vegetables. Production is sufficient enough to be sold at the Vegetables Collection Center.

6. Role of Partners: Government, Donors, POs, and CBOs for success of PAF Nepal:

PAF’s success can be attributed to good coordination between PAF partners and each partner effectively carrying out their own roles and responsibilities as outlined below.

6.1. Role of the Government:

The government’s main role is to provide policy feedback, oversight and monitoring of PAF program activities at the central level. Office of Prime Minister and Council of Ministers, Ministry of Finance, National Planning Commission approves the annual program and budget of PAF. Office of the Prime Minister and Council of Ministers, Ministry of Finance, National Planning Commission, Ministry of Cooperatives and Poverty Alleviation and Ministry of Federal Affairs and Local Development carry out regular monitoring of the PAF activities and provide necessary feedback and suggestions for further improvement. Similarly, Office of Auditor General carries out the financial audit of PAF every year.

 

 6.2. Role of Donors:

Major donors of PAF include IDA/World Bank, IFAD and JSDF. However, a lion’s share is from the World Bank. Their major role is to provide financial support as a grant as well as technical support for the implementation of PAF program interventions. Apart from this, World Bank, IFAD and the Nepal Government carry out regular monitoring of programme activities including periodic supervision missions.

6.3. Role of Partners:

Partner Organizations (POs) selected by PAF are facilitating Community Organizations (COs) of the Poor.  Their major role is to perform facilitation, social mobilization, technical backstopping and monitoring.  The facilitation being carried out by POs are in organizing COs, their capacity development, planning activities, carryout detailed feasibility, survey design & estimates, and proposal preparation during preparatory phase, and provide technical assistance and monitoring feedback support during implementation phase.  As such, 400 Partner Organizations are working with PAF, covering a total of 2,022 VDCs.

6.4. Role of COs:

Community Organizations (COs) are the crux of PAF program, and they are always positioned in the driving seat. From inception to the end of project cycle, COs are the key stakeholder for planning, designing, managing, implementation, and monitoring of the project intervention.

Prior to the project planning and implementation, COs carry out community identification of the poor through participatory social assessment and a community organization comprising of 25-35 HHs is formed.  COs thus identified and formed as per PAF norms through the social assessment, are formally registered with PAF. Meanwhile, COs open their bank accounts in nearby Bank.

7. Lessons-Learnt

7.1. Meeting Demand without Compromising Sustainability

There is a high demand for the PAF programme at the grass root level. Communities have demonstrated their keen interest to participate in the programme and make the necessary contributions. Demand for the programme is high and it is challenging to achieve a good balance between rapid implementation and institution building. Sustainablity requires enhancing the technical capability of the community organizations. Thus, the challenge is to meet demand without compromising quality and sustainablity.

Coordinated efforts targeting effectiveness and sustainability are indepensable and enhances government ownership while diversifying activities and donors.

Programmes for urban poor have recently been  introduced. Now, PAF is linking its local level planning for rural and urban communites through ward citizen forums. Harmonization in Social Mobilization with other DDC programmes is stressed. This multiplies the benefits of PAF capacity building when COs access other DDC programmes.

PAF supported programmes need to be linked to other government, private sector and civil society institutions to help ensure sustainability post-PAF. Many COs are now linked with Financial Institutions, Private Sector and Service Agencies for additional funding of further activities. CO’s informal networks are now developed at both VDC and District level.

Decentralization can improve the effectiveness of programme activites. PAF has estbalished contact offices in every programme district and Portfolio Managers are now stationed at the distirct level. Decentralizaton is a major policy breakthrough for PAF. A MoU has been signed with Ministry of Federal Affairs and Local Development to establish a PAF office within the DDC office in the respective districts.

7.2. PAF Approach and Lessons-Learnt to Revitalize Livelihoods in Earthquake-affected Communities:

Two earthquakes hit parts of Nepal on April 25th and May 12th, severely affecting the Central and Western Development Regions. The disasters caused more than 8,600 deaths and injured over 16,500 people. The earthquakes caused significant damage to houses, agriculture, transport, irrigation, and communications infrastructure. The earthquake also triggered extensive landslides and avalanches causing further damage and disruption to essential services.

The Post Disaster Needs Assessment (PDNA) of National Planning Commission of Nepal findings highlights that the earthquakes caused major damage in the 14 most affected districts, and damage in an additional 17 districts.  This includes damage to approximately 770,000 homes, of which 550,000 have been destroyed. The PDNA report estimates the cost of reconstruction for household recovery to be US$5 billion, of which the housing sector was the most severely hit with the cost of reconstruction estimated at US$3.54 billion, followed by the education sector at US$250 million.

The earthquake has indiscriminately affected both rural and urban areas.

However, keeping in view of PAF’s mandate, the area of its focus will be the rural earthquake affected districts.

Divided in different components, the proposed scheme would cover around 4,900 existing COs in 10 districts where PAF is already operating and communities and settlements in two of the Major Crisis Hit Districts.

The Revolving Fund (RF) component will enable affected COs to resume revolving fund services by reinstating the RF’s operations to the pre-earthquake level. Earthquake effects on the RFs include: (i) damages to members’ assets financed by RF with a high likelihood of inability for the borrowers to repay according to the schedule; and (ii) damages to cash if kept where physical damages were sustained. There are also cases of losses and damages of RF records and documents. The component would recapitalize the affected RFs in almost 1,500 COs according to a clear set of rules and beneficiary selection criteria.

7. 3. Summary of Lessons-Learnt for Livelihoods:

The major lessons learnt of the livelihoods programme are as follows;

1. Poverty reduction and improved livelihoods requires effective targeting for Prosperity Enhancement. From the beginning, PAF-N has been trying to identify and engage with extremely poor households. However, better off households have also express interest in joining the program and have become involved. Having non-poor involved trends to divert programmes from the real interest of the extremely poor households.  Inclusion is the key to mainstreaming all livelihoods activities
2. Right balance of Social and Economic empowerment for livelihoods activities
3. Agriculture and forest based livelihoods activities are more successful
4. Capacity development and technology transfer is key for success
5. Poor households require Intensive and focused support for an extended period of time.
6. Access to finance and small-scale credit through revolving fund supports sustainable livelihoods. The organization is promoting financial cooperatives as higher level institutions to do proper fund management and develop linkages with existing financial institutions.
7. PAF Nepal has developed exit strategies, which involves linking up with higher level institutions such as CO’s networks at VDC level to serve as a civil society platform and to develop official linkages with local government bodies.

8. Graduation Strategy:

PAF Nepal is exploring- economic based Higher Level Institutions (HLIs). Social platform type NGOs/Civil Society, exit from weak COs and going through line ministries. By doing so, PAF is really looking into the future model based on the social capital gained and accumulated so far.

The proposed Graduation Strategy will promote institutional sustainability and self-reliance of COs and other types of organizations created with the support of PAF. More specifically, the strategy will aim at equipping the COs and other PAF-supported institutions, by the end of the PAF-II closure, with the capacity to manage their own organizations and activities, and making them capable to provide services to the members for poverty alleviation and livelihood improvements on the sustainable basis.

To avoid long-term dependency on PAF there needs to be an exit strategy which is transparent and understood by COs, POs and government stakeholders. This requires an effective assessment system to determine when COs and POs are mature enough to continue without PAF support.

Participatory CO graduation assessment and exit from POs is now in place for the self-propelling and self-sustaining of community organizations. Staff and PO performance evaluation and performance based incentives need to be introduced and reward the best performers (CO,PO, Staff). The organization is conducting CO maturity assessments which helps to identify mature, semi-mature, and COs that need more support.  PAF-N has taken a  major decisions to deputize it’s portfolio managers to work with local bodies called District Development Committees (DDCs). These DDCs represent a longer term sustainable system for development and internalize all poverty alleviation intiatives within local governemnt.

9. Challenges:

The Poverty Alleviation Fund Nepal is facing major challenges. Which are as follows;

• The April Earthquake increased poverty (2.79 %) in those 23 highly affected districts
• The livelihoods pillars drastically go down when vulnerability goes high. For example the recent earthquakes and floods of mid and far west Nepal.
• Funding Gap: The PAF-Nepal may face huge funding gap beyond 2017. Additional funds are needed to continue all these highly successful programme activities
• Least Developed Country Graduation. After the graduation of LDCs, many newly emerging economies may not be able to access grants. However, this is  not practical in the context of Nepal.
• Remittance based economic growth is not sustainable. Most youths are abroad mainly in Arabic nations, which are not a sustainable income source. Youth need economic opportunities within Nepal.

The on-going success of PAF will depend on addressing these challenges with the continued support of PAF partners.

10. References:

1. Poverty Alleviation Act 2007; Government of Nepal
2. Operational Manual of Poverty Alleviation Fund 2012
3. www.pafnepal.org.np
4. Center for Economic Development and Administration CEDA of Tribhuwan University of Nepal and Poverty Alleviation Fund of Nepal 2014
5. Post Disaster Need Assessment Report; National Planning Commission. Government of Nepal 2015
6. Auditor General Office impact study report 2014
7. National Planning Commission of government of Nepal: PAF Program Evaluation; 2013
8. Office Auditor General: Performance Audit Report 2012
9. Overseas Development Institute ODI:  CDD /livelihoods projects in fragile and conflict affected areas of South Asia 2014

 Note: This paper was presented lessons learns of PAF Nepal in to Livelihood Asia Summit which was organized by ACCESS Development Services; www.livelihoods-india.org and www.accessdev.org on December 10-11; 2015 at Delhi, India. 

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[1] . This paper was prepared to share lessons learns of PAF Nepal in to Livelihood Asia Summit which is organized by ACCESS Development Services; www.livelihoods-india.org and

www.accessdev.org