RURAL POVERTY IMPACT: greater attention called for at IFAD

RURAL POVERTY IMPACT: greater attention called for at IFAD

Trend analysis from 2013 to 2022 has revealed a continued decline in effectiveness and rural poverty impact of IFAD-supported interventions, from a high of 89 per cent of projects in 2012–2014 to 70 per cent in 2020–2022. The recently published 2024 Annual Report on the Independent Evaluation of IFAD (ARIE), which presented these findings, underscores that this decline needs attention and further analysis, given the substantial organizational reforms undertaken since 2017. These include Decentralization 2.0, revised HR policies, the reorganization of headquarters and the response to the COVID-19 pandemic.

The 2024 ARIE reviews the performance of IFAD-supported operations, based on evaluations conducted by the Independent Office of Evaluation (IOE). The report reinforces IFAD’s framework of accountability and learning, to improve the organisational performance. This year’s ARIE examines two key themes: the relationship between cofinancing and project performance, and inclusive rural finance interventions, which form a significant part of IFAD’s current investment portfolio. In addition, the ARIE presents its standard analysis of project performance ratings based on a dataset of evaluations of 297 projects completed between 2013 and 2022, and 42 country strategy and programme evaluations (CSPEs) conducted between 2014 and 2023.

The report found that environmental and natural resource management (ENRM) and climate change adaptation (CCA) have improved over the last decade, with over 87 per cent of projects performing well in these areas. This performance is the result of over a decade of dedicated efforts, prioritizing climate change responsiveness and investing resources to integrate climate and environmental aspects in all IFAD activities.

Relevance, sustainability, innovation and government performance have also witnessed an upward trend, albeit more recently, since 2016–2018. Other encouraging findings include those emerging from country strategy and programme evaluations, which indicate recent improvements in country-level policy engagement.

Regarding inclusive rural finance (IRF), the ARIE notes that interventions succeed when their design aligns with government goals and objectives and works with existing systems to enhance local ownership. Moreover, the effectiveness and sustainability of IFAD’s IRF interventions rely on having sufficient supportive policies and regulations. To this end, a robust contextual analysis ensures that financial services and products meet local needs and financing gaps.

Less encouraging are the findings related to the proportion of high-performing projects, which has fallen from 80 per cent in 2017–2019 to 73 per cent in 2019–2021, and currently stands at 72 per cent for 2020–2022. Potential contributing factors include a decrease in the budget allocated for country programme delivery and disruptions in operational cycles at the country level due to ongoing decentralization processes.

Among the greatest areas of concern is efficiency, which remains the lowest performance area with only 56 per cent of projects performing well. Fragility continues to be a hindering factor of performance, due to weak governance and institutional frameworks. Moreover, during the reference period (2013–2022), projects in non-fragile conditions performed significantly better than those in fragile conditions in efficiency, sustainability of benefits, government performance and overall project performance.

Other areas in need of attention include partnership-building, which has registered a downward trend since 2018, and the performance of very small projects, which was significantly weaker than the average portfolio performance.

Performance trends during the past 10 years showed that Asia and the Pacific continued to have the highest average rating for overall project performance, and West and Central Africa (WCA) showed the lowest rating. This is a reflection of the external development context WCA faced. For instance, among the five regions, WCA has the lowest human development index and 10 of its 39 countries are identified as operating under long-term conditions of fragility and conflict.

In this regard, the analysis identified 75 projects as operating under conditions of fragility, and the performance of this group was compared with that of the remaining 222 projects (operating in nonfragile conditions). Projects in nonfragile contexts unambiguously outperformed those in fragile contexts in effectiveness, efficiency and sustainability of benefits. For instance, the 2020–2022 values for effectiveness were 75 per cent for the non-fragility group and 60 per cent for the fragility group. The differences in performance varied, but 2019–2021 saw the highest differences (with effectiveness showing a difference of 24 percentage points, efficiency 28 percentage points and sustainability 25 percentage points). In general, the weak governance and institutional frameworks in countries with conditions of fragility and crisis limit the projects’ ability to achieve effective, efficient and durable results.

The report also reviews the gap between performance ratings by IOE and by IFAD management, as measured through project completion reports (PCRs). The differences between the IOE and PCR ratings of all criteria were found to be statistically significant, with the largest rating disconnect for relevance and scaling up and the smallest disconnect for ENRM and CCA and innovation. The disconnects for relevance and scaling have narrowed while that for ENRM and CCA has been widening since 2018–2020. The disconnects in the effectiveness and rural poverty impact criteria narrowed until 2015 but have been widening since then and appear to have been stabilizing in the last reference period (2020–2023).

Looking ahead, in order to strengthen cofinancing and project performance, the ARIE recommends that IFAD should carry out a deep dive to understand the performance effects of project-level international and domestic cofinancing. In this regard, ensuring mutual ownership of projects by IFAD and government should be a consideration when determining their respective financial contributions. This should also inform the setting of IFAD’s replenishment targets for cofinancing. With regard to IRF, the ARIE also suggests that, in measuring the performance of IFAD’s IRF interventions, it is necessary to go beyond outreach and volume and include measures of their impact and sustainability.