Guiding Principles for Project Design

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1 Strengthening Operational Skills in Community Driven Development April 15-19, 2002 Washington, D.C. Guiding Principles for Project Design Community-Based Development in Northeast Brazil Luis Coirolo World Bank

2 Guiding Principles for Project Design Place money in the hands of communities. Decentralize decision-making and involve local authorities. Keep decision-making transparent at all levels. Involve communities in financing and managing investments. Make poverty targeting mechanisms simple, explicit and monitorable.

3 Lessons Learned The rural poor can efficiently control resources and make good decisions about investments. Project sustainability is better when municipalities and communities share the costs. Standarized subproject designs simplify preparation and implementation, lowering costs. Technical assistance is critical to build local planning and implementation capacity.

4 Northeast Brazil Single largest area of rural poverty in Latin America Ten States 1.6 m. km2 (>France, Italy, Germany, Spain combined) -- 16% of Brazil s total land 28% of Brazil s 160 m. popn. (45 m.), 16 m. rural popn. 40% of rural NE households US$1/day (7.5 m people) living on

5 Northeast Brazil

6 Northeast Brazil 60% adult illiteracy 80% rural households lack sanitation; 90% without safe water Causes of poverty: poor natural resource base chronic drought limited access to land, water, financial resources.

7 NE Brazil: Rural Poverty Alleviation Efforts POLONORDESTE ( ): Integrated Rural Development: focus on selected areas ( 6 Federal Projects) Northeast Rural Development Program (NRDP) ( ): state focus, sectoral approach (10 Federal Projects) reformulated NRDP ( ): community focus Rural Poverty Alleviation Project (1996-present):deepened decentralization (8 State Projects)

8 POLONORDESTE ( ) Centralization of decision-making and resources at federal level Without beneficiary participation Growing number of project components Large number of involved federal and state agencies Lack of coordination among project components Only 20% of resources reaching beneficiaries (high admin. Costs)

9 Northeast Rural Development Program (NRDP) ( ) reduced number of components emphasis on small farmers and increased agricultural production community participation piloted through support to small communities component (APCR) Communities identify, propose, implement Resources disbursed directly to communities for other components: continued centralization at federal level 40% of resources reaching beneficiaries

10 NRDP Reformulation New constitution of 1988: new federalism and seeds of decentralization : NRDP projects virtually paralyzed Fiscal Crisis Reduced Administrative Capacity Bank faced with canceling the program or substantial reformulation

11 Reformulated NRDP ( ) transformation into a community-based program targeting of poorest communities decentralization to states, municipalities and communities reduced role of public agencies 46,000 investment subprojects proposed by communities approx. 18,000 subprojects executed or under execution (14,000 additional subprojects approved for financing) Infrastructure - (61%) Productive - (34%) Social - (5%)

12 Rural Poverty Alleviation Project (RPAP) (1996-Present) Municipal cost-sharing strongly encouraged Checks and balances for transparency and accountability Procurement through direct contracting by communities Specific funds for TA to communities and Municipal Councils Improved MIS, and Monitoring and Evaluation Improved Operational Manuals Development/introduction of graduation strategy

13 RPAP: The Mechanisms PAC State Community Schemes FUMAC Municipal Community Schemes FUMAC-P Pilot Municipal Greater Community Funds Decentralization

14 State Community Schemes (PAC) Original subprojects component of NRDP Project Coordinating Unit (PCU) screens, approves and releases funds for proposed community subprojects PCU interacts directly with beneficiary communities PAC fosters participation of communities in municipalities which lack will or capacity to adopt FUMAC/FUMAC-P

15 Approval Mechanism and Flow of Funds: PAC Analyze Approve Supervise Evaluate State Technical Unit authorize release $ presents project Identify Prepare manage contract/implement maintain Community Association WB Special Account Operating agreement release $

16 Municipal Community Schemes (FUMAC) Successfully piloted under reformulated NRDP Decision-making delegated to project Municipal Councils (MC), comprising community members, 80% civil society and authorities MCs prioritize community demands and approve subprojects, within indicative budget, for financing by PCU Communities themselves, through MCs, determine best use of funds

17 Approval Mechanism and Flow of Funds: FUMAC Supervise MC Evaluate Project Project Agreement Analyze Approve Supervise Identify Prepare manage contract/implement maintain State Technical Unit presents project Municipal Council Community Association informs Operating Agreement authorizes release $ WB Special Account release $

18 Pilot Municipal Community Funds (FUMAC-P ) Pilot, more decentralized variant of FUMAC Selected MCs prioritize and approve subprojects MCs finance them from an annual budget based on POA Budget allocated to MCs is based on distribution formula, and FUMAC performance Promotes locally-determined investment planning

19 Approval Mechanism and Flow of Funds: FUMAC-P Supervise MC Evaluate Project Analyze Approve Supervise Identify prepare contract/implement manage maintain Project Agreement State Technical Unit Municipal Council presents project Community Association (CA) Annual Operating Plan (AOP) authorizes release $ to CA Operating Agreement WB Special Account release $ for AOP Municipal Council Account release $

20 Cofinancing Matrix Type of Subproject Community 1 Municipality Participation State World Bank Infrastructure 10%-25% Up to 15% 75% Productive 10%-25% Zero Up to 15% 75% Social 10%-25% Up to 15% 75% 1. In all cases, a minimum of 10% on the part of community.

21 Evaluation Sample of 331 municipalities, 671 communities, 3,888 families, 500 community subprojects. Community participation study Supervision missions Management Information System (MIS) Evaluations by the communities

22 Evaluation Results Program reaching 7.5 million people, 53% of target population >30,000 communities US$ 900 million invested in loans 100,000 additional jobs created 85,000 hectares increased cultivated area Additional sustainable annual income or savings - US$ 203 million From a sample of 8,000 infrastructure projects, 1,820 productive projects and 239 social projects implemented between , 89%, 86% and 88% were operational in March 2000

23 Evaluation Results (continued) Targeting effective: 94% of resources got to the target beneficiaries, 75% with initial income of less than $1/day Quality of Investments (with community evaluation) >90% good or excellent; 50-75% of projects considered adequately sized, 13-33% under-sized, and 2-14% too large Community participation study(225 communities) based on compound index: Social Capital Index Social capital accumulation increased by 40%

24 Reform. NRDP + RPAP: Results 93% of resources reach communities 7% Technical Assistance and Administration vs. 40% under original NRDP ( ) vs. 20% under POLONORDESTE ( ) 45% of rural Northeast families benefited with at least one subproject subprojects operating in 1,500 of total 1,665 Northeast municipalities > 50,000 community subprojects financed (77% infrastructure, 20% productive, and 3% social) in 1,500 municipalities (90% of total in region) 7,000 communities with water systems, operated and maintained by the communities

25 Reform. NRDP + RPAP: Results Fiscal Savings Infrastructure subprojects are 40% cheaper when implemented by the communities Examples of fiscal savings Water trucks - US$39 m./year improved health and time savings - US$42 m./year Additional income Value-added tax (ICMS) collected from the sale of electrical appliances - US$27 m.

26 Reform. NRDP + RPAP: Results 600,000 families with access to water generally of good quality reduced incidence of water-borne diseases, infant mortality increased time for income generation 8,000 rural electrification subprojects 320,000 households and 4,300 schools connected

27 Reform. NRDP + RPAP: Results 1,500 of 1,665 NE municipalities with municipal councils (FUMAC, FUMAC-P) Approximately 30% of Municipal Councils take part in discussions about other investments in the municipality and help in shaping a framework for municipal development Approximately 25% of community associations are leveraging social capital to solicit other investment financing outside the RPAP

28 New Program Due to results on the ground 10 governors requested new loans Federal government created a program for 14 states Focus Scaling-up to government programs - councils Expand IT transparency marketing Integration of Bank programs in the rural areas (ie. Tocantins, infrastructure; BA, CE, MA, PE, education)

29 Thank you Strengthening Operational Skills in Community Driven Development April 15-19, 2002 Washington, D.C.

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