Document of The World Bank

Report No:ICR0000000098

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-33320)

ON A

CREDIT

IN THE AMOUNT OF SDR 82.9 MILLION (US$111.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF INDIA

FOR THE

ANDHRA PRADESH DISTRICT POVERTY INITIATIVES PROJECT

July 26, 2007

Sustainable Development Sector Unit India Country Management Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective December 2006)

Currency Unit = Rs. 1.00 = US$ 0.022 US$ 1.00 = 44.0

FISCAL YEAR

April 1 – March 31

ABBREVIATIONS AND ACRONYMS

AP Andhra Pradesh LA Livelihood Associate APDPIP Andhra Pradesh District Poverty

Initiatives Project LIC Life Insurance Corporation of

India APERP Andhra Pradesh Economic

Restructuring Project MARKFED

AP Marketing Federation

APM Assistant Project Manager MBK Master Book Keeper APP Antipoverty Program M&E Monitoring and Evaluation APRPRP Andhra Pradesh Rural Poverty

Reduction Project MIS Management Information

System APSWREIS Andhra Pradesh Social Welfare

Residential Educational Institutions Society

MS Mandal Samakhya

CAL Computer Aided Learning MSP Minimum Support Price CAS Country Assistance Strategy MTR Mid-Term Review CBCS Community Based Convergent

Services NDDB National Dairy Development

Board CBO Community Based Organization NTFP Non-Timber Forest Product CC Community Coordinator O&M Operation and Maintenance CEO Chief Executive Officer PAD Project Appraisal Document CESS Center for Economic and Social

Studies PD Project Director

CF Community Facilitator PDS Public Distribution System CIF Community Investment Fund PIP Participatory Identification of

Poor CIGs Common Interest Groups POP Poorest of the Poor CV Community Volunteer PRIs Panchayati Raj Institutions DAP Differently Abled Persons’ QAG Quality Assurance Group DCA Development Credit Agreement QER Quality Enhancement Review DPIP District Poverty Initiatives Project SA Social Activist DPMU District Project Management Unit SAPAP South Asia Poverty Alleviation

Project DRDAs District Rural Development

Agencies SC Scheduled Caste

DWCRA Development of Women and Children in Rural Areas

SERP Society for Elimination of Rural Poverty

FFW Food For Work SGSY Swarnajayanti Gram Swarozgar Yojana

GCC Girijan Cooperative Corporation SHG Self-Help Group GOAP Government of Andhra Pradesh SPMU State Project Management Unit

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GOI Government of India ST Scheduled Tribe GSDP Gross State Domestic Product SUCHU

RSOD Society for Human Rights and Social Development

ICDS Integrated Child Development Services

TDP Tribal Development Plan

IRDP Integrated Rural Development Program

TPMU Tribal Project Management Unit

IRR Internal Rate of Return UNDP United Nations Development Program

ISR Implementation Status Report VO Village Organization ITDA Integrated Tribal Development

Agency

Definitions: Habitation: Cluster of about 200 households in a distinct geographic area. Village: Administrative unit consisting of a collection of habitations. Gram Sabha: All adult residents of a village (equivalent to the general assembly of the village;

some large habitations in Andhra Pradesh also have Gram Sabhas). Gram Panchayat: Elected body representing one or several villages - part of Panchayati Raj Institutions (local government). Block (Mandal): Administrative Unit below the district consisting of a group of Villages/Panchayats (in Andhra Pradesh blocks were sub-divided into mandals but retained the administrative and local government functions of blocks).

Vice President: Praful C. Patel Country Director: Isabel M. Guerrero

Senior Manager, India Program Fayez S. Omar Sector Manager: Adolfo Brizzi

Project Team Leader: Parmesh Shah

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INDIA ANDHRA PRADESH DISTRICT POVERTY

INITIATIVES PROJECT

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design............................................... 5 2. Key Factors Affecting Implementation and Outcomes ............................................ 10 3. Assessment of Outcomes .......................................................................................... 16 4. Assessment of Risk to Development Outcome......................................................... 24 5. Assessment of Bank and Borrower Performance ..................................................... 25 6. Lessons Learned ....................................................................................................... 28 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 32 Annex 1. Project Costs and Financing.......................................................................... 33 Annex 2. Outputs by Component ................................................................................. 34 Annex 3. Economic and Financial Analysis................................................................. 45 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 46 Annex 5. Beneficiary Survey Results ........................................................................... 48 Annex 6. Stakeholder Workshop Report and Results................................................... 50 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR..................... 51 Annex 8. List of Supporting Documents ...................................................................... 68

MAP IBRD No. 30693

A. Basic Information

Country: India Project Name: ANDHRA PRADESH DISTRICT POVERTY INITIATIVES PROJECT

Project ID: P045049 L/C/TF Number(s): IDA-33320 ICR Date: 07/26/2007 ICR Type: Intensive Learning ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF INDIA

Original Total Commitment:

XDR 82.9M Disbursed Amount: XDR 82.09 M

Environmental Category: B Implementing Agencies: Society for Elimination of Rural Poverty and Andhra Pradesh Social Welfare Residential Educational Institutions Society Co financiers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 05/05/1999 Effectiveness: 08/07/2000 08/07/2000 Appraisal: 11/25/1999 Restructuring(s): Approval: 04/11/2000 Mid-term Review: 03/31/2002 11/12/2003 Closing: 12/31/2005 12/31/2006 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance: Satisfactory Overall Borrower

Performance: Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments (if

any) Rating

Potential Problem Project No Quality at Entry None

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at any time (Yes/No): (QEA): Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

Satisfactory

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) General agriculture, fishing and forestry sector 20 General education sector 20 20 General water, sanitation and flood protection sector 12 Micro- and SME finance 40 Other social services 27 20 Roads and highways 20 Sub-national government administration 21

Theme Code (Primary/Secondary) Education for all Secondary Gender Secondary Primary Other rural development Primary Participation and civic engagement Primary E. Bank Staff

Positions At ICR At Approval Vice President: Praful C. Patel Mieko Nishimizu Country Director: Isabel M. Guerrero Edwin R. Lim Sector Manager: Adolfo Brizzi Ridwan Ali Project Team Leader: Parmesh Shah Ashok Seth ICR Team Leader: Parmesh Shah ICR Primary Author: Sati Achath F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The main objective of the project is to improve opportunities for the rural poor to meet priority social and economic needs in the six poorest Districts of Andhra Pradesh, namely Chittoor, Srikakulam, Adilabad, Vizianagaram, Mahabubnagar and Anantapur. To achieve this objective the project would : (a) help create self-managed grass-roots institutions; (b) build the capacity of established local institutions, especially the Gram Sabha/Panchayats and GOAPs line

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departments, to operate in a more inclusive manner in addressing the needs of the poor; (c) support investments in sub-projects proposed by grass root institutions of the poor to accelerate their entry and expand their involvement in social and economic activities; and (d) improve access to education for girls to reduce the incidence of child labor among the poor. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of poor women mobilized and organized into SHGs Value quantitative or Qualitative)

36,000 930,000 2,294,215

Date achieved 08/30/2000 12/31/2005 12/31/2006 Comments (incl. % achievement)

Indicator 2 : Number of SHGs formed and strengthened Value quantitative or Qualitative)

0 75,000 171,618

Date achieved 08/30/2000 12/31/2005 12/31/2006 Comments (incl. % achievement)

Indicator 3 : Number of SHGs linked to Banks Value quantitative or Qualitative)

0 45,000 155,091

Date achieved 08/30/2000 12/31/2005 12/31/2006 Comments (incl. % achievement)

Indicator 4 : Volume of savings generated by the SHGs Value quantitative or Qualitative)

0 US$15 million US$113 million

Date achieved 08/30/2000 12/31/2005 12/31/2006 Comments (incl. % achievement)

Indicator 5 : Volume of formal sector credit obtained by SHGs through Bank linkages Value quantitative or Qualitative)

US$2,222 US$15 million US$425 million

Date achieved 08/30/2000 12/31/2005 12/31/2006

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Comments (incl. % achievement)

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of families that have benefited from subproject investment Value (quantitative or Qualitative)

0 900,000 986,860

Date achieved 08/30/2000 12/31/2005 12/31/2006 Comments (incl. % achievement)

Indicator 2 : Number of girl child laborers enrolled in residential schools Value (quantitative or Qualitative)

0 15,000 21,468

Date achieved 08/30/2000 12/31/2005 12/31/2006 Comments (incl. % achievement)

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual Disbursements

(USD millions) 1 09/29/2000 Satisfactory Satisfactory 3.60 2 01/16/2001 Satisfactory Satisfactory 3.74 3 06/27/2001 Satisfactory Satisfactory 4.25 4 11/19/2001 Satisfactory Satisfactory 4.63 5 12/20/2001 Satisfactory Satisfactory 4.63 6 03/13/2002 Satisfactory Satisfactory 4.74 7 08/21/2002 Satisfactory Satisfactory 8.84 8 02/19/2003 Satisfactory Satisfactory 16.97 9 04/03/2003 Satisfactory Satisfactory 22.79

10 11/18/2003 Satisfactory Satisfactory 33.31 11 02/04/2004 Satisfactory Satisfactory 42.51 12 08/31/2004 Satisfactory Satisfactory 66.79 13 05/14/2005 Satisfactory Satisfactory 82.22 14 03/16/2006 Satisfactory Satisfactory 98.05 15 11/27/2006 Satisfactory Satisfactory 105.91

H. Restructuring (if any) Not Applicable

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design (This section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative)

1.1 Context at Appraisal (Brief summary of country and sector background, rationale for Bank assistance) The main sector issue throughout India, including Andhra Pradesh (AP), had been the inability of public sector anti-poverty programs (APPs) to reduce the number of the rural poor over the years in spite of significant investments at all levels. Since the early 1950s, the Government of India (GOI) and most state governments had been implementing APPs providing wage-employment, productive assets (such as land or animals), credit and food security to the poor. For the most part, these programs were poorly targeted, inefficiently managed and highly fragmented. In AP itself, despite concerted efforts at reform, there was a progressive crowding out of development expenditures by costly and poorly targeted subsidies, a rapidly expanding civil service, and increasing interest payments. As a result, public spending on social development was falling as a share of gross state domestic product (GSDP) and was far short of the state's needs. In the late 1990s, many social indicators in AP were below the national average: 30 percent of the population lived below the poverty line; malnutrition among children aged 0-6 years was about 30 percent; and female literacy rate (33 percent) was one of the lowest in India. The thrust of GOAP's strategy was to support a process of decentralized decision-making in direct APPs, while continuing to promote a more general fiscal adjustment. The burden of overall fiscal adjustment and policy reform in primary education, primary health, nutrition, rural roads and irrigation was supported by the AP Economic Restructuring Project (APERP) (Cr./Ln.49385./IN), which provided resources for priority needs. However, APERP could not provide effective coverage of all the poor and vulnerable households, especially those in regions dependent on risk-prone rain-fed agriculture or those who lacked productive assets and skills or those who suffered from ill health, disability or illiteracy. To meet the needs of these poor and vulnerable, GOAP recognized the need for new policies, institutions and processes, linked to direct assistance and designed to empower poor rural communities in the targeting and use of resources. GOAP wanted to scale up the work done by it on building poor people’s institutions through social mobilization and thrift promotion. The Andhra Pradesh District Poverty Initiatives Project (APDPIP) was built on United Nations Development Program (UNDP) supported South Asia Poverty Alleviation Project (SAPAP) and AP Government’s investments in institution building through women Self Help Groups (SHGs). SAPAP was implemented in about 700 villages in Mahabubnagar, Kurnool and Anantapur districts of AP. The main focus of SAPAP was on capacity building through social and economic mobilization of women’s SHGs through thrift and credit. The project had also promoted development of self-managed community organizations, which had resulted in formation of 250 Village Organizations (VOs) and 20 Mandal Samakhyas (MSs), together rotating own savings, resulting in internal capital accumulation. In the initial stages, UNDP had provided direct assistance for seed capital. The project had developed the concept of Community Based Convergent Services (CBCS) approach for securing social and economic empowerment of women. Development programs like literacy, preventive health care, girl child education, elimination of child labor etc. were dovetailed to the thrift and credit activities undertaken by SHGs. An important objective of the Bank Group's assistance to India was to reduce poverty through accelerated economic growth with equity. The Country Assistance Strategy1 (CAS) (January 15, 1998) and CAS

1 Document number:17241-IN

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progress report (February 18, 1999) highlighted the need to develop well-targeted programs to assist the poor. The areas in which investment would be made under the project (strengthening social organization; human capital development, natural resource management, agriculture and related activities; infrastructure) were among the priority areas identified in the CAS. The CAS also included a focus on states with a commitment to economic reform. Under the APERP, the GOAP had already started a radical program of fiscal and administrative reform with support from the Bank (Loan/Credit Nos. 4360/3103-IN). It was envisaged that the APDPIP would complement the APERP, and at the same time support another key CAS objective - decentralization and beneficiary participation in the development process. Based on wide experience of the poverty reduction projects in other regions and experience with rural projects in India, the Bank was well placed to add value by facilitating transfer of innovative ideas to poverty reduction work in India and Andhra Pradesh.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The main objective of the project is to improve opportunities for the rural poor to meet priority social and economic needs in the six poorest Districts of Andhra Pradesh, namely Chittoor, Srikakulam, Adilabad, Vizianagaram, Mahabubnagar and Anantapur. To achieve this objective the project would : (a) help create self-managed grass-roots institutions; (b) build the capacity of established local institutions, especially the Gram Sabha/Panchayats and GOAP’s line departments, to operate in a more inclusive manner in addressing the needs of the poor; (c) support investments in sub-projects proposed by grass root institutions of the poor to accelerate their entry and expand their involvement in social and economic activities; and (d) improve access to education for girls to reduce the incidence of child labor among the poor. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 1.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project)

The project’s main beneficiaries included: • About 620,000 poor families were estimated to benefit directly from the project in terms of: (a)

social empowerment and mobilization through better organization; (b) improved skills to undertake productive investment and to increase earning opportunities; and (c) greater access to productive assets, infrastructure and social services.

• Girls from poor families especially Scheduled Castes from areas with a high incidence of child labor and school drop-outs were expected to receive improved access to primary and secondary education.

• Rural poor were expected to benefit from the more inclusive operation, transparency and accountability of Gram Sabhas/Panchayats.

• District administrations were expected to improve their ability to respond to the demands of the poor, and increase effectiveness, through better targeting and ownership, of other on-going development programs.

1.5 Original Components (as approved) The DPIP program was implemented in six districts of Andhra Pradesh. The project consisted of the following four components: Component I Institutional and Human Capacity Building. Project Cost: US$20.34 million

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The focus of this component was to develop self-reliant and self-managed community-based organizations. Specific activities to be financed included: (a) Formation, strengthening and development of Common Interest Groups (CIGs), including SHGs, and their support organizations. (b) Information, education and communications support (c) Capacity building of Gram Sabhas/Panchayats (d) Skill enhancement and re-orientation/sensitization of participating line department staff and Non Governmental Organizations (NGOs) (e) Introduction of a pilot program on institutional and capacity rating to enable development of linkages with the banking institutions Component II Community Investment Fund (CIF). Project Cost: US$76.39million The activities to be financed under this component included demand-driven sub-projects to be proposed by CIGs/SHGs either on their own or jointly with communities (Gram Sabha/Panchayat) during implementation. The participants would have the freedom to prepare sub-project proposals based on their felt needs, provided these conformed to the agreed criteria. An indicative list of likely demand identified during the social assessment in the project districts included the following clusters of activities: (a) Group-based income-generating investment proposals identified by CIGs/SHGs related to: (i) improved production and/or marketing of commodities (crops, horticulture, pasture, livestock, sericulture); (ii) provision of support services to facilitate adoption of new skills/activities and strengthening of backward and forward linkages of micro enterprises owned and managed by the poor, and (iii) facilitation of improved access to institutional credit for micro enterprise development; and (b) Small infrastructure. Component III Educational Support for Girl Child Laborers and School Drop-outs. Project Cost: US$ 30.42 million To address the twin problems of child labor and high rate of school drop-out, the project proposed to finance a package of inter-related activities involving both non-formal and formal education. Since girls were at a greater disadvantage compared to boys in poor families, the project support focused on their needs. Under this component provision would be made to finance: regular campaigns to sensitize parents, especially mothers and other community members about the importance of education and its long-term implications for child welfare and poverty; and in project districts/mandals with the highest concentration of child labor and drop-out rates, establishment of a maximum of 18 residential "bridge" and 6 regular secondary residential schools for girls. Bridge schools would run short-and long-term remedial courses to prepare child laborers and school drop-outs ranging in ages between 7 to 14 years to enter the formal education system. Component IV Project Management, Monitoring and Evaluation, and Studies. Project Cost: US$7.65 million Provision was to be made to cover the costs of incremental staff, technical assistance/ consultants, training, workshops and study tours, vehicles, office equipment supplies and other incremental operating costs. Provision was also made for special studies and preparation of a follow-up project. This component would include funding for a Monitoring and Evaluation (M&E) system. 1.6 Revised Components: N.A. 1.7 Other significant changes

9

(in design, scope and scale, implementation arrangements and schedule, and funding allocations) There were no changes in the project’s core design. However there were changes in the coverage and scale, activity focus, project schedule and funding allocation as mentioned below: Coverage and scale. The project’s coverage and scale were increased significantly without compromising on the quality aspects and by ensuring that PDO will be achieved. The project was expanded to 316 mandals from the initial 180 mandals due to integration of various government resources and programs with the project. Lessons emerging from the ongoing Andhra Pradesh Rural Poverty Reduction Project (APRPRP) (Cr 71272/IN) made the project incorporate newer features/elements like addressing disability, health and nutrition, and social protection issues. Activity focus. The project’s focus moved towards developing associative tiers of village and mandal level federations of SHGs, and also on assets and livelihoods, and to a lesser extent on investments in infrastructure than originally envisaged. This was as a result of priorities expressed by the community and the poor during various participatory needs assessments. Also, AP had numerous other well running programs on community infrastructure during project implementation. This also led to reduction in work done with Gram Panchayats. As the response from commercial banks in terms of credit access to the poor and their institutions was much stronger than anticipated, the project focused on strengthening the thrift promotion, credit planning and financial management capacities of the community organizations. Project Schedule. The closing date of the project was extended by one year from December 31, 2005 to December 31, 2006 in order to: (i) consolidate the two phases of the project activities; (ii) address the second and third generation institution building issues including higher order capacity building inputs, sustainability of Community Based Organization (CBOs), human resource management by CBOs; (iii) enable repeat finance to SHGs from banks and financial institutions; (iv) facilitate the development of support institutions around livelihoods; (v) enable resource mobilization at federated Village Organization (VO), Mandal Samakhya (MS) and Zilla Samakhya (ZS) levels; and (vi) develop sustainability and withdrawal plans. Funding allocations. An amount of SDR 0.774 million (US$1.0 million) was reallocated across categories of expenditure, as shown below, in order to meet fund requirements till project closing. The major reallocation was with respect to Equipments/Vehicles/Materials and Consultancy Services/NGOs/Training. The allocations for Equipments/Vehicles/Materials were increased by 39.55% and for Consultancy Services/NGOs/Training by 1.47%.

Category Amount of the Credit allocated (in SDR eq.)

Revised allocation (in SDR eq.)

% of expenditures to be financed

1. Sub Projects under Part B 45,420,000.00 45,420,000.00 85% 2. Civil Works under Part C 9,160,000.00 9,160,000.00 80% 3. Equipment /Vehicles/Materials (Excluding Part B of the Project)

1,340,,000.00 1,870,000.00 100% of foreign expenditures, 100% of local expenditures,

(ex-factory cost) and 80% of local

expenditures for other items procured

4. Consultant services/ NGO/Trainings

16,380,000.00

16,624,067.38 100%

5. Incremental Operating Cost

10,070,000.00 9,825,932.62 80% until March 31o, 2002, 60% from April 1st

2002 until March 2004 and 40% thereafter

7. Unallocated 530,000.00 0.00 TOTAL 82,900,000.00 82,900,000.00

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2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry (Including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) During preparation, the project design took into account lessons learned from several ongoing and completed Bank-financed rural development projects in India. Further, lessons from many large scale community development programs in South Asia were also learned during the preparatory process. The design considered the risk factors and appropriate measures were adopted to mitigate them. Lessons Learned from previous Bank-assisted projects. The previous rural development projects in India showed the importance of community participation and ownership in achieving efficiency and sustainability. They also demonstrated how communities can contribute towards investment and operational costs if they are assured of good service. The Uttar Pradesh Sodic Lands Reclamation Project showed how the poor can establish their own organizations and can engage in multiple activities in order to mitigate risks and participate more fully in the development process. Similarly, the Integrated Watershed Development Project, the Karnataka and UP Rural Water Supply and Sanitation Projects and the AP Community Forestry Project demonstrated the viability of user groups and their potential to manage project activities as well as to mobilize community contributions. These projects also demonstrated the potential value of successful partnerships between community organizations, NGOs and the government. An important lesson from the UNDP-funded SAPAP, which included AP, was that it is not enough to mobilize communities for social action - they also need to have investment opportunities alongside social mobilization. Hence, APDPIP sought not only to mobilize communities but also included support to facilitate linkages with the credit institutions to open investment opportunities for the rural poor in economic activities. The UNDP project also showed the importance of working with federated institutions of the poor. Another lesson from the SAPAP was that NGO involvement must be selective and focused. At the operational level the main lessons incorporated into the project design were: (a) creation of a decentralized project management structure with full control over sub-project approval to expedite decisions and to minimize political interference; (b) inclusion of competitive employment conditions for project management staff to attract and retain competent and motivated individuals; (c) inclusion of detailed operational manuals, computerized Management Information System (MIS), standardized financial management procedures, regular and rigorous auditing, and quantitative and qualitative monitoring and evaluation; and (d) incorporation of physical and financial sustainability conditions in the sub-project eligibility criteria to ensure a continued flow of benefits. Risks and their mitigation The project faced the following substantial risks and the measures mentioned below were taken to mitigate them:

Risk Mitigating measure Institutional finance is not readily available at the group/community level

Provision for intensive program for capacity building, linked to institutional and performance rating of groups in association with banks and NGOs to enable financial institutions to provide credit to the poor

Infrastructure put in place, especially those under the control of PRIs, may not benefit the poor significantly relative to the rich, and public investments may be more attractive to the relatively better-off groups owning private assets.

Use of poverty criteria in infrastructure planning and training in participatory approaches and listening to socially excluded groups; limitation of infrastructure investment to 30 percent of the CIF.

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Existing supply-driven programs with minimal community input may weaken the self-help orientation of this project.

In the short to medium term, the project disseminated the merits of the demand-based, self-help approach through information campaigns. It emphasized quick implementation for speedy demonstration of the benefits of this approach. In the long term, the Bank engaged in policy dialogue with the government on how the existing programs could be made demand-based and participatory, and thereby more effective in reducing poverty.

In addition, the risks deemed moderate were also taken into account and appropriate measures to mitigate them were incorporated into the project design. Adequacy of participatory processes The project preparation involved active participation by the primary beneficiaries and a broad-based collaboration with various types of civil society institutions. Consultations were held during project identification with a broad cross-section of poor communities, a number of apex NGOs and intermediary NGOs operating in the state. Some of the NGOs also participated in conducting social assessments and preparation of district plans. Quality Enhancement Review (QER) At the request of the South Asia Region, a QER of the project was conducted by the Quality Assurance Group (QAG) in July 1999. The QAG panelists commented that: (i) “Despite the heavy process focus of the project, we are comfortable with the project’s design; and (ii) The intersectoral collaboration exemplified in the Participatory Rural Poverty and Development cluster in the India country team is to be complimented.” In order to enhance its quality, the task team incorporated the recommendations made by QAG, into the project design. These included simplifying the development credit agreement, using operational manual as a guiding document for implementation, adjusting project processes to make them simpler and flexible, focusing on the institutional arrangements and direct transfer of resources to the communities.

2.2 Implementation (Including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) The project was not restructured and it was never at risk during implementation. The Bank conducted Mid Term Review (MTR) of the project in October-November 2003. The MTR found that some initial assumptions made were no longer relevant and institutional arrangements were not adequate to cope with the challenges posed by this innovative project. Accordingly some of the changes made during the MTR are mentioned below in brief (details are provided in Annex II). Organizational arrangements Merger of the District Rural Development Agency (DRDA) and the Project Administration at the District level. This convergence helped in improving coordination between the DRDA and the project, dovetailing of funds and functionaries, and ensuring long term support to the CBOs. Creation of Tribal Project Management Units (TPMUs). The state project management created TPMUs in three districts, with the project officer of Integrated Tribal Development Agency (ITDA) acting as the ex-officio Director. This innovative arrangement brought a good degree of convergence between the ITDA and the project activities.

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Changes in Human Resource Deployment. The project introduced a decentralized Area Coordinator System under which each project district had a sub-district tier comprising seven to ten mandals for management of project activities including planning and monitoring. The decentralized system resulted in more effective project implementation. Institutional arrangements at the community level Focus on SHGs and reducing emphasis on CIGs : Closely knit and functionally effective SHGs were seen as prerequisites for fund management, asset promotion, retention and its productive use; which the loosely organized CIF would not be able to provide, thus affecting sustainability. Focus on Federations of SHGs as core institutions: The investments on institutional development were increased by 50% to enable development of good quality institutions which will attract investment from banks and commercial organizations and also build collective voice to influence public services. Use of Community Resource Persons (CRPs). The project shifted to a community based capacity building and learning approach which focused on developing CRPs2 to nurture and build the capacities of the institutions on a sustainable basis. Financing Decentralized Funds Flow Arrangement. Under a decentralized financial management system introduced in FY 2004-05, the project funds for each mandal were transferred directly to the MSs from the State Project Management Unit (SPMU) through the ZSs. This financial arrangement system contributed to empowering the CBOs to plan and implement all project activities. CIF-related changes. In order to facilitate a larger and more equitable revolution of livelihood funds, the project found the MS, instead of the VO, as the appropriate CIF management agency. Instead of a grant approach, the project adopted a revolving fund system to fund sub projects. And finally, CIF was used to promote demand driven activities such as job promotion for youth which was not originally envisaged. Micro credit planning as basis for community investment: The project started using micro plans as a basis for CIF financing as it found that these proved to be a better vehicle for financing as opposed to the sub project financing. Targeting approaches Improved Methods of Targeting. (a) Participatory Identification of Poor (PIP): A state wide revised list of poorest of the poor (POP) and the poor households was created, using an elaborate and objectively triangulated participatory and transparent approach; and. (b) Entitlement Based Allocation of Funds: To ensure a fair flow of project funds to all the mandals (MSs, VOs and SHGs), the project introduced an entitlement approach to the allocation of project funds. The following factors affected project implementation: Factors outside government control or implementation agency

2 Community Resource Persons (CRPs) are active community leaders selected by MSs from the members of mature SHGs, VOs and MSs who have first hand experience of coming out of poverty.

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Positive factor

The Bank’s flexibility: The flexible approach of the Bank was a favorable factor during implementation. This enabled the project to use new information and learning to adjust implementation arrangements to make them more effective in addressing problems faced by the poor, women, tribal and the marginal communities.

Negative factors Droughts, Floods and Tsunami. Recurrent droughts affected implementation as it resulted in destruction of livestock and agricultural assets and shortage of fodder and farmers suffering heavy economic losses. Similarly, the tsunami that struck coastal villages of Srikakulam district had adversely affected the asset base of the fishermen communities and created additional expenditure obligations on the project. Factors subject to government control or implementation agency

Positive factors

Strong political commitment and support at the highest level in both administrations to continue with the project’s agenda, and continuity of senior level officials involved with the project, contributed to the smooth implementation and success of the project.

Negative factors

(i) SERP Organizational Structure. While SERP was able to attract good quality staff in the initial stages as numbers were small, it found increasing difficulty to recruit good quality staff at all levels and retain them. The project used village immersion programs with good quality VOs to train new staff and PDs. (ii) Lack of adequate support for complex portfolio. In some of the districts, the MSs were expanding their business volume and ventures. The project introduced a new cadre of fresh MBAs to work with the communities as livelihood associates to help them develop market expertise and linkages with various market functionaries. (iii) There was a delay of about six months in the construction of the bridge and residential schools as there was some setback in identification of the mandals and hence the selection of sites, and construction of the residential school complexes, which affected the enrolment and retention rates. In addition, as the students enrolled were first generation learners, the parents and the community had to be sensitized to retain their children in the schools without succumbing to social pressure for early child marriages, which is a prevalent practice in these social groups. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization (a) M&E design and implementation A three-part monitoring and evaluation system was incorporated into the project design, with emphasis on learning from implementation experience. The three parts were: (i) input and output monitoring; (ii) process monitoring; and (iii) impact evaluation. The first two were planned to be conducted continuously throughout the project, whereas the third one was scheduled to be carried out in three stages using an independent agency.

• Input/output monitoring. The SPMU/DPMUs was responsible for input/output monitoring at all levels through a computerized MIS. Activities to be monitored included allocation and use of project funds for

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various inputs and delivery of other targeted inputs and monitoring specific outputs. In addition, the monthly video conferencing arrangement between SPMU, DPMU, MSs and community functionaries has improved the information exchange and learning processes. This could be considered as on of the best practices in terms of experience sharing, learning and use of IT to facilitate concurrent monitoring. Many MSs have computerized their MIS performance data and are using it for monitoring financial and group performance of SHGs. Participation of target beneficiaries in the Monitoring and Learning (M&L) activities is an assurance leading to sustainability of the system even after the project is closed.

• Process monitoring was undertaken by an independent agency with access to data gathered by the MIS. A

non-profit organization was entrusted with the task of process monitoring which carried out and completed more than 12 rounds of process monitoring of the project. The assessments judged the quality of project implementation, particularly in institutional development at the village level, community satisfaction with project inputs, and mechanisms to ensure inclusiveness. Monitoring assessed the extent to which the poor were included in the process of project selection, design, and implementation at the individual and community levels and focused on the dynamics of CIGs, SHGs, VOs, and MSs. The SPMU and DPMU took into account the observations made and appropriate corrective actions were taken to improve quality of implementation. This concurrent monitoring has improved the adaptability and efficiency of the project.

• Impact evaluation. External evaluation was carried out by Centre for Economic and Social Studies

(CESS) at baseline (2001), MTR (2004) and ICR (2006) stages. In addition, several other topical evaluations were carried out by independent agencies as well as the project.

(b) M&E utilization The project developed a system of quality assessment of CBOs based on the MIS data collected. MSs analyzed the data collected and used it to monitor the progress of VOs, SHGs, and CRPs. This data was also used to develop customized training programs for CBOs. The project conducted a comprehensive process monitoring and changed many processes and procedures as a result of the feedback received. The recommendations and findings of the MTR and various studies carried out, were used to make mid course corrections in the project. The project also used M& E data and learning to identify best practices and practitioners and developed a process of peer learning among community functionaries based on that. Social auditing. The project introduced transparent practices of information display and dissemination at all tiers of the CBOs. The transparency in transactions and open information system enabled effective monitoring of project inputs and outputs. All VOs in the project formed Asset Verification Committees.

2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable): There were no significant deviations or waivers from the Bank safeguards and fiduciary policies and procedures during the implementation of the project.

2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable): (a) Transition arrangements Appropriate transition arrangements have been put in place, particularly in the following areas: Organizational Sustainability More than 76,000 Community Managed Functionaries (Community Resource Persons (CRPs), Community Activists (e.g., health activists), Animators, Facilitators, Bookkeepers, Para-botanists etc)

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have been identified, trained and deployed in the project villages playing a critical role in the establishment of self-reliant and self-managed CBOs of the poor. 316 Mandal Training Centers (MVTCs) have been established at the Mandal level and are managed by MSs. In addition, Master Book Keepers (MBKs) provide hand holding support to community book-keepers and undertake periodic verification and auditing of accounts and facilitate SHG – bank linkage. The MBKs are also expected to support VOs and MSs in their transition from being micro finance to livelihood finance institutions.

Community institutions have developed into self managed entities and at each tier have developed well defined roles and rules of engagement. VOs are acting as a platform for collective knowledge building and leadership promotion. The VOs are being used by line departments as effective service delivery agents and by commercial banks as financial intermediaries for SHGs through securing bulk credit for on lending to and facilitating recovery of loans from SHGs. VOs have also emerged as business and marketing agents of the poor, engaging in purchase of inputs and raw materials, and marketing of agricultural commodities. VOs have generated substantial surpluses to meet their recurring costs.

MSs have emerged as apex mandal federation of CBOs and are providing multiple types of support to SHGs and VOs. They are financing micro credit plans of VOs. MSs are playing a critical role in facilitating social mobilization and reviving defunct/dormant SHGs. Apart from facilitating procurement and distribution; MSs are also involved in the recovery of food credit provided to the poor households. In addition, 150 MSs are engaged in business and collective marketing activities in agricultural commodities and inputs. They are managing the training centers with their internally generated resources. ZSs act as forums for discussion and articulation of larger social and developmental issues affecting the poor. They have emerged as life insurance intermediaries in all project districts, promoting low premium life insurance cover for the poor in all project districts. ZSs are providing technical guidance and advice to MSs on market information, procurement and logistical aspects. Financial Sustainability. The major factors for financial sustainability in the project are the following: Internal Corpus consists of a) member savings; b) community investment fund (CIF) i.e., project funds; c) funds/grants from various government sponsored programs; and d) interest income from internal loaning of member savings. Propelled by the regular member savings, earnings from inter-lending and receipt of revolving fund, the resource base of the SHGs has expanded to US$127 million at the close of the project. On an average, the corpus per SHG worked out to US$742 in December 2006.

External Funds are loans from commercial banks which have been leveraged using internal corpus at the SHG, VO and MS level. Annual credit flow to poor households and their groups has increased ten fold from US$ 11.6 million in 2000 to US$124 million in December 2006. The total credit flow from commercial banks to these groups since 2000 has grown to US$425 million. Thus, during the project period (July 2000 to December 2006), the total revolved fund of the SHGs (including CIF, recycled CIF, SGSY subsidy, revolving fund/matching grant, interest subsidy, bank loans and internal loans from own savings and other earnings) amounted to US$919 million, at an average of US$5355 per SHG. Hence, each US$ 1 of CIF has leveraged an SHG fund turnover of US$12.3. It is expected that SHGs, VOs and MSs will be able to sustain the recurring costs of managing the organizations and will be able to leverage significant amount of investments in form of credit and grants after the project investments are over. Details of the funds leveraged by the CBOs are provided on page 12, in Section 3.2. Economic Sustainability: The various tiers of institutions have developed business and management skills, making them viable economic institutions with public, private and cooperative partners. The line departments/government agencies have come to recognize SHGs and their federations as representatives of the poor and have established very productive partnerships to facilitate delivery of economic and social services. Similarly, commercial organizations acknowledge the low cost and efficient distribution and service delivery channels offered by the CBOs.

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Government Policies: The GOAP is implementing Indira Kranthi Patham, which is a statewide rural poverty eradication program based on social mobilization and empowerment of rural poor women. The women’s empowerment program in AP is the largest in the country and accounts for more than 40 % of the total SHGs in the country. The project has been instrumental in reformulating the poverty reduction strategy of GOAP. Many Development Departments in AP are factoring community institutions of the poor in design of service delivery arrangements. (b)Follow-up projects A follow up program scaling up APDPIP in rest of the Districts in AP, Andhra Pradesh Rural Poverty Reduction Project (APRPRP) became effective on April 1, 2003 and covers 594 backward mandals in 16 districts of the State and covers 5.7 million families. This project’s duration is until September 2008. In the year 2005 the GOAP decided to extend the same approach to all rural areas of AP and leverage the program with funds from ongoing programs from the State Budget. GOAP is preparing a third project for rural poverty reduction, to contribute significantly to the state’s endeavor of achieving the UN Millennium Development Goals (MDGs) by 2015. (c) Future impact evaluation. An independent external evaluation by a panel of experts in various fields, to evaluate the project and its follow up project, APRPRP is scheduled to be conducted in 2008. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation (To current country and global priorities, and Bank assistance strategy) The objective of APDPIP is in consonance with AP’s social and economic development agenda. The current poverty reduction strategy of the GOAP is built around empowerment of women SHGs and increased resources have been allocated in the State Budget to provide financial support to the approach. In addition, many Government programs envisage an important part for the organizations of the poor in delivery of services and managing social welfare programs. In many respects, the project design and implementation has become more relevant in the current policy environment. At the Central level, the approach used by the project has been described as a national model in the Draft Eleventh Five Year Plan approach paper released in 2006 and is likely to be a basis for a National Mission on Poverty Elimination. It is still relevant and appropriate to the needs of the State. The project is also consistent with the Bank's latest CAS3 (September 15, 2004) for India. According to the CAS, one of the key pillars is investing in people and empowering Communities. The CAS talks about scaling up support to improved rural livelihoods through state level interactions and investment operations using a community driven development approach. Since the project was initiated, six new operations using similar approaches have been initiated in India and four others are in the pipeline 3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) Satisfactory. The project was more than successful in achieving its objective. The following achievements demonstrate that there is a direct linkage between the project’s outputs and outcomes:

3 Document number: 29374-IN

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• The project’s interventions have enabled the poor and poorest households to acquire assets

(especially livestock) and shift from wage employment to self employment. • The poor and the poorest households have bought their fallow land under cultivation and have

started actively participating in the land lease market. • There is a reduction in distress and contract migration, especially for women and children and

decline in incidence of child labor. • There is also a reduction in debt burden and dependence on moneylenders. • SHGs have become a major credit supply institution with increased access to finance from

commercial banks. The poor households are now perceived as clients by commercial banks. • The increased access to information by women on education, family planning, health care and

social issues have resulted in higher level of mobilization and action on social issues by women and their organizations.

• There is a substantive increase in all forms of social capital resulting in increased solidarity, peer support in crisis, linkage with government programs and other institutions like the Banks and collective action against undesirable social practices.

The key investments made by the project were in the area of institutional and human capacity building, community investment funds, educational support for girl child laborers and school drop outs and project management including monitoring and evaluation studies. The key outcomes of the project are described as follows:

1. Thriving organizations of the poor, social mobilization and institution building

The project supported the formation and strengthening of three tiers of institutions of the poor: SHGs of poor women as the foundation, VOs (as federations of SHGs at village level), MSs (as federations of VOs at Mandal level) and ZSs (as federations at District Level). All these tiers were promoted and supported by the project to become self managed, self reliant and sustainable institutions. These institutional arrangements have enabled the poor to access a range of services, resources and expertise from both public and private sector. This is the core investment made by the project.

2.29 million rural poor women have been organized into 171,618 SHGs and 9872 VOs at the village level, 316 MSs at the mandal level and 6 ZSs at the district level. The project currently covers 90 percent of all rural poor households in six project districts of AP. The coverage is much higher than originally envisaged due to a good response from communities, government agencies and commercial banks.

2. Access to thrift, credit, investments and financial resources These organizations have leveraged resources and accessed credit and other financial sector services on a significant scale (details provided in Annex 2). From an IDA investment of US$111 million the following additional investments have been leveraged by the participating poor households in six years: (a) Cumulative member savings is in excess of US$113 million. This savings was used to further

leverage credit from commercial banks. (b) Cumulative credit from commercial banks in excess of US$425 million with repayment rates higher

than 95 % indicates a strong relationship with commercial banks as clients. The annual bank credit accessed by the members of SHGs has increased from US$11.6 million in 2000 to $ 124 million in 2006. The number of SHGs linked to banks was 155,091 as against the target of 45,000. The SHGs have become valued clients of the banking system.

(c) During the project period, the total revolved fund of SHGs (including CIF, recycled CIF, SGSY subsidy, revolving fund, interest subsidy , bank loans and internal loans from own savings and other earnings) was estimated to be US$919 million. This worked out to be at an average of US$5355 per SHG. The cumulative credit flow is expected to cross $ 1 billion this year.

The project has been able to catalyze the financial sector for the poor as is evident from the rapid progress being made while scaling up the approach in all Districts in AP.

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3. Livelihood Diversification, Assets, Income and Consumption Expenditure Livelihoods: In six years the livelihood sources for households have undergone transition from below subsistence wage employment to self employment, increased asset ownership (land, livestock and other non farm enterprises) and diversified forms of livelihood. Access to CIF and Bank finance has enabled the poor to upgrade their assets, acquire new assets and diversify their livelihood sources. With the reduced dependency on money lenders for credit, increased surplus from economic activities and assets and reduced consumption expenditure, livelihoods of the poor have improved.

Assets: The value of assets at the household level has almost tripled i.e., from US$1032 to US$2974 on an average during the six year period. There was a significant increase in the ownership of both immovable and movable assets. A large majority of this investment has been made on purchasing and leasing dry and wet land, constructing houses, purchase of milch animals and purchasing gold jewelry. Many households are participating in land lease market. The extent of irrigated land owned by the poor has also increased. Many women have taken up non farm activities including small manufacturing and trading including garments, furniture and retail trading in consumption goods. The turnover from assets has also increased by 177% during this period.

Increase in Credit, Assets and Income

0

50

100

150

US$ Million

Increase in Annual Credit from Commercial Banks

Credit 12.3 124

2000 2006

1032

2974

0

1000

2000

3000

Value of Assets (US$)

2000 2006

Growth in Assets Per Household for Project Participants

483

1041

0

500

1000

1500

US$

2000 2006

Increase in Income Per Household for Project Participants

Food Security: The project supported many VOs to undertake bulk procurement of rice and other food commodities, access public distribution system and access food on credit. Over half a million households and 5,577 VOs, across the six districts are now under the umbrella of food security. The turnover handled by the VOs in DPIP districts for the Rice Credit Line (RCL) was US$171 Million. As a result an average household was able to increase annual income as a result of savings on transaction cost by US$48. Food assurance has reduced the proportion of indebted households from 21% to 13% and increased the daily wage rate by 30% due to the enhanced bargaining power of the poor farmer. Market Access: The project invested significantly in promoting value addition at local level for various agribusiness activities. This was done through developing market linkages with public, cooperative and private sectors. These linkages have enabled increase in price realization by more than 30%. Access to the market has been improved by (i) meeting critical infrastructure gaps (e.g. setting up bulk milk cooling centers); (ii) promoting wholesale trade by community groups in commodities produced and consumed by the poor; (iii) developing franchises and partnerships with private sector. There are over 1500 VOs implementing collective marketing activities, including 695 community managed procurement centers. In addition, 273 VOs and 42 MS are operating village procurement and bulk milk cooling centers and acting as franchises for large state and national dairy companies and cooperatives. The cumulative collective marketing turnover in 2006, including all commodities was US$38.8 million. These investments also contributed to the increased sustainability and viability of individual economic activities taken up by the poor households. Jobs: The project supported rural youth belonging to SHG member households with skill development, training, market scan and placement support in partnership with many private sector organizations and

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employers. This was done with establishment of Livelihood Advancement Business Schools (LABS) at District and Mandal Levels. In FY 2005-2006, a total of 11,883 youth belonging to poor households were offered placement. A post assessment study conducted on youth who were placed in urban areas revealed that each one on an average was earning annually about US$1000 and sending about US$500 as annual remittance back to their families. Household Income: According to CESS impact study based on sample households, the annual income per household has increased in absolute terms by 115% from US$483 to US$ 1041 over the last five years as against a 64% increase for non-participants households. January 2007 survey indicates that a substantial part of increase in income was used for reinvesting in existing and new livelihoods. Consumption Expenditure: On the whole, the average expenditure has increased per household by US$196 per annum. A household is spending three times more on education in the family. Interest payments have significantly reduced from US$104.5 to US$60, indicating access to credit on reasonable terms from commercial banks and reduction in credit from moneylenders. Reduction in Vulnerability and Indebtedness: Dependence on high-cost sources of borrowing has reduced by more than one-third. Small but compulsory savings and inter loaning by SHG members reduced the dependence of the members on traditional high-cost sources of borrowing, often interlinked with commodity/labor sales. Reduction in distress migration: Improved food security through the project interventions and other livelihood impacts has significantly reduced distress migration which was a common feature in drought prone areas of Anantpur and Mahbubnagar and parts of Chittoor Districts. Access to Insurance services: In excess of half a million households have purchased life insurance cover (death, and disability insurance) on a voluntary basis. This is more than a three-fold (15 percent of poor households have insurance) increase when compared to the scenario in 2003 (less than 4 percent of poor household had life insurance coverage). 4. Increase in school enrolment for girl children and their academic performance The girl child enrolment, which stood at 91.95 percent in 2001-02 steadily increased to full enrolment at the time of closure of the project. Number of girl child laborers enrolled in residential schools was 21,468 which exceeded the target of 15,000. 78.42% of girls enrolled moved into regular schools from bridge schools. During, 2002-03, in 7th class the pass percentage was 97% and in 2005-06 it was 100%. The performance in high school (Senior School Certificate - SSC) examination improved from 76.75% to 93.92% with six schools achieving 100% results in SSC. 5. School completion rates among girls (ever) enrolled in bridge schools Nearly 209,543 out of school children were enrolled in other public schools. Among girls enrolled in bridge schools, the completion rate is 78.42%. Residential school infrastructure had a positive impact on girl child education. Backward linkage created to the GOAP run bridge school, has created high demand for admissions. Dropout rates have reduced considerably over the years reflecting parents’ determination to keep the girls in school and effort of APSWREIS and school management to retain girls in schools. Attendance of these girls is regular, and the dropout rate is very low in residential schools. The drop out rates from the residential schools decreased from 14.8% in 2001 to 4.3% in 2005-06. The project resulted in motivating parents to withdraw their girls from work and to send them to schools and into hostels. Academic performance was found to be better compared to other government schools. All round personality development was also noticed, due to excellent infrastructure and promotion of sports and cultural activities.

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6. Greater inclusiveness in the Panchayati Raj Institutions (PRIs) and Political Empowerment During the project, SHG members were sensitized to their entitlements and their potential role in local government institutions including PRIs. There were a large number of poor women willing to stand for elections out of which 4072 were subsequently elected. These included all tiers of local government from District, Mandal and ward level and included leadership positions as well. 4072 women members are now holding offices across the state in local governments. According to CESS, 2.33% of participant members contested the elections out of whom 1.3% won. While in the case of non-participants, it is 1.54% and 0.7%, respectively. The study concludes that the political empowerment is taking place among the poor women due to the project. The CESS study also points out an increase in participation of women in gram sabhas and community level meetings conducted by panchayat bodies. 7. Access to government programs and services and Improvements in household perception of the quality and quantity of government services There were a number of factors which contributed to the improvement in service delivery. The community institutions provide a ready database to channel funds from line departments hence making targeting for service delivery agents more efficient. In addition, public agencies have outsourced or franchised some of their services to CBOs. Up to November 2006, a total of 822,602 pensions worth US$31 million were distributed by VOs. CBOs organized midday meal services, executed watershed works, mobilized and mainstreamed child labor, increased school enrollment and mobilized immunization and sanitation campaigns. CBOs have also provided additional teachers to primary schools at their own cost. Social audit of the Employment Guarantee Scheme was carried out by the CBOs as well. The external evaluation by CESS indicates that school drop out rates have decreased and enrollment ratio has increased. 87% of the participant households (as against 80% of non-participants) in Srikakulam and 78% in Adilabad (against 75% of non participants) reported better performance of primary schools. The study also points out that the project had an impact on health seeking behavior in terms of improved anti-natal checks, hospital deliveries, and increased participation in immunization campaigns. The study documented the increased utilization of services provided by Primary Health Centers, ICDS, Employment Guarantee Scheme and veterinary services available at the village and sub-district levels. Proportion of households having immunization cards and children receiving BCG vaccination increased from 78% in the baseline survey to 91% in 2006 among participants. Breast feeding has increased by almost 10% among participants in comparison to non-participants. By and large, the proportion of households who access the various government programs is high among participants as compared to the non-participants. 3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) The PAD assumed: (i) about 620,000 families would directly benefit from the project; (ii) the project investment of US$86 per household would result in an average annual increase of US$ 11.8 per household, breaking even with an IRR of 12% i.e., the project assumed an increase of 1 US$ per month in the household income; (iii) different rates of IRR for generic categories of sub-projects viz., 31% for cattle feed mix, 19% for cotton beds and cushion production, 31% for brass artisan work, 19% for ghee making, 48% for training of para-vets, 36% for fish pond construction, and 14 to 17% for physical infrastructure. All the studies conducted so far (CESS impact study, May 2006 survey and January 2007 survey) clearly indicated that the incremental income benefits to the households are much larger than what was assumed in the PAD. Even more significant is the fact that the project has conferred benefits to a much larger number of households (986,860 households directly through CIF and a much larger number through other sources of finance) than what was envisaged in the PAD. To assess the IRR from project investment in

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sub-project activities, a study was conducted in February 2007 across six project districts covering 475 sub-projects. As shown in Annex V, despite the variations among project districts, in general, the IRR estimates for all the activities under consideration are very high. In addition to the high turnover of income to beneficiary households, it is also possible to conclude that management and operation of the sub-projects has been efficient. In turn, this would ensure sustainability of the sub-projects and the potential to be replicated elsewhere. It should also be noted that most SHGs and their clusters at village levels have become financially viable and credible business entities. They are emerging as important elements in the economic growth of rural AP. 3.4 Justification of Overall Outcome Rating (Combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory The project has exceeded the performance targets envisaged at appraisal and MTR under most indicators. It has also covered a significantly larger geographical area and higher number of households, and has been efficient in delivering outcomes. For details see Sections 3.2, 3.3, and 4. 3.5 Overarching Themes, Other Outcomes and Impacts (If any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development (Poverty impact has been described in section 3.2) Gender and Social Development Aspects Economic Empowerment: • Women are undertaking various forms of self-employment and moving their families from

subsistence livelihoods to more diverse forms of livelihoods. The improved access to resources has enabled a large proportion of SHG women to pursue independent economic activities like household dairy and micro enterprises.

• Women are managing most enterprises run by the VOs, MSs and ZSs. This has led to an increase in participation of women in the rural market economy as they are negotiating with traders, private sector and public sector representatives. Women have demonstrated their leadership ability and management skills through the successful management of food security program, collective procurement and marketing and supply of different types of inputs including seed, plant material, and fertilizers.

• The CESS study and the May 2006 survey highlighted the improved control of women over resources, largely facilitated by the project interventions across all social groups. The study also indicated that decisions relating to purchase of food items and savings, subscription of savings, marriage of children, purchase of immovable property, health expenditure are jointly made at the household level.

Social Empowerment: • Key outcomes of social action through SHGs included prevention of 5000 child marriages and

eradication of the exploitative social practices such as “jogini” (temple concubine) system. Successful campaign against trafficking in women and girl children were conducted in parts of Anantapur and Chittoor district with the support of police, revenue administration and NGOs. Key activities include community based monitoring, developing a para legal cadre, and setting up of vigilance cells as well as provision of alternate livelihoods for the rescued women and children. The CESS study report indicates that the incidence of child marriages declined compared to the baseline among project participants.

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• A study done on a sample of 8,642 SHG members demonstrated that there has been a remarkable improvement in the mobility of SHG women members after joining the group. It is observed that there is a steep decline in domestic violence after the members joined the SHGs. In addition, respect for the SHG women members increased both within the family and within and outside their villages.

• The evaluation by CESS pointed out that SHG members by and large, could bring issues relating to number of children to have, spacing between births and family planning to the collective space thus indicating significant change in the ability of women to exercise reproductive choice within the household.

(b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development):

The project resulted in a substantial institutional development impact at the community level as demonstrated by the following: Development of skills and capacity at the community level: Community Resource Persons at the village level have taken over a lot of responsibilities from the Community Coordinators (CCs) with respect to social mobilization, group building and strengthening processes. The project’s efforts have resulted in availability of a cadre of functionaries trained in social mobilization, value addition, business and enterprise development, logistics management at the village level. The project has created social and human capital on a large scale. Development of a three tier system of community organizations: The three tier system of community organizations has been well established with independent sources of financing and appropriate management structures. The project has developed self managed institutions which provide support at each level, negotiate service provision and linkages with external agencies, provide financial management and auditing services, manage and upgrade skills of various community level functionaries and take up commercial activities on a demand driven basis. It is expected that this federated structure of community organizations will sustain and has reached a threshold level of capacity and institutionalization. Development of Mandal level Training Centers managed by Mandal Samakhyas: Every Mandal is now equipped with a well equipped multi media training and learning centre and is managed by a Training Coordinator paid for by Mandal Samakhyas and management committee consisting of community members. Many external agencies have used these facilities and organized training and learning events. Each training centre has a curriculum developed through a demand driven process. The Mandal Training Centre is an important part of institutionalization of capacity building activities. Development of grass root level social accountability mechanisms. These mechanisms have been a key factor in ensuring a high loan repayment rate (95%) and greater convertibility of loan into assets. The federations and their functionaries are operating as franchises for public and private sector institutions due to high level of trust built between banks and the local functionaries. Government Policy and Programs: The project helped to evolve GOAP's Rural Poverty Reduction Strategy and Program which aims to use institutions of the poor at all levels for implementation of poverty reduction programs being implemented by the Department of Rural Development. The decision to integrate District Rural development Agency (DRDA) 4 with the project implementation structure at District level has helped in integrating key programs for job employment like National Rural Employment

4 DRDAs implement various rural development programs financed by State Government and Central Government.

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Guarantee Program (NREGP) and self employment programs like Swarnajayanthi Gram Swarojgar Yojana (SGSY) with the community institutions and has helped in effective implementation and targeting of these programs. GOAP has doubled the amount of resources compared to what was originally envisaged in the PAD. Supporting capacity building of APSWREIS. Teaching abilities and other related skills of teachers have been strengthened because of their exposure to Computer Aided Learning (CAL) and orientation programs conducted by DIET and CIEFL. Workshops conducted on management development, stress management and refresher courses on administrative and accounting procedures have helped the delivery systems in the educational institutions. Teaching aids, teaching learning materials, library books and lab equipment have facilitated child centered learning process.

(c) Unintended Outcomes and Impacts (positive and negative): Positive Community Level (i) High Extent of Community empowerment. Initially it was envisioned that by the time the project closes, MSs would be generating sufficient income so that they could pay professionals to sustain the project’s outcomes and achievements. But by the end of the project, they have been able to develop sufficient capacity, especially in terms of human resources, to manage most activities by themselves, without depending on outside staff, and to ensure post-project sustainability. (ii) Community Resource Persons (CRPs). The concept of CRPs evolved during the course of the project and has been perfected in the last three years. The experience and managerial capacities of CRPs are currently being tapped to enable MSs to run their organizations. This has helped in scaling up of the program at much lower cost and increased the speed of lateral learning and innovations in the project. (iii) CIF strategy to empower institutions and as a catalytic fund. The project moved away from a strategy of using CIF for assetization to a strategy of using CIF for empowering institutions. Under the original plan CIF was envisioned as a one off activity and it would have been difficult to sustain the interests of community members in institution building once the activity was over. But the CIF was treated by community organizations not as a grant, but as a revolving fund leading to increased recycling and revolution of funds. CIF became a catalytic investment for institution building and demonstrating creditworthiness of the poor to financial institutions. Public and Private Sector Policy Level (iv) Impact on the formal financial sector: The willingness and openness of the banks to finance SHGs has grown exponentially. This kind of enthusiastic response of the banking system to help SHGs and the high level of credit flows to the poor was not originally expected. For details see Section 3.2 (C). (v) Partnership with private sector: The engagement of the project with the private sector has produced remarkable outputs. The project was able to tap the resources of private sector companies such as Dr. Reddy’s Foundation for providing the salary/self-employment oriented training to the educated unemployed youth from the poor households and provide them suitable placement. The project also facilitated training of youth in employment oriented construction activities with the support of National Academy of Construction in all project districts. Similar partnerships were developed with many private sector companies for agribusiness, consumption goods and other livelihood activities. Many private sector companies developed bottom of pyramid markets and products in partnership with the project and community organizations.

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(vi) Adapting the project as a national model in the 11th Five Year Plan. The 11th National Five Year Plan being currently finalized describes the project approach as a national model which needs to be replicated. It also envisages reform of the Central Government programs on Self Employment to be replaced by State Missions on the lines of SERP. A project in the eastern State of Bihar is being designed based on AP approach with technical assistance from the project. These impacts at a systemic level were not originally envisaged. Negative (i) Covering the poorest of the poor. As the program has expanded beyond the level originally envisioned, unless the government closely monitors the progress, it is likely that: (a) the resources currently available may not be sufficient to cover the poorest of the poor; (b) their voices may not be heard; and (c) the benefits of the project will not reach them. The project in the six districts has been dovetailed with the APRPRP project covering all the Districts. (ii) Burden on women. Empowerment of women has indirectly led to putting undue burden on them in terms of time and energy, as they have to manage their own households and the organizations in which they are involved. The change in gender roles has begun with men sharing a lot of chores of the women; however, there is still a lot of ground to be covered. (b) Other Unintended Outcomes and Impacts (positive or negative) 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) Provided in Annex V. 4. Assessment of Risk to Development Outcome Rating: Negligible to Low The project has significantly surpassed all expectations in terms of its outcomes, as demonstrated by the results presented in Section 3.2 and Annex II. In addition following trends point to high likelihood of achieving development outcomes: • The creation of a cadre of trained community activists who are able to do an excellent job of

community mobilization, organization, and capacity-building as well as articulation of community needs and demands is the most visible outcome of the project. The vast reservoir of leadership that has been carefully nurtured has a vast potential for the future sustainability of the institutions of the poor.

• 75% of the SHGs, VOs and MSs fulfilled standards of both financial and non financial parameters related to healthy institutions. About 80% of the SHGs have been linked to Banks and have accessed at least one Bank loan. Savings is regular in about 90% of the SHGs and internal lending has been accepted and practiced as a non negotiable norm

• VOs have emerged as a critical intermediary organization in the institution building process fostered by the project. A vast majority of these institutions are sustainable.

• All the MSs are firmly established. They are fairly self-reliant and largely self managed. They are able to meet their normal expenditure from their income.

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5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory The Bank's performance in the identification, preparation, and appraisal of the project was satisfactory. The project’s objective was consistent with the government’s development priorities and the Bank’s CAS. During preparation and appraisal, the Bank took into account all major relevant aspects. The project design reflected lessons learned from several on-going and completed Bank-financed rural development projects in India. In addition, major risk factors were considered and appropriate mitigating measures were incorporated into the project design. The Bank worked actively with GOAP and their local consultants to develop a computerized financial management system which was subsequently piloted in two DPMUs. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory A Quality of Supervision Assessment was carried out in September 2002 by a QAG panel of reviewers for the project. The panel rated the supervision of the project as satisfactory overall. QAG noted that: “Supervision focused systematically on assuring decisions and speeding up contracting of the schools, the relevant rating was upgraded only after choice of sites and award of contracts. Community awareness, education, and participation in project activities was encouraged as part of supervision to reduce potential for conflict through enhanced perceptions of inclusiveness even by the "better-off poor". The team is aware of progress in the more complex areas and in the panel interview provided meaningful recent examples of movement towards eventually higher impact. Supervision has correctly focused on capacity building in communities, and government (district and state levels) for a truly participative approach relying on community mobilization as against the traditionally supply-driven anti-poverty government programs of the past. The FMS in the Bank's office in Delhi was actively involved in project supervision on a continuous basis, reviewing audits and reviewing the borrowers FM systems and making recommendations for their improvement. PSR ratings for financial management are appropriate - satisfactory. Capacity building measures have also been well supervised. Supervision provided good feedback to adjust implementation so that it was more effective in achieving project objectives. There was excellent continuity in the field and at HQ. The combination of expertise in specialized fiduciary areas, with in-depth HD experience and skills, and an experienced Team Leader is optimal. The Country Office has shown continuous and strong involvement with very significant contributions right through.” The ICR team concurs with the above findings of QAG. According to the ICR team, the Bank's performance during the implementation of the project was satisfactory. The Bank provided technical assistance on a variety of activities – institution building, development of financial products, facilitating market linkages, monitoring and evaluation. It played the role of a catalytic investor in partnership with the GOAP in experimenting and learning from various livelihood interventions such as the Village Procurement Center; Food Credit Line; Micro insurance, development of innovative products for bottom of pyramid markets and bought external best practice to the project in these areas.

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Adequate resources in terms of budget and staff were allocated. The task team carried out intensive supervision through a multi sectoral team. The ratings in the Implementation Status Reports (ISRs) on the performance of the project both in terms of achievement of development objectives and project implementation were realistic. Selection of consultants was reviewed by the Bank in accordance with the provisions stipulated in the Credit Agreement and the Bank's Guidelines for Selection and Employment of Consultants. The task team carried out the MTR in October-November 2003. The Review assessed progress to date on all project components, the implementation issues and the actions to be taken to ensure the successful completion of the project. Procurement under the project mainly consisted of demand-driven community development sub projects and civil works for school component. Procurement under community driven projects involved more than 8,500 sub projects already approved. The review of procurement of goods was also in accordance with the provisions stipulated in the Credit Agreement and the Bank's Guidelines for Procurement. For ensuring fiduciary requirements under the sub projects, the Bank financed a special review, since it was difficult for the Procurement Specialist to cover such large spread of small projects. The financial management and accounting functions were considered satisfactory. The task team constantly strove to improve the quality and impact of its operation on the project by the innovative approach of process monitoring. This approach helped in strengthening CBOs and facilitating their access to technical and financial services. All supervision missions were preceded by a “community supervision mission” carried out by the communities themselves. Project field staff and chairpersons of MSs jointly presented findings to the task team at the beginning of every mission. Based on these findings, field visits were strategically planned for two basic purposes: (i) visiting relevant districts to understand and tackle “problems” as identified by the communities; and (ii) visiting relevant districts to strategize on scaling up successful (and more importantly demand driven) project innovations or best practices. As a result of this “auxiliary supervision,” the Bank team had a better insight and first-hand knowledge of project implementation issues and outcomes than would have otherwise been possible in a project of such size and scope. The task team promoted cross learning activities such as “peer supervision” and sharing of best practices. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory

Based on the Bank performance during lending phase and supervision as discussed in Section 5.1, the overall performance is rated as Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory. The government's commitment to the project was initially demonstrated by its persistent request for Bank assistance for a project focused on poverty reduction and by including all necessary budgetary resources in its plans and budgets. GOAP was seriously concerned about the high level of poverty, illiteracy and poor health and had widely promoted participatory approaches to address the needs of the rural poor. The government supported this commitment by establishing a dedicated team to prepare the project proposal. The government registered SERP as an autonomous society to implement the project with the Chief Minister accepting the Chairmanship of its General Body. In addition, a number of actions were taken to enhance institutional readiness for implementation, including selection of the project mandals, staffing arrangements for the state, district and mandal units, preparation of various manuals and development and testing of the computerized financial management system.

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The government consistently maintained its commitment throughout the implementation. Its commitment and approach to rural poverty reduction was demonstrated in the: (a) Andhra Pradesh: Vision 2020 report; (b) draft concept outline for the RPRP prepared by GOAP in November 2000; and (c) draft White Paper on eradicating poverty and formation of a Poverty Eradication Mission consisting of eminent experts throughout the country. The government further demonstrated its commitment by: (a) providing increased resource allocation for rural development and doubling originally planned allocation for the project; (b) ensuring continuity of senior project management staff, including the Chief Executive Officer and the Project Director who were retained in their positions during the entire project period; (c) unwavering support for the project by the government despite the change of administrations and (d) taking timely corrective measures and making appropriate budget provisions, as a result of which the project did not suffer from any counterpart funding problems.

(b) Implementing Agency or Agencies Performance Rating: Satisfactory SERP designed and implemented various strategies for enhancing the managerial capacities of these institutions like capacity building through regular facilitation, developing linkages with commercial banks, developing market linkages, convergence with line departments and establishment of both internal and external rating systems. The organization’s autonomous status enabled it to select highly committed professionals on fixed-term appointments to implement the project. It was very effective in carrying out all aspects of project management, such as financial management, procurement arrangements, reporting activities, and disbursements. The financial management system including accounting, controls, auditing and reporting was adequate and satisfied the Bank’s financial management requirements. Procurement of all works, goods and technical services under the project followed the Procurement Guidelines “Procurement under IBRD Loans and IDA Credits”. The procurement aspects of the project in relation to CIF sub-projects were managed in a satisfactory manner by SERP. The systems and procedures concerning the procurement function in CIF projects, including compliance with cost benchmarks and recording of purchases in the minutes, at the Sub-project Implementing Agency (SPIA) level were adequate to provide a reasonable degree of fiduciary assurance regarding use of funds. SERP submitted all required quarterly and annual reports in a timely manner. These reports were informative, and provided valuable feedback on the project’s progress. APSWREIS was the implementation agency for the component on support to out-of- school children through residential schools, under APDPIP. APSWREIS, a registered society under the Department of Social Welfare, was responsible for the construction of residential schools and operating them, and got its funds through a budget allocation from the social welfare department (not from SERP). Given its experience of managing a large educational program through residential institutions since 1983, it had both the expertise and capacity to execute this component. A nodal officer was trained, working with the Engineering wing of the Scheduled Caste Corporation of the Social Welfare Department. APSWREIS hired consultants through a competitive process to prepare contract documents, invitation to bid, finalization of contracts and supervision of the construction work. The main procurement included civil works for Schools. Initially APSWREIS did not have procurement capacity and the work was carried out through another GOAP entity. There were certain delays, mainly on account of lack of availability of land and change in sites for schools. The design was also outsourced to private consultants. To expedite the process, the Bank agreed to single-source selection of these consultants. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory In light of the government and implementing agencies’ performance as discussed in Section 5.2, the overall performance of the Borrower was satisfactory.

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6. Lessons Learned (Both project-specific and of wide general application) Important factors for the success of a project: • Factors such as strong political commitment and continuity of project leadership are essential for the

success of a project. (General applicability). • Promotion of trust and group solidarity based on a common purpose is an important element for

building inclusive community institutions. (General applicability). Project Design:

• A poverty reduction project should focus more on building the capacity of rural communities rather than the capacity of the government. This could be done, for example, by designing the project in terms of giving more responsibility to community members and community organizations from the very beginning. Implementation:

• It is not realistic to expect a poverty reduction project such as APDPIP to achieve its objectives within a five year time frame. Such projects should rather be implemented over a long-term horizon, say 10-15 years, so that the government can adopt a programmatic approach towards planning such programs.

• Autonomous institutions such as SERP will need appropriate institutional arrangements, quite different from a normal PIU. This is because such institutions may need to deal with new types of products, such as insurance and marketing. These institutions should have the flexibility to recruit from the open market.

• In hindsight, it would have been better that the follow-up APRPRP was launched at least a year later so that, by that time DPIP could have been more well entrenched and well established without any distractions, and the problems associated with a program expanding too rapidly could have been avoided.

• Capacity building should be given very high priority. Implementation of sub projects should start only after sufficient capacity building is achieved. Any attempt to fast track without proper foundation can result in manipulation and diluting project objectives.

• Scaling up can not happen through external teams. These projects need to invest in community to community mechanisms of scaling up and mobilization. Monitoring:

• Mechanisms for transparency and disclosure, community monitoring and social audit that are incorporated into livelihood projects to ensure effective and efficient use of project funds do have important spill-over effects. For example, these elements induce communities to amplify their voice in making public expenditure work for them by participating in local government processes.

• As compared to normal reviews (post award etc), Social Audit, with a transparency of process and participatory process, is a very effective tool for ensuring fiduciary safeguard. Procurement:

• In hindsight it appears that the Bank should not have agreed to Single Source Selection of Design Consultants for APSWREIS. May be Selection Based on ‘Consultants' Qualification’ could have provided greater transparency without sacrificing on time. There should have also been greater scrutiny of the work of Design Consultants for ensuring that layout is suitable for the given site. Financing:

• Preference for Loans over Grants: CIF given initially as a grant to the MSs and the good micro finance practices have led to multiple doses of loans to the SHG members. The lesson is that outright grant for financing of the income generating activities taken up by the poor has a limited impact. On

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the contrary, loan financing of livelihood activities has a multiplier impact on the livelihoods of the poor through revolution of funds.

• It may be worthwhile to consider the creation of some kind of ‘Innovation Fund’ to try out developing specific relevant products for rural communities, such as new insurance and marketing products, which may require private sector linkage. Community participation, Social mobilization and Institution Building Limits to Social Mobilization: The project has mobilized a large proportion of POP and Poor households into the SHG fold. However, certain households (migrants, seasonal migrants, households with aged persons and the destitute) could not be mobilized into the SHGs. There are inherent limitations to social mobilization. A separate strategy would be required to address households and individuals who cannot be mobilized into the SHGs. Importance of Early Social Mobilization and Capacity Building: The project confirms the lesson learnt from other livelihood programs across the region that promotion of trust and group solidarity based on a common purpose is an important initial element of building inclusive community institutions. The project experience shows that social mobilization and capacity building is process oriented, and therefore, takes time to start-up but produce good results when matured. It implies that project planning should emphasize social mobilization as early in the project cycle as possible. Further, the project management should refrain from expanding the project to other locations in the last phases of the project when adequate time for institution and capacity building is not likely to be available before the end of the project. Need for Homogeneity in CBOs: The project experience shows that SHGs with members from mixed socio-economic backgrounds are less likely to be sustainable. A certain degree of homogeneity in the member background ensures long-term sustainability of the SHGs and prevents the capture of these institutions by the non-poor. This is true of the federations of the SHGs as well. SHGs Vs CIGs: The project experience reveals that common interest groups are less likely to survive in the absence of SHGs. In the absence of micro-finance activities, there was no cementing factor in the CIGs that could ensure their sustainability. Closely knit and functionally effective SHGs are a prerequisite for fund management, asset promotion, retention and its productive use. Importance of Social Capital: A significant output of the APDPIP is the creation of a vast resource of social activists, animators, para-workers and resource persons drawn from the poor and POP households. The valuable resource stock could be used for enhancing implementation efficiency of development programs of the line departments. The APDPIP has successfully demonstrated that the well trained and experienced community resource persons perform the project activities as efficiently as the project staff in a cost effective manner. Importance of Vision Building and Value Inculcation: The sustainability of CBOs critically hinges on the vision of the members and the values they have imbibed. Mere external financial support would not contribute to sustainability of the institutions and promotion of livelihoods of the poor. Integrated CBO Structure with Suitable Governance and Financial Relationships: The project experience suggests that integrated CBO structure (SHGs – VOs – MSs – ZS) could ensure long term sustainability of the institutions, besides facilitating resolution of larger social and livelihood issues affecting the poor. The inter-dependent financial relationships (facilitated by CIF and inter institutional savings and borrowings) would promote the resource base of the institutions and ease the credit constraint faced by the members.

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Importance of Bookkeeping: Institution of appropriate book-keeping arrangements (appropriate books, trained and qualified book-keepers and book-keeping practices) are an essential prerequisite for successful financial management. Providing hand holding support to the book-keepers, periodic auditing of accounts, institution of suitable audit arrangements of the project are an integral part of transparent and accountable financial management for sustainability of the CBOs. Empowerment of women: This requires dialogue with other sections of the community as well. Furthermore, the successful addressing of major social issues at both the community and household levels requires women and men to work in tandem. Decentralized Planning and Management: The introduction of decentralized management involving annual works and finance plans (AWFPs) at the mandal level and the transfer of earmarked project funds directly to the MSs was found to be very effective. Livelihoods and Service Delivery The project demonstrates that while the appropriate starting point may be social capital development, bringing people out of poverty requires an economic purpose and a business rationale for which the establishment of ‘forward linkages’ is key, along with upgrading of skills and means to access, negotiate and tie-up with external markets, partners and service industries. CBOs Provide A Risk Less Credit Market for the Banks: The project experience reveals that the CBOs provide an elastic and risk free credit market for the banks. The very high SHG loan recovery ratio (95%) in the project districts is a testimony to the good repayment behavior of the SHGs. Mature CBOs can Successfully Run Life, Health and Asset Insurance: The ZSs have successfully run life and asset (livestock) insurance schemes at low premiums in the project districts. They have successfully adopted quick redemption procedures. Mature VOs and SHGs have successfully managed health risk fund in the project districts and provided quick financial support for medical treatment. Collective Marketing Activities: The project demonstrates that interventions should aim at clustering of villages in the interests of developing a ‘critical mass’ for marketing and investment purposes. The CBOs have successfully demonstrated their ability to undertake collective procurement of agricultural inputs and outputs and market them for the benefit of the small and marginal farmers and NTFP collectors. These operations have very favorable impact on the over all market prices.

Non-Farm Livelihoods: Due to absence of other viable and feasible livelihood opportunities a large proportion of the project promoted investment went into livestock and allied activities and petty trade and service activities, which are relatively low productive areas. The lesson is that the government and the development projects should focus on promotion of non-farm livelihoods of the poor. Building New Institutions around Livelihoods: While the SHGs, VOs and MSs have proved to be very vibrant organizations efficiently handling complex livelihood activities, there are inherent limitations to their capacities. There is need for developing new institutions around certain livelihoods viz., Dairy, Agriculture, Non Pesticide Management (NPM), Marketing, Non Timber Forest Produce (NTFP), etc. Convergence with Line Departments: Despite the progress in the convergence efforts of the project, there is great scope for promoting coordination with the PRIs and other line departments such as health, education, forest and revenue at the Gram Panchayat, mandal and district level.

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CBOs as Effective Service Delivery Arms of the Government: The experience of APDPIP suggests that the CBOs are a very efficient, economical and effective means of delivering and monitoring government services such as pensions and mid-day meals for school children etc. APSWREIS (Residential schools component)

• After the girls have been rehabilitated through bridge schools, it is important to ensure that girls continue their education till Class X in residential schools so that they do not revert back to being child labor.

• The model of residential schools should be adopted by bridge schools being run under other programs such as National Child Labor Program, DPEP and SSA.

• Investment in computer education, vocational courses, supply of teaching aids, library books and laboratory equipment and sports infrastructure helps to improve the quality of education provided to children and improves overall academic results.

• The excellent performance of the students of APSWREIS both in academic as well as extracurricular activities demonstrates that, when the right opportunity is given to these socio-economically disadvantaged students, they can excel.

• In the selection of residential school sites, it is important to avoid remote places and choose those areas which have better accessibility for medical and other essential facilities for students and teachers. In the absence of better accessibility, it is more difficult to recruit teachers in those schools.

• Not only economic factors, but also social and cultural factors, such as the ignorance of parents due to illiteracy, tradition, and insensitive administrations (including teachers at large) inhibit children from attending school. Evidence from APDPIP suggests that, through the social mobilization approach, parents and children can be motivated to withdraw children from work, and parents, regardless of their economic condition, are willing to send their children to school.

Lessons Learned from Rural Livelihoods Programs in India

Emerging lessons learned so far indicate that: (i) promotion of trust and group solidarity based on a common purpose is an important initial element of building inclusive community institutions; (ii) the use of participatory approaches enhances targeting and inclusion of the poor and disadvantaged, including women, tribals and youth; (iii) interventions should aim at clustering of villages in the interests of developing a ‘critical mass’ for marketing and investment purposes; (iv) the underlying logic of project support should be one of progressive subsidy reduction, while facilitating the set-up of mechanisms for capital formation; (v) establishing links with micro-finance service providers and with the banking sector in general is one of the key program elements, in the interests of sustainability; (vi) while the appropriate starting point may be social capital development, bringing people out of poverty requires an economic purpose and a business rationale for which the establishment of ‘forward linkages’ is key, along with upgrading of skills and means to access, negotiate and tie-up with external markets, partners and service industries; (vii) mechanisms for transparency and disclosure, community monitoring and social audit that are incorporated into livelihoods projects to ensure effective and efficient use of project funds do have important spill-over effects as these elements induce communities to amplify their voice in making public expenditure work for them by participating in local government processes; and (viii) there is a need to recognize the long term nature of the process of multi-faceted engagement with poor households that is typically adopted under livelihoods projects. While taking into account these lessons, scaling up rural livelihoods development in view of growing demand would also require addressing a number of challenges, including the need for: (i) M&E systems that are better tailored to the demand-driven nature of livelihoods interventions; (ii) greater leverage by more explicitly seeking convergence between Bank-supported projects and Government

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programs; and (iii) a more systematic interface with micro-finance institutions aimed at better tailoring the supply of financial services to the needs of organizations of the poor and their members.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Comments by SERP on the ICR report were received electronically and subsequently incorporated. Those comments have been provided in annex 7, on page 66. (b) Co financiers: N.A. (c) Other partners and stakeholders (E.g. NGOs/private sector/civil society)

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate (USD millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

CAPACITY BUILDING 19.01 30.21 159 COMMUNITY INVESTMENT FUNDS 70.40 81.41 116

EDUCATIONAL SUPPORT FOR GIRL 28.13 30.44 108

PROJECT MANAGEMENT 7.20 8.54 119

Total Baseline Cost 124.74 150.60

Physical Contingencies 0.73

0.00

0.00

Price Contingencies 9.33

0.00

0.00

Total Project Costs 134.80 150.60 Project Preparation Fund 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00

Total Financing Required 134.80 150.60 112

(b) Financing

Source of Funds Type of Co financing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Government 16.60 32.40 148 International Development Association (IDA) 111.00 111.00 100

Local Communities 7.20 7.20 100

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Annex 2. Outputs by Component and Implementation Arrangements

Summary of Key Outputs and Outcomes Parameters Before (i.e., 2000) Dec 2006

Social Mobilization

Number of poor mobilized and organized into SHGs

36,000 2,294,215

Cumulative Savings N/A US$113 million Annual Credit Flow from Commercial Banks

US$ 11.6 million US$124 million

Insurance Coverage < 20,000 >500,000

Financial Performance

Food Credit Line (Cumulative Turnover) N/A US$171 million Average Asset Holding per Household US$1032 US$2974 Average Income per Household US$483 US$1041 Economic Average Expenditure per Household US$512 US$708

Component I Institutional and Human Capacity Building Establishment of Self-Reliant and Self-Managed CBOs. The project was successful in establishing self-reliant and self-managed CBOs of the rural poor. The overall achievement of targets for the establishment of CBOs is very satisfactory, based on the following assessment. Successful Social Mobilization: As against an initial target of 180 mandals in the 6 districts, the project was progressively scaled up and implemented in 316 mandals encompassing 6,644 GPs and 29,250 habitations. The project has exceeded the coverage of ‘benefiting’ population by several folds. While the project targeted a total population with ‘family’ impact of 620,000 households (3.05 million population), the project actually mobilized 2,294,215 poor by December 2006. The total households mobilized into the project fold accounted for 65% of the total rural households in the project districts. The percentage of total SC and ST households mobilized into the project fold accounted for 89% and 90%, respectively. A unique feature of the project was the mobilization of single women, women headed households and the disabled or their care-givers into the project target. The focus on the POP, the SC and ST, the single women and the disabled clearly establishes the project’s focus on ultra poor and vulnerable groups. The project had its impact on 10.32 million population in the state which was more than three times the original target. Promotion of Self-reliant and Self-managed SHGs: The project exceeded its target of firmly establishing self-reliant and self-managed CBOs of the poor, including strengthening of the pre-project groups. As against a target of promoting 18,000 new groups (CIGs) and strengthening 20,000 pre-project groups, the project was successful in promoting 106,719 new SHGs, besides reviving and strengthening 64,899 SHGs by December 2006. Equally significant was the sustained facilitation and nurturing support provided by the project frontline staff to the SHGs spread over 316 mandals, resulting in the institution of democratic and micro-finance norms in a vast majority of them. The project facilitated promotion of regular audit of accounts, transparency in bookkeeping and accountability of the SHGs to the members. The sustained institutional and capacity building efforts of the project resulted in the institutionalization of the SHGs. The fact that 68% of the SHGs attained ‘A’ grade (on NABARD rating scale which is a pre-requisite for bank credit to SHGs) by December 2006 is a clear indication of their functional effectiveness in terms of adhering to democratic norms (regular meetings, high member attendance and participatory decision-making) and financial norms (regular savings and inter-lending, collective financial decision-making, need based lending and borrowing, regular bookkeeping etc). Elastic Resource Base of SHGs: Propelled by the regular member savings, earnings from inter-lending, receipt of revolving fund and matching grant subsidy from the government, the resource base of the SHGs has been expanding rapidly. By Dec.’06, the total corpus of the SHGs (excluding project funds) amounted

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to US$127 million (Rs.5600 million). On the average, the corpus per SHG worked out to US$742 in December 2006. External Finance Leveraged: Another significant indicator of the establishment of the SHGs is their ability to access external finance. During the project period, a total of 155,091 SHGs were linked with banks cumulative loan amount of US$425 million. 90% of the total SHGs were able to access bank loans, and 62% of them more than once. The bank loan repayment was 95%. The bankers now treat the SHG loans as risk worthy clients. Total Revolved Funds: The project support in the form of CIF acted as a critical catalyst in facilitating access to external funds for the SHGs. It has facilitated greater revolution of funds at the SHG level. Thus, during the project period (July 2000 to December 2006), the total revolved fund of the SHGs (including CIF, recycled CIF, SGSY subsidy, revolving fund/matching grant, interest subsidy, bank loans and internal loans from own savings and other earnings) amounted to USUS$919 million, at an average of US$5355 per SHG. For a total project investment of US$151 million, the total fund turnover in the SHGs has increased to US$919 million. Similarly, for each US$1 CIF investment, the SHG fund turnover has increased to US$12.3. Establishment of Village Organizations (VOs) As envisaged in the PAD, the project facilitated the formation of VOs of SHGs throughout the project. Though no target was fixed, the project successfully established 9,872 VOs at the rate of at least 1 VO per Gram Panchayat (GP). Though the PAD envisages the VOs as unregistered and informal federations the project provided a statutory basis for the VOs to ensure transparency, downward accountability and long-term sustainability. By December 2006, the project had facilitated registration of 7,453 VOs (75%) under the Andhra Pradesh Mutually Aided Cooperative Societies (APMACs) Act and the registration of other VOs was under progress. VOs as Viable and Functional Units: A large proportion of the VOs matured into self-reliant and self-governing institutions under the close support and supervision of the project. Democratic and financial norms have been instituted in all the VOs (regular monthly/bi-monthly meetings, agenda based discussions and collective decision-making, regular bookkeeping, micro-plan/priority based lending and recovery of CIF from the SHGs, identification and articulation of social issues). The resource base of the VOs has gradually expanded with the CIF support and other receipts from business activities. A sample survey conducted for 1,718 VOs indicated that the average corpus was more than US$1727 per VO. Under the entitlement approach, all the 9,872 VOs were provided CIF support to facilitate implementation of livelihood activities by the poor households. More significantly, 5,092 VOs were successfully undertaking community based food security program involving need based supply of food grains and other essential consumer goods to the poor on easy terms of credit. In addition, 1,543 VOs were undertaking collective marketing activities involving procurement and sale of agricultural commodities, NTFPs and inputs for the benefit of small and marginal farmers. VOs as Forums for Collective Action: The functioning of the VO reveals that they provided a very useful forum for the poor to share their experiences, plan and undertake collective action. An important role played by the VOs was to identify the poor outside the SHGs and mobilize them into new or existing SHGs. They also provided critical support to the revival and functioning of weak groups. The VOs also facilitated some useful linkages with the GPs. Emergence of VOs as Business and Marketing Agents of the Poor: The other major output of the project was the emergence of VOs as business and marketing agents of the poor. More than 1,500 VOs were successfully engaged in purchase of inputs and raw materials, agricultural commodities and marketing to

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benefit from economies of scale. These operations conferred substantial price and non-price benefits on the poor, besides the VOs making substantial surpluses. VOs as Social Service Providers: A considerable number of VOs were engaged in running family counseling centers, supplementary nutrition centers and other community services. Some of them were successfully managing emergency health support services, para-teachers and para health workers. In Vizianagaram, the VOs were supporting the Livestock Insurance run by the ZS. A significant service delivered by the VOs in all the project districts was the distribution of old age and other pensions on behalf of the GOAP. The VOs have earned a reputation for timely distribution of Pensions at the door-step of the pensioners without any leakage. In 2005 – 06, the VOs distributed over US$2 million worth of pensions. VOs as Financial Service Providers: Towards the end of the project, the VOs were emerging as financial intermediaries by securing bulk credit from banks for on-lending to SHGs. Right from the commencement of the project, the allocation and distribution of CIF through the VOs has enhanced their financial intermediary role. Apart from allocating CIF to SHGs, the VOs were playing an active role in the recovery and recycling (inter-group lending) of CIF. During the last two years, the SHGs in a few project mandals started saving with the VOs, under an inter-institutional saving system. Banks used VOs to facilitate recovery of loans. Establishment of Mandal Samakhyas (MSs) As envisaged in the PAD, the project promoted formation of MSs, but earlier than expected. The project promoted MSs initially as confederation of VOs and gradually strengthened them through continuous facilitation support and capacity building. Thus, project has promoted 316 MSs in the project mandals, of which 120 were registered under the APMACs Act up to December 2006. The MSs have gradually become stronger and emerged as mandal level project planning and management agencies. The decentralized funds flow arrangement under which the entitlement of funds of each mandal is transferred to the MS, has made them stronger. The total resource base of the MSs (corpus) at the close of the project was US$66 million at an average of US$0.2 million per MS. The MSs were also undertaking performance review and monitoring of the frontline staff, community resource persons and bookkeepers. Thus, the MSs emerged as strong apex organizations responsible for managing the CIF and carrying forward the mantle of the project. MSs Provide a Forum for Social Action: The MSs emerged as apex mandal federation of CBOs and provided multiple types of support to the SHGs and VOs. The MSs played a critical role in facilitating social mobilization and reviving defunct/dormant SHGs. The MSs periodically reviewed the performance of the SHGs and VOs and provided the critical facilitation support. A significant development was the line department recognition of the MSs as genuine representatives of the poor. The key officials of the district including the district collectors frequently participated in the MS meetings and resolved a number of issues affecting the poor. The banks used the services of MSs to facilitate recovery of bank loans. The MSs provided a larger forum for the poor to articulate social problems and fight against social evils such as illicit distillation and illegal sale of liquor, trafficking in women and children (Anantapur and Chittoor), practice of dedicating girls to local goddesses (Chittoor, Anantapur and Mahabubnagar), child marriages (Chittoor, Vizianagaram and Srikakulam), and child labor in all project districts. MSs Undertake Collective Marketing and Food Security Activities for the Poor: While all the MSs were engaged in management of CIF, 295 of them also undertook food security program benefiting a large number of poor households. In addition, 150 MSs were engaged in business and collective marketing activities in agri commodities and inputs. The MSs undertook supply of quality seed, fertilizer and plant material to the poor households.

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MSs as Decentralized Project Managers: A significant development during the last 2-year phase of the project was the emergence of MSs as project managers at the mandal level under the decentralized management system introduced by the project. The MSs not only received funds directly from the SPMU, but also undertook planning, implementation and monitoring of project activities. The MSs undertook preparation of annual works and finance plans and implemented them under the guidance of the DPMU. The MSs had begun recycling the CIF among the VOs and SHGs. Establishment of Zilla Samakhyas (ZS) Apex CBO: The ZS emerged as the apex district level federation of CBOs in the six project districts. The ZSs facilitated preparation of MS-AWFPs. They provided support for district-wide programs such as collective marketing including NTFP, insurance, land development, training of youth for jobs and promotion of NPM. More importantly, the ZSs bring out the community journal in all the districts (‘Navodayam’ in Chittoor, Janavikasa in Adilabad Mana Velugu in Mahabubnagar etc.) Forum for Collective Action: First, the ZSs acted as forums for discussion and articulation of larger social and developmental issues affecting the poor. Representing all MSs in the district, it provided a useful platform for discussion of issues relating to service delivery by the line departments, land related issues, women empowerment, security and well-being of the weaker sections and social security. ZS as Insurance Intermediary: Second, the ZSs have emerged as life insurance intermediaries in all project districts. The ZSs have promoted low premium life insurance cover for the poor in all project districts, with the support of the public sector insurance companies. The efforts of the ZSs resulted in providing insurance cover for 528,000 women and their spouses in six project districts during 2006-07. The total premium collected during the last year of the project amounted to US$0.8 million. Apart from the quick redemption benefits, the insurance initiatives of the ZSs provided immediate relief for the families of the insured. The benefits also included scholarships for children of the insured studying in high schools and junior colleges (XI and XII grades). Performance Monitoring of DPMU Staff: During the last two years of the project, the ZSs undertook monitoring of the performance of the MSs and guided them to achieving the project objective. As part of the monitoring, the ZSs also undertook performance review of key DPMU staff. The ZS is eventually expected to take over the role of the DPMU. Cross-Learning among ZSs: The quarterly video-conferencing of the SPMU with all the ZSs has not only facilitated effective cross-learning but also made the dissemination of best practices relatively easier throughout the project districts. CRPs and Para-Professionals Functioning (Book-keepers, Activists and Botanists etc): Community Resource Persons played a critical role in the establishment of self-reliant and self-managed CBOs of the poor in the project. Trained and nurtured by the project, the multiple cadres of resource persons (CRPs, Activists, Animators, Facilitators, Bookkeepers, and Para-botanists etc) supported the project in mobilization of the rural poor; formation, revival, development and strengthening of SHGs and VOs in the project mandals; capacity building of the SHGs and VOs; bookkeeping of the SHGs and VOs, and assistance in the preparation of sub-projects/micro-plan for income generating and other activities undertaken by the SHG members and VOs. About 76,000 resource persons (variously called CRPs, MBKs, BKs, Para-professionals, CAs/Facilitators, livelihood activists, etc.) were reported to be supporting the CBOs. This valuable social resource would contribute to the long-term sustainability of the CBOs.

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Promoting Inclusive Approach in Line Departments The project focused on sensitizing the line departments to the strategy of the project and the needs of the poor during the early phases of the project. Structured inputs were provided to the district and the mandal level line department officials. The project also oriented certain key panchayat functionaries to the needs of the rural poor. Productive Partnerships Established with Line Departments and Government Agencies: As envisaged in the PAD, the project has promoted a wide-range of linkages between the CBOs and the line departments, which have proved to be mutually beneficial. Some of the key partnerships fall under a micro- franchising model, while others could be categorized under accessing and outsourcing models: Micro-Franchising Model: Under the franchising model, the CBOs were permitted to act as authorized procurement and marketing agents by line departments and para state agencies. These included: • CBOs acting as seed and fertilizers distributors for APMARKFED in all project districts; • CBOs acting as procurement agents for APMARKFED and APOILFED in all project districts (Maize,

Soybean, Cotton etc); • CBOs acting as procurement agencies for milk collection and chilling for National Dairy Development

Board (NDDB), AP Dairy Development Corporation. The VOs and MSs being permitted by Girijan Cooperative Corporation and Forest Department to act as collecting, grading and marketing agents for their monopoly forest products; and

• CBOs acting as insurance intermediaries for LIC and other public sector insurance companies (e.g., Janashree Bheema Yojana (JBY)).

Accessing Model: Under this model, the CBOs were facilitated and guided to access services from the line departments and state agencies. Some of these included: • CBOs accessing rice from the AP State Civil Supplies Corporation for their rice credit line (RCL), at

Public Distribution System (PDS) rates; • Use of Forest Department agencies or its affiliates (KOVEL Foundation etc.) for training botanists and

Para-Botanists in NTFP collection and management; • Accessing Agricultural Department services for the supply of Agricultural Inputs including Seed,

Fertilizer, Gypsum etc. and for promotion of non-pesticide management (NPM) on a fairly large scale in all project districts;

• Linking-up with Horticulture Department of GOAP for supply of Sprinklers, Plant Material, Fertilizer and technical support (in all TPMUs);

• Accessing the services of the Medical and Health Department for the conduct of health camps and issue of certificates after screening and provision of referral services including surgical corrections for the poor DAPs mobilized by the CBOs;

• The ICDS staff regularly participating in the ‘fixed HN days’ organized by the VOs in the H-N pilot mandals;

• Utilization of the services of the Police and Revenue Departments and the good offices of the Judiciary for resolution of disputes brought to the Family Counseling Centers run by the CBOs and prevention of child marriages, trafficking in women and children and initiation of girls into Jogini practice;

• CBOs organizing veterinary service camps with the support of veterinary department; • CBOs facilitating distribution of aids and appliances to the DAPs with the support of the disabled

welfare department; • Link with the Andhra Pradesh State AIDS Control Society (APSACS). The trained SHG leaders acted

as community resource persons for undertaking a massive HIV/AIDS awareness campaign.

Outsourcing Model: The line departments have outsourced certain services to the CBOs. These included:

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• The District Water Management Agencies (DWMA) using the services of CBOs for identifying the shelf of works, prioritization of works, support for opening of accounts in post offices and banks for the workers and for provision of work-site facilities;

• The Revenue Department using the services of CBOs for identifying suitable land for purchase; and • The DRDA using the services of MSs and VOs for the distribution of old age and other pensions in the

six project districts. The productive linkages promoted between the project and the line departments at the mandal and GP level have contributed to the livelihoods of the poor and sustainability of the CBOs. At the same time, the partnerships have empowered the CBOs to demand responsive governance and accountability for the delivery of essential services. The engagement of the line departments with the CBOs has contributed to the pro-poor impact of their services. Engagement with NGOs: The project used the services of the NGOs for capacity building of CBOs as well as for delivery of certain services. The services of NGOs were used for general CB support, micro finance development, identification of livelihood promotion activities, micro-planning, promotion of NPM, health, nutrition and disability related activities. Component 2. Community Investment Fund Establishment of CIF: The project was successful in establishing the Community Investment Fund (CIF) to finance demand-driven individual and collective livelihood activities of the poor in all project mandals. In line with the project strategy, the project succeeded in establishing mechanisms for demand generation and utilization of the CIF by the CBOs. On the basis of the learning from the early implementation, sub-project financing (plan preparation, appraisal, financing and implementation) was given up in preference to a micro plan approach. The entitlement of each MS is pre-determined based on objective criteria and the CIF transferred. The entitlement to CIF of each VO and SHG are also determined and inter se priorities established on the basis of relative wealth ranking. The micro plans are prepared in all SHGs and the resource needs of each household vis-à-vis the investment activity are identified and documented. The principles governing inter-institutional CIF flows including recycling procedures are clearly established. This is a very significant output of the project. The SHG members have been accessing CIF in conjunction with bank loans and other resources for implementing sub-projects/micro plans. CIF-SPs/Micro Plans Implemented: The project was successful in facilitating implementation of 36,477 income generating sub-projects/VO level micro plans involving utilization of about US$75 million (Rs.3,288 million) of community investment fund during the project period. The sub-projects/micro plans have directly benefited close to one million poor households. Equally significant was the coverage of vulnerable groups. Total Investment/Funds Turnover Promoted: Indirectly, the sub-projects/micro plans have contributed to a much larger investments financed by bank loans, internal loans from SHGs and other funds. Even assuming that only 50% of bank loans and internal loans from SHGs were utilized for investment, then the additional cumulative investment (unadjusted for inflation and apart from CIF) works out to US$384 million. Diversified Portfolio of Income Generating Activities Made Possible by CIF: The establishment of the CIF and the financing of sub-projects/micro plans of the poor have contributed to the diversification of the income generating activities pursued by the members. The utilization certificate based data indicates that a large proportion of the members preferred to invest in agriculture (34%), household dairy (23%), non-farm trade (19%), and sheep rearing (10%). In terms of the proportion of investment, household dairy (30%), agriculture (29%), non-farm trade (20%), and sheep rearing (10%) accounted for the bulk of investment. The sample survey data (May 2006) indicates that during the project period, the beneficiary households diversified their movable and immovable asset base.

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New Business Enterprises Facilitated by CIF (via Training and Investment): The project opened up new areas of profitable business opportunities for the poor farmers, NTFP collectors and dairy farmers. The project invested substantial amounts in training, dissemination of market information, liaison support, infrastructure and working capital to promote new collective business opportunities through the mature CBOs. First, the project invested in identifying areas of interventions which could improve the livelihood opportunities of the poor in the areas of agricultural and NTFP marketing. Second, the project hired the services of livelihood specialists, livelihood associates, community coordinators, botanists, para-workers and provided them training and cross-learning opportunities. The community also trained and prepared the CBOs to undertake collective procurement and marketing operations in agricultural commodities, NTFP and milk. The CIF supported collective procurement and marketing of Red gram, Green gram, Soya bean, Maize, Paddy, NTFPs and provided substantial price and non-price benefits (from correct weighing, grading, timely payment etc.) to the poor. It has contributed to the de-linking of exploitative inter-linked credit and commodity markets. The procurement and marketing of agricultural commodities and NTFPs was undertaken through a network of 695 centers (at VO and MS levels) in the project districts. A larger network of MSs (150), VOs (1,543) and SHGs (14,943) were involved in the procurement and marketing operations funded by CIF. The collective activities had cumulatively benefited 255,000 poor households in the project area. The project investment in the procurement centers for creation of infrastructure (drying platforms, warehouses, weighing and storage equipment) amounted to US$1.8 million. Household dairy enterprise comprised of a significant portion of the CIF disbursed. To make investment in household dairy viable, the project promoted investment in dairy infrastructure including the bulk milk cooling centers and collection infrastructure, besides establishing linkage with bulk milk buyers such as the AP Dairy Development Corporation, the NDDB and the Vishaka Dairy. The project had invested in 47 bulk milk cooling and collection centers and 1,196 milk collection centers in the project districts. The total investment in the bulk milk cooling centers amounted to US$1.9 million. The annual turnover of the bulk milk cooling centers was expected to be close to US$14 million during FY 2006-07. The significant outputs of the intervention are the improved quality of livestock, access of the dairy farmers to the market, better prices and quick repayment. Another significant indirect output is the promotion of community level milk co-operatives in several project mandals, which could emerge as autonomous dairy co-operatives in future. CIF Promoted Food Security: The other significant output of CIF is the improved food security of the poor in the project districts. The project facilitated implementation of a comprehensive community based food security system under which the poor are provided access to food grains and other essential commodities on credit basis. The food security program funded by CIF, including recycled funds, covered 550,000 households during the last year of the project. The program was run with the effective involvement of 295 MSs, 5,092 VOs and 43,220 SHGs. The turnover of the food security program during the last year of the project was US$15 million. The significant results of the intervention include improved food security of the poor, supply of food grains and other essential commodities of good quality at relatively lower prices. CIF Facilitated Social Development Activities/Services: The CIF was also used to promote delivery of supplementary social services. An investment of US$6 million was made in the social development activities/ services. The social development activities taken up included supplementary nutrition centers, family counseling centers, supply of cycles to girl students to improve attendance in schools, residential bridge courses for child labor, schools for the disabled children, silt application for degraded lands owned by SCs, medical camps and pre-examination training centers for students belonging to vulnerable communities. The project also facilitated construction of houses for DAPs, allotment of house sites, grant of seed fund for housing and promotion of individual sanitary toilets. CIF was used to promote the well-

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being of destitute women including single women, women in difficult circumstances and certain semi-nomadic communities. CIF Promoted Jobs for Youth: Promotion of employment, both jobs and self-employment, through appropriate skill building and placement support was an important post-design innovation of the project. As the educated youth were not getting absorbed in the rural and urban sectors, the project took up the task of providing customized training and placement services with the support of private sector organizations. The market linked rural jobs model was extended to train and secure remunerative employment for 11,883 educated youth during the project period. While Dr. Reddy’s Foundation provided the technical support for the market scan and training, the project invested a CIF amount of US$0.5 million towards the training and placement support cost. Remunerative employment was offered in the service, textiles and construction sectors. The average project investment per person trained was US$136 for training periods ranging between 15 to 90 days. The average monthly salary of the employed youth varied between US$45 to US$91. The incremental rate of return on investment for a small sample of youth trained and placed in different jobs works out to 72%. The employed youth are now providing sustained livelihood support to their families who are using the additional income to discharge the high cost debt, finance education of younger children and undertake additional investment in livelihood activities. CIF for Land Access to the Poor: The project facilitated resolution of several outstanding land issues affecting the poor including restoration of assigned lands alienated or under illegal occupation. The project provided support through para-legals, law Students, Law University (NALSAR) and trained land surveyors. CIF for sustainable agriculture activities. Non- Pesticide Management Practices (NPMP) is an alternative model of agriculture which replaces chemical and other external inputs with local knowledge and natural methods of pest management. Moreover, it reduces the cost of cultivation by cutting expenditure on input supplies. Covering 186,000 acres in 2006-07, this is the largest intervention in the country. The unique partnership between NGOs and MSs developed as a community managed extension program covered all major crops. The crop protection from NPMP resulted in a cost savings ranging from about US$40 to US$120 per acre. Through this intervention, there has been a 75% increase in the income of a farmer. In addition, this intervention had positive effects on farmers’ health status and encouraged environmentally sustainable production of cotton. Promotion of organic cultivation was also undertaken in select areas. CIF for Health Risk Fund: Covering over 21,000 households on a pilot basis, the purpose of the community managed risk fund is to provide quick financial support to meet health expenditure including emergency health expenditure. The members of the fund subscribe through additional savings to the fund, while the project invested US$0.3 million (Rs.14.4 million) of CIF. This intervention has significantly reduced high cost debt incurred from informal sources for medical emergencies and reduced the financial constraint that deterred the poor to seek health services of good quality. Component 3. Educational Support for Girl Child Laborers and School Drop-outs. The project supported the construction of twenty four residential school complexes across the six districts to provide quality education to girl child laborers from poor households. The number of girl children enrolled in residential schools was 21,468. In addition, 209,543 out of school children were mainstreamed in other public schools. According to an impact evaluation, the residential schools have outperformed other public schools, in terms of regular attendance, academic results and facilities provided to students. The drop out rate decreased from 14.8% in 2001 to 4.3% in 2005-2006.

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Capacity building workshops in development and stress management for principals, computer aided learning and training programs for teachers and additional study material for students were funded through the project. Also, social mobilization and awareness programs were conducted to sensitize parents and community leaders about the need for education of girls. Component 4. Project Management, Monitoring and Evaluation and Studies. Under this component, State Project Management Unit was established at the State level with six District Project Management Units in six of the project districts. In addition, three Tribal Management Units were operating successfully in three districts of Srikakulam, Vizianagaram and Adilabad where there is considerable concentration of tribal population. Under this component, a comprehensive Monitoring and Evaluation system was established. This has been described in the section 2.3 on M&E on page 10. In addition, SERP commissioned various other topical studies and surveys. Project Implementation and mid course changes and factors affecting implementation The project was not restructured and it was never at risk during implementation. The Bank conducted MTR of the project in October-November 2003. The objectives of the MTR included: (i) reviewing the project progress to date and assess the need for restructuring or reallocation of resources; (ii) reviewing the proposed institutional approach for federated organizations, their organizational and business models and their emergence as deliverers of financial and commercial services; (iii) examining the mechanisms through which federations could work on social empowerment and intermediation issues including social and legal services for the poor; (iv) reviewing the progress made by project management for developing linkages with private sector and other market based organizations for livelihood enhancement; (v) reviewing the progress made in the schools construction component being implemented by Andhra Pradesh Social Welfare Residential Educational Institutions Society (APSWERIS); and (vi) reviewing the human resources and performance of project management systems of Society for Elimination of Rural Poverty (SERP) to handle scaling up throughout the State. The MTR found that some initial assumptions made were no longer relevant and institutional arrangements were not adequate to cope with the challenges posed by this innovative project. Accordingly some changes as mentioned below were made during the mid term review of the project: Organizational arrangements Merger of the District Rural Development Agency (DRDA) and the Project Administration at the District level. During 2003-04, the project was brought under the fold of DRDA, with only one Project Director (PD) for both the DRDA and the project. This convergence helped in improving coordination between the DRDA and the project, dovetailing of funds and functionaries, and ensuring long term support to the CBOs. Creation of Tribal Project Management Units (TPMUs). The state project management created TPMUs in the predominantly tribal areas of Adilabad, Srikakulam and Vizianagaram districts, with the project officer of Integrated Tribal Development Agency (ITDA) acting as the ex-officio Director. This innovative arrangement brought a good degree of convergence between the ITDA and the project activities in the three districts. Changes in Human Resource Deployment. The project introduced a decentralized Area Coordinator System under which each project district had a sub-district tier comprising seven to ten mandals for management of project activities including planning and monitoring. The decentralized system resulted in more effective project implementation. Furthermore, the project hired the services of livelihood associates

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(LAs), botanists and other livelihood specialists depending on the livelihood activities promoted in the mandal. Institutional arrangements at the community level Focus on SHGs and reducing emphasis on CIGs: The concept of CIG, envisaged by the Project Appraisal Document (PAD) as the chief vehicle of livelihood promotion was not found appropriate due to operational hurdles. For example: (a) the CIG concept was not acceptable to the commercial bankers who were keen to provide credit to SHGs because of their track record of thrift and internal repayment; (b) the CIGs were not likely to be sustainable beyond the CIF sub-project implementation; (c) the CIG approach was found inappropriate for recovering CIF and its recycling. As a result, the concept of CIG was temporarily jettisoned. However, the project continued to work on establishment of dairy cooperatives, commodity cooperatives and such other common interest groups. Focus on Federations of SHGs as core institutions: The project focused on promoting and strengthening good quality federations of community organizations to ensure scaling up of livelihood development and credit activities and ensure sustainability of community organizations. The investments on institutional development were increased by 50% to enable development of good quality institutions which will attract investment from banks and commercial organizations and also build collective voice to influence public services. Use of Community Resource Persons (CRPs). The project shifted to a community based capacity building and learning approach which focused on developing community resource persons5 to nurture and build the capacities of the institutions on a sustainable basis. Financing Decentralized Funds Flow Arrangement. Under a decentralized financial management introduced in FY 2004-05, the project funds for each mandal were transferred directly to the MSs (from the State Project Management Unit (SPMU) through the ZSs. Each MS was trained to prepare annual works and financial plan (AWFP), and empowered to undertake sanction and distribution of financial resources for different activities including CIF transfers to VOs and SHGs. This financial arrangement contributed to empowering the CBOs to plan and implement all project activities. CIF-related changes. (a) Changes at sub project level: In the interest of long term sustainability of all the CBOs in a mandal and to facilitate larger and equitable revolution of livelihood funds, the project found MS, instead of VO as the appropriate CIF management agency. The adoption of micro plan approach to CIF further reinforced the need for a higher level institution to act as the CIF manager. (b) Grant to loan financing of sub-projects/activities: The project adopted a revolving fund approach to financing, instead of a grant approach, to the financing of sub-projects/income generating activities. This approach was necessitated to ensure financial discipline within the SHG and to facilitate larger coverage of the poor. The emergence of bank loan as a major co-financing instrument of sub-projects/income generating activities also necessitated the shift from grant to loan approach. This approach enabled community institutions to achieve financial sustainability and proved catalytic to accessing credit from commercial banks. (c) CIF for promoting skills and jobs: CIF was used for expanding job opportunities in the private corporate sector, by investing in training the rural educated youth in appropriate skills and providing them placement support.

5 Community Resource Persons (CRPs) are active community leaders selected by MSs from the members of mature SHGs, VOs and MSs who have first hand experience of coming out of poverty.

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Micro credit planning as basis for community investment: The project promoted use of micro credit planning by SHGs and VOs and found that it proved to be a better vehicle for financing as opposed to the sub project financing. The project started using micro plans as basis for CIF financing. This lead to significant reduction in transaction costs for the community, project and commercial banks. It also ensured that SHGs developed independent capacity to negotiate with commercial banks and reduced dependence on project resources. Targeting approaches Improved Methods of Targeting. (a) Participatory Identification of Poor (PIP): In order to improve the equity impact of the project, a state wide revised list of poorest of the poor (POP) and the poor households was created, using an elaborate and objectively triangulated participatory and transparent approach. The list of the POP and poor households, placed in the public domain, formed the basis not only for project targeting but also for the selection of beneficiaries by the line departments. (b) Entitlement Based Allocation of Funds: To ensure a fair flow of project funds to all the mandals (MSs, VOs and SHGs), the project introduced an entitlement approach to the allocation of project funds. Within the mandal, the allocation to VOs and SHGs was determined on the criterion of the extent of poverty. Within CIF, specific allocations were made for POP and vulnerable households.

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Annex 3. Economic and Financial Analysis (Including assumptions in the analysis)

To assess the IRR of sub-projects, a study was conducted in February 2007 across 6 project districts covering 475 sub-projects. The sub-projects selected constitute about 1.3 percent of the total sub-projects (36,477) implemented by the project up to December 2006 for the IRR study. The selection of different categories of sub-projects was in proportion to the population proportion. The sample sub-projects for which IRR is calculated is furnished below. The study brought out that the IRR was much larger than what was envisaged in PAD for almost all activities.

Table 3. IRR for Select Sub-Projects: APDPIP

Source: SERP-IRR Study, Feb 07 Inferences: The high IRR estimates for a fairly large sample of sub-projects across project districts vis-à-vis the estimated in the PAD indicates that there would be a steady flow of income from the assets created with the catalytic support of CIF. This implies that a great proportion of the activities taken up with the project support are viable and sustainable. A feasibility analysis carried out for the 475 sample sub-projects indicated that 95% of them are feasible. The higher observed propensity to invest from additional income is another significant factor that would sustain the outcomes of the project. The regular subscription of member savings, the responsible repayment behavior and need-based borrowing are strong indicators of the potential sustainability of the project outcomes.

Sl.No. Sub-Project Category Number of Sub-Projects

IRR Range Across Districts (%)

Average IRR (%)

1 Household Dairy 202 36 – 210 103 2 Plough Bullocks 8 42 42 3 Sheep & Goat Farming 124 38 – 73 48 4 Petty Trade 91 25 – 110 76 5 Pot Making 5 123 123 6 Fish vending 7 100 100 7 Coconut Garden Lease 5 174 174 8 Land Purchase 5 39 – 40 40 9 Agricultural Inputs 20 44 44

10 Irrigation & Horticulture 8 50 50

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending Ashok K. Seth Agriculturist SASAR Agriculture Jeeva A. Perumalpillai-Essex Economist SASAR Economic T. K. Balakrishnan Financial Analyst SASAR Finance Tara Vishvanath Economist Economic Ghazala Mansuri Economist Economic Stephen Howes Economist Economic Salman Salman Lawyer LEGMS Legal Paul Martin Environment Specialist Environment Meera Chatterjee Social Development Specialist Social Development Rajat Narula Financial Analyst Finance C. S. Nawathe Rural Engineer Engineering D. J. Baxi Procurement Specialist SASPR Procurement Achim Fock Agricultural Economist Economic William Marke Loan Officer LOAG2 Disbursement Josef Emstberger Economist Economic Parmesh Shah Community Development Specialist SASAR Community Development John Joyce Agricultural Economist Agriculture P. Kotaiah Community Banking Specialist Community Banking Theodosia Karmiris Staff Assistant SASAR Administrative

Supervision/ICR

Parmesh Shah Lead Rural Development Specialist SASSD Task Team Leader

Varalashmi Vemuru Senior Social Development Specialist SASSD Co-Task Team Leader

Jeeva A. Perumalpillai-Essex Lead Operations Officer SASRD Task Team Leader (2000-2003)

Vijaysekar Kalavakonda Financial Analyst FPDSN Health and Private Sector Development Specialist

Assaye Legesse Senior Agricultural Specialist AFTS2 Monitoring and Evaluation Sati Achath Consultant SASSD ICR Report Shweta Banerjee Junior Professional Associate SASSD Monitoring and Evaluation Atul B. Deshpande Financial Management Specialist SARFM Financial Management Ivor Beazeley Senior Financial Management Specialist OPCFM Financial Management Christine H. Allison Lead Human Development Specialist SASHD Human Development Manvinder Mamak Senior Financial Management Specialist SARFM Financial Management Dhimant J. Baxi Senior Procurement Specialist SARPS Procurement Deepal Fernando Procurement Specialist SARPS Procurement Gandham N. V. Ramana Senior Public Health Specialist SASHD Health Venita Kaul Senior Education Specialist SASHD Education Vinayak Ghatate E T Consultant SASSD Livelihoods

Renate Kloeppinger-Todd Rural Finance Advisor ARD Credit and Financial Services

Subramaniam Janakiram Consultant SASSD Communications

Madhavi M. Pillai Senior Natural Resource Management Specialist SASSD Natural Resources

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Keith McLean Senior Social Development Economist ECSSD Panchayats Sankaran Vaideeshwaran Consultant SASES Environment Philip Beauregard Senior Counsel LEGMS Legal Sandra Ursula Sousa Program Assistant (NDO) SASSD Administrative Deborah Lee Ricks Program Assistant (HQ) SASSD Administrative Donna Thompson Senior Financial Management Specialist SARFM Financial Management Anne Ritchie Micro-Finance Specialist AFTH1 Micro-Finance Ajai Nair Consultant ARD Micro-Finance Paul Martin Senior Environmental Specialist AFTSD Environment Julian Barr Consultant Mike Felton Consultant Monitoring and Evaluation Suryanarayan Satish Senior Social Development Specialist SASES Social Development

Manish Bapna Senior Economist SASRD Co-Task Team Leader (2000-2003)

A. K. Seth Agriculturist Agriculture T. K. Balakrishnan Lead Financial Management Specialist AFTFM Financial Management

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks USD Thousands (including travel

and consultant costs) Lending

FY98 0.88 FY99 137.85 FY00 72 245.33 FY01 0.00 FY02 0.00 FY03 0.00 FY04 1.36 FY05 0.00 FY06 0.00 FY07 0.00

Total: 72 385.42

Supervision/ICR FY98 0.00 FY99 0.14 FY00 1 2.57 FY01 19 74.25 FY02 15 51.31 FY03 20 92.42 FY04 31 190.36 FY05 22 102.47 FY06 17 61.17 FY07 22 92.16

Total: 147 666.85

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Annex 5. Beneficiary Survey Results The project conducted three types of beneficiary surveys and a range of other qualitative assessments. These included (i) impact assessment survey covering 2641 households across six project districts conducted by CESS, an independent research organization, over a six year project period, (ii) a sample survey of 2545 households across 6 project districts in May 2006 and (iii) sample survey of 1885 beneficiary households across six project districts conducted in January 2007. Most results have been described in the preceding sections on Outcomes and Impact. Some key results not covered earlier are described below: APDPIP Impact Evaluation by Center for Economic and Social Studies (CESS)

1. Assets: Proportion of households owning land has increased across all Districts. The program has contributed to the participation of the poor in land lease market and improvement in getting clear entitlement of the land. The proportion of households possessing different consumer durables increased among the project participants.

2. Access to credit and savings: The amount of credit accessed per household was nearly US$ 2000

per household during the project period. The composition of credit sources showed a reduction in dependence on high interest informal institutions and increased reliance on commercial banks and CBOs.

3. Livelihood Sources and Income: The overall income per household showed an increase of 115%

over a project period. There is substantial decrease in proportion of income flowing from wage labor and migration. Dependency on migration and agriculture labor as a source of livelihood declined among all households. The level and quality of income has been enhanced.

4. Consumption: The composition of consumption basket among the participants has undergone

change. There is clear shift from food to non food items, and among food items, shift towards non cereals. A substantial increase was noticed in consumption of sugar, jaggery, fruit and vegetables, milk and milk products, edible oil and eggs indicating improvement in nutritional status. The per capita consumption expenditure and quality of consumption basket has improved. Among non food items, there was significant increase in expenditure on clothes, education and health.

Other Impact studies Table 1 summarizes the key impact data not presented earlier about access to credit and financial resources, assetization and consumption expenditure.

Table 1 Per Household Assets, Income and Expenditure Mid 2000 Dec 2006 S.

No. Category Rs. US $ Rs. US $

Absolute Increase

% 1. Total Income 21260 483 45792 1041 1152. Average Investment on

Assets 32808 746 88061 2001 1683. Average Assets Turnover 20853 474 57737 1312 1774. Average Assets Income * 9676 220 25936 589 1685. Value of Assets a. Value of Movable Assets 6331 144 18928 430 189b. Value of Immovable Assets 43376 986 76614 1741 77c. Value of Total Assets 49707 1130 95541 2171 92

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6. Total Expenditure 22533 512 31174 708 38A Expenditure on Food 9899 225 14032 319 42B Expenditure on Health 2988 68 3412 78 14C Expenditure on Education 1828 42 5549 126 204D Other Household

Expenditure** 3201 73 5532 126 73E Interest Payments 4617 105 2648 60 -43

Notes: * income here does not include wage income, subsidies and other transfer payments ** other household expenditure includes subscription to SHG savings and loan repayments

Participation rate in PRIs and other social committees. Prior to joining of the SHGs, the participation rate in PRIs and other social committees for poor women was more or less uniform across all social categories with minimum being 18% for minorities and maximum being 18.9% for Other Castes (OCs). This has drastically changed after the members joined the SHGs. The overall participation rate has improved from 18.7% prior to joining the SHGs to 40.3% as of May 2006. The lowest participation rate after the SHG movement was 38.7% from Backward Caste community and the highest participation rate is from Scheduled Tribe community at 45%. Thus, not only is there improvement in participation rate in PRIs and other social activities but there is also an improvement in participation rate from SC, ST and Minority communities after joining the SHG movement. SHG members across all well being categories have improved their participation rate in PRIs and other social committees. For example, the participation rate by SHG members from rich households increased from 17.1 percent to 48.8% and the participation rates form SHG members of POP families have also improved from 18.7% to 43.3% after joining SHG. Intra-household relations. The members have reported significant improvement in the involvement of men in household work in the last five years. The results show that decision making has changed from being primarily male dominated to greater joint decision making in the family. Around 90 percent of the members reported low level of mobility prior to becoming members of SHGs. At present a vast majority of the members report increased mobility. It is observed that there is a steep decline in domestic violence after the members have joined the SHGs while there is an increase in respect given to the members in the family, in the village, outside village, and also in the community as a whole. Around 90 percent of the respondents reported increase in the respect given to them in terms of all the issues mentioned above.

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Annex 6. Stakeholder Workshop Report and Results At the ICR workshop organized in Hyderabad on January 23, 2007, the stakeholders present were hundred and fifty community representatives and functionaries, district project teams, state project teams, representatives from the Ministry of Rural Development, GOAP, and the World Bank. Following is a brief summary of the remarks and testimonies of stakeholders present, that complements the quantitative data provided earlier with a qualitative account of their perceptions regarding the impact of the project. Chenchu Tribal Leader, Mahabubnagar District “I used to survive on head loading when in 2004, I joined a few others to go and learn from the women in Ananthapur district. After returning, we started weekly savings and received small loans. Initially a lot of people migrated and it was difficult for us to repay the loans. But after starting the food security line, it became much easier. I want to convey, on behalf of my community that there have been a lot of changes for the better. The incidence of Tuberculosis has greatly been reduced, women are using the hospitals for deliveries and more of our children are going to schools”. Community Activist, Mahabubnagar District “I was made a jogini when I was eleven years old by my parents. Joining the SHG gave me confidence and I got married despite opposition, to lead a normal life. There are still thousands of joginis still operating in and around my community, whom we are trying to rehabilitate. We are going to conduct DNA tests for four thousand children of these jogini mothers who are considered illegitimate by the village, to determine the fathers and ask them for support. We want to ensure that the children are proud of their mothers and live a normal life”. Project Officer, Integrated Tribal Development Agency, Utnoor, Adilabad District “Earlier only the big people would come to me, now anybody can call me – so many SHG group members have cell phones and access to my numbers. They voice their issues and ask for advice on a regular basis”. Project Director, District Rural Development Agency, Srikakulam District “The list derived from the participatory identification of the poor conducted by the project is the list used by every government department for efficient targeting of the poor”. Chetna Organic Project, Solidaridad-ETC Organic Cotton Program India ETC Consultants India (www.etc-india.org) is a non-profit firm working on building capacity of small organic farmers in Andhra Pradesh, Maharashtra, Tamil Nadu and Orissa and linking them to the international and domestic market. “Our work in Adilabad District, Andhra Pradesh, has been very successful due to the institutional networks of Indira Kranthi Patham. These networks of VOs and MSs are helping us scale up effectively and manage financial transactions as they already have an in built capacity”. Managing Director, AP Civil Supplies Corporation, GOAP “The procurement centers managed by these SHG members provide us with access that we never had before. We appreciate the skills and management capacity of these women that allow us to procure from small farmers in a cost effective manner. We will be using this model to reform our decentralization strategy”. Commercial Banks The commercial banks indicated that this project has helped them expand the work of their rural branches and made many of their rural branches viable. They would like the project to continue work on developing micro enterprises and business of SHG members. The private sector representatives indicated that there is a huge potential for building market based skills for SHG members and their organizations.

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR I. ICR (Borrower’s) Report By SERP Rural Poverty in Andhra Pradesh presented a grim picture during 1990-2000. The slow growth rate in agriculture, inelastic non-farm livelihood opportunities and stagnant real wage rates slowed down the decline the poverty during the decade. The state had relatively less favorable human development indicators (IMR, MMR, female literacy rate and girl child enrolment ratio). A more distressing feature of poverty in AP was its concentration in Adilabad, Anantapur, Chittoor, Mahabubnagar, Srikakulam and Vizianagaram districts. The GOAP launched the APDPIP to improve the livelihoods of the rural poor in 180 poorest mandals of these districts in June 2000. The project was progressively scaled-up to cover all the 316 rural mandals in the 6 project districts. The financial pattern of the project cost is IDA Credit US $ 111.00 M and GOAP share of US$16.60 M and the community contribution equivalent to US$ 7.20 M. The project period was extended by one year and it actually closed on Dec. 31, 2006. The project was managed by SERP, an autonomous society specially created for this purpose by the GOAP. The SERP-SPMU headed by the CEO and the 6 DPMUs supported by multi-functional units facilitated implementation of the project with CBOs of the poor playing a key role in planning, implementation and monitoring. Built on the experience of UNDP-SAPAP and the on-going SHG movement in AP, the main project development objective (PDO) was to improve the opportunities for the rural poor and vulnerable to meet their own social and economic development needs in the 6 poorest districts. The project investment components include: (i) Institutional and Human Capital Building; (ii) CIF; (iii) Educational support for Girl Child Laborers and School Dropouts; and (iv) Project Management, Monitoring and Evaluation and Studies.

The PDO was relevant to the project area, which were among the poorest in the state, was in consonance with the development priorities of the GOAP’s Ninth and Tenth Five Year Plans (1997-2008) as well as the Bank’s CAS. The project adopted a realistic three fold system of targeting (districts-mandals, SHGs and households) and had made appropriate institutional arrangements for implementing a CDD approach. The project components were organically linked to the PDO. The PDO and the components were not revised at MTR, although several innovative strategic mid-course corrections were made. The quality at entry was very high. The project area was fully prepared for implementing community centered participatory strategy built in APDPIP. The project reached out to about 90% of the poor and POP rural households in the six districts (60% of total rural households) and supported mobilization of 2.371 M rural poor women into 1,71,618 SHGs and 9,872 VOs at the village level, 316 MSs at the mandal level and six ZSs.

The project interventions individually attained their specific outcomes and thus, helped in the overall achievement of the PDO. The impact assessment studies (CESS studies, May ’06 survey, Jan. ’07 survey and the Feb.’07 IRR study) clearly indicate that the PDO is fully achieved. In about six years, the livelihoods of the poor in the 6 districts had undergone a transition in terms of employment, asset base, income, household consumption expenditure and investment behavior.

Asset: The average household asset value for project beneficiaries increased from US$746 (Rs.32808)

in mid-2000 to US$2001(Rs.88061/-) in December 2006 (both at current prices), recording an annual growth of 31%. There was a significant increase in the livestock, land, housing, gold jewelry and other non-farm assets.

Employment: The dependence on wage labor and distress migration declined significantly while the

reliance on self-employment and non-farm sources increased.

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Income: The CESS study indicates that the average household income of the project beneficiaries increased from US$483 (Jan-Dec 2001) to US$1041 (Jan-Dec.2006), registering an absolute increase of 92% at current prices. Whereas for the non-project beneficiaries, the household income increased by about 48% during the same period from US$568 to US$929.

Poverty: Though no estimate of the incidence of poverty was made, the Jan.’07 survey indicates a significant decline in the incidence of poverty among SHG members from 70.8% to 51.4% during the project period.

Household Consumption Expenditure: The expanding asset base and rising incomes of the poor had their impact on the household consumption. The average household expenditure recorded 38% increase, while the expenditure on food increased by 42%. The household expenditure on education recorded a steep increase of 204%. Equally significant was the decline in the proportion of household expenditure on interest payments (- 43%).

Financial Resources Leveraged: The transition in the livelihood economy of the poor was brought about by the substantial increase in financial resources made available to the poor by the project investments in CIF and CBOs. The total revolved fund turnover of the SHGs rose from US$69 M in mid-2000 to US$919 M by December 2006. On the average, each SHG had a turnover of US$ 5355 (Rs.235616) or US$388 (Rs.17052/-) per member. The sharp increase in formal credit to the SHGs, the CIF support and institutional strengthening had contributed to the whopping increase in the fund turnover. For each Rupee of CIF invested, the CBOs had a revolved fund turnover of Rs. 12.3. The total project cost and the revolved fund ratio works out to 1:6.1.

Investment Promoted: The CIF strategy succeeded in triggering investment in livelihood activities. The bank credit linkage of CIF investments and the compulsory beneficiary contribution resulted in the poor investing a much larger amount than the CIF. The CIF investment multiplier worked out to 1:2.9, suggesting that each dollar of CIF triggered a total investment of US$0.07 (Rs.2.9) in livelihood activities. This implies that the total CIF amount of US$75 M would have catalyzed a total investment worth US$217 M during the project period. A substantial number of households which were primarily dependent on wage labor were enabled to invest in household dairy, sheep-rearing, non-farm enterprises, land and housing.

Livelihood Asset Turnover: Along with the investments, the turnover from the livelihood assets of the poor recorded a significant increase during the project. The total investment on livelihood assets increased from US$746 (Rs. 32808/-) per household to US$2001 (Rs. 88061) during the project. The asset turnover per household increased from US$474 to US$1312, while the income from the livelihood assets increased by from US$220 to US$589. While the average household investment value has increased by 34% per annum, the income increased by 35%.

Enlarged Community Asset Base: The project has also contributed to the community’s stock of physical infrastructure (bulk milk cooling centers, procurement and marketing infrastructure etc.) which in turn made several new enterprises of the CBOs viable and feasible (collective procurement and marketing in agri commodities, food grains, NTFPs etc.).

Impact on Consumption: The project had beneficial impact on Food consumption pattern of the household. The average annual household expenditure on Food increased from US$ 280 to US$ 311 showing an increase of 11.2 percent in 2 years and 6 months. More clearly the average annual household consumption expenditure on non-food showed a 20 percent increase from US$174 to US$ 203 during the span of 2 years and 6 months.

Impact on Health, Education and other expenses: Not only the expenditure on consumption but also expenditure on health and education has also increased by 59 percent and 69 percent respectively during the last 2 years and 6 months (CESS Study). The Survey conducted by SERP in January 2007 also reinforced the impact on Food, Health and Education during the project period. As per this survey, expenditure on Food Health and Education increased by 42 percent, 14 percent and 20 percent respectively over the last 5 years. The low increase in health is a reflection of the impact of the project on the member household in avoiding the preventive medical facilities as well as consumption of qualitative food grains because of the Food Security program of the project. The increase in expenditure on education is very impressive and standing testimony to the fact that the SHG members

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want to send their children to higher studies and further, to better Schools, Colleges and Universities. January 2007 Survey also brought out the fact that the expenditure on account of interest payments have gone down by as much as 43 percent during the period of the project.

Working with PRIs and Line Departments: The project interventions had catalytic effect on promoting the inclusiveness in the PRIs in the sense that a large number of women have become aware of the importance of the political processes and the percentage of women contesting for Village Elections has dramatically gone up from 13 percent in July 2002 to 23 percent in May 2006. The CBOs have also taken up various activities in association with line departments such as AP Marketing Federation, National Dairy Development Board, Department of Rural Development, Girijan Cooperative Corporation, etc., to facilitate the effective access of the services of those departments to SHG members. Collective Marketing practices in the project have really helped many poor to obtain better price for their agricultural produce and NTFP produce. Further, the CBOs are collectively involved in Employment Guarantee Scheme, distribution of Pensions, spreading the awareness of AIDS and providing food security through lower prices and better quality Food grains. The activities of CBOs along with line departments have helped in providing the practices of dedicated women to quit child marriages, women and children trafficking, etc., in many cases.

Women Empowerment: After joining the SHGs, the women members have become aware of their rights and duties with regard to their mobility, exposure and access to information. In addition, almost all the women members are taking up independent economic activities to supplement the income of their families. Further, the domestic violence and abuse has considerably gone down compared to pre-project situation. Because of the active role of women members in and around various village activities, the villages have recognized the usefulness of these SHG members as a force to recon with and, therefore, there is a lot of demand for the services of the poor to solve the problems at the village level, household level and individual level.

Self-reliant and self-managed CBOs: The project has been able to mobilize 2.37 Million women into 0.172 Million SHGs in 316 Mandals and 29250 Habitations in the 6 project districts. Further, a total of 9872 Village Organizations are formed along with 316 Mandal Samakhyas and 6 Zilla Samakhyas. The Project has been very inclusive in terms of mobilizing SHG members from vulnerable communities STs, SCs, disabled persons. With the formation of these CBOs, the project has been able to mobilize huge external resources in the form of Bank Loans to the SHGs and to the CBOs. A Total of US$ 425 M was mobilized as bank loans during the last 6 years. Also the CBOs have been able to mobilize total funds of US$ 919 M from various resources during the project period. That is, each US$ 1 invested in the form of Community Investment Fund generated US$ 12.3 in terms of funds available to the SHG members.

Power Relations in Larger Perspective: A vast majority of SHG transcended from mere thrift and credit activities, to taking various activities like social agenda, working with PRIs, working with line departments, etc. Village Organizations are planning to take up multiple roles in collective marketing, food security, insurance, employment guarantee schemes, distribution of pensions, helping the banks in recovery of loans, effective use of community resource persons etc. Similarly, the Mandal Samakhyas play a very important role in taking up social action, collective marketing, Project Management and Annual Works Finance to plan budget and monitor the expenditure in relation to the budget. The Zilla Samakhyas play a crucial role in activities such as Annual Works and Financial Plans, Insurance, Jobs, Food Security and monitoring of the other community based organizations to ensure effective management at all levels. All these activities had a favorable impact on power relations and the poor, in a vast number of project villages, are freed from exploitative inter-linked credit-commodity trade agencies.

Project management, Monitoring and Learning: The project has successfully managed 6 Zilla Samakhyas, 316 Mandal Samakhyas in addition to extending a helping hand to 9872 Village Organizations, 171618 Self Help Groups and 2371393 SHG members. A comprehensive Monitoring and Evaluation system is established in the form of (a) Input and Output Monitoring System, (b) Process Monitoring and (c) Impact Evaluation and Review Systems. A simple and manual MIS system is introduced in the Project Districts wherein information on key indicators of the project was

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collected from the districts. Monthly review reports are being submitted by the SHGs to the VOS, by the VOS to the MSs and by the MSs to the ZSs. District Project Management Units and State Project Management Unit analyze these reports regularly. The development of MIS also included Financial Management System which is fully developed and is in operation in the Project Districts. Process Monitoring has been undertaken regularly. In addition, Base Line Survey, Follow up Survey –I (FUS-I) and Follow up Survey –II reports are submitted as part of evaluation.

Factors Facilitating the Implementation of APDPIP

Continued Support of GOAP to the Project: The creation of SERP as a fairly autonomous organization has facilitated smooth management of the project. The project enjoyed continued support of the GOAP, despite the change of the government in 2004. The introduction of the subsidized interest rate policy of the GOAP, the GOAP’s support to upscale the project to all rural mandals in the project districts, the bringing of the project under the DRDA set up and decision to introduce decentralized planning, management and funds flow arrangement in the project were important policy initiatives of the government, that have ensured continued support to the CBOs even beyond the project period. In addition, the GOAP’s support to the top management of the project facilitated the smooth implementation of the project. Dynamism of Banking Sector: The banking sector in general and commercial banks in particular, responded very positively in increasing the not only the quantum of loan but also the average loan amount to the SHG members. SAPAP Experience and Learning: The SAPAP experience and learning have been great catalysts in the implementation of the project. A significant contribution made by SAPAP is the supply of experienced and trained community resource persons to different project districts for institution building and training of internal activists and resource persons. Support from Line Departments: The line departments not only recognized the CBOs as representative collectives of the poor, but also used them to deliver certain services and activities and to identify beneficiaries for some programs. Costs and Financing: Project costs at appraisal were SDR 82.90 million or US US$134.80 million. In Rupee terms it was equal to 5931.24 million. However, following the change in SDR-USUS$ rate, the cost were revised to US US$143.74 million after the MTR (2003). In addition, because of changes in $- Rupee rate, the costs were finally fixed at Rs.6540.00 million although there was no change in the budget in terms of SDRs. The actual expenditure was Rs. 6625.92 and, thus, there was no funds constraint in the project. Factors Adversely Affecting Implementation and Outcomes Droughts, Floods and Tsunami: The Tsunami had adversely affected the asset base of the fishermen communities and created additional expenditure obligations on the project and had also adversely affected project outcomes in parts of Srikakulam, Adilabad and Anantapur districts. Elections: The conduct of elections to the Union Parliament, the State Assembly and later to the PRIs resulted in temporary suspension of certain key project activities including funding of income generating activities. Lack of Adequate Viable Livelihood Opportunities Outside Agriculture and Livestock: The other factor which had the effect of limiting the livelihood outcomes of the project was the relative lack of livelihood opportunities outside agriculture and livestock development in the rural areas.

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Factors Generally Subject to Government Control: Frequent transfer of Project Directors of some district project units and tribal project units affected the pace of project implementation for sometime. Institutional Sustainability Self reliant and Self Managed CBOs: The project has fostered representative and empowered organizations at the village (SHG and VO), mandal (MS) and the district (ZS) levels, which, in course of project implementation, have acquired self-management and self-governing skills required of grassroots democratic institutions. These institutions have also emerged as fairly efficient micro-finance institutions and fund managers with reasonable degree of book keeping skills. Some of them have acquired the business management skills, having implemented collective economic, food security and marketing activities very efficiently. More importantly, most of the CBOs, having participated in livelihood assessment and micro-planning exercises, acquired generic skills of planning, demand representation and monitoring. A vast majority of these institutions are adhering to statutory audit and other micro finance norms providing a governance mechanism for maintaining own and borrowed funds including livelihood funds are likely to sustain. In addition to SHG bank linkages, the emerging VO – bank linkage could also promote the sustainability of the institution. The substantial amount of CIF provided to the MSs is an important factor contributing to their sustainability. The organic democratic relationship between the MS and the ZS is another factor which would contribute to the sustainability of the MS. Corpus of CBOs: The expanding corpus of the SHGs facilitated by regular savings, internal lending, matching grant/revolving fund assistance etc., and the transparent financial management and accountability systems promoted through regular bookkeeping, identification and training of bookkeepers and collective financial decision making is yet another factor that contributes to the sustainability of the SHGs. Strong Financial and Governance Linkages between SHGs, VOs, MSs and ZSs: A strong financial inter-relationship has been established between the SHGs, VOs, MSs and ZSs through CIF and savings. This system has worked well and is most likely to sustain the integrated relationships. Expanding SHG and VO Bank Linkage and Reduced Credit Constraint of the Poor: The high proportion of SHGs linked to the banks (90% of SHGs;), the high repayment ratio of bank loans, the fairly high average volume of savings US$656 (Rs.28,854) and total funds available with the SHGs US$5355 (Rs. 235,616 per SHG) and the high volume of revolved funds of the SHGs US$919 M (Rs.40,436 million) clearly point to the long-term sustainability of the SHGs. The emerging VO-bank linkage is another potential sustainability factor. The VO bank linkage could transform the VO into a real micro finance institution. Recognition of CBOs by Line Departments, Banks and other Agencies as Representative Institutions of the Poor: The recognition of the SHGs, VOs and the MSs as representative institutions of the poor by the line departments, banks and PRIs is another factor that would contribute to their sustainability. Community Recognizing CBOs as Socially and Economically Useful Institutions: Because of their role in the delivery of certain line department services and identification of beneficiaries, the SHGs and their federations are viewed as very useful, pro-poor and women-friendly institutions. The poor in all the project districts look up to the CBOs as social guides and livelihood advisers Expanding Knowledge, Skills and Competencies of the CBO Functionaries for Self- Management, Business Management, Dispute Resolution and Intermediation: The sustained capacity building efforts of the project through training, exposure/cross-learning, nurturing support of the frontline staff and resource persons and activists on the one hand and the democratic and financial systems instituted on the other have contributed to the knowledge, skills and capabilities of the leaders. A large number of leaders

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have successfully handled micro finance management, dispute resolution and intermediation, procurement and marketing management and bookkeeping. It is the vast reservoir of the trained leaders and activists and community resource persons that are most likely to sustain the institutions. IRR for Select Sub-Projects: The high IRR estimates for a fairly large sample of sub-projects across project districts indicates that there would be a steady flow of income from the assets created with the catalytic support of CIF. This implies that a great proportion of the activities taken up with the project support are viable and sustainable. A feasibility analysis carried out for the 411 sample sub-projects indicated that 95% of them are feasible in terms of the availability of backward and forward linkages. Bank Performance The Bank: The Bank provided valuable inputs in developing the community demand driven strategy which is central to the project. The Bank had a productive dialogue with the GOAP in the areas of social mobilization, development of CBOs, establishing CIF and project implementation arrangements. The Supervision Missions: The Bank Supervision Missions worked closely and intensively with SERP to implement the project. The successive Supervision Missions provided very useful technical inputs and international best practices on social mobilization, institution building, development of financial services and establishment of CIF. The Missions spent lot of time with all the stakeholders in the project and provided useful inputs in each mission. The Missions facilitated some of the such as the move from CIG, Sub-project mode to V.O implementation mode and from there to a Seed Capital support to Miss to fund the micro plans of the VOs, decentralized institutional arrangements for devolving project funds to MSs; etc. The Missions also facilitated several private sector partnerships and forays into new areas of collective marketing. The international workshop organized around MTR provided a very useful forum for cross learning and reevaluation of the strategies. The Borrower: The GOAP appropriately designed the project on the basis of the learning from UNDP-SAPAP and on the strength of the SHG movement in the State. The GOAP has consistently provided strong support for the project. The Department of Rural Development provided the necessary coordination and support for the project. The Department harmonized the interests of the pro poor and social mobilization strategy of the project with the approach of the DRDA and the district line agencies. The GOAP encouraged other line departments to adopt institutions and practices promoted by the project for delivering their services. A key support provided by the State Government to the project was to ensure continuity in the top project management during the entire project implementation. SERP: The SERP has been extremely dedicated and innovative in the implementation of the project. A remarkable aspect of the implementation is the extent which the project top management internalized the values, approach and methods of community demand driven development. The attitudes and behavior of the project staff at all levels was a key factor in the success of the project, especially in promoting institution development and community participation in planning and implementation of the project activities. The top project management provided very effective over sight, guidance and sustained support to the District project units. The DPMUs enjoyed excellent working relationships with the front line staff, facilitators, resource persons and activists. The PDs and DPMs provided close support supervision to the project functionaries and CBOs. Lessons Learned from APDPIP In terms of pro-poor innovative design, diversity of interventions, vast outreach and sustainable impact on the livelihoods of the poor and vulnerable, there is no rival to APDPIP in the contemporary history of rural development in India. The six year long project provides a number of lessons for development

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projects in general and poverty alleviation initiatives in particular. Some of the key lessons emerging from the project are briefly summarized in the following: Autonomous Project Management: The implementation arrangements made for the project mark a watershed in the management of rural development projects in India. An autonomous Society for Elimination of Rural Poverty (SERP) has been created with the Chief Minister as the President, with a good number of members drawn from non-governmental agencies as well as community based organizations. The organizational structure (SERP, Executive Committee, CEO, SPMU, DPMU, etc.,) provided for necessary flexibility, innovation and effective management. The CBOs were effectively involved in planning, implementation and monitoring of the project. The innovative model has several replicable features. Limits to Social Mobilization: The project has mobilized a large proportion of POP and Poor households into the SHG fold. However, certain households (migrants, seasonal migrants, households with aged persons and the destitute) could not be mobilized into the SHGs. There are inherent limitations to social mobilization. A separate strategy would be required to address households and individuals who cannot be mobilized into the SHGs. Importance of Early Social Mobilization and Capacity Building: The project experience shows that social mobilization and capacity building is process oriented, and therefore, takes time to start-up but produce good results when matured. It implies that project planning should emphasize social mobilization as early in the project cycle as possible. Further, the project management should refrain from expanding the project to other locations in the last phases of the project when adequate time for institution and capacity building is not likely to be available before the end of the project. Need for Homogeneity in CBOs: The project experience shows that SHGs with members from mixed socio-economic backgrounds are less likely to be sustainable. A certain degree of homogeneity in the member background ensures long-term sustainability of the SHGs prevents the capture of these institutions by the non-poor. This is true of the federations of the SHGs as well. SHGs Vs CIGs: The project experience reveals that common interest groups are less likely to survive in the absence of SHGs. The CIGs provided no additional economies to scale as envisaged. In the absence of micro-finance activities, there was no cementing factor in the CIGs that could ensure their sustainability. Closely knit and functionally effective SHGs are a prerequisite for fund management, asset promotion, retention and its productive use. Importance of Facilitation and Capacity Building: Facilitation and capacity building support to the CBOs is a critical input that helps community sustainably address their livelihood concerns. Importance of Social Capital: A significant output of the APDPIP is the creation of a vast resource of Social Activists, Animators, Para-Workers and Resource Persons drawn from the poor and POP households. The valuable resource stock could be used for enhancing implementation efficiency of development programs of the line departments. The APDPIP has successfully demonstrated that the well trained and experienced community resource persons perform the project activities as efficiently as the project staff at economical rates. Importance of Vision Building and Value Inculcation: The sustainability of CBOs critically hinges on the vision of the members and the values they have imbibed. Mere external financial support would not contribute to sustainability of the institutions and promotion of livelihoods of the poor. Integrated CBO Structure with Suitable Governance and Financial Relationships: The project experience suggests that integrated CBO structure (SHGs – VOs – MSs – ZS) could ensure long term

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sustainability of the institutions, besides facilitating resolution of larger social and livelihood issues affecting the poor. The inter-dependent financial relationships (facilitated by CIF and inter institutional savings and borrowings) would promote the resource base of the institutions and ease the credit constraint faced by the members. Importance of Bookkeeping and Surplus Sharing Arrangements: Institution of appropriate book-keeping arrangements (appropriate books, trained and qualified book-keepers and book-keeping practices) are an essential prerequisite for successful financial management. Providing hand holding support to the book-keepers, periodic auditing of accounts, institution of suitable audit arrangements of the project are an integral part of transparent and accountable financial management for sustainability of the CBOs. CBOs as Effective IEC Medium: CBOs are an effective IEC medium to reach out to million of households. Information on any line department program affecting the poor can be disseminated effectively and economically through the CBOs. In particular, video conferencing with the CBOs has been found to be very effective in disseminating best practices and other information and for generating a feed back on programs implemented. CBOs as Effective Service Delivery Arms of the Government: The experience of APDPIP suggests that the CBOs are a very efficient, economical and effective means of delivering and monitoring government services such as pensions and mid-day meals for school children, provision of work site facilities for women employed in public works programs, identification of beneficiaries for various programs, execution of works in the place of contractors, etc. CBOs Provide A Risk Less Credit Market for the Banks: The project experience reveals that the CBOs provide an elastic and risk free credit market for the banks. The very high SHG loan recovery ratio (95%) in the project districts is a testimony to the good repayment behavior of the SHGs. Mature CBOs can Successfully Run Life, Health and Asset Insurance: The ZSs have successfully run life and asset (livestock) insurance schemes at low premiums in the project districts. They have successfully adopted quick redemption procedures. Mature VOs and SHGs have successfully managed health risk fund in the project districts and provided quick financial support for medical treatment. Community Based Food Security: A significant outcome of this project is the institution of a community based food security system under which the CBOs assess the food grains requirement of each poor household and provide assured supply of the required amount of commodities at cheaper than market rates. Collective Marketing Activities: The CBOs have successfully demonstrated their ability to undertake collective procurement of agricultural inputs, agri-output and market them for the benefit of the small and marginal farmers and NTFP collectors. These operations very favorable impact on the over all market prices. CBOs as Effective Social Change Agents: The CBOs were very effective agents to bring about desirable social changes in systems such as Jogini in Mahabubnagar, women trafficking in Anantapur and child marriages in Chittoor districts and illicit distillation and sale of illegal liquors in many of the project districts. Multiplier Effect of Skill Development Intervention: The training of youth from poor households and placing them in decent salary employment demonstrated the importance of the private partnerships fostered by the project.

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Decentralized Planning and Management: The introduction of decentralized management involving annual works and finance plans (AWFPs) at the mandal level and the transfer of earmarked project funds directly to the MSs was found to be very effective. Preference for Loans Over Grants: CIF given initially as a grant to the MSs and the good micro finance practices has led to multiple doses of loans to the SHG members. The lesson is that outright grant for financing of the income generating activities taken up by the poor has a limited impact. On the contrary, loan financing of livelihood activities has a multiplier impact on the livelihoods of the poor through revolution of livelihood funds. Non-Farm Livelihoods: Due to absence of other viable and feasible livelihood opportunities a large proportion of the project promoted investment went into livestock and allied activities and petty trade and service activities, which are relatively low productive areas. The lesson is that the government and the development projects should focus on promotion of non-farm livelihoods of the poor. Building New Institutions Around Livelihoods: While the SHGs, VOs and MSs have proved to be very vibrant organizations efficiently handling complex livelihood activities, there are inherent limitations to their capacities. There is need for developing new institutions around certain livelihoods viz., Dairy, Agriculture, NPM, Marketing, NTFP, etc. Convergence with Line Departments: Despite the progress in the convergence efforts of the project, there is great scope for promoting coordination with the PRIs and other line departments such as health, education, forest and revenue at the GP, mandal and district level. Tasks Ahead and Future Plans SHG Book-keeping: The SHGs do not have adequate number of trained book-keepers. Low honorarium, reluctance of some SHGs to pay honorarium and over burdening appeared to be the main reasons for high turn over of book-keepers. The project management is alive to this problem and has taken up identification and training of SHG members in a big way to overcome the problem. VO and MS Bookkeeping: The project has facilitated identification and training of accountants to manage the complex financial transactions of the VOs and MSs. As some of the accountants are recently identified and trained, they need further training and handholding support. Second Line Leadership Development: Sustained capacity building has improved the managerial capabilities of their leaders. However, second line leadership needs to be developed and nurtured in these organizations to ensure sustained governance and financial management. The project’s focus on institution of good practices including leadership rotation is catalyzing the desired change. Statutory Basis for all MSs and VOs: The resource base of the VOs and MSs has been expanding rapidly due to CIF, recycled funds and service payments for discharging a few line department activities/services. However, not all MSs and VOs are registered. Provision of a statutory basis for the CBOs would leave no scope for irregularities and mismanagement of funds. Institution of Mechanisms for Surplus Sharing: With many profit making community level interventions being undertaken clear mechanisms on profit/loss sharing, membership rights, utilization of surplus, dividends, penalties, insurance etc., need to be devised and instituted. While some institutions have already devised mechanisms, others need to follow suit.

Social Audit of VOs and MSs: The project has recently introduced a system of annual report publication, conduct of frequent right to information meetings, social audit along with internal audit mechanisms to

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promote transparency and downward accountability in the VOs and MSs. These areas need to be pursued further.

II. ICR Report by AP RESIDENTIAL SCHOOL SOCIETY, APSWREIS, the implementing agency for the Residential and Bridge Course School Component. 1. Assessment of Development Objective & Design and Quality at Entry 1.1 Original Objective: The main Project development objective is to improve opportunities for rural poor to meet social & economic needs in the six poorest district of Andhra Pradesh. Under the Educational Support to Girl Child Labor and School Drop-outs, the Project seeks to improve access to education for girls to reduce incidence of child labor among the poor. Six district covering 180 mandals (Adilabad, Mahabubnagar, Anathapur, Chittoor, Srikakulam, Vizianagaram) covering the three socio-political regions (Coastal Andhra, Rayalaseema & Telangana) are selected for project implementation on the basis of the following weighted socio-economic criteria.

Percentage of population below the poverty line; Infant mortality rate and hospital beds; Female literacy and female school dropout rate; Ratio of SC/ST population to the total population

Based on the weightings assigned, the two poorest districts in each region were selected. The project envisages greater access to productive assets, infrastructure and social services thereby enabling improved access to secondary education for girls from poor families, as support for formal education through residential schools as well as informal interventions to prepare working children and school dropouts to enter the formal education system greatly reduce future dropout rates and enables most vulnerable and disadvantaged groups in the society for better future. The key components of project design were (i) construction of (24) residential schools complexes & (ii) mainstreaming of girl child labor. Towards these goals, the project financed (3) bridge & (1) regular residential school per district for classes 6th to 12th and other inputs in the project included strengthening of leadership and educational modules, improvement of educational facilities, recruitment and training of teachers and strengthening of management functions at APSWREIS. Assessment: In the initial years, against the target of running of 18 bridge course schools, only 9 bridge course schools were started with an intake of 2790 students. After review by the Mission, the bridge school component was deleted and a decision was taken in consultation with the Bank for running the 18 bridge course residential schools also as regular residential schools from the year 2002-2003 as the bridge school component was being taken care of through RBCs/NRBCs run by the District Primary Education Project (DPEP), Sarva Siksha Abhiyan (SSA) and National Child Labour Project (NCLP) The objectives were realistic involving intervention by Education Department & SSA, whose human resource was utilized for institutional capacity building in areas like providing training to teachers & supplementing project effort in providing learning material and teaching aids to the school.

1.2 Revised Objective:

Except the deletion of the bridge school component, in view of the preponderant role by DPEP, NCLP& SSA in running RBCs/NRBCs, there is no major revision of objective during the course of the Project. Entry level of admissions in Project schools was in class 5 instead of class 6 as originally envisaged in the Project Design, to strengthen core competencies of the bridge school students to cope with the regular syllabus of formal schooling, which is highly competitive.

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1.3 Components Of The Project:

The implementation of Educational Support of Girl Child Labor has the following components:

Construction of 24 residential school complexes; Establishment and Maintenance of 24 residential schools; Other inputs in the project would be strengthening of leadership and educational modules,

improvement of educational facilities, recruitment and training of teachers and strengthening of management functions at APSWREIS.

Assessment:

(i) The construction of 24 residential school complexes in the 6 districts was completed by 2005 satisfactorily.

(ii) However, on account of deletion of the bridge course school component and their conversion into regular residential schools in 18 locations in the newly constructed school complexes also, number of classrooms, number of laboratories and dormitory rooms are insufficient for upgrading the school to intermediate level.

(iii) Moreover, keeping in view the poor core competencies of the girl children enrolled from RBCs/NRBCs the schooling component was revised to include class-V, which was not envisaged in the original schooling pattern. This also placed enormous stress on project resources and added to the accommodation problem. The project while revising its goal did not increase the financial outlay commensurate to meet the teaching needs for running classes up to 12th class and these deficiencies will have to be addressed in the post project period.

(iv) 14157 girl children have been successfully mainstreamed into formal education within the project period.

(v) To strengthen human resource functions the following activities were taken-up: Workshops in Management Development program for Principals were organized to promote

Leadership Qualities in the Principals as Heads of Institutions. Refresher courses on Administrative & Counting procedures were conducted for Principals. At the district level teaching staff were provided Orientation Training Program by DIET. Workshop on Stress Management was imparted to Principals. 10th class study material was prepared by the State Resource Persons for supplementing

classroom teaching. All teachers have been given exposure to Computer Aided Learning (CAL) through Microsoft &

Azim Premji Foundation Vocational courses have been introduced at High School level. To create community awareness and social mobilization in the community, balavelugu and

chinnarula saddassu was conducted to sensitize the parents, and community leaders on importance of education to the girl child and the evils of early child marriage.

1.4 Revised Components:

There was no formal revision of components at Mid Term Review (MTR) although some reallocations across sub-components were made within project outlay.

1.5 Quality at Entry:

Un-Satisfactory: Although project design & preparation had positive features, quality of entry is unsatisfactory for the following reasons;

Lack of community awareness on importance of girl child education & the prevalent practice of early girl child marriages in rural communities;

Non-availability of girl children in the age group relevant for entry into class-VI in the bridge camps, whereby the entry level was reduced to class-V;

Schools were opened at the 24 locations in rented houses which were highly congested & lacked the ideal setup for running a residential school with poor infrastructure;

There was high attrition ranging from 19% to 25%, in the initial years;

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Slow progress in identification and handing over of sites for taking up the construction of permanent residential school complexes.

On the positive side, the project objectives were consistent with national goals of universalization of secondary education with special emphasis on providing free education to the girl child and gender sensitization.

2. Achievement of Objective and Outputs:

2.1 Outcome/ Achievement of Objectives:

Satisfactory: The project interventions individually attained their specific outcomes. The girl child enrolment, which stood at 91.95% in 2001-02, has steadily increased to 112.99% at the time of closure of the project in 2006-07. The academic achievements have also been impressive. During, 2002-03 in 7th class the pass percentage was 97% & in 2005-06 it is 100%.

The performance in SSC has improved from 76.75% to 93.92% with 6 schools at Puttur, Gooty, Hindupur, Sirpur, Jam & Gattu achieving 100% results in SSC.

However, the results in intermediate have not been very encouraging on account of non-availability of qualified part time Junior Lecturers in the schools situated in remote areas.

Residential school infrastructure had a positive impact on girl child education. Backward linkage created to the bridge school has created high demand for admissions with 5446 girls competing for 1920 seats in DPIP schools.

Dropout rates have reduced considerably over the years reflecting parent’s determination to keep the girls in school and effort of APSWREIS and school management to retain girls in schools.

Profiles of (64) girls were selected randomly from Class-V to Class-X in (2) Project Schools. Of the (64) girls, (14) girls worked as Agriculture labor, (20) girls were working at home and

looking after younger sibling and (30) girls had done variety of jobs such as grazing animals, brick kilns and the few had studied and were dropouts before they were located by teachers and activists and brought back to bridge schools.

Most of the girls come from economically disadvantaged families and are first generation learners. Without admission into the Residential Schools the girls would have been denied education.

2.2 Enrollment & Retention Initiatives:

Identification of genuine child labor; Motivation of parents of child labor enrolled in RBC’s to make the children appear for ability test

and enroll their children in Residential Schools; Class to class dropouts monitoring; Loss of instructional classes to students on account of over stay at their homes after mid term

vacations has been reduced; School induction procedure have become more transparent; Norms were changed to allow girls from neighboring districts to be enrolled in the Residential

Schools when vacancies were available. Genuine girl child labor were identified and permitted admission without taking ability tests in

sensitive cases. 2.3 Main Impact:

Enrolment of girls from extremely deprived environment is an achievement. Girls in these schools are role models to not only other children but also parents who other wise

may not have considered sending their daughters to schools. Schools located in backward mandals are prone to trafficking of girls, early marriage and high

incidence of child labor and these schools have acted as change agents in the community. Many parents now preferred to send their girls to schools rather then get them married or send

them to work.

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2.4 Institutional Strengthening:

Institutional capacity building by conduct of workshops on management development, stress management & refresher courses on administrative & accounting procedures has enhanced the delivery systems in the project institutions. Exposure to Computer Aided Learning (CAL) and orientation programs conducted by DIET, CIEFL has enhanced the teaching abilities in the classroom. These programs have generated a high range of skills, and knowledge capital in project schools among teaching personnel enhancing sustainability of interventions in the ground thereby increasing the implementation potential of the Government development machinery.

The supply of teaching aids, teaching learning materials, library books and lab equipment has facilitated child centered learning process. Supply of SSC study material & workbooks has quantitatively & qualitatively improved the results in the public examination going classes.

Setting up of play fields & supply of sports equipment & games material has promoted all round development of the child. Co-curricular & extra curricular activities are encouraged in a big way and students of these schools have won many medals at district, state & national level.

2.5 Financial Impact: The project is in a package of remedial and conventional education through residential regular schools and is relatively more costly than regular day school education. From a simplified cost/benefit analysis it is estimated that after full development of the 24 residential schools to be established under the project, about 3650 girls would reach grade 10 and about 1600 would finish grade 12 each year. Assuming a modest annual incremental economic productivity of an educated girl with grade 10 (US$285) and with grade 12 (US$357) the cash flow analysis results in an IRR of 16 percent. Over and above this education would generate incremental home productivity in the form of personal welfare in the life of the affected women. Educated girls as grown up women and mothers would contribute to the welfare of their families and to their own children. In this context an IRR of 16 percent is a very conservative estimate of the long run economic impact of this component. The direct costs of the component include investment in the buildings and other facilities, the annual operation costs (teachers, meals, books, etc.), and the maintenance and repair cost for the buildings and facilities. Indirect costs are considered as foregone earnings of the working girls estimated at US$71 per year. This wage loss is partly off-set by savings in child support costs estimated at US$23 per year for such items as food and housing, when girls attend boarding schools instead of staying at home or at a work place. 2.5 Assessment: So far, 2601 students have successfully completed their SSC till 2005-06 and they are pursuing further studies in Government Colleges by and large. As such the derivatives in terms of real income could not be measured but the fruits of education would definitely be reflected in the quality of life of their families and the community at large. Student tracking requires to be taken up as a post project exercise to assess the actual gainful employment or entrepreneurial, leadership activities taken up by girl children enrolled in the project financed residential institutions. 3. Major Factors Affecting Implementation and Outcome 3.1 Bank and institutional support enabled the project to achieve the targets within the project period. 3.2 Factors generally subject to Government Control:

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Government supported the project consistently creating operating environment with no significant adverse factor affecting project implementation. The Government supported up scaling of policies and practices adopted under the project and issues relating to release of funds and staffing of project

3.3 Factors generally subject to Implementing Agency Control:

There were some difficulties and delays in the initial years of the project in selection of sites and construction of the permanent residential school complexes, which affected the enrolment and retention rates. As, the students enrolled were first generation learners, the parents and the community had to be sensitized to retain their children in the schools without succumbing to social pressure for early child marriages, which is a prevalent practice in these social groups.

4. Costs and Financing: The project cost at appraisal was USUS$30.42 million or Rs.133.82 crores. Out of project cost Rs.133.82 crores, the Bank share is 98.67 crores. The reimbursement claimed by APSWREIS up to 8/06 is Rs.88.23 crores. The balance amount of Rs.10.44 crores is to be reimbursed from the bank from 9/06 to 12/06. At the closure, 100% of the project funds have been spent amounting to Rs.133.82 crores. Further, the Bank share has been increased to Rs.99.88 crores, instead of 98.67 crores as per reallocation if credit. These changes appear to be a consequence of the projects demand driven implementation mode as per mid term review.

5. Sustainability: 5.1 Rationale for sustainability rating: (i) The overall rating for sustainability – Highly Likely based on the following considerations:

The project has invested substantially in construction of 24 permanent residential schools complexes to create a congenial school environment to promote the learning process and facilitate all round personality development of the girl child;

APDPIP will result in some increase in recurring expenditures during the post project period, which will relate to the cost of teachers, boarding & other incremental operational costs of the residential schools. The incremental requirement would be about USUS$2.6 million equivalent per year. It is estimated that, GOAP would be able to support this level of increased expenditure, since it is only a small percentage of the total budget for the residential schools (AP currently has about 173 such schools) being financed by the Social Welfare Department.

ii) Environmental: As the school complexes are located in spacious campus, there is scope for tree plantation and kitchen gardening. From 2005-06 environmental education has also been included in the academic module of schools & junior colleges, hence this will positively impact the school environment.

(iii) Institutional: The APSWREIS will further enhance the core competencies of the Principals, Teaching & Non-teaching staff manning the project institutions to create a core of committed teachers working for the overall development of the girl child, by strengthening the training component and further exposure to computer aided learning (CAL). 5.2 Transition arrangement to regular operations APSWREIS is running 276 residential educational institutions at present. No problems are envisaged for transition of the 24 project schools to regular residential school, while retaining the goal of mainstreaming girl child labor & school dropouts, as necessary expertise in managing residential schools is available.

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6. Bank and Borrower Performance Bank

6.1 Lending: Satisfactory: The Bank has provided valuable assistance in developing the project objectives, project designs and the project components to make them consistent with national educational goals. 6.2 Supervision: Satisfactory: Despite a slow start to the project, Bank supervision teams worked closely and intensively with the SPMU to achieve the objectives of the project. The Bank provided useful inputs and cleared all proposals especially after Mid Term Review (MTR) and was flexible in implementation goals to encourage and support innovation as per local needs. The project was never at risk during implementation. To consolidate project achievements and help ensure sustainability the project was extended by one year. Finally, the project dispersed 100% of its funds, which is remarkable. 6.3 Overall Bank Performance: Satisfactory: Bank involvement & support was noteworthy and has contributed significantly to project success.

Borrower 6.4 Preparation: Satisfactory: The borrower has appropriately designed the project, while roping in the support of Government agencies like SSA, DPEP & NCLP who are active partners in running of residential & non-residential bridge course schools (RBCs/NRBCs) to prepare the girl child who is either child labor or school dropout to enter formal education provided by the project funded residential schools. Learning from the ground situation, the borrower pragmatically modified the project design to delete the bridge school component and instead took up establishment of regular residential schools at 18 locations to provide formal education to the learners from the bridge schools, which is commendable. 6.5 Government Implementation Performance: Satisfactory: The flow of funds from the Government has been satisfactory. The State Government responded favorably to the funding requests of the project, occasioned by rupee dollar exchange rate movements.

6.6 Implementing Agency: Highly Satisfactory: Overall, the implementing agency has been dedicated, diligent & innovative in project implementation. Initially, there was designed capacity and process related ambiguities. But, implementation effort has been regular and consistent. The project personnel largely project school departmental staff have internalized the spirit and the approach to make the goal of providing educational support to girl child labor & school dropouts.

Success: The Project Management structure provided effective monitoring guidance & support and kept the ground staff highly motivated to achieve the project objectives.

6.7 Overall borrower’s performance: Satisfactory 7. Lessons Learned:

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• Pro poor interventions to mainstream girl child labor and school dropouts are helpful in improving the quality of life of the stakeholder families creating an articulate and resourceful youth in the local communities.

• The goal of providing quality education to girl child labor & school dropouts requires intensive interventions at entry level to measure core competencies i.e., reading, writing and arithmetic skills, graded child monitoring and child centered learning in the initial years to enable the child to cope with the syllabus and be equal partner with other students in formal schools.

• Project experience showed that social mobilization through conduct of sensitization camps for the community particularly mothers facilitated the achievement of targets for school enrolment retention and reducing the dropout rate.

• Involving the Mandal Mahila Samakhyas (MMS) in the admission process has also enabled genuine child labor & school dropouts to access the formal education through project schools.

• Certification from multiple agencies for admission to project schools resulted in long delays in completing admission process. Hence, to facilitate smooth transition from bridge camp to residential school, certification by PD, NCLP is insisted. MEO certification is dispensed with.

• In the initial years of the project there were shortfalls in achieving enrolment and retention targets, but by mid term there was growing demand for admissions and ability tests were conducted to select the students from the bridge schools, improving the quality of intake at entry level, which impacted the results in the public exam going classes.

• A significant output of the project is the up gradation of skills/ capacities of projects staff whose valuable resource stock can be used to enhance implementation efficiency of development programs.

• Accounting & reporting systems in project administrations should be well designed and made feasible for implementation under a computerized financial management system.

• Greater uniformity in recording and reporting system is needed to facilitate comparison as self-project appraisal.

8. Comments by Borrower (SERP) on the ICR Report With regard to negative factors affecting the project, there were many changes in the internal and external environment including inability to get good quality staff, orienting and retaining them. SERP used the following strategies to overcome the problem: (i) Empowering the VOs and MSs to take up more and more management responsibilities. We realized that scale cannot be achieved if the entire work has to be done by the staff. The women groups and their leaders have to be empowered and power has to be devolved to them. They have to take the leadership role. S.P.M.U and D.P.M.U roles changed from ‘doers’ to ‘facilitators’. It is an ongoing process and each year more and more work is done by the VOs and MSs themselves. (ii) Extensive use of CRPs obviated the need for staff, it was more effective, sustainable and a low cost strategy. The project became a project by the people. The beauty of this process was that all investments in institution building done through the CRPs achieved two goals – the quality and speed were much better, and, the money spent on CRPs meant that the training and capacity building funds were going to the poor people themselves. (iii) Standardizing interventions, institution building processes were simplified so that the VOs and MSs could do it by themselves without needing significant external technical assistance.

(iv) All Project Directors went through a four week immersion into the project’s fundamental processes.

With regard to the point made in the ICR about covering the poorest of the poor, the concern raised in ICR is quite important and SPMU and all DPMUs need to come out with a clear strategy to ensure that adequate care is taken to provide exclusive support to PoP groups.

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Please note to date that no comments received from Ministry of Rural Development, Government of India.

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Annex 8. List of Supporting Documents

• Project Implementation Plan • Project Appraisal Document for India: Andhra Pradesh District Poverty Initiative Project

(APDPIP) dated March 20, 2000 (Report No: 20089-IN)

• Aide Memoirs, Back-to-Office Reports, and Implementation Status Reports.

• Project Progress Reports.

• Project Appraisal Document for India: Andhra Pradesh District Rural Poverty Reduction Project (APRPRP) dated January 14, 2003 (Report No: 24771-IN)

• Borrower's Evaluation Report dated February 2007

*including electronic files

Adilabad

Nizamabad

Karimnagar

Warangal

Sangareddi

HYDERABAD

Mahbubnagar

Nalgonda

Khammam

Guntur

Machilipatnam

Srikakulam

Vizianagaram

Vishakhapatnam

Kakinada

Eluru

Kurnool

Anantapur

Cuddapah

Ongole

Nellore

Chittoor

ADILABAD

NIZAMABAD

KARIMNAGAR

MEDAK WARANGAL

RANGAREDDYKHAMMAM

NALGONDA

SRIKAKULAM

VIZIANAGARAM

VISHAKHAPATNAM

EASTGODAVARI

WESTGODAVARI

KRISHNA

GUNTURMAHBUBNAGAR

KURNOOL

PRAKASAM

ANANTAPUR

CUDDAPAH

NELLORE

CHITTOOR

To Raipur

To Wardha

To Jalna

To Parbhani

To Solapur

To D

harw

ad

To Goa

To Hassan

To Coimbatore

To Dindgul

BANGALORE

CHENNAI(MADRAS)

To Wardha

To KoraputTo Jagdalpur

To Bhubaneshwar

Bay ofBengal

Krishna R.Krishna R.

Godavari R.

Godavari R.

Penneru R.

Papa

gni R

.

Kandleru R.

I N D I A

ANDHRA PRADESHDISTRICT POVERTY

INITIATIVES PROJECT

PROJECT DISTRICTS

NATIONAL HIGHWAYS

SELECTED STATE ROADS

RAILROADS

DISTRICT CAPITALS

STATE CAPITALS

DISTRICT BOUNDARIES

STATE BOUNDARY

0 50 100

KILOMETERS

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

IBRD 30693

MARCH 2000