Integrated Safeguards Data Sheet (Updated)
Report No: AC110
Section I - Basic Information
Date ISDS Prepared/Updated: 09/17/2003
A. Basic Project Data (from PDS)
I.A.1. Project Statistics
Country:PAKISTAN / Project ID: P082977Project:Pakistan Poverty Alleviation Fund II / Task Team Leader: Qazi Azmat Isa
Authorized to Appraise Date: April 28, 2003 / IBRD Amount ($m):
Bank Approval: December 4, 2003 / IDA Amount ($m): 238.00
Additional Financing: 100.00
Managing Unit: SASES
Lending Instrument: Financial Intermediary Loan (FIL)
Status: Lending / Sector: Micro- and SME finance (65%); Water supply (15%); Irrigation and drainage (10%); Roads (5%);Other social services (5%)
Theme:Civic engagement, participation and community driven development (P); Rural services and infrastructure (P); Gender (P); Access to urban services for the poor (P); Rural markets (S)
Additional Financing - Sector: Housing Construction (60%); Water Supply (10%); Roads (10%); Vocational Training (10%); Other Social Services (10%)
Additional Financing - Theme:Natural Disaster (P); Social Safety Nets (P); Civic engagement, participation and community driven development (P); Rural services and infrastructure (P); Other Human Development (P)
I.A.2. Project Objectives (From PDS):
The Pakistan Poverty Alleviation Fund Project II (PPAF II) is a follow-on of the Pakistan Poverty Alleviation Fund Project. The development objective remains: to reduce the incidence of poverty in the country through provision of resources and services to the poor and low income, particularly women. This is to be achieved through an integrated approach including provision of microcredit, community infrastructure, training and skill development and social sector interventions. The apex Pakistan Poverty Alleviation Fund (PPAF) and its partner organizations (POs) will continue to play a key role in delivery of these services to the poor.
I.A.3. Project Description (From PDS):
The follow-on Project would provide funds to PPAF for further reducing the incidence of poverty in the country. The size of the Project has been determined based on PPAF's experience during the first Project as well as on conservative estimates of the absorptive capacity of PPAF's existing POs for the next four years. The funds will be channeled through POs and their communities as loans and grants to the poor and low income. Services to the poor would include provision of micro-finance, community infrastructure, skill development and education and health facilities. The main components of PPAF II include:
Credit & Enterprise Development (IDA: US$158 million, Reflows: US$ 100 million)
Under the credit and enterprise component PPAF will continue to lend to POs for on-lending to individuals or groups of individuals who meet the eligibility criteria of the PPAF. Under PPAF II, PPAF is targeting to expand outreach and introduce second generation innovations for its existing micro-credit clients, approximately one million new loans are planned for over half a million borrowers.
Sector Development
Pakistan microfinance sector has matured and become far more transparent over the past four to five years. Pakistan Microfinance Network (PMN) – set up by microfinance practitioners, has played a key role in compiling sector data, setting standards and disseminating information. According to PMN estimates, as of end 2002, there were approximately 250,000 active microfinance clients in Pakistan – 81 percent of whom are being serviced by the NGO sector. The number of potential borrowers, on the other hand, is estimated at 5.1 million, thus indicating significant unmet demand and the need for continued financial and capacity building support in the sector.
Performance under PPAF I
PPAF has effectively enhanced retail capacity in a country where the poor have had very limited access to micro-credit. Especially of smaller retail institutions working as its partners as a result of which in FY03, 41 percent of its funding was disbursed through these small and emerging NGOs. PPAF's clients have doubled every year for the past three years and as of March 2003, POs had extended 187,000 loans from PPAF funding to more than 180,000 borrowers, 41% of whom are women. The average loan size is approximately US$150 - well below the individual loan ceiling of US$500. PPAF has also managed to bring financial discipline into a sector resulting in 100 percent repayments that PPAF will be using as reflows to fund the increased demand for credit.
Community Infrastructure (IDA: US$58 million; Community Contribution: US$ 13 million)
The community infrastructure component will continue to support, in the form of grants on a cost sharing basis, community physical infrastructure (CPI) sub-projects. Identification of sub-projects will be done by poor communities and their selection will be transparent and based on sustainability as determined by the ability of the communities to recover operations and maintenance costs. POs will assist communities in organizing as groups and preparing, implementing and managing these schemes. Based on past trends, it is expected that 40 percent of the conventional projects would be for drinking water supply, 20 percent for irrigation, 18 percent for sanitation, 20 percent for link-roads and bridges and the remaining 2 percent for flood protection works. PPAF expects to fund infrastructure projects that are expected to reach approximately 3.8 million poor (approximately 541,000 households). Apart from conventional community infrastructure projects, POs are also expected to undertake new initiatives aimed at integrated development, dissemination of low-cost, appropriate and innovative technologies, such as micro-hydels, desalination, windmill and solar pump projects, as well as towards reducing poverty in drought stricken/ prone areas through implementation of drought mitigation & preparedness plans (DMPPs). These interventions would involve provision of sustainable infrastructure facilities to the poor in a holistic and systematic manner.
Performance under PPAF I
PPAF is currently working with 24 POs and has approved 6,564 projects for implementation in 75 districts of the country. 3,223 projects are currently in progress of which 2,730 have been completed. All projects have been identified by the communities, are small in size and well within per capita limits. They are also being operated and maintained by the community organizations satisfactorily. Within three and a half years of operations, PPAF's infrastructure schemes have benefited some 1.54 million men and women. In view of the fact that a large percentage of the population still does not have access to basic infrastructure and that implementation capacity and outreach of existing POs has been enhanced, PPAF aims to increase coverage and make a tangible impact on poverty reduction.
Training & Skill Development (IDA: US$9 million)
This component would primarily cover the costs of training communities as well as staff of PPAF's partners. Vocational and technical training would be given to community members to enhance their income generating skills and increase their understanding of market structures and marketing. Under the first Project, PPAF funded 1,570 such trainings for community members which benefited approximately 38,000 community members, 40 percent of whom were women. Approximately 108,000 new borrowers and 61,000 repeat borrowers would be trained through this component under PPAF II. Exposure visits to other communities for some 1,500 community members would also be supported to allow dissemination of best practices. In addition, a limited number of exhibitions would be funded to introduce community made products to the market.
Education & Health (IDA: US$5 million)
Under this component, PPAF would provide funding to its existing POs for their health and education programs, subject to their meeting the additional eligibility criteria for these services. These include amongst others: i) active participation of communities; ii) equity and cost effectiveness of the intervention; iii) linkages and mainstreaming with public sector programs; iv) conformity with environmental and safety standards; v) community contributions towards upkeep of the facility; vi) comprehensive baseline to assess potential of the facility; vii) mandatory training of teacher/health worker; viii) preference for using local human resources; etc.
Support for PPAF (IDA: US$8 million)
All operating costs under the first project are currently being met by PPAF, from interest income and returns on the initial endowment received from Government. IDA support under this component relates to costs for the new project and would include capital costs, equipment, training facilities, and a resource center. This support also includes costs of consultancies primarily for baseline socioeconomic data collection, post intervention impact assessments, and technical assistance for improving data management and financial systems.
PPAF's Equity (Government of Pakistan: US$10 million)
Under the first Project, the Government provided PPAF with US$10 million endowment to build its equity and manage the US$90 million IDA Credit, which is invested in Government securities to support PPAF's core institutional costs related to the first project. A second injection of equity of the same amount by the Government is justified on the grounds that: i) the size of the follow-on project is nearly four times the first and therefore PPAF would require support in meeting the incremental costs related to the much larger second project; ii) it will help assure sustainability of PPAF’s operations in the future without further infusion of capital; and iii) the additional US$10 million would ensure that PPAF remains a strong and sustainable financial institution.
Additional Financing for Rehabilitating Earthquake Affected Communities
The earthquake that struck Pakistanon the morning of October 8, 2005left widespread destruction in its wake, killing at least 73,000 people, injuring another 70,000, and leaving 2.5 million people displaced. Vulnerable groups, mainly women and children living in inaccessible mountain areas with low levels of income and service provision, have borne the brunt of the quake’s impact. AJK and eastern NWFP were dealt the most serious blow and have suffered extensive damage to economic assets and infrastructure, with social service delivery, commerce and communications either debilitated or destroyed.
PPAF has been quick to respond to the earthquake. It has embarked upon a two-pronged strategy, which focuses in the first instance on the provision of immediate relief and assistance to poor households and communities directly affected by the earthquake. More importantly, as part of its broader poverty alleviation mandate, it will endeavor to comprehensively address the long term needs of reviving social, physical and economic structures of affected communities through revitalized and intensive social mobilization processes as well as asset building of vulnerable households through small scale infrastructure. Such infrastructural projects will primarily revolve around the provision of water, sanitation and link roads as well as low cost housing. The Government of Pakistan has requested the Bank for additional financing for the PPAF to assist with its reconstruction and rehabilitation effort.
The additional financing of US$ 100 million would explicitly address the needs of restoration, rehabilitation and reconstruction of earthquake affected villages and communities and is well within the existing scope of PPAF’s work. The program will be implemented through existing and new POs, as per PPAF’s eligibility criteria and implementation arrangements already in place; and will be within timelines of the existing project period. This funding would be used for the following purposes:
(i) Low-cost seismologically appropriate housing -- $ 60 million
Under this component PPAF will provide households with financial assistance for the reconstruction of houses destroyed in earthquake hit villages of NWFP and AKJ. It will involve financial assistance for the reconstruction of 24,000 damaged houses @ US$ 2,500. It will deliberately target poor households without title to land and without access to institutional insurance coverage and long-term house building finance. The reconstruction process will involve: (A) preparation and dissemination of earthquake resistant designs involving low-cost, easily incorporated structural improvements in the traditionally built houses and using indigenous materials and technologies. The structural improvements will also be incorporated in the houses that have undergone partial damage; (B) once households are familiarized with earthquake resistant building techniques, disbursements will be made to each affected and participating household according to a pre-agreed mode of disbursement; (C) disbursement of funds will be tied to various stages of construction and contingent upon adherence to the agreed designs and specifications, to the satisfaction of PPAF and the concerned PO. PPAF will ensure that its approach for the provision of housing conforms to the overall government policy on housing reconstruction that is being developed based on the recommendations of the joint WB-ADB Earthquake Damage Assessment.
(ii) Rehabilitation and Reconstruction of Village Level Infrastructure -- $ 20 million
Under this component PPAF will also carry out the rehabilitation of over a 1,000 infrastructure schemes that were providing water, sanitation and link roads to these communities. This component will also include construction of over 200 standardized, earthquake resistant, multi-purpose community buildings. During normal circumstances, these buildings will be used to house a school or a health facility and/or any other community facility. In case of a future emergency, these buildings will serve as readily available shelters. Works will be implemented following the normal CPI procedures of the PPAF. However, the entire cost of the works will be grant funded, (and the 20% community contribution requirement will be waived). Care will be taken not to duplicate existing or under implementation schemes pertaining to the World Bank funded, NWFP and AJK Community Infrastructure Projects (CIPs). PPAF in consultation with its POs will also explore the possibility of designing workfare programs as part of its infrastructure rehabilitation strategy.
(iii) Livelihood Restoration & Revitalization of Communities -- $ 15 million
The earthquake has had a devastating effect on institutional structures and the capacity of POs as well as village based community organizations. This component will address the immediate resource constraints for intensive revitalization of social mobilization processes, the back bone of effective community driven development. PO staff will be given training in Post Traumatic Stress Management to help them mobilize these broken communities. Extensive and large numbers of trainings will be conducted with community members to teach practical income earning skills such as Masonry, Carpentry and Plumbing as well as community management and conflict resolution skills. PPAF is also building training modules that could create livelihood opportunities for the more vulnerable groups (such as the disabled and the elderly).
(iv) Monitoring, Supervision and Technical Assistance -- $ 5 million
PPAF will hire and dedicate staff for systematic monitoring and supervision to ensure physical progress, design adherence and quality assurance. Technical assistance will be required to hire the services of national and/or international experts to create the designs for earthquake resistant structures, using indigenous materials and techniques. Different designs will be reviewed with the perspective of their cost effectiveness and social acceptability. A ‘Do it Yourself’ manual for earthquake resistant houses and community buildings will be prepared, giving designs, construction specifications and step-by-step construction-guidelines for houses/buildings suitable for different regions. Also included will be guidelines for location of buildings.
I.A.4. Project Location: (Geographic location, information about the key environmental and social characteristics of the area and population likely to be affected, and proximity to any protected areas, or sites or critical natural habitats, or any other culturally or socially sensitive areas.)
PPAF, the implementing agency for the Project, is based in Islamabad. The microcredit, infrastructure, education and health components are, however, executed through PPAF's POs all of whom target the poor and the disadvantaged through theirfield offices in different parts of the country. Infrastructure projects are small and operation and maintenance by communities guarantees effective use of natural resources, and compliance with the EMF ensures environmentally benign interventions that do not impact harmfully on critical natural habitats.As the location of each intervention varies, so do characteristics;nonetheless, the main national characteristics which the project is trying to address and which are prevalent throughout with varying degrees ofrelevance include the following:
Overall Poverty Levels
Poverty in Pakistan has persisted at more or less the same level since the nineties. According to the World Bank’s Poverty Assessment Report, released in October, 2002, one third of the population in Pakistan can be classified as poor. The Pakistan Economic Survey 2002-2003 states that "Not only do the poor have low incomes; they also lack access to basic needs such as education, health, clean drinking water and proper sanitation. This undermines their capabilities, limits their opportunities, leads to their social exclusion and exposes them to exogenous shocks. Moreover, poverty is perpetuated as governance structures exclude the most vulnerable from the decision making process".
As poverty is multidimensional encompassing economic, social and political needs, definitions abound - some focusing on income levels, some on basic needs, some on caloric intake, yet others on lack of opportunity. This makes it difficult to assess the extent and depth of poverty. The Government of Pakistan has recently adopted an official poverty line based on caloric norm of "2,350 calories per adult per day - 2,150 in rural areas and 2,450 in urban areas". This basic needs poverty line approximates per capita expenditure of Rs. 670 (US$12) per month in 1998-99 increasing to Rs. 748 (US$13) per month in 2001. To facilitate comparison, a basic needs poverty assessment has been carried out based on the Household Income and Expenditure Surveys (HIES).
Source: Economic Survey 2002-2003
Higher Incidence of Rural Poverty
Two-thirds of the poor reside in rural areas and their poverty is more deep and severe than urban poverty (see graph above). Although rural households earn their livelihood from a number of sources, most are linked directly or indirectly to agriculture, including the bulk of non-farm activity. Rural poverty levels rose during the later half of the decade due to the persistence of drought particularly in Sindh and Balochistan.