Implications of the Performance Base Allocation System for Countries and Projects

1. Implications of the Performance Base Allocation System for Countries and Projects

2. PBAS: Foundations of the System • Builds on similar systems from other international financial institutions (International Development Association [IDA], African Development Bank [AfDB], Asian Development Bank [AsDB], Islamic Development Bank [IsDB], but taking the specific terms of IFAD’s mandate into account • a system stimulating establishment of the national- and local-level conditions needed for a sustainable reduction in rural poverty • a tool for political dialogue

3. PBAS: Objectives To increase the effectiveness of IFAD’s development aid by • establishing the distribution of IFAD loans on a coherent and transparent basis • Encouraging the establishment of the national- and local-level conditions needed to reduce poverty • initiating a periodic review of countries’ progress in establishing an institutional and political environment favourable to poverty reduction

4. PBAS: Criterion for calculating country allocation • the country’s performance: • performance of the project and programme portfolio (35%) • country’s rating in establishing a political and institutional environment favourable to a reduction in rural poverty (45%) • general development framework (20%) • the country’s needs: • population • national per capita income

5. PBAS - Modalities • the system applies to all borrowing countries • the system is applied in accordance with regional allocations approved by IFAD’s Governing Council • the allocation process is set within a three-year planning cycle (first cycle 2005-2007) • allocations are re-examined each year • the minimum allocation is USD 1 million per year • special treatment for countries in a post-conflict or other crisis situations, in particular in the case of natural disasters

6. PBAS : Main implications for countries • IFAD allocations are based on performance • resource planning covers three years • special attention is paid to the institutional and political environment with a view to reducing rural poverty • authorities are involved in monitoring and improving the performance of IFAD projects and programmes in the country

7. PBAS: Main implications for projects The performance of each project has a positive or negative influence on the rating and allocation of each country: • improvement in project implementation and supervision • improvement in monitoring and evaluation in order to take corrective measures more quickly • establishment of the Results and Impact Management System (RIMS) to measure the impact of projects on rural poverty • close monitoring of performance in project management, including that of key staff

8. Implications for projects: indicators for monitoring project performance • IFAD’s 11 early warning flags • Execution indicators: • compliance with loan covenants • project management performance • compliance with procurement procedures • availability of counterpart funds • quality and timeliness of audits • disbursement rate • performance of M&E system

9. 11 Early warning flags (continued) • Impact indicators: • beneficiary participation • gender focus in implementation • poverty focus in implementation • responsiveness of service providers • Two general performance indicators: • progress of implementation • achievement of development objectives

10. PBAS: A System in Evolution The PBAS will be finalized in the light of experience gained during its implementation • weight of the population in the allocation formula • treatment of countries emerging from conflict or affected by crises, natural disasters • level of allocations (floor/ceiling) • management of allocations in a multi-annual context • maintenance of regional