draft national social support programme: synthesis … · draft national social support programme...

Government of Malawi

Ministry of Development Planning and Cooperation

National Social Support Programme

Formulation Process

DRAFT NATIONAL SOCIAL SUPPORT

PROGRAMME: SYNTHESIS REPORT

Munhamo CHISVO

Consultant and Team Leader (Core Team)

October 2010

Draft National Social Support Programme – Synthesis Report

Recommendations from Review of Previous National Social Support Programmes in Malawi /Page i

ACKNOWLEDGEMENTS

This synthesis report has been commissioned by the Ministry of Development

Planning and Cooperation, Government of Malawi with financial support from the

multi-donor support to the road map for the National Social Support Programme

Formulation Process.

The views expressed here are those of the author and do not necessarily reflect the

views of the Government of Malawi or the development partners that have

contributed financially to the exercise.


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page ii

ACRONYMS

AIDS Acquired Immuno Deficiency Syndrome

ATM Automated Teller Machines

CEO Chief Executive Officer

CFLP Cash and Food for Livelihood Pilot

COMSIP Community Savings and Investment Promotion

CSB Corn Soya Blend

CWW Concern Worldwide

FIMA Financial Inclusion in Malawi

FINCA Foundation for International Community Assistance

GDP Gross Domestic Product

HIV Human Immuno Deficiency Virus

IGPWP Income Generating Public Works Programme

ILRAD Irrigation, Rural Livelihoods and Agricultural Development Project

LDF Local Development Fund

MAMN Malawi Microfinance Network

MARDEF Malawi Rural Development Fund

MASAF Malawi Social Action Fund

MDG Millennium Development Goals

MDPC Ministry of Development Planning and Cooperation

MFI Microfinance Institutions

MIPA Malawi Investment Promotion Agency

MIS Management Information System

MK Malawi Kwacha

MM Microloan Found Manager

MoF Ministry of Finance


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page iii

MOU Memorandum of Understanding

MP Member of Parliament

MVP Millennium Village Project

NGO Non Governmental Organisation

NICO National Insurance Company

NSSP National Social Support Programme

ODA Overseas Development Assistance

OSS Operational Self Sufficiency

PMU Project Management Unit

POS Point of Sale

PWP Public Works Programme

SHN School Health and Nutrition

SCT Social Cash Transfers

TA Traditional Authority

UNICEF United Nations Children’s Fund

USD United States Dollar

VSL Village Savings and Loans

WB World Bank

YEDEF Youth Enterprise Development Fund


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page iv

Table of Contents

ACKNOWLEDGEMENTS ...................................................................................................... i

ACRONYMS ......................................................................................................................... ii

EXECUTIVE SUMMARY ..................................................................................................... vi

1 INTRODUCTION ........................................................................................................... 1

2 SYNTHESIS OF FINDINGS ........................................................................................... 2

2.1 Labour-intensive Public Works Programmes ............................................................. 2

2.1.1 Appropriateness of rationale in relation to social support policy objectives ....... 2

2.1.2 Programme coverage, poverty targeting and targeting effectiveness ............... 2

2.1.3 Quality of design of the package of support ..................................................... 4

2.1.4 Results achieved ............................................................................................. 4

2.1.5 Efficiency of delivery mechanisms, cost effectiveness and challenges ............. 6

2.1.6 Sustainability and exit strategies ...................................................................... 6

2.1.7 Potential for scale-up ....................................................................................... 7

2.2 Social Cash Transfers ............................................................................................... 8

2.2.1 Appropriateness of rationale in relation to social support policy objectives ....... 8

2.2.2 Programme coverage, poverty targeting and targeting effectiveness ............... 8

2.2.3 Quality of design of the package of support ..................................................... 9

2.2.4 Results achieved ........................................................................................... 10

2.2.5 Efficiency of delivery mechanisms, cost effectiveness and challenges ........... 12

2.2.6 Sustainability and exit strategies .................................................................... 12

2.2.7 Potential for scale-up ..................................................................................... 13

2.3 Village Savings and Lending Schemes .................................................................... 14

2.3.1 Appropriateness of rationale in relation to social support policy objectives ..... 14

2.3.2 Programme coverage, poverty targeting and targeting effectiveness ............. 14

2.3.3 Quality of design of the package of support ................................................... 15





2.4 Microcredit ............................................................................................................... 18





Recommendations from Review of Previous National Social Support Programmes in Malawi /Page v





2.5 School Meals ........................................................................................................... 23








3 KEY MESSAGES FOR THE DESIGN OF THE NSSP ................................................. 27

3.1 Enhancing the design of intervention packages for poverty impact .......................... 27

3.2 Reaching the poor – enhancing targeting ................................................................ 29

3.3 Expanding the scale of operation ............................................................................. 29

3.4 Strengthen integration of social support instruments into a holistic package with clear

graduation pathways and exit strategies .................................................................. 30

3.5 Rationalise institutional arrangements ..................................................................... 31

3.6 Infrastructure development remains key to optimal delivery of social support

programmes ............................................................................................................ 31

4 INFORMATION GAPS AND RECOMMENDED NEXT STEPS .................................... 31

5 ANNEX 1: DOCUMENTS AVAILABLE FOR REVIEW ................................................ 32


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page vi

EXECUTIVE SUMMARY

This Synthesis Report presents emerging findings, key conclusions and recommendations from the participatory review of a wide range of social support interventions currently being implemented in Malawi. The review was undertaken during the period March – July 2010 as the first step in the process of formulating the national social support programme (NSSP). The analysis focused mainly on programmes that are using either one or a combination of the following five types of social support instruments:

• labour-intensive public works programmes (PWP); • social cash transfers (SCT); • village savings and lending (VS&L); • microfinance; and • school meals.

Three approaches were adopted for analysing current programmes: (i) review of literature; (ii) field visits to interview project stakeholders including beneficiaries; and (iii) a series of national workshops with implementers that were facilitated by subject matter specialists with hands-on experience in implementation of the instruments. In this regard, five workshops were held in Lilongwe1.

Key Findings, Conclusions and Recommendations

The review findings clearly confirm that Malawi has a good mix of instruments for social support, whose objectives are well aligned with the goals of the national social support policy and should thus be carried into the NSSP. Past experience both in Malawi and internationally confirms that the instruments being used, if properly designed and implemented, can contribute significantly to MGD impacts, especially MDG 1, 2 and 72. Instruments such as public works programmes and social cash transfers have the potential to (a) increase incomes of the poorest households by as much as 50-100%, (b) reduce the poverty gap among beneficiaries by up to 36%, (c) improve the nutrition status of up to 70% of participating households, and (d) increase years of schooling and educational attainment for children from poor families. They are contributing significantly to the improvement of the living conditions of the poor, including quality of their shelter, water and sanitation. With an improved design, they have the potential to unlock economic multipliers of up to 2.5 times the value of the cash transfer distributed thus effectively helping to mitigate the effects of the global financial crisis on small economies like Malawi.

Public works programmes have an added advantage of complementing the conditional cash transfers with the creation of social and economic assets (both in the form of household and community infrastructure) that improves access of the poor people to income earning opportunities and critical social services or contribute as well (e.g., through agro-forestry projects) to environmental management. Income transfers are strongly linked to the farm input subsidy and subsidies in the social 1 Reports are available for the field visits, and the five stakeholder workshops convened.

2 Goal 1: “Eradicate Extreme Poverty and Hunger”; Goal 2: “Achieve Universal Primary Education”; Goal 3:

“Promote gender equality and empower women”; Goal 7: “Ensure environmental sustainability”.


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page vii

sectors thus increasing access of the poor people to farm inputs and critical social services.

Microfinance on the other hand is playing many functions, including gender and economic empowerment of the poor and marginalised groups such as women and the youths and, in the process, strengthening their coping capacities and resilience. The economic empowerment of women is contributing to a marked reduction in their vulnerability to HIV infection and gender based violence.

Forestry-related PWP programmes on the other hand, while taking longer time (at least 4 years) to create tangible benefits, are critical for mitigating the effects of climate change in the longer run by restoring forest cover and contributing to the reduction of environmental degradation.

However, to fully achieve this potential, the instruments used in Malawi need to be improved in terms of their precision in poverty targeting, the packages of support must be enhanced for poverty impact, and their scope scaled up to reach more poor people. The programmes should systematically integrate impact assessment in order to track the changes in poverty arising from the interventions. Predictable and reliable funding sources and mechanisms for disbursing and accounting for the funds are needed but creation of parallel structures for fund management should be avoided, with greater focus being placed instead on supporting, revitalising and building national systems including those for decentralisation, such as the local development fund.

Enhancing the design of intervention packages for poverty impact

There is a wide variation of generosity across interventions even under the same type of instrument. This is partly due to differences in programme objectives and, more importantly, the absence of empirical work to determine the smallest transfer necessary to achieve the desired impact on intended outcomes. Whilst many social support programmes in Malawi on paper aim to achieve poverty reduction, it is not clear how they intend to achieve this objective through the level of transfer, which in most cases is too low and eroded by inflation over time thus eroding the potential impact on poverty. Consequently, most interventions have only been able to lift the poor from ultra-poverty to moderate poverty but not completely above the total poverty line due to the low level of support (value of transfer). Interventions with high levels of start-up support (e.g., irrigation projects which come with free start-up inputs) are achieving more in terms of poverty impact than those whose support comes in small quantities (e.g., forestry projects, micro-finance schemes with small loan sizes) or intermittently (social cash transfers that experience pipeline breaks).

To lift the poor out of poverty, it appears the levels of transfer should be increased for most interventions, being explicitly linked to some objective measures such as the income gap of expected beneficiaries, or the cost of an “adequate food basket”. This implies that the poverty levels of the target groups must be known, before hand (through baseline surveys) and the level of transfer is varied according to poverty characteristics at household level, and indexed to inflation to ensure that the value of transfer is not eroded over time.

The duration of the workfare (number of days of employment provided by the public works) should be compared with the average number of days of idleness during the


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page viii

slack season. The school meals programme should assess adequacy of the nutritional supplement it provides against the nutritional deficit of a child in school.

As a general rule, from a poverty impact perspective, the level of transfer should reflect two objectives: reducing current poverty among beneficiaries and enabling meaningful investments in productive capacity and asset base (including human capital) as a way of lifting the poor out of poverty.

In enhancing the design, one of the important steps for Malawi is to develop standardised packages of support based on what has been proven to work in achieving the stated objectives. Government should thus be prepared to test the suitability of different sizes of support packages in a selected number of districts in terms of meeting goals of the social support policy. These experiments should be integrated into on-going longer term programmes rather than short term pilots which do not give enough room for impact assessment.

Reaching the poor – enhancing targeting

The poverty vulnerability profiles of people reached by most social support programmes in Malawi are not known so is the poverty impact of these programmes. For current interventions to become more pro-poor whom they target should be known a priori (through good baselines) and mechanisms to reach the right target group for each instrument put in place. So far, self-targeting wage rates are used and work well in some low wage public works programmes, but in others where the wages are higher the workfares are oversubscribed and targeting is a real challenge. For social cash transfer the arbitrary 10% cut off point for determining reach at community level, introduces challenges in districts where the proportion of the labour constrained ultra-poor exceeds 10% of the population, as those in need exceed the cut-off point. The cut-off points should in future be objectively determined on the basis of the actual levels of poverty prevalent in the respective districts.

A combination of community-based and scientific methods of targeting (such as means tests) is essential for reducing inclusion/exclusion errors in most community targeted programmes.

Significant investment in operational research (good baselines and longitudinal impact assessments) is needed to improve targeting. Key poverty related indicators should thus be developed to inform targeting and improve monitoring of the poverty impact, graduation and exit of clients. Each social instrument needs a standard set of poverty impact indicators to evaluate the impacts.

Expanding the scale of operation

Most social support interventions have a very small reach when compared to the magnitude of the population in need (they reach less than 30% of deserving households). All need significant scaling up (e.g., by a factor of 2 or 3). The potential to scale them up exists but the most critical requirement is adequate and predictable funding. This calls on the government, first and foremost, to commit a substantial proportion of the national budget to social support instruments (especially public works, social cash transfers, and micro-finance), and where necessary adjusting allocations to some of the on-going programmes (such as farm input subsidy) to achieve an optimal balance. In the case of micro-finance, availing affordable working


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page ix

capital, levelling the playing field for players in the sector and facilitating the supply of skills are likely to see the sector grow exponentially as these two constitute the most critical constraints.

Government alone may not be able to marshal the resources needed in the short term (estimated at more than 10% of GDP). Strong donor, NGO and private sector support is critical for delivery of a technically sound national social support programme that has the right mix of instruments, sufficiently high levels of transfers, sufficiently long periods of benefit and optimal reach to the poor.

Strengthen integration of social support instruments into a holistic package

with clear graduation pathways and exit strategies

Past social support instruments have been designed and operated in isolation of other complementary forms of social support. Not enough attention has been paid to ensuring that individual social support programmes fit into a congruent whole and that social support complements the country’s other social policies. While the public works instrument has been adapted to complement the farm input subsidy, and works well in this regard, VS&L which can complement and become an exit strategy for social cash transfers, public works programmes and micro-finance is not systematically integrated into the design of these instruments. Programmes that could complement each other have not always reached the same groups of people largely due to differences in objectives, scope and targeting criteria. The problem with this situation is a tendency by current programmes to spread out too thinly for coverage but achieving very limited impact with the limited resources available.

Another major finding of the review is that many programmes do not articulate clearly the graduation pathways out of poverty. Exit strategies are also missing. More work is needed to ensure that social support programmes aim not only to provide transfers but also other types of assistance to help households increase their autonomous incomes. This will entail selective bundling up and customising social support and other critical services for the poor and vulnerable in strategic ways that (a) generate positive synergistic effects, (b) provide a logical continuum of support from the level of the labour constrained ultra-poor, to that of the labour resourced ultra-poor and finally to the moderately poor and (c) provide a clear graduation pathway for the poor as a “conveyor belt” to household independence. A richer mix of instruments can ensure that the underlying problem of poverty is addressed without necessarily creating a dependency on welfare.

To improve coherence and synergy between social support instruments in Malawi, a critical step will be the introduction of harmonised targeting. The country should seriously consider adopting one targeting system for all social support interventions. A system to harmonise targeting of social support interventions is of paramount importance. The poverty and vulnerability status of each household in the village should be established through a baseline assessment, households should then be ranked and the most appropriate package of social support intervention for each poor household determined. Such a targeting exercise may require the setting up of a comprehensive national database to improve efficiency in beneficiary selection.


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page x

Rationalise institutional arrangements

There is merit in moving away from a situation where the country has several fragmented programmes using the same type of instrument (e.g., public works) to comprehensive programmes. The country should, for example, consider moving away from fragmented public works programmes to one holistic programme. The country could also consider the same institution implementing a programme using different approaches.

These strategies will reduce transaction costs arising from the running of several parallel institutional arrangements (steering committees, advisory committees, and management committees at national and the sub-national level) for different smaller projects in some cases a similar programme implemented differently by the same institution.

Infrastructure development remains key to optimal delivery of social support

programmes

Reducing the cost of delivering social transfers will require the continued upgrading of transport, communications and energy infrastructure, especially in the rural areas. There is a clear need to introduce automated systems for delivering transfers (e.g., social cash transfers) as part of scale-up efforts, but electronic payment systems work well when complementary infrastructure is functional and efficient. Upgrading of infrastructure will thus remain critical to improving efficiency of social support delivery mechanisms.

Information Gaps and Recommended Next Steps

Drawing from the key messages above, the next steps in the design should focus on the following steps:

1. Identifying tools that have been developed elsewhere to harmonise targeting of social support programmes.

2. Identifying examples of good practice in combining community and scientific methods for targeting.

3. Identifying good examples of programme integration – especially to find out how different instruments of social support can be combined for synergy and impact.

4. Exploring possibilities of moving from fragmented projects to more comprehensive programmes.

5. Identifying impact indicators that can be used to track the performance of a comprehensive social support programme. (WB to support

6. Exploring the feasibility of funding various social support instruments through the national budget, including analysis of various institutional options for fund management and delivery.

7. Identifying appropriate levels of transfer for the various social support interventions being considered in Malawi.


Recommendations from Review of Previous National Social Support Programmes in Malawi /Page 1

1 INTRODUCTION This Synthesis Report presents emerging findings, key conclusions and recommendations from the participatory review of a wide range of social support interventions currently being implemented in Malawi. The review was undertaken during the period March – July 2010 as the first step in the process of formulating the national social support programme (NSSP). The analysis focused mainly on programmes that are using either one or a combination of the following five types of social support instruments:

• labour-intensive public works programmes (PWP); • social cash transfers (SCT); • village savings and lending (VS&L); • microfinance; and • school meals.

Three approaches were adopted for analysing current programmes: (i) review of literature (e.g., programme design documents, operational manuals and external evaluations/impact studies); (ii) field visits to interview project stakeholders including beneficiaries (using focus group discussions and key informant interviews); and (iii) a series of national workshops with implementers that were facilitated by subject matter specialists with hands-on experience in implementation of the instruments. In this regard, five workshops were held in Lilongwe3. Each programme was reviewed based on a fixed set of seven main criteria to standardise the process and allow comparisons to be made across the various instruments so as to build a holistic picture in terms of the niches of the various instruments in relation to addressing needs at different layers of the poverty profile identified by the Malawi National Social Support Policy. The poverty profile identifies 3 main groups or categories into which poor households fall: (i) the moderately poor (estimated at 25% of the population by the Welfare Monitoring Survey of 2008); (ii) the ultra-poor but who have some labour capacity to engage in productive work; and (iii) the ultra-poor who at the same time have a labour shortage either due to age (e.g., where the head of household is either a child (below 18) or too old to be able to work), or illness or a high dependency ratio. The seven assessment criteria were:

1. Appropriateness of rationale in relation to objectives of the national social support policy;

2. Programme coverage, poverty targeting and targeting effectiveness; 3. Quality of design of the package of support (including type, level and

frequency of support); 4. Results achieved (e.g., number of poor people reached by poverty category,

needs met and poverty impact/graduation out of poverty); 5. Efficiency of delivery mechanisms, cost effectiveness and challenges; 6. Sustainability of the intervention and its impacts, and exit strategies (e.g.,

linkages to other social support programmes); and

3 Reports are available for the field visits, and the five stakeholder workshops convened.



7. Potential for scale-up (this is in terms of unmet needs and availability of both technical capacity and funding).

The results of the analyses are synthesised by type of social support instrument and assessment criteria in Chapter 2 of the report starting with PWP and moving to SCT, then VS&L, microfinance, and ending with school meals. Chapter 3 highlights the main conclusions emerging from the synthesis and conveys key messages for the design of the national social support programme. The fourth and final Chapter brings to light the information gaps and offers some recommendations on the next steps to completion of the programme formulation exercise.

2 SYNTHESIS OF FINDINGS

2.1 Labour-intensive Public Works Programmes

2.1.1 Appropriateness of rationale in relation to social support policy objectives

The goals of the current PWP vary but are well aligned with all four goals of the social support policy. They seek to (1) address the immediate pressing needs of the very poorest by generating employment and providing complementary inputs, (2) improve resilience and prevent further erosion of assets of poor people through income support, (3) increase the productive capacity and asset base of the poor people so as to lift them out of poverty, (4) establish coherent and progressive social support synergies for wider poverty impact and policy influencing through linking PWP to the farm input subsidy and in the case of MASAF, linking PWP to VS&L. The Malawi Social Action Fund has components that link PWP to the farm input subsidy, while ILRAD tries to fill the gap with agricultural credit but beyond these, the other possible linkages are not explicitly pursued as specific programme objectives. Yet, apart from these linkages, many other opportunities exist for more systematic linking of PWP to other social support instruments, for example, VS&L and micro-credit for irrigation-oriented cash for asset public works programmes, but the linkages are not emphasised in the objectives of the current portfolio of PWP programmes. There is therefore the need to tap into the vast potential to integrate PWP with other social support instruments (for example, directly linking Income Generating Public Works Programme (IGPWP) interventions with VS&L as was the case with Care Malawi. Most of the objectives of the current PWP have a rural focus, yet urban poverty is also a growing phenomenon that warrants greater attention in the future.

2.1.2 Programme coverage, poverty targeting and targeting effectiveness Geographic coverage: Most PWP have poverty at the centre of their targeting criteria. However, geographic targeting of the current PWP portfolio is not coordinated. For example, district selection criteria are not harmonised across various PWP, due to differences in objectives and life spans of the programmes and the fact that PWP in Malawi are designed as parallel projects, separately funded by different development partners. They are not jointly designed and funded as a holistic package for labour endowed ultra-poor households.



For example, IGPWP is in 15 districts selected using a poverty-based formula. Cash for Livelihood Programme (CFLP) was an 8 month pilot programme addressing acute hunger and experimenting on different combinations of assistance (food only, cash only, and food and cash). It covered only 5 traditional authorities (TAs) in 2 districts which were selected on the basis of presence of other WFP programmes, market price stability, prevalence of high levels of food insecurity and access to relatively well developed financial infrastructure. Integrated Rural Livelihood and Agriculture Development Programme (ILRADP) is in 11 districts identified on the basis of irrigation potential, while in contrast MASAF covers all districts but resource allocation at district level are determined by a formula attaching different weights to population, poverty and level of vulnerability to food insecurity in the districts. Hence MASAF reaches every district but does not necessarily reach every TA and this is a common characteristic across all currently running PWP. Chikhwawa, Dedza, Lilongwe and Machinga have the largest presence of PWP programmes with at least 3 different types of PWP operating in them. However, there is little linkage between the programmes in terms of harmonising approaches. Poverty targeting: All PWP have a poverty focus, with the following groups of the poor being implicitly or explicitly targeted:

• Visible ultra-poor and food insecure households but with labour; • Households with poor people who are willing and able to work; • Households caring for orphans; and • Households with small piece of land or affected by natural disaster or that did

not cultivate in the previous season or without other sources of income, or with reduced number of active family members.

Road projects are self-targeting; those able and willing to work come forward to register. For forestry, agro-forestry and irrigation interventions are mostly based on agro-potential, and most importantly availability of land. The interventions are therefore not capable of reaching every ultra-poor household with labour as some lack the land resource. Although the programmes try to target poor households, none of the programmes have developed and applied scientific methods for systematically screening beneficiaries. Almost all programmes apply community-led selection processes that place the ultimate judgement on eligibility for PWP benefits on the part of community leaders who coordinate the mobilisation of the labour for the works. Targeting effectiveness: None of the PWPs have been evaluated for targeting effectiveness. The MASAF short-term PWP is usually over-subscribed and experiences difficulties with beneficiary screening due to its higher wage rate, relative to the other programmes. This is unlike the long-term PWP component which has a lower, self-targeting wage rate that attracts only the unskilled labour from the ultra-poor households. In general, PWPs directly reach mostly the ultra-poor households who have some labour capacity. The moderately poor do benefit directly to some extent, especially from the higher wage PWPs and those focusing on irrigation, while the ultra-poor without labour are benefitting mostly indirectly through the use of community assets created. Field visit observations also confirmed that forestry related PWPs directly benefit the ultra-poor as the project groups are all



encompassing. ILRADP projects make a deliberate effort to bring on board such groups. Problems of double dipping were reported in the CFLP with participants registering twice for the same benefits, for instance by using both the “maiden” and “married” names or names in local and foreign languages. The findings point to the need for a more comprehensive approach that systematises beneficiary screening, being informed by a combination of sound community wealth ranking and scientific criteria to minimise targeting errors.

2.1.3 Quality of design of the package of support All PWP have the goal of reaching one person per selected poor household who participates in the programme, with the benefits (cash and, sometimes, food earned) being expected to benefit the entire household. There is no standard package of support or size of daily task that is applied across the programmes. Each PWP has a different level of support. Under ILRADP, participants contribute labour for up-to 20 days. Upon satisfactory completion of work, the beneficiary will be issued with a voucher with a face value of two 50 kg bags of fertilizer (one bag for basal dressing and second for top dressing) and a 10kg bag of hybrid seed both of which have an estimated value of MK 9,000 (approximately US$64). For IGPWP, the duration of the work and package depend on the type of project (e.g., forestry, irrigation, road maintenance, road/bridges upgrading). For MASAF, under the short term programme, beneficiaries work for a maximum of 10 days (with 4 hour tasks per day) and are paid a daily rate of MK200, whilst for the long term programme the wage rate is set at 20% below the market wage rate (estimated at MK50 per day in rural and MK200 per day in urban areas), and the period of employment ranges from 5-7 months.

The CFLP offered three payment options, as monthly rations:

• Food only: 50kg cereals & 5kg pulses; • Cash only: local market value of food ration, in cash; and • Food and cash: local market value of the cereal ration in cash, 5kg pulses in

kind.

The wide variation in pay packages, yet many PWPs may be operating in the same geographical area (e.g., Chikhwawa, Dedza, Lilongwe districts where at least 3 PWPs have been operational at the same time) shows the need for greater standardisation of wages across these programmes.

2.1.4 Results achieved PWPs are generating employment which is scarce in rural areas. In rural Malawi, 85% of the population often does not have employment in the dry season. All PWPs are achieving generally good results in terms of creating usable community assets but quality of the assets is an issue for some programmes that rely heavily on the limited technical capacities resident in district assemblies for technical advice, supervision and quality assurance (e.g., MASAF, CFLP and ILRADP). It is clear from the review that all PWPs are significantly contributing to improved food consumption, and diet diversity. A large proportion of the cash earned is being used to purchase agricultural inputs, food, clothing, household assets (e.g., kitchen utensils), education and health services. Such farming inputs have had a significant positive impact on



staple food production. Households who participate in the PWPs long enough are investing in productive income generating activities/assets (e.g., small livestock, petty trading) to diversify their income sources as well as improving their housing.

The review confirms that short term PWP projects and pilot projects of less than one year can address acute needs of food insecure households and therefore appropriate for income support, strengthening of resilience and preventing the erosion of assets, but do not have any discernible poverty impact. Furthermore, short term pilot projects do not allow sufficient learning to take place and time for proper impact assessment. Experiments should thus be incorporated into existing longer term PWPs to create adequate time for learning and impact assessment.

Community assets created by PWPs, such as irrigation schemes, offer the greatest potential for lifting the poor out of poverty with up to 30% of beneficiaries expected to move out of poverty in 2-3 years. However, this potential is not fully exploited due to weak linkages to agricultural output markets and access to finance. Forestry projects on the other hand take longer time to create tangible benefits but are critical for mitigating the effects of climate change by restoring forest cover and reducing environmental degradation. Agro-forestry projects that produce and sell fruit tree seedlings have the potential to generate quick results in terms of reducing poverty but the market for this type of intervention quickly gets saturated and households do not move sufficiently upwards in their incomes to completely graduate out of poverty.

PWPs have not as yet created a critical mass of employment opportunities and productive assets at community level to have a discernible impact on MDGs. Annually they create employment opportunities that reach less than one third of those in need of such opportunities (Table 1).

Table 1: Direct beneficiaries reached and the estimated total population in households reached by PWPs annually

Programme Direct beneficiaries

/ year Population reached

/year Population reached as a

% of total poor with labour

IGPWP 31,348 156,740 3%

MASAF 200,000 1,000,000 22%

ILRADP 20,833 104,167 2%

CFLP 11,100 55,500 1%

Total 263,281 1,316,407 29% Source: PWP Review Stakeholder Workshop: presentations on IGPWP, MASAF, ILRADP, and CFLP.

In order to create a critical mass, the programmes should be scaled up significantly. Road rehabilitation/maintenance-related PWPs whose wage rate is below the market rates, will at best only move the poor from ultra-poverty to moderate poverty. To completely lift them out of poverty will require longer periods of guaranteed employment, higher wages, and stronger linkages to VSL, micro-credit and other complementary social and economic support packages. This calls for the government to set minimum standards for the design of PWPs which guarantee some measurable poverty impact.



2.1.5 Efficiency of delivery mechanisms, cost effectiveness and challenges PWPs characteristically have steering and advisory committees at the national level, but are mainly implemented with the active involvement of local authorities who identify the projects together with the target communities. In some instances such as the MASAF programme, the local authorities also carry-out field and desk appraisals prior to recommending the projects for funding to national level committees. The local councils also oversee the setting up, training and supervision of the community project management committees. Communities play an active role in day-to-day management and supervision of the works and monitoring of physical progress. Project management is done by units set up at the national level (e.g., IGPWP PMU, but these may have regional/district sub-offices).

The review observed that national level structures for policy advice and technical support are functioning relatively well, but there are too many of these parallel structures as each PWP has a separate national level steering committee yet on the ground the PWPs are funding more or less similar activities (e.g., forestry/agro-forestry, irrigation development and road rehabilitation and maintenance). Delivery capacity at the level of the district is being built by current PWPs but there is still a wide gap which is hindering quality delivery of PWP outputs with roads usually being the worst affected.

Some PWPs find the systems for procurement and financial management at the district level compromised and this negatively affects the pace of delivery, and financial accountability. At the community level, the main challenges include the non-precision of poverty targeting as different communities define wealth status and apply project guidelines on beneficiary selection in different ways. Another challenge is illiteracy which requires more investment in community sensitisation and education prior to implementation of technology-based cash payment systems. All PWPs in one or the other have been trying to strengthen the capacity resident at the district level and such capacity building has not been properly coordinated across the different PWPs, say working in the same district. In future PWPs should closely coordinate and harmonise their approaches to district level capacity building.

In cases where PWPs partnered with the private sector, for instance in the case of the CFLP, a major challenge was encountered with the technology for cash payment, which was associated with the steep learning curve for users of the system, and power outages which rendered mobile automated teller machines dysfunctional. If technology is to be used in scaled-up cash for asset operations, energy back-up systems, or more user-friendly context specific technologies have to be identified and used.

2.1.6 Sustainability and exit strategies PWPs in Malawi are, in general, consciously promoting appropriate technologies for the skills and other resource endowments of the communities targeted. For example in the case of irrigation projects, affordable and easy to use and maintain technologies for water supply are being promoted. River diversion systems and treadle pumps are usually the main methods of irrigation that are being supported as opposed to electric water pumps that are more expensive to run. In the case of agro-forestry and irrigation, the exit strategy is provision of start-up kits and inputs with a clear explanation to the farmers on when the project support will



end. In other cases, PWPs are linking farmers to other social support interventions such as VS&L as a graduation and exit strategy. However, limited access to bigger loans to diversify their business portfolio and small plot sizes in some irrigation schemes, limit scheme viability and prospects for farmers to graduate out of poverty and be weaned from donor support. The main concern, however, is with the heavy reliance of PWPs on donor funding for continuity. This type of funding is unsustainable and there is already a real threat of reduced funding due to the global financial crisis that has begun to reduce in real terms overseas development assistance (ODA). Road projects lack a clear exit strategy both at road rehabilitation and road maintenance stages. IGPWP has made good progress in introducing the concept of road maintenance clubs, which are paid to maintain sections of the rehabilitated road with a task of one kilometre per worker. However, the sustainability of this approach will depend on government putting in place an effective system to mobilise resources to continue paying the wages of road maintenance clubs. For as long as this activity is funded by development partner projects, no real exit strategy would be in sight.

2.1.7 Potential for scale-up In Malawi there is good potential to scale up almost all PWPs to reach more poor people with employment opportunities and productive assets that expand their income earning opportunities. In the case of forestry, Malawi’s climate is suitable for fast growth of trees, land that is suitable for regeneration of forests is available, re-forestation can easily be done by poor and illiterate people, and the projects are socially acceptable among communities that are experiencing a critical shortage of firewood. As for roads, the demand for road rehabilitation is high. Labour supply is also guaranteed given the large proportion of the rural labour forces that is on seasonal employment in agriculture. Irrigation schemes are very popular. Interest is very high among target groups including the willingness to contribute towards the construction of dams and canals and purchase cost of the equipment once the irrigation schemes are functional. Irrigation development builds on farmers’ own knowledge of farming. Furthermore, agro-economic potential supports expansion. For instance, only 18% of the total irrigable area in the country has been developed for irrigation. Irrigation is one of the top priorities in the country’s growth and development strategy. It is high on the agenda of top policy makers and a key focal area of the President, under the Presidential Green Belt Initiative. Many development partners are also willing to invest in rural infrastructure in the medium term (with road rehabilitation being a top priority). However, a key challenge is the high vacancy rate of more than 50% at the level of the District Agricultural Development Officer level and the scarcity of trained crop specialists and irrigation staff. In addition, irrigation will thrive where infrastructure development is strongly complemented by farmer training on agronomic practices, as well as strengthening of their links to markets. This should also include strengthening of their agro-processing capacities in order to increase the shelf life of horticultural produce from irrigation schemes.



2.2 Social Cash Transfers


Social cash transfer programmes that have so far been implemented in Malawi have been pilot interventions to test the efficacy and effectiveness of the instrument in either (a) providing short term welfare support to smoothen consumption and prevent erosion of productive assets of food insecure households affected by natural disasters, or in reducing poverty and food insecurity among households who are chronically ultra poor and at the same time labour constrained. A complementary objective for the longer term social cash transfer pilot SCT programme implemented by the Government of Malawi with technical support from UNICEF and financial support from development partners has been to increase school enrolment and attendance of children living in target households and invest in their health and nutrition status. The broader rationale of the SCT has been therefore to contribute to the achievement of food and nutrition security (MDG 1) by providing the purchasing power to access food and agricultural inputs (including seed, fertiliser, and labour) plus accelerate achievement of MDGs 2, 3, 4 and 8 as cash transfers contribute to ultra-poverty reduction, school enrolment, retention and improved performance at school. Cash transfers empower women, especially grandmothers taking care of orphans. They become better able to address the plight of vulnerable children, resulting in a decrease in child morbidity and mortality. This broader rationale is therefore well aligned with Goal No. 1 of the national social support policy which seeks to provide welfare support to meet most pressing needs of the very poorest members of society such as the elderly, infirm, persons with disabilities, chronically ill, and orphans and other vulnerable children living in households with no adults fit for work. The longer term pilot project by the government recognises that this commitment is not a short term one. The transformation of this target group requires adequate time as changes in the health status of the chronically ill or changes in the household demographic composition that increase the supply of labour also take a long time. The implicit longer term goal of this instrument is thus long-term investment in human capital development leading to favourable changes in the labour composition of target households.

2.2.2 Programme coverage, poverty targeting and targeting effectiveness Short term pilot SCTs have characteristically been targeted to very few districts (from 1 to 4 districts) while the longer term pilot currently implemented by the Government has gradually increased district coverage from one district at inception in 2006 to the current seven. Within each of the pilot districts, total coverage of the targeted number of ultra-poor households who at the same time have a labour constraint has only been achieved in Mchinji. Other districts are at various stages of scaling up population coverage. Furthermore the targeted number of households does not equate to all households that are ultra-poor and labour constrained in the district. The pilot programme works on the basis of a uniform cut off point of 10% of the bottom poor, whereas the ultra-poor in some districts exceed 10% of the district population.



Most of the SCT pilot programmes have been poverty focused in their targeting, essentially enrolling the following types of households for support:

• Households with missing food entitlements as defined by Malawi Vulnerability Assessment Committee but with some labour capacity (as in the case of the short-term pilot SCT safety net by Concern World Wide (CWW) implemented in Dowa); and

• Ultra-poor households (i.e., those in the lowest expenditure quintile and under the food poverty line) and at the same time labour constrained (e.g., for the long-term SCT pilot programme delivered by the Government).

SCT pilot projects have applied different targeting methods, with the short term project by CWW using a combination of community wealth ranking and proxy means testing, and the pilot by the Government fully relying on community based targeting which required intensive community training in order to reduce targeting errors of up to 20% at project inception. The CWW experience demonstrated that a combination of community-based and scientifically determined criteria can minimise targeting errors for SCT interventions. The World Bank has also experimented in Zomba district on the use of SCT to influence educational and health outcomes for girl children. As a randomised experiment, no explicit poverty targeting was done but educational and health outcomes of girls from households of differing wealth status were compared, and so were the educational and health outcomes arising from varying amounts of cash transfer to girls and to their households tested.

2.2.3 Quality of design of the package of support Since all SCT programmes implemented in Malawi so far have been on a pilot basis, and informing different programming questions, the design of their packages has not been uniform, even though some SCT projects have been implemented in the same districts (e.g., the CWW SCT pilot project and the Government SCT both implemented in Dedza district). In addition, targeting differed. While the CWW and the Government SCT projects gave transfers to households, the World Bank experimental SCT in Zomba gave transfers to girls of school going age in addition to a complementary transfer to their households. CWW indexed level of transfer to household size up to a maximum of 10, whilst the Government SCT linked SCT amounts to household size up to a maximum of 4, but also topped up the amount with an education bonus for every child in primary or secondary school. SCT under the CWW pilot was inflation indexed, whilst that of the Government has not been reviewed since inception in 2006. The WB pilot was a short intervention similar to that of CWW but the levels of its transfers were not inflation indexed. The use of cash payment systems also varied across programmes, with some using only manual systems (cash distribution by district assembly finance officers with police escort) whilst others programmes used automated systems (e.g. the SmartCard, with automated and mobile teller machines). All recently implemented SCT programmes appeared to converge on the need to use cash transfer packages that are linked to household size and the number of children of school-going age.



However, none of the SCT so far piloted explicitly linked the level of transfer to poverty impact. It would appear that while the level of transfer adequate to leverage educational and health outcomes for girls has been studied through the Zomba World Bank funded experiment, the level of transfer that is sufficient to address underlying problems of poverty, increase other household incomes in the near term and result in graduation and total emancipation of the ultra-poor from welfare dependency remains an empirical question. Yet the level of transfer remains the central question needing careful consideration and testing in pilot SCT initiatives. Artificially cheap levels of SCT based on short term consumption smoothing often have longer term detrimental costs on economic growth.

2.2.4 Results achieved Despite the fact that all SCT programmes have operated as pilots, impressive results have been achieved on the ground. Pressing needs of the poor (e.g., food, clothing, household utensils, improved shelter, health and education services, labour for farming, human dignity and self-esteem) have been met. Negative coping strategies such as use of child labour and selling assets have also been avoided. Assets have been protected and often times built (Box 1).

Box 1: Selected Impacts of Mchinji Pilot Social Cash Transfer Scheme (Malawi) Between Baseline (March 2007) and the follow-up (April 2008)

⇒ Improved health with fewer reported sicknesses among adults and children

• 7.9 percentage point difference in reported sicknesses per month in adults • 10.9 percentage point difference in reported sicknesses in children of all ages • 2.2 percentage point difference in wasting; 4.2 percentage point difference in

stunting; and 10.5 percentage point difference in underweight is under-five year olds

⇒ Greater demand for healthcare for children and adults and higher healthcare expenditures, with fewer reported cases of child illness

⇒ Increased expenditures on children’s schooling, resulting in higher enrolment and fewer absences

• MK333 per child and MK1,049 per household difference in monthly school expenditures

• 4.9 percentage point difference in school enrolment for 6-17 year olds • 0.9 percentage point difference for mean number of days absent

⇒ Reduction in child labour

• 10.7 percentage point difference in children that work in someone else’s home

⇒ Significant accumulation of household and productive assets, basic necessities, and livestock, leading to stronger resilience to shocks

⇒ Increased agricultural production, with greater food stores

⇒ Improved food security, including higher food expenditures, fewer missed meals, fewer days without adequate food, and greater food diversity

• Difference in food diversity of three food groups consumed per week • MK3,125 (USD 22) difference in monthly food expenditures

Notes: (1) The measurement of changes is based on a comparison of the situation of

Intervention and Control Households; (2) 1 USD=MK140 (Sept 2007) Source: Miller et. al., 2008



Food purchases usually top the list of uses of the cash transfer implying greater household food security; most households use the cash transfer to afford the second or third meal of the day. Diet diversity is increased with evident impact on child nutrition. Households are also investing the cash stipend in household assets (such as utensils, bedding, radios and bicycles) and reserving a portion of the cash as household savings. A significant proportion of the cash is invested in children’s education, and healthcare. The cash transfer also has a marginal promotional effect as households invest part of the cash in farming inputs and agricultural labour. Synergistic effects with farm input subsidy programme are strong so is the wider economic multiplier estimated at approximately 2.5 times the value of cash distributed. Graduation out of ultra-poverty to moderate poverty is evident but further graduation out of total poverty is not yet evident, nor has it been measured. None of the pilot SCT projects have carried studies to examine graduation pathways out of poverty for SCT beneficiaries. Some households that have been assisted have children who have now turned into adulthood (18 years and above) who through the cash transfer have been able to access and attain good secondary education and are now employable. However, none of the pilot programmes have undertaken a retargeting exercise to confirm whether some of the beneficiaries have been lifted out of ultra-poverty. Considerable potential to move the poor out of poverty through the longer term Government SCT pilot programme exists (due to the multiple uses of cash, impact of the cash on markets and the investment of cash in productive assets/enterprises). Experience elsewhere already shows that cash transfers in the form of social pensions, for example, can double incomes of the poorest 5% in Brazil, and increase by 50% incomes of the extreme poor in South Africa. Mexico’s Progresa programme reduced the poverty gap among beneficiaries by 36%, and 70% of participating households registered an improvement in nutritional status. The rate at which children gained height increased by one centimetre per child per year whilst in South Africa, presence of recipient of social pension correlated with a 3-4 cm increase in height among children. Similarly, Mexico’s Oportunidades programme which provides cash transfers conditional upon attendance at educational sessions related to ill-health and nutrition had positive impacts on all measures of child nutrition including: 1 cm increase in height; 10% fewer stunted children; and 8% reduction in overweight children. In Brazil, Bolso Familia (including Bolso Escola) which runs Conditional Cash Transfers targeted at poor households on the condition that beneficiaries protect and build their human capacities – e.g., send their children to school, or family members regularly visit health clinics had the effect of reducing incidence of poverty by 5%, poverty gap by 12% and severity of poverty by 19%. Overall, there is both scientific and anecdotal evidence on the effectiveness of cash transfers in tackling poverty, enhancing growth’s effectiveness in reducing poverty and stimulating economic growth. However, in Malawi this potential has somewhat been eroded by non-indexing of the transfers to inflation. This gap has seen the purchasing power of the cash dwindle



over time. In addition, the SCT programmes that have been implemented so far have achieved very little in terms of the number of ultra-poor households that are labour constrained who have received the cash transfers. The cumulative total number of beneficiaries reached by all SCT programmes so far is equivalent to about 38-42% of all ultra-poor households in the country who are at the same time labour constrained4. However, due to pipeline breaks for the cash, and intermittent distribution, the actual number of households benefitting from SCT at any given time in Malawi is much less. Linkages to VS&L and other forms of social support that could further expand income earning opportunities of SCT recipients are also weak. They have not been systematically pursued, but they offer very promising graduation and exit strategies for households who are being lifted from ultra-poverty.

2.2.5 Efficiency of delivery mechanisms, cost effectiveness and challenges The ratio of overhead costs to total programme costs for the SCT tested in Malawi show high cost-efficiency. The overhead proportion averaged between 12% to 15%. This translates to a cost of transfer of US$0.14 to US$0.18 per every US$1.00 transferred. However the major challenge confronting SCT is the unreliability and unpredictability of funding flows. The Government SCT programme for example relies almost fully on donor funding through the Global Fund and regular pipeline breaks are affecting the implementation of cash disbursements to households. In some districts pipeline breaks of between 6-12 months have been experienced in the past with some districts compensating recipients by paying in retrospect whilst others start afresh whenever the pipeline is eventually restored. This affects recipient households who will have borrowed in anticipation that they will use income from the cash transfer to pay off their debts. It would appear there is no binding social contract between district assemblies implementing the SCT and recipients that would standardise the treatment of skipped months in the event of a pipeline break. SCT programmes that have used automated systems such as the SmartCard confirm that they work reasonably well provided adequate sensitization, orientation and training is given to the illiterate poor on how to use the systems and the electronic gadgets. Manual systems are bogged down with too much paperwork and the Government SCT’s community based targeting system and manual cash distribution model is in particular prone to this constraint. Other challenges include the high cost of setting up automated cash payment systems especially for short term SCT programmes (they are more appropriate for large-scale and long term interventions); and the unreliability of such a system in a country experiencing regular power cuts.

2.2.6 Sustainability and exit strategies The current portfolio of SCT programmes in Malawi is made up of pilots. NGO-led pilots have typically been short term in nature (less than one year duration) and linked to emergencies. However, their positive results have encouraged the

4 The cumulative total number of people reached by SCT is based on the statistics presented by resource

persons at the SCT workshop and also literature on other pilot projects.



continued use of SCT for emergency response in situations where the market conditions are favourable. The Government SCT programme has greater potential for sustainability than NGO programmes, given that cabinet has directed that the programme be expanded to seven districts and Government has started to commit resources through the annual budget process towards implementation of the programme. A guiding policy is also nearing completion. At full scale the programme will require an estimated US$63 million annually which is only a fraction of what the country has been spending using own resources on other programmes. However, a major challenge is that a large portion of the overall recurrent expenditure of Government is donor funded, and up to now the bulk of the resources supporting the implementation of the Government-led SCT have been from the Global Fund, whose pipeline has had limited reliability and sustainability. In terms of sustainability of impacts achieved and potential for the programme to exit, this is likely to happen on a case by case basis as individual households graduate. The experience to date shows that due to the configuration of the cash transfer levels, larger households with school going children receive larger aggregate amounts of cash transfers and progress much faster in terms of improving their socio-economic status than smaller households who receive lower amounts. In addition households who invest in small stock, farming or other income earning opportunities quickly diversify and grow their incomes. However, the level of transfer in general, is below market wage rates, and is too low to enable investments that would make a significant impact on poverty in the short-term for labour constrained households. For many households real change will come when children grow, acquire education, become employable youths and acquire jobs. The number of households that have graduated since the start of the programme would be quantified if a retargeting exercise were to be undertaken. Such an exercise is now long overdue especially for the Government SCT.

2.2.7 Potential for scale-up The unmet demand for SCT is quite large. It is estimated that about 300,000 households are in need of similar support countrywide yet the Government pilot SCT programme has reached a cumulative total of 103,872 households. In many of the pilot SCT districts, coverage is planned to reach the 10% threshold set by Government. Trainable technical capacity that could be equipped with the necessary technical skills and financial and logistical resources to scale up the programme exists at district level. The Government pilot SCT programme has demonstrated that the cost of setting up functional district secretariat capacity (refurbished office, provision of office equipment, stationery, vehicles, and training of staff) for effective delivery of SCT is not prohibitive. However, reaching the target of 300,000 households nationwide when the programme will be operating at full scale may require, where feasible, the introduction of electronic cash payment systems to complement the manual system currently being used. The manual system is not only labour intensive but carries many inherent risks and costs. The electronic delivery of cash can be done through a



range of mechanisms – debit card, smart card, or cellular phone – and using a range of financial infrastructure – banks, automated teller machines (ATMs) and point-of-sale (POS) devices. In addition, the recipients of cash transfers themselves often start to make use of additional financial services offered by the banks, such as micro-credit and savings. Some capacity exists in the local financial institutions to scale up the use of automated cash payment systems, as secure and reliable systems, but branch network coverage is limited, the road network in many rural areas is in a poor state, communication infrastructure is limited, and power supply is either non-available or erratic. Innovations to overcome these challenges will be needed but this hybrid system could start in areas with better infrastructure.

2.3 Village Savings and Lending Schemes


The rationale for VS&L is to enable marginalised rural populations to access financial services which strengthen household income security and income earning opportunities. VS&L schemes enable their effective participation in productive savings and investment activities. An associated and equally important objective of the VS&L is promoting gender equality through the direct empowerment of women. Women constitute the main target group for this intervention. In addition to promoting a savings culture the instrument seeks to build an entrepreneurial culture by developing small business management skills among beneficiaries. Some promoters of VS&L advance two additional objectives of strengthening family and community capacities to mitigate the impact of HIV and AIDS through improved access to disposable income, and reducing vulnerability of women to HIV and AIDS through their social and economic empowerment. For these reasons, VS&L schemes tend to have a promotion effect, by raising the productive capacity of households.

2.3.2 Programme coverage, poverty targeting and targeting effectiveness VS&L schemes are relatively a new concept in Malawi and coverage is still very limited. Most VS&L activities are being promoted mostly in the rural areas. Two large international non-governmental organisations, CARE, Plan International, and Catholic Relief Services are some of the NGOs at the forefront of promoting the instrument in partnership with smaller local NGOs who cover about one or two districts each. Promoters of VS&L target self-selected groups (mainly made up of women) with group size ranging from 15 to 20 members. Although a number of evaluations have been carried out at project level, none have focused on the issue of targeting effectiveness in as far as confirming the poverty status of VS&L members is concerned. Exact information on the poverty profile of people reached by the instrument are therefore not known. However, large NGOs promoting VS&L in Malawi (e.g., Care International) estimate that most groups are made up of people who come from households in the “moderately poor” (about 75%) or “ultra-poor with labour” (24%) categories. Only very few members (less than 1%) come from the “ultra-poor and labour constrained” population group because they lack the start-up cash with which to join the groups. There are very few groups made up exclusively of men and groups of mixed gender compositions are generally uncommon.



2.3.3 Quality of design of the package of support In Malawi, VS&L programmes are being designed as a long term intervention that is usually integrated into food security and livelihoods programmes of the institutions promoting the instrument. Most of the local NGOs are implementing VS&L for the first time and therefore eager to learn more from countries that have had a long history with this instrument, such as Bangladesh. The standard package, however, usually consists of community sensitisation and mobilisation to encourage women in particular to form clubs of 15-20 people each. Each group has an agreed lifespan (commonly referred to as a savings and lending cycle which is usually 9-12 months). At the end of the lifespan the money accumulated through the savings and the interest rate charged on borrowings from the fund is shared by members and the group is free to disband or reconstitute. These clubs are given training which is delivered through a number of modules. The training is to equip them with skills on how to voluntarily and regularly save money, and how to generate additional income from the accumulated savings by using them as a loan fund. The clubs can lend to members or non-members at a rate of interest agreed upon by the group. In addition to this VS&L, members are usually trained on how to operate a successful business. Groups are taught on the concept of charging interest and how to recover loans, including measures to deal with defaulters. A key component of the training is on record keeping and keeping the money in a safe way (e.g., the concept of using a money box and management of the keys by members of the club). Some VS&L programmes also introduce the concept of shares, whereby members are free to invest in the loan fund either a uniform amount or differentiated according to a member’s own ability to save and invest more into the group activity. The concept of shares is introduced to further bind the members together since the shares create a fund that groups can decide not to distribute at the end of a typical savings and lending cycle (usually 9-12 months), but retained by the group as start-up capital for the next cycle. In some VS&L schemes such as COMSIP, four products are promoted. These are shares, mandatory savings, voluntary savings and loans. VS&L products are not standardised and there is considerable debate on when it would be appropriate to introduce the aspect of lending or linking groups with providers of micro-credit.

2.3.4 Results achieved Emerging results from current VS&L programmes indicate that they are improving incomes and the net worth of group members. Even the ultra poor are able to save. Group members are borrowing from their group savings to finance expansion of their income generating activities or lend the savings to other borrowers at market based interest rates thereby generating additional income. Some members borrow to purchase food, agricultural inputs, send children to school or meet other pressing needs. VS&L is therefore effectively improving access by the poor, especially women, to finance and farming inputs. Agricultural productivity of the beneficiaries is being enhanced. With improved food security, some VS&L schemes have shown that people living with HIV and AIDS who are participating in the VS&L schemes are able to better adhere to anti-retroviral therapy regimes resulting in improvement of health status, greater mobility and additional income generation potential.



Through VS&L, women are being empowered, their social standing in society has improved, and so have been their family relations. Decision making at household level, especially, has become more inclusive of women and family resources are being used more wisely. Members can help each other in times of need (e.g., sickness, natural disaster or death) through their club social fund. In relation to graduation from poverty, VS&L schemes in Malawi have demonstrated their capacity to lift members from ultra-poverty to moderate poverty and with time a few get lifted completely out of poverty. The graduation out of poverty is faster if VS&L groups are linked to micro-finance and access to larger loans. One emerging concern is the appropriate time for linking VSLA to micro finance institutions. It was noted that it was an on-going debate, with some preferring to delay the linking of VS&L clubs to MFI because rushing the process would result in significant dilution of the purpose and original concept of the VS&L approach. Some VS&L schemes (e.g., those promoted by Plan International) have demonstrated that the net-worth of members can improve by a factor of 500% to 1,000% but this is usually from a low base. Where minimum share purchase prices are low, groups tend to save better than in groups where they are high. Where groups had shared out their money at the end of a savings and lending cycle, formation of new groups through village agents (VAs) became easier. However, many of ultra-poor members failed to graduate out of poverty due to high levels of illiteracy and poor participation in savings meetings. It is evident from the review that coverage of VS&L is still very limited in Malawi. All members of the Malawi Micro-Finance Network only reach at most 30% of the poor with services that promote savings5. These members include micro-credit institutions; hence the proportion reached by purely VS&L services is much lower.

2.3.5 Efficiency of delivery mechanisms, cost effectiveness and challenges Delivery of the VS&L package is mainly done by NGOs, through two approaches – direct delivery or in partnership with locally based NGOs. In both cases, the VS&L programmes are not cost-intensive. Much of the support is in the form of short-term (2.5 hour) training at inexpensive community venues, mentoring of the groups by either district based government staff or locally appointed village agents, who are a low cost cadre, and support with cash boxes for safekeeping of the savings. The overhead portion in total expenditure for some VS&L implementers is estimated at 14%. The investment is highly cost-effective as group members are able to generate very high returns from loans which they extend to borrowers in the local area. Most loans are repayable after 30 days. Some groups charge an interest of 40% per month to non-members and 20% per month to members for loan disbursements. The net-worth of members rapidly grows due to interest rates on loans which are much higher than the rates charged by financial institutions. A major challenge affecting the VS&L approach is the high level of illiteracy of the target group. Hence, many VS&L programmes try to link this instrument with informal adult education. Groups need close supervision, especially at inception and this is

5 This figure is based on the statistics on the total reach of MFIs, published by Malawi Microfinance Network.



usually difficult in the wet seasons due to the poor state of roads. Difficulties are also faced in trying to synchronise the savings and lending cycles of groups with the time when group members need the cash for farming inputs and other uses. Uncoordinated approaches of different implementers also introduce unnecessary competition between the promoters of the concept. Getting the ultra poor to join VS&L cubs, requires them to have some start up capital but many lack this critical resource. Hence the need to link VS&L to social cash transfers or other forms of income support for the poor. VS&L presents a potential graduation and exit strategy for social cash transfers.

2.3.6 Sustainability and exit strategies VS&L promotes self-reliance as promoters do not provide seed capital to club members. The experience of VS&L in Malawi actually shows the instrument works better when linked to other social or economic development programmes in the area that provide an income stream from which the prospective VS&L members can save the initial amount required when forming/joining the clubs. Secondly, by virtue of their strong viability VS&L, clubs do not disintegrate easily. The concept of shares which are not withdrawn unless the member is withdrawing his/her membership from the club, further reinforces sustainability, by keeping members closely knit together around a common financial asset. Many VS&L clubs have provisions within their constitutions to replace members who exit. Programme implementers proactively address graduation and exit strategies by linking VS&L clubs to micro-credit institutions and by providing them with business training to promote investment into viable small businesses whose profit will bankroll club activities. However, the appropriate timing for linking VS&L to micro-finance or banks remains a subject of debate and further research. The promoters of VS&L however emphasise the concept of “saving” rather than “credit” and prefer to delay the linking of VS&L clubs to MFI because rushing the process introduces the risk of diluting the original concept of the VS&L approach – which is to inculcate a savings culture. In a programme such as COMSIP, there is a clear graduation and exit path. The approach starts with group formation, followed by institutional development for consolidation, then financial literacy training together with business and marketing skills development and, finally, training in cooperative management. Group survival, achievements and number of groups dissolving over time are also being monitored through a client database. Clubs are registered through the District Assembly to formalise them and for linkages to other upcoming programmes.

2.3.7 Potential for scale-up The cost per beneficiary is low, at around US$65 per cycle. Donor funding for VS&L is increasing through foundations such as the Bill and Melinda Gates. VS&L groups are only given training which is delivered at minimal cost, the minimum amount of savings per member per month is flexible, and the concept is socially acceptable therefore relatively easy to scale up. Since no seed capital is given to the groups, the scale up of VS&L will not be resource intensive.



2.4 Microcredit


Objectives of micro-credit programmes differ by programme, but most aim to enable the poor to lift themselves out of poverty, and target especially women and the youths. They address both depth and breadth of poverty. The aim of lending to these groups is primarily to expand their small businesses, and to a less extent start up new business. The programmes expect to improve the living standards of low income people by enabling their participation in profitable income generating activities which meet their basic needs whilst at the same time contributing to overall economic development. The micro-credit instrument is designed to promote a good credit culture among small, medium and micro-entrepreneurs. Other projects in the sector, such as the Financial Inclusion in Malawi Project, seek to strengthen MFIs to expand, introduce service innovations and modernise technology and systems. The above objectives of micro-credit institutions are consistent with Goal 3 of the national social support policy which seeks to increase the productive capacity and asset base of the poor people to enable them to lift themselves out of poverty. They also address Goal 4 on linkages for synergy and poverty impact since they are designed as part of integrated food security/livelihoods programmes.

2.4.2 Programme coverage, poverty targeting and targeting effectiveness With the exception of MARDEF, a government programme, which has a countrywide coverage, none of the other micro-finance institutions studied covered the whole country. They extended services to 19-25 districts each and excluded what they termed “problematic” districts which lacked a credit culture and were characterised by high default rates. For this reason, some micro-credit institutions had actually discontinued their services in such districts. The implication for the NSSP design process is that if micro-finance should be part of the programme, ways in which to reach these “blacklisted” districts need to be found. In terms of categories of the poor reached, no operational research has been carried out to confirm categories of the poor reached, but implementers estimate that they are reaching mainly the “non-poor”, the “moderately poor” and the “ultra-poor with labour capacity” due to the explicit selection criteria which favour people who are already running a viable income-generating activity (Table 2). Table 2: Estimated proportions of beneficiaries reached by a selection of micro-finance institutions by poverty category

Programme

Districts covered

Share of beneficiaries reached by poverty category (%) Total (%)

Non-poor

Moderately poor

Ultra-poor with labour capacity

Ultra-poor without labour

MARDEF National 10 70 15 5 100 Micro-loan 19 19 36 45 0 100 FINCA 25 No data No data No data No data No data Source: Workshop to review Microcredit Programmes in Malawi - Stakeholder presentations on micro-credit programmes.



In terms of gender targeting most micro-credit is directly targeted at women (who constitute over 70% of clients). However, most women tend to borrow and run businesses together with their spouses. In urban areas, the following types of entrepreneurs are targeted: traders in clothes, wholesales, hardware shops, fish, grocery stores, farming (fish, poultry, food and cash crops), baking, and transportation, among others. In rural areas, MFIs are extending small loans to farmers (fish, poultry, food and cash crops), fishermen, traders in clothes, road side sellers, market stalls operators, fish sellers, grocery store operators, bakers and hawkers, among others.

2.4.3 Quality of design of the package of support Micro-credit in Malawi is being extended to clients who are organised into groups which vary in size from 10 - 18 members. Most products target groups of women who according to the selection criteria should know each other well and preferably come from the same community. Some MFIs select groups that have been operating a business for at least 6 months. Some of the microcredit institutions that reach out to women and are welfare oriented, are prepared to fund groups that have not yet run businesses but have a promising business idea. Group members should have economically active adults (usually between 18 and 65 years of age). Loan amounts vary with the minimum amounts ranging from about MK 5,000 for group loans to MK 50,000 for individual business loans. The upper limit for loans also varies ranging from MK 100,000 to MK 1,600,000. Loan repayment periods range from 3 to 24 months. Most MFIs go for shorter loans. Depending on the MFI, loans are repaid weekly, bi-monthly, or monthly through instalments. For group loans, institutions generally waive the requirement for collateral security and rely mostly on group solidarity, social pressure and the fear of embarrassment among members. If any member fails to pay every other member becomes jointly charged with the responsibility to repay. Microfinance institutions also offer special products such as (a) the FINCA Business Loans which are lent to individuals who are already running successful businesses, or (b) the MARDEF Youth Enterprise Fund targeting the youths, and (c) the Microloan Foundation Agricultural Loans which have a special grace period of four months. FINCA business loans for individuals have to be secured with collateral (e.g., household assets). Table 3: Illustrative loan packages for selected micro-finance institutions and products

Programme Group size

Min. loan size

(MK)4

Max. loan size (MK)

Loan duration (months)

Grace period

(months)

Loan repayment

rate (%)

Client groups served

per year (2009)

MARDEF 10-15 10,000 300,000 12-24 1-2 No data 2,100 FINCA GL1 10-15 5,000 400,000 4-6 Nil 91% 15,704 FINCA BL2 Individuals 50,000 1,600,000 3-12 Nil 91% 985 Microloan3 15-18 10,000 100,000 4-10 4 5 99%



Notes: (1) GL refers to Group Loans. (2) BL refers to Business Loans. (3) Microloan refers to Microloan Foundation. (4) Exchange rate: USD1.00=MK155.00. (5) Grace period only applies to agricultural loans. More loans are disbursed to existing clients rather than to new clients. For MARDEF, for example, the ratio of loan disbursements to these two client categories is 60:40, respectively. Old clients receive the larger share of loans to promote continuity and expansion of businesses. Few loans are insured against default and recourse to any form of household assets offered as collateral in times of drought induced default is a big challenge for MFIs. Many are assessing the feasibility of insurance products to offer them that protection against defaulters. Increasingly micro-finance institutions are encouraging their clients to also save part of the loan (for example, FINCA encourages clients to save up to 10% of the loan). These savings become a cheaper source of money for lending to other clients.

2.4.4 Results achieved The review shows that most low income earners are using the loans for smoothening their expenditure and consumption during lean months (Figure 1). The largest proportion of household expenditures for recipients of both group and business loans is food purchases especially during the farming season. In recognition of this practice, some MFI proactively build into the loan a certain amount for consumption smoothening to protect the amount to be invested in productive activities as well as prevent disposal of current productive assets of the poor.

Figure 1: Typical household expenditures for village and business loan beneficiaries

Source: Presentation by FINCA at Workshop to Review Micro-credit Programmes.



Other uses include transport, payment for utilities, and food production related expenditures. These are of a promotional and business-related nature. After these priorities, are accumulation of household assets, investment in education, improvement of shelter, and fuel for cooking. A significant portion of business loans is also used to pay for rent and sustain business operations. Business-oriented borrowers are sustaining operations of their businesses and acquiring new productive assets for income generation. Some of the loans are used to address social problems emanating from emergencies (both personal and impersonal e.g., floods, fires, illness, bereavement and desertion). Borrowers are also using part of the loans or proceeds from their investments to meet other life-cycle needs such as marriage and health services (e.g., reproductive health services). Overall, the experience of micro-finance programmes shows clients are meeting immediate consumption needs, life-cycle needs as well as their investment requirements, ensuring business continuity and, in some cases, expansion. They are also accumulating important assets (such as livestock, bicycles and improved houses). In terms of how well micro-finance is meeting the objectives of the national social support policy, micro-finance interventions are not specifically addressing the welfare objective but significantly contributing to asset protection, increased resilience to shocks, and advancing productivity through asset accumulation. Linkages between micro-credit interventions and other social support programmes are still weak and require further strengthening.

2.4.5 Efficiency of delivery mechanisms, cost effectiveness and challenges Costs of delivering small loans to many scattered groups of clients in rural areas are high and the process of training MFI field staff is both long and expensive. Use of improved technology in the rural areas is not possible due to limited coverage of the banking network and telecommunications infrastructure. High rates of loan repayment are achievable only with intensive monitoring of groups as most only pay back when they see a loans officer. The delivery channels are labour intensive, including intensive monitoring of groups by MFI field staff as most groups only pay back when they see a loans officer. Staff turnover is high in the sector which imposes additional constraints on outreach and economies of scale. MFIs that are poverty-focused are struggling to reach the level of operational self-sufficiency (OSS) even after several years of operating in the country. Some of the MFIs that have operated for more than 12 years have an operational self-sufficiency rate in the range of 72%. They continue to rely on external support to meet their overheads. The source of working capital for micro-finance institutions is the local commercial banking industry and interest rates are considered too high to afford a profit margin for the MFIs whilst keeping the overall cost of loans affordable to the poor. The playing ground is also considered not equal as MARDEF receives its working capital from the Government at subsidised rates while other MFIs mobilise resources from the open market at market rates. MFIs have limited branch networks in rural areas and most rely on the commercial bank branch network for the recovery of loans from borrowers but this service comes



at an additional cost. Hence some of the MFIs such as FINCA plan to transform into deposit taking institutions once the micro-finance bill has been passed into law.

2.4.6 Sustainability and exit strategies By targeting mostly existing businesses, the benefits of micro-credit will continue to accrue beyond the current programmes. Some MFIs move to new groups after providing loans for 3 or 4 consecutive rounds.

2.4.7 Potential for scale-up The unmet demand for micro-credit is very high in both rural and urban areas of Malawi. MARDEF, for example, is able to meet only about 10% of qualifying applications and has a large backlog due to inadequate resources. The same applies to other MFIs. The 2004/5 Integrated Household Survey confirmed that only 1.5% of the population had access to microfinance services. This figure has risen over time but evidence collected by this review shows that about 70% of the country’s population is still not being reached by microfinance. Repayment rates on the current loan portfolios are considerably high (91-99%) and this is mainly attributable to strong internal controls. The average loan size is way below what groups actually need to diversify or expand their businesses. Since most loans are lent to groups and not individuals, the average loan size per group member becomes too small for any meaningful investment at the level of the individual member. For example, FINCA loans for 2009 averaged MK 32,200 per group, and based on group sizes of 10-18 members, the loan size per member averaged between MK 3,220 (US$20) and MK 1,788 (or US$12) , respectively. These facts confirm the need to scale-up microfinance services. However, for micro-credit to be scaled up, one of the most critical requirements is availability of a dedicated fund to provide more affordable capital to MFIs (Table 3). Currently most MFIs (apart from MARDEF which receives funding directly from the Government) borrow capital from commercial banks but they find this source expensive. The other challenge is the limited availability of skills and the long time it takes to train loan officers (2 years) before they can master skills and experience they need to start creating value for the MFIs. This cost needs to be shared and hence a national programme to continue providing a training service to MFIs emerged as another critical requirement for success of any scale-up efforts. Table 3: Main obstacles to growth and institutional development of microcredit sector

Major obstacle to Growth

Number of MFIs citing constraint Total

number %

Mature MFIs

Growth Stage MFIs

Survival Stage MFIs

Start-up Stage MFIs

Lack of growth capital - - 2 3 5 15

Lack of skills in credit assessment and risk management

- 1 4 4 9 26

Lack of adequately trained manpower

1 4 1 - 5 11 32



Major obstacle to Growth

Number of MFIs citing constraint Total

number %

Mature MFIs

Growth Stage MFIs

Survival Stage MFIs

Start-up Stage MFIs

Lack of capital to invest in modern equipment and software

-

2 3 5 15

Lack of adequate skills / ability in financial analysis and management

-

1 3 4 12

Total mentions 1 5 10 18 34 100

Source: Presentation by FIMA at Workshop to Review Microcredit Programmes. The third most limiting factor is high operating costs in the form of transportation and other operating expenses (labour intensive). Politicisation of government microfinance programmes also increased the number of defaulters so did rampant multiple borrowing. Many MFIs have begun sharing client registers to mitigate this phenomenon. Business seasonality, occasional project failures, diversion of loan proceeds and high staff turnover in MFIs also continue to impact negatively on operations of most microfinance institutions. Strategies to address these challenges would be needed as an integral part of efforts to scale-up microfinance in Malawi.

2.5 School Meals


Targeted schools meals are an intervention designed to increase school enrolment, attendance and retention in primary schools located in areas with a high prevalence of household vulnerability to food insecurity. In Malawi the instrument was introduced as a form of welfare support to mitigate the impacts on education (low enrolment, inconsistent attendance, poor class participation and high dropout rates) of the devastating drought of 1995. The instrument has been retained with the objective of contributing to increased learning performance, and improved nutrition and health status of primary school learners. They are not designed as a short term poverty reduction instrument, but one that contributes to the long-term objective of human capital development. As such school meals programmes are implemented specifically to achieve education sector objectives.

2.5.2 Programme coverage, poverty targeting and targeting effectiveness Government plans to target all vulnerable primary schools across Malawi. However, at the time of the review, the school meals programme coverage was 956 schools with approximately 1.2 million beneficiaries. However, only 536 (19%) of the planned 2,858 schools classified as vulnerable were being reached due to resource constraints. Funding proposals had been submitted to the Ministry of Finance and to development partners to mobilise resources for the scale up of the programme. Identification of the schools is done using three indicators, which are: prevalence of ultra-poverty in the district, stunting rates, and standard 8 survival rates. The



instrument targets the child and not the household from which the child comes. All children attending school at the selected school receive one meal per day. The poverty status of households from which the children being fed come is not known as no study has profiled the beneficiaries. However, it is expected that by selecting schools in districts with the highest poverty levels and food insecurity, the ultra poor households would be reached with assistance. Yet by targeting all children in a vulnerable school, the instrument is unable to eliminate leakage to children coming from well-to-do households. A field visit to one school implementing school meals established that as many as 15% of school children were coming from families who are non-poor (families of teachers, business people, working at nearby training centres and tobacco farmers). About 25% came from moderately poor families, 40% from the “ultra-poor with labour” and 20% from “ultra-poor without labour”. In addition, targeting older children (girls) with the take home ration while living out those in Standard 4 and below marginalized children who are in greatest need. Children above Standard 4 had greater access to income-earning opportunities than those below Standard 5. Furthermore, given that children from ultra-poor families could not afford the other educational needs such as uniforms, stationery, levies and schools fees, and remained out of school, they were not being reached by this instrument.

2.5.3 Quality of design of the package of support In Malawi school meals are a component of the School Health and Nutrition (SHN) Programme. The SHN strategy aims, over time, to diversify the foods eaten (i.e., not always eating maize and soya, but including foods from all food groups). Under SHN, food is expected to come from the following, starting with the first level and moving outwards:

i. Parents – all parents need to feed their children before school and send their children with a snack, and a lunch if appropriate;

ii. Schools – can assist by role modelling food and nutrition security methods at school through the curricula, practical subjects, adapting chores to be more useful and productive, clubs, community days, etc.;

iii. Communities – can assist in providing food for their children by organizing and running school meals gardens / farms; and

iv. Government / donors – can assist by helping the most vulnerable areas through “Targeted Support to School Meals Programme (TSSMP)” – this is what most people know of as “school feeding” (which is now School Meals).

Under the TSSMP, at every participating school, every child in attendance receives a mid-morning snack of Corn Soya Blend porridge. The porridge is prepared at the school by community members appointed and paid by the parents of the benefitting children. In addition, some programmes provide a take home dry ration of 12.5 kg for adolescent girls and orphans (Standard 5 upwards) based on consistent school attendance for 18 days (80%). CSB is currently being used as the main type of meal whilst the Government is testing through pilot projects the appropriateness of four other types of foods6 to enhance the quality of the school meal. It is envisaged that

6 These foods are: a) “chiponde cha mapira ndi chitowe” (fortified sesame, sorghum and maize

spread); b) nutrition bars (high nutrient biscuits); c) fortified drink (such as ’’Thobwa’ made from



under the TSSMP, the CSB will be fortified with essential vitamins and minerals and will provide a minimum of 350 kcal and 15 grams of protein per child, as per the recommendations in the SHN guidelines. It is fortified with micronutrients to address the high micronutrient deficiency disorders discovered in schools by the 2006 National School Health and Nutrition Baseline Study funded by the World Bank. The instrument demands a lot of fuel wood for cooking with potential negative medium to long-term implications for the environment unless schools establish woodlots. The plan under TSSMP is to introduce fuel-efficient stoves for use in the preparation of the school meal. Water and sanitation issues related to food preparation and consumption are also not consistently addressed in the schools. Schools lack adequate sanitation facilities and safe water. In some schools, storage is also suboptimal and utensils for feeding the children are in short supply. The nutritional value of the CSB porridge is inadequate. CSB is high in carbohydrate, low in fat, low in minerals and vitamins (unless fortified) and too focused on maize as a starch, which Malawi is trying to diversify away from to balance the diet. Government is also piloting four types of alternative.

2.5.4 Results achieved Malawi’s experience with school meals programmes indicates that while the food boosts school enrolment, attendance, retention, class participation and performance (e.g., 5% higher Standard 8 pass rates), particularly of girls in vulnerable areas, one meal per child per day is too little to substantially improve nutrition of school children and food alone is not sufficient to facilitate access to education by children from very poor families who often lack uniforms, food in the home (evening meal), and washing soap. Migration of children from nearby schools to feeding centres can also give rise to superficial increases in enrolment of around 40%. This increase in enrolment is sometimes not matched by an increase in teachers and or teaching materials (leading to low teacher-to-pupil ratios in the range of 1:100 and pupil-to-text book ratios of 10:1). In terms of nutrition, the school meal (porridge) contributes only 14-26 percent of daily calorific requirements for children in Standards 1-8. Small children get more benefit (26 percent of calories), but bigger children get less benefit (14 percent of calories). In the lean period, when households are experiencing severe food stress, the school meal at times becomes a replacement meal rather than being a supplementary meal. The take home ration is also shared with other household members. Both of these dilute the impact of the programme on nutrition. Impact assessment to track the changes in micronutrient disorders in school children is yet to be done as the follow-up school health and nutrition survey (which was supposed to be carried out in 2009) is yet to be carried out due to lack of financial resources. In terms of poverty impact, the mid-morning snack at school relieves short-term hunger and increases a child’s capacity to concentrate and learn, and thus perform better in exams, but in the short term has little poverty impact. Impact on poverty is expected to occur in the medium to long term when the children with higher pass rates graduate from school and enter the job market, secure jobs that pay them a decent income to support their family livelihoods.

sprouted grains and legumes and developed with a long shelf-life); and d) full meals such as rice, beans, vegetable and fruit.



2.5.5 Efficiency of delivery mechanisms, cost effectiveness and challenges The cost per learner under the targeted support to school meals programme is estimated at US$42 per annum. This unit cost puts the total annual cost of the programme at full scale at about 4% of GDP. Central procurement of the porridge and use of local labour for cooking also helps to keep costs low, but the cost of distributing the supplies to schools is high. The other challenges included:

• Inadequate capacity within Government; • Poor road network which sometimes hampers delivery and raises costs

especially in the wet season; • High pupil-to-teacher and pupil-to-classroom ratios due to school meals

programme; • Weak integration of school meals activities with clean water supply, sanitation

provision, and health and hygiene education; • Negative environmental impacts of the school meals programmes arising from

the energy demands (fuel wood for cooking); and • Misappropriation and mismanagement of food at school in some cases.

2.5.6 Sustainability and exit strategies The instrument is highly dependent on donor funding. Enrolment, retention and class participation quickly drop in lean months when there is no feeding in the schools. However, the education (e.g., literacy) attained by the pupils during the project period is likely to continue to benefit the children. Home grown school meals programmes offer opportunities for enhancing sustainability of school feeding programmes and the basic ingredients of the porridge can be locally produced (e.g., maize, soya beans and groundnuts). The linkage of the school feeding programme to the overall school health and nutrition (SHN) strategy, may assist in resource mobilisation and continuity of the programme, but components of the SHN package have not yet been scaled up to reach all schools (e.g., health and nutrition assessment, sustainable school gardens and bilharzias control and treatment are only in a few schools and running as a pilot approach). Political will is needed to mobilise resources for the school meals programme through national budget framework. Already, Cabinet in 2007 gave a Directive to scale up school meals to reach more schools, but this is yet to be followed by concrete action in terms of funding by the government. There are opportunities to link the school meals programme to the input subsidy programme by targeting home grown school meals programme and school gardens with subsidised inputs and irrigation development to encourage local production of the raw materials needed for manufacturing the porridge. Experience of the Millennium Village Pilot (MVP) Project confirms that communities can be successfully trained to produce locally the porridge. Whilst the MVP has not run for long enough to fully assess its viability, it does mimic the School Meals strategy for communities joining forces and organizing to support their own children’s food at



school and would be important to explore as one of the strategies for ensuring sustainability. Some schools have suitable land for agriculture. There are also potential links to the social cash transfers instrument with the latter removing other barriers to education by meeting non-food needs of school children from poor families whilst the school meals programme supplies the porridge at schools. In terms of exit strategies, there is no exit strategy at programme level unless the poverty profiles of targeted districts change and a retargeting exercise is carried out. Exit is more at the level of the individual children who automatically exit the programme once they complete Standard 8. There is no feeding of children from poor families at secondary school level.

2.5.7 Potential for scale-up Achievement of Millennium Development Goal No. 2 on education remains a top priority for Malawi. The school meals programme is a component of the school health and nutrition programme which is gradually being scaled up. On paper the scale up of school meals is supported by the 2007 Cabinet Directive, but financial resources are yet to be availed through the national instrument. Scale-up potential exists as communities are willing to provide free labour. Food insecurity remains a challenge in some parts of Malawi where family resources are not adequate for achievement of food self-sufficiency even in a good rainfall year. Prevalence of food insecurity at household level sharply increases in areas affected by national disasters (such as floods, droughts and earthquakes) which happen occasionally in Malawi. In general, the school meals programme has the potential to boost socio-economic development and industrial growth at community level if home grown school meals approach is adopted in Malawi.

3 KEY MESSAGES FOR THE DESIGN OF THE NSSP

The review findings clearly confirm that Malawi has a good mix of instruments for social support, whose objectives are well aligned with the goals of the national social support policy. However, at the minimum, these instruments need to be sharpened in terms of their precision in poverty targeting, the packages of support must be enhanced for poverty impact, and their scope scaled up to reach more poor people. The programmes should systematically integrate impact assessment in order to track the changes in poverty arising from the interventions. Predictable and reliable funding sources and mechanisms for disbursing and accounting for the funds are needed but creation of parallel structures for fund management should be avoided, with greater focus being placed instead on supporting, revitalising and building national systems including those for decentralisation, such as the local development fund.

3.1 Enhancing the design of intervention packages for poverty impact

There is a wide variation in the level of support across provided by current interventions. This applies even under the same type of instrument. This is partly due



to differences in programme objectives and, more importantly, the absence of empirical work to determine the smallest transfer necessary to achieve the desired impact on intended outcomes. Good examples are found in public works programmes where wage rates vary, the period of workfare is not uniform, and complementary inputs distributed to beneficiaries of infrastructure such as irrigation schemes also varies widely across programmes funded by the different donors. The same obtains for the micro-credit instrument whereby the minimum loan sizes, interest rates and grace periods offered by the different MFIs also vary widely.

Whilst many social support programmes in Malawi on paper aim to achieve poverty reduction, it is not clear how they intend to achieve this objective through the level of transfer, which in most cases is too low and eroded by inflation over time thus eroding the potential impact on poverty. Consequently, most interventions have only been able to lift the poor from ultra-poverty to moderate poverty but not completely above the total poverty line due to the low level of support (value of transfer). Interventions with high levels of start-up support (e.g., irrigation projects which come with free start-up inputs) are achieving more in terms of poverty impact than those whose support comes in small quantities (e.g., forestry projects, micro-finance schemes with small loan sizes) or intermittently (social cash transfers that experience pipeline breaks).

To lift the poor out of poverty, it appears the levels of transfer should be increased for most interventions, being explicitly linked to some objective measures such as the income gap of expected beneficiaries, or the cost of an “adequate food basket”. This implies that the poverty levels of the target groups must be known, before hand (through baseline surveys) and the level of transfer is varied according to poverty characteristics at household level, and indexed to inflation to ensure that the value of transfer is not eroded over time.

The wage rate for public works programmes and the level of social cash transfers, for example, should be systematically adjusted in line with inflation, but monitoring of the wages in low-skill occupations should also be done when determining wage rates for public works. The duration of the workfare (number of days of employment provided by the public works) should be compared with the average number of days of idleness during the slack season. The school meals programme should assess adequacy of the nutritional supplement it provides against the nutritional deficit of a child in school.

As a general rule, from a poverty impact perspective, the level of transfer should reflect two objectives: reducing current poverty among beneficiaries and enabling meaningful investments in productive capacity and asset base (including human capital) as a way of lifting the poor out of poverty. So far, the levels of transfer for most programmes appear to be linked to the welfare objective and the need to maximise reach against overall budget constraints. They achieve Goal 1 of the social support policy but fall short on the other 3 objectives. To address Goals 2 and 3 (on poverty impact), the design of future programmes should start by interrogating the level of the poverty gap, identifying what is causing it, and assessing affordability and effectiveness of various measures to bring consumption of the poor back to the poverty line.



In determining the optimal level of transfer, Malawi will have to choose between restricting coverage but reaching as many beneficiaries as possible with an adequate level of the benefit, or maximising coverage by reducing the level of transfer which also compromises poverty impact. The latter is more politically acceptable strategy but more expensive in the long term in terms of missed opportunities for using the same resources to achieve economic growth and poverty reduction.

In enhancing the design, an important step for Malawi is therefore to develop standardised packages of support based on what has been proven to work in achieving the stated objectives. Government should thus be prepared to test the suitability of different sizes of support packages in a selected number of districts in terms of meeting goals of the social support policy. This will facilitate harmonisation of approaches for programmes delivering the same type of instrument.

3.2 Reaching the poor – enhancing targeting

The poverty vulnerability profiles of people reached by most social support programmes in Malawi are not known so is the poverty impact of these programmes. For current interventions to become more pro-poor whom they target should be known a priori (through good baselines) and mechanisms to reach the right target group for each instrument put in place. So far, self-targeting wage rates are used and work well in some low wage public works programmes, but in others where the wages are higher the workfares are oversubscribed and targeting is a real challenge. For social cash transfer the arbitrary 10% cut off point for determining reach at community level, introduces challenges in districts where the proportion of the labour constrained ultra-poor exceeds 10% of the population, as those in need exceed the cut-off point. The cut-off points should in future be objectively determined on the basis of the actual levels of poverty prevalent in the respective districts.

Most programmes use community targeting approaches whereby beneficiaries are identified by communities based on what they judge as “deserving” clients. This approach has strong community ownership but also has inherent weaknesses. Community targeting is based on perceptions informed by experience but not on empirical evidence. It is therefore prone to subjectivity. In addition, communities tend to promote equity by rotating beneficiaries after sometime to give others in the community an equal chance to benefit but without due regard to whether or not the previous clients have graduated out of poverty and whether or not they still deserve the support. A combination of community-based and scientific methods of targeting (such as means tests) is therefore essential for reducing inclusion/exclusion errors.

Significant investment in operational research (good baselines and longitudinal impact assessments) is needed to improve targeting. Key poverty related indicators should thus be developed to inform targeting and improve monitoring of the poverty impact, graduation and exit of clients. Each social instrument needs a standard set of poverty impact indicators to evaluate the impacts.

3.3 Expanding the scale of operation

Most social support interventions have a very small reach when compared to the magnitude of the population in need (they reach less than 30% of deserving households). All have to be scaled up significantly (e.g., by a factor of 2 or 3). The potential to scale them up exists but the most critical requirement is adequate and



predictable funding. This calls on the government, first and foremost, to commit a substantial proportion of the national budget to social support instruments (especially public works, social cash transfers, and micro-finance), and where necessary adjusting current allocations to some of the on-going programmes (such as farm input subsidy) to achieve an optimal balance. In the case of micro-finance, availing affordable working capital and facilitating the supply of skills are likely to see the sector grow in leaps and bounds as these two constitute the most critical constraints.

Government alone will not be able to assemble the resources needed in the short term. Strong donor, NGO and private sector support is critical for delivery of a technically sound national social support programme that has the right mix of instruments, sufficiently high levels of transfers, sufficiently long period of benefit and optimal reach to the poor.

3.4 Strengthen integration of social support instruments into a holistic

package with clear graduation pathways and exit strategies

Past social support instruments have been designed and operated in isolation of other complementary forms of social support. Not enough attention has been paid to ensuring that individual social support programmes fit into a congruent whole and that social support complements the country’s other social policies. While the public works instrument has been adapted to complement the farm input subsidy, and works well in this regard, VS&L which can complement and become an exit strategy for social cash transfers, public works programmes and micro-finance is not systematically integrated into the design of these instruments. Programmes that could complement each other are not always targeted at the same groups of people because of differences in objectives and targeting criteria. Fragmentation of interventions spreads resources too thinly and does not permit exploitation of synergies for greater impact.

Another major finding of the review is that many programmes do not articulate clear graduation pathways for the poor nor do they have exit strategies when they start. More work is needed to ensure that social support programmes aim not only to provide transfers but also other types of assistance to help households increase their autonomous incomes. This will entail selective bundling up and customising social support and other critical services for the poor and vulnerable in strategic ways that (a) generate positive synergistic effects, (b) provide a logical continuum of support from the level of the labour constrained ultra-poor, to that of the labour resourced ultra-poor and finally to the moderately poor and (c) provide a clear graduation pathway for the poor as a “conveyor belt” to household independence. A richer mix of instruments can ensure that the underlying problem of poverty is addressed without necessarily creating a dependency on welfare.

To improve coherence and synergy between social support instruments, a critical step will be the introduction of harmonised targeting. The country should seriously consider adopting one targeting system for all social support interventions. A single targeting exercise entails generation of information about household poverty and vulnerability covering all households in a village and categorisation of households according to the most appropriate package of social support they need. It will also involve the setting up of a national database of beneficiaries that could be managed at the local level to coordinate targeting of various social support interventions.



3.5 Rationalise institutional arrangements

There is merit in moving away from a situation where the country has several fragmented programmes using the same type of instrument (e.g., public works) to comprehensive programmes. The country should, for example, consider moving away from fragmented public works programmes to one holistic programme and from several institutions implementing programmes using the same instrument to one institutional arrangement that may have the flexibility of implementing the same programme using different approaches. This will reduce transaction costs arising from the running of several parallel institutional arrangements (steering committees, advisory committees, and management committees at national and the sub-national level) for different smaller projects.

3.6 Infrastructure development remains key to optimal delivery of social

support programmes

Reducing the cost of delivering social transfers will require the continued upgrading of transport, communications and energy infrastructure, especially in the rural areas. There is a clear need to introduce automated systems of delivering transfers (e.g., social cash transfers) as part of scale-up efforts, but electronic payment systems work well when complementary infrastructure is functional and efficient. Upgrading of infrastructure will thus remain critical to improving efficiency of social support delivery mechanisms.

4 INFORMATION GAPS AND RECOMMENDED NEXT STEPS

Drawing from the key messages above, the next steps in the design should focus on the following steps:

1. Identifying tools that have been developed elsewhere to harmonise targeting of social support programmes.

2. Identifying examples of good practice in combining community and scientific methods for targeting.

3. Identifying good examples of programme integration – especially to find out how different instruments of social support can be combined for synergy and impact.

4. Exploring possibilities of moving from fragmented projects to more comprehensive programmes.

5. Identifying impact indicators that can be used to track the performance of a comprehensive social support programme.

6. Exploring the feasibility of funding various social support instruments through the national budget, including analysis of various institutional options for fund management and delivery.

7. Identifying appropriate levels of transfer for the various social support interventions being considered in Malawi.



5 ANNEX 1: DOCUMENTS AVAILABLE FOR REVIEW

Village Savings and Loans

VSL Guidelines Manual

Field work back to office reports of DPRSP desk officers

Draft VSL programme design

Public Works Programme

MASAF Operating Manual

MASAF Impact Assessment Report by Jimat, ITAD and O&M Associates (2008)

Study on Wage Rate by Wadonda Consultants

Progress Reports (IGPWP, ILRAD)

Back to office reports by DPRSP desk officers

Malawi 10th European Development Fund Formulation Mission Report: Identification

Report, Final Report, May 2009

Social Cash Transfers

EU Proposal

SCTS scale-out plan

Social support categories

SP resource tracking

Manual for the Malawi Pilot SCT scheme

SCTS Joint Financing Modalities

SCTS funding flow diagram (Draft)

Guidelines for internal monitoring of the SCTS

SCTS proposal draft (22 Feb 2010)

Cost of Social Cash Transfer Programme based on District Specific Incidence (IHS&WMS data)

Alignment of SCTS to LDF

Minutes of Social Cash Transfer Directors’ Meeting, KuChawe Inn, 12th & 13th October, 2009



Discussions and Recommendations on the Social Cash Transfer Programme –Directors’ Statement

Micro-Credit

Draft MF Programme

Guidelines / Manual on MARDEF Loans

MDPC Desk Officer Field visit reports on micro-credit

Food and Cash for Assets/Skill Building

MDPC Desk Officer Field Visit Back to Office Report(s)

Round 1 Workshop Reports

Report on the Workshop to Review Public Works Programmes in Malawi

Report on the Workshop to Review Social Cash Transfers Programmes in Malawi

Report on the Workshop to Review School Meals Programmes in Malawi

Report on the Workshop to Review Microcredit Programmes in Malawi

Report on the Workshop to Review Village Savings and Loans Programmes in

Malawi

draft national social support programme: synthesis … · draft national social support programme...

Documents