Document of The World Bank FOR OFFICIAL USE ONLY Report No: 82617-MW INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR21.4 MILLION (US$ 32.80 MILLION EQUIVALENT) TO THE REPUBLIC OF MALAWI FOR A STRENGTHENING SAFETY NETS SYSTEMS PROJECT – FOURTH MALAWI SOCIAL ACTION FUND (MASAF IV) November 20, 2013 Social Protection, East and Southern Africa East Africa Country Department 3 Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective October 31, 2013) Currency Unit = Malawi Kwacha US$1 = MWK 395 US$ = SDR 0.65017815 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS COMSIP Community Savings and Investment Promotion CPs Cooperation Partners CSSC Community Social Support Committee DSSC District Social Support Committee EU European Union FISP Farm Inputs Subsidy Program FROIP Financial Reporting And Oversight Improvement Project GoM Government of Malawi IA Irish Aid, IFMIS Integrated Financial Management Information System IHS Integrated Household Survey KfW Kreditanstalt für Wiederaufbau, LDF-Mechanism Local Development Fund Mechanism LDF-TST Local Development Fund-Technical Support Team MASAF Malawi Social Action Fund MEP&D Ministry of Economic Planning and Development M&E Monitoring and Evaluation MGCSW Ministry of Gender Children and Social Welfare MIS Management Information System MLGRD Ministry of Local Government and Rural Development MoAFS Ministry of Agriculture and Food Security MoF Ministry of Finance. MVAC Malawi Vulnerability Assessment Committee (MVAC) MW&I Ministry of Water and Irrigation. NSCTS National Social Cash Transfer Secretariat NSSSC National Social Support Steering Committee NSSP National Social Support Program NSSTC Social Support Technical Committee SCTP Social Cash Transfer Program PMT Proxy Means Targeting POS Point of Sales Devices. PWs Public Works OPC Office of the President Cabinet SCT Social Cash Transfer UNICEF United Nations Children’s Education Fund. Vice President Makhtar Diop Country Director: Kundhavi Kadiresan Sector Director: Ritva S. Reinikka Sector Manager: Lynne Sherburne-Benz Task Team Leader: Maniza B. Naqvi i REPUBLIC OF MALAWI Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) TABLE OF CONTENTS I. STRATEGIC CONTEXT ............................................................................1 A. Country Context ....................................................................................... 1 B. Sectoral and Institutional Context............................................................ 2 C. Higher Level Objectives to which the Project Contributes ..................... 6 II. PROJECT DEVELOPMENT OBJECTIVES ...........................................7 A. PDO.......................................................................................................... 7 Project Beneficiaries ...................................................................................... 7 PDO Level Results Indicators ........................................................................ 8 III. PROJECT DESCRIPTION .........................................................................8 A. Project Components: .............................................................................. 10 B. Project Financing ................................................................................... 11 Project Cost and Financing .......................................................................... 12 C. Lessons Learned and Reflected in the Project Design ........................... 12 IV. IMPLEMENTATION ................................................................................14 A. Institutional and Implementation Arrangements ................................... 14 B. Results Monitoring and Evaluation ....................................................... 15 C. Sustainability: ........................................................................................ 15 V. KEY RISKS AND MITIGATION MEASURES .....................................16 A. Risk Ratings Summary Table ................................................................ 16 B. Overall Risk Rating Explanation ........................................................... 16 VI. APPRAISAL SUMMARY .........................................................................18 A. Economic Analysis ................................................................................ 18 B. Technical ................................................................................................ 19 C. Financial Management ........................................................................... 21 D. Procurement ........................................................................................... 21 E. Social (including Safeguards) ................................................................ 21 F. Environment (including Safeguards) ..................................................... 21 G. Other Safeguards Policies Triggered ..................................................... 23 Annex 1: Results Framework and Monitoring ....................................................24 Annex 2: Detailed Project Description ..................................................................34 Annex 3: Implementation Arrangements .............................................................38 Annex 4: Operational Risk Assessment Framework (ORAF) ............................71 Annex 5: Implementation Support Plan ...............................................................76 Annex 6: Vulnerability and Poverty in Malawi ...................................................79 Annex 7: Social Protection Public Expenditures Review ....................................84 Annex 8: Economic Analysis For MASAF IV .....................................................94 Annex 9: MASAF III Detailed Progress Report ................................................105 Annex 10: Targeting Tools in Programs in Malawi ..........................................107 Annex 11: Social Cash Transfers Program-Mukula Pakhomo ........................117 Annex 12: Productive Community Driven Public Works: ...............................138 Annex 13: Community Savings and Investment Promotion (COMSP) ...........145 Annex 14: Social Accountability ..........................................................................149 Annex 15: Social Sustainability ..........................................................................151 ii . PAD DATA SHEET REPUBLIC OF MALAWI Strengthening Safety Nets Systems Project – Fourth Malawi Social Action (MASAF IV) (P133620) PROJECT APPRAISAL DOCUMENT . AFRICA AFTSE Report No.: PAD670 . Basic Information Project ID Lending Instrument EA Category Team Leader P133620 Investment Project B - Partial Assessment Maniza B. Naqvi Financing Project Implementation Start Date Project Implementation End Date 18-Dec-2014 31-Dec-2017 Expected Effectiveness Date Expected Closing Date 20-Jan-2014 30-June-2018 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Lynne D. Sherburne- Ritva S. Reinikka Kundhavi Kadiresan Makhtar Diop Benz . Borrower: Government of Malawi Responsible Agency: Local Development Fund TST Tel +265 (0)1 775 666/ 1 774 725 Fax +265 (0)1775949 1 771 676 Web www.ldf.gov.mw Off Presidential Road, Area 14 Red Cross House Private Bag 352, Lilongwe, Malawi Contact: Mr. Sam Kakhobwe Title: Executive Director Telephone +265 (0)1 774 725 Email: sakhobwe@ldf.gov.mw No.: . Project Financing Data(in USD Million) [ ] Loan [ ] Grant [ ] Other [X] Credit [ ] Guarantee iii Total Project Cost: 107.00 Total Bank Financing: 32.80 Total Cofinancing: Financing Gap: 74.2 . Financing Source Amount BORROWER 0.00 International Development Association (IDA) 32.80 Total 32.8 . Expected Disbursements (in USD Million) Fiscal FY14 FY15 FY16 FY17 0000 0000 0000 0000 0000 Year Annual 28.0 4.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Cumulati 28.0 32.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ve . Proposed Development Objective(s) The Project Development Objective of the proposed project is “to strengthen Malawi’s social safety net delivery systems and coordination across programs”. . Components Productive Safety Nets US$28.8 million Systems and Capacity Building US$2.0 million Project Management US$2.0 million . Institutional Data Sector Board Social Protection . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co-benefits % Co-benefits % Other Social Services Other social services 50 General Agriculture General Agriculture, 30 fishing and Forestry Water and Irrigation Irrigation and Drainage 15 Agro-Industry Marketing and Trade Agro-Industry Marketing 5 and Trade Total 100 iv I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Social protection and risk management Social safety nets 100 Total 100 . Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [X] respects? . Does the project require any waivers of Bank policies? Yes [ ] No [X] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [X] Does the project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 x Natural Habitats OP/BP 4.04 x Forests OP/BP 4.36 x Pest Management OP 4.09 x Physical Cultural Resources OP/BP 4.11 x Indigenous Peoples OP/BP 4.10 x Involuntary Resettlement OP/BP 4.12 x Safety of Dams OP/BP 4.37 x Projects on International Waterways OP/BP 7.50 x Projects in Disputed Areas OP/BP 7.60 x . Legal Covenants Name Recurrent Due Date Frequency Schedule 2 Section I H. 1. The Recipient Yes June 30, 2014 shall not later than June 30, 2014, engage an independent expert to verify the list of Cash Transfer Beneficiaries for the purpose of Part A.3(a) of the Project in accordance with the provisions of Section III of this v Schedule, whose terms of reference, qualifications and experience and terms and conditions of employment shall be satisfactory to the Association. Schedule 2 Section I H. 2. The Recipient Yes October 31, 2014 shall not later than October 31, and January 31, 2014, submit to the Association 2015, the technical audit report satisfactory to the Association referred to in Section II.B.4 of this Schedule related to the use of the proceeds of the Cash Transfer for the first three months of the Project and, thereafter, submit to the Association not later than January 31, 2015,the technical audit report related to the use of the full proceeds of the Cash Transfers under Category (4) of the table set forth in Section IV.A of this Schedule. Schedule 2, Section IV. B. 1 Yes Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (b) for payments made under Category (1), unless the Recipient has exhausted the funds allocated in Category 1 of Section IV.A.2 of Schedule 2 to the Third Social Action Fund Project (Phase II) Financing Agreement; Schedule 2, Section IV. B. 1 (c) Yes for payment of the Cash Transfer under Category (4), unless the Recipient has issued a complete list of Cash Transfer Beneficiaries eligible to receive Cash Transfers in vi accordance with the eligibility criteria set forth in the Project Implementation Manual, verified by an independent expert recruited under Section I.H of this Schedule 2, and in a manner satisfactory to the Association (as the list may be updated from time to time with the prior consultation and agreement of the Association). . Conditions: Name Type Description of Condition The legal opinion of the Attorney General of Malawi prior to effectiveness. Team Composition Bank Staff Name Title Specialization Unit Maniza B. Naqvi Sr Social Protection Team Lead: Safety Nets AFTSE Specialist Systems, PWs and CDD. Cheikh A. T. Sagna Senior Social Safeguards AFTCS Development Specialist Ida Manjolo Sr. Social Protection Safety Nets Systems, AFTSE Specialist PWs and CDD Alejandro De la Fuente Poverty Economist Economist AFTP1 Steven Maclean Mhone Procurement Specialist Procurement AFTPE Laura Campbell Consultant Safeguards AFTSE Muderis Abdulahi Sr Social Protection Safety Nets Systems, AFTSE Mohammed Specialist PWs and CDD Deliwe Ziyendammanja Team Assistant Team Assistant AFMMW Ana Makiesse Lukau Program Assistant Program Assistant AFTSE Trust Chamukuwa Financial Management Financial Management AFTME Chimaliro Specialist Maiada Mahmoud Abdel Finance Officer Disbursements CTRLA Fattah Kassem Nneoma Veronica Counsel Legal LEGAM Nwogu Edith Ruguru Mwenda Sr. Counsel Legal LEGAM vii Antonia T. Koleva Operations Officer Operations AFTSE Non Bank Staff Name Title Office Phone City Rui Benfica Associate Professor, Michigan International Development Department of Agricultural, Food and Resource Economics Michigan State University . Locations Country First Location Planned Actual Comments Administrative Division Malawi 35 Districts Rural and Peri 35 Districts Urban viii I. STRATEGIC CONTEXT A. Country Context 1. Extreme poverty and vulnerability is a serious and persistent problem in rural Malawi, with extreme poverty increasing from 20 percent to 24 percent between 2005 and 2011. Over half the total population of Malawi lives in poverty. Vulnerability and poverty affect the majority (85 percent) of the approximately 16 million Malawians who are dependent on agriculture for their livelihood and live in the rural areas. Of the 3.4 million ultra-poor 1, 96 percent are dependent on agriculture, mostly tobacco and maize, for their livelihood. 2 Over half the total population of Malawi lives in poverty, with one of the lowest per capita incomes in the world of approximately US$330. 3 2. Despite strong economic performance registered during 2005-2010, poverty remains widespread and concentrated in rural areas. Income also remains unevenly distributed (the gini-coefficient deteriorated from 0.39 in 2005 to 0.45 in 2010), reflecting inequalities in the access to assets, services and opportunities across the population. Within rural areas, the same index rose from 0.34 to 0.38, while within urban areas inequality stayed roughly constant at about 0.49. The national absolute poverty rate of 52.4 percent in 2004/05 declined only marginally to 50.7 percent in 2010/11. The trends in rural poverty were 55.9 percent in 2004/05 vs. 56.6 percent in 2010/11. 4 In addition, while the absolute poverty rate among male- headed households was estimated at 49 percent in 2010/11, the comparable figure among female-headed households was 57 percent. 5 3. For decades, Malawi’s economy has been highly susceptible to adverse shocks partly due to its landlocked geography and the structure of the economy. The country is landlocked and has a narrow export base of agriculture produce (primarily tobacco) and is highly dependent on imports and unpredictable aid inflows. 4. For almost two decades the Government of Malawi’s (GoM’s) efforts to reduce poverty have focused on its flagship safety nets program of cash transfers through MASAF-LDF public works to 1.6 million of the poor. In addition, MASAF public works beneficiaries have been organized into savings groups under the MASAF supported Community Savings and Investment Promotion. More recently, a Social Cash Transfers program supported by a number of Cooperating Partners (CPs) has targeted the most vulnerable and labor constrained households. However, these key programs have worked in isolation of each other and the delivery of safety nets remains fragmented and inadequate. 1 The poor are categorized as ultra poor and moderately poor in Malawi’s National Social Support Policy and Program, the HIS surveys and Poverty and Economic Analysis. Poverty in Malawi is classified and divided into poor and ultra-poor. Approximately 22 percent of Malawi’s population is considered ‘ultra poor’ and 52 percent live under the poverty line. The criteria for the ultra-poor category, is an income of 10,029 MK or below per person per year (836 MK per person per month. 2 Malawi Public Expenditure Review, World Bank 2013 3 WDI, 2011 4 The difference between the IHS2 and the IHS3 national absolute poverty rates is not statistically significant. The IHS3 rural poverty rate is also statistically indistinguishable from its IHS2 counterpart. 5 Proposed Analytical Work Program on the Evaluation of the Farm Input Subsidy Program Wendy Karamba , Paul Winters , and Talip Kilic . 1 5. Moving forward MASAF IV is designed as a second generation safety net system that builds a Safety Net platform to harmonize, coordinate and deliver safety nets based on the 17 year experience of the Local Development Fund Mechanism (LDF) and more recent approaches underway in the country on a unified registry system. It would support productive community driven public works through MASAF, the Community Savings and Investment Promotion (COMSIP), and the more recent Social Cash Transfers program. It would also strengthen, coordinate and harmonize the establishment of a system for unified registries and the targeting of the poorest and most vulnerable in the country. The proposed MASAF IV would harmonize and coordinate the approaches, targeting, and systems of these programs. MASAF IV would thus support a second generation safety nets system through the Safety Net platform, which is based on improving the existing safety net programs in the country. MASAF IV is in line with the National Social Support Policy (NSSP) while also working within the water, agriculture, environment and climate resilience and disaster risk management sectors to reduce poverty and vulnerability. 6. Recent events in Malawi have put close public scrutiny on corruption in high places. A recent shooting of an official in the Ministry of Finance unraveled large-scale fraud committed by senior officials on the Integrated Financial Management System (IFMIS). The full extent of the fraud is still being investigated, but it seems to have triggered large-scale public anger in the media (including social media) on corruption and impunity in government. Subsequent actions by the GoM have included removing of some Ministers from the Cabinet and action taken against a few officials. The full extent of punitive actions that will be taken is still unclear. GoM and development partners are currently discussing a set of immediate and medium-term actions that have to be taken in order to restore public trust in the financial management and oversight mechanisms. The MASAF III and MASAF IV projects have not been using IFMIS, but a different system at the sub-national level, which has been working reasonably well. This will remain an important risk for the project and mitigation measures have been spelt out in the PAD which build upon systems in MASAF III and experiences from elsewhere. B. Sectoral and Institutional Context Social Protection Policy in Malawi 7. The Government of Malawi (GoM) approved its Social Protection framework through the NSSP in March 2013 and the National Social Support Program in April, 2013. The NSSP outlines the need for better coordination, targeting and a rebalancing of expenditures to make way for a more effective SP system that has a goal to reduce poverty and enable poor households to move out of poverty and vulnerability. 8. Social Protection in Malawi is coordinated by the Ministry of Economic Planning and Development through its Department of Poverty Reduction and Social Protection. The Local Development Fund Mechanism (LDF) through the MASAF project is the largest safety net program through Public Works. The LDF is under the Ministry of Local Government and Rural Development (MoLGRD) with oversight from the Ministry of Finances (MoF) and the Office of the President Cabinet Secretariat (OPCS). The Ministry of Gender, Children and Social Welfare (MGC&SW) is responsible for the implementation of the Social Cash Transfers through a Secretariat established in the Ministry. The MEP&D is responsible for the overall 2 social protection policy implementation. Other stakeholders such as the Ministry of Agriculture also implement other interventions defined in Malawi as part of safety nets. This includes the Farm Inputs Subsidies Program (FISP). There are also a number of non-governmental organizations including faith based missions that support and implement social support interventions in Malawi albeit in a fragmented manner. Social Protection Programs in Malawi 9. Social Protection benefits to the poorest citizens of Malawi are varied in their scope and effectiveness. Broadly, however, most remain insufficient, inefficient, underfinanced, limited, fragmented and donor financed. Total Social Protection expenditures minus the FISP are currently MK 12.8 billion (US38.4 million) or 2.6% of total Government expenditures, which translates to 1.0% of GDP. This is low by even regional standards. In Africa, public spending on social security is low but averages 2.8% percent of GDP (excluding health expenditures). This is approximately half the world average of about 5.7 percent (World Bank: Africa Social Protection Strategy, 2012). 10. Food and cash for work programs comprise the bulk of social protection programs and benefit approximately 10 percent of Malawians. Approximately 14.8 percent of the population in Malawi benefit directly and indirectly (through take home rations) from the National School Feeding Program. A small percentage of the population also benefits from free maize programs. By sex of head of household, a slightly higher proportion of female-headed households (16%) benefits from school feeding programs compared to male-headed households (14.6%). Likewise, 3 percent of female-headed households receive free maize relative to 2 percent of male-headed households. Besides, free food other than maize programs benefit 2 percent of rural and 1 percent of urban areas. Rural areas in the south benefit more (21.1 percent) compared to those in the north (6.3 percent) and center (8.5 percent). Of Malawi’s three regions, the Southern region has the highest share of population (23.4%) benefiting from the National School Feeding Program, while the Central region benefits the least (7%). Similarly, the Southern region (3%) benefits more from free maize compared to Central and Northern regions (1%). 11. Social Protection investments include public works and direct cash transfers, although the latter are comparatively small. The administrative costs of delivery range from 8% for MASAF and to 10%-19% for the Social Cash Transfers Program. Current expenditures do not adequately cover the vulnerable and the programs to varying degrees need improvements in their targeting. While non-FISP safety net programs reach the poor, on average the expenditures only reach 19% of the poor, as well as 17% of non-poor, even though 50% of the population is below the poverty line. 3 Table 1: Government of Malawi Social Protection Programs All Social Protection Source of Districts Intended Targeting Method # HHs # persons Benefit per Cost of GoM Budget Expenditures Funds Target Group HH in kind or Delivery Expenditure MK % of 2012/13 Total MKs (000,000) School Feeding GoM, WFP, 13 Primary School Schools: enrolment, 630,000 Meal Daily 170 Program Mary Meals, going children attendance/ drop-out rates, food insecurity Social Cash Transfer GoM EU, 7 Direct Cash Recertifying 10% poorest 28,000 100,000 2700 mthly 10%- 100. 67 million Scheme KfW, Irish transfers to. in each district. End 19% Euros Aid, Ultra poor/labor community Targeting, state commitment UNICEF constrained HHs IH3, and PMT 319,000 2014 HHs (EU/KFW) Rural Infrastructure The 15 Poor HHs. PWs Community Targeting NA NA NA NA Development European that create short Program (RIDP) Union term employment. MASAF-LDF Public The World 28 Labor able poor Geographical, Poverty 586,000 2,900,000 14,400 8% 13,783.87 Works Program Bank, GoM Labor intensive Targeting; MVAC annually PWs Assessment report Ministry of Gender KfW, Irish 28 Poor, sick and Recertifying and targeting NA NA NA NA 982.81 Children and Social Aid, GoM,, vulnerable using PMT and Welfare Dfid, EU. children, men Community Targeting. UNICEF and women Ministry of 28 Disabled and Extension social workers. NA NA NA NA 293.09 Disabilities & Elderly Elderly Community targeting. Government Public GoM GoM GoM Retirees GoM payrolls and records NA 30,000 NA NA 16,000 Pension Scheme Retirees of staff (GPPS) 12. Malawi Social Action Fund (MASAF) III. The largest public works program in Malawi, which is implemented by the LDF mechanism, has reached approximately 1.6 million people through a total of 9,023 public works subprojects to address various sector gaps including reforestation (3,499 ha leading to improvements in the environment); roads (28,023 km facilitating access to socio-economic services and opportunities) and irrigation (1,339.6 ha contributing towards increased food security and income). A total of 1,610,637 beneficiaries have received cash transfer through PWs. About 52% of beneficiaries are reported to have an increased income as a result of their participation in the PWs. Improvements in food security have also been noted such as 62% and 54% of PW beneficiaries used PW wages to meet their basic food needs. 6 (Annex 9) 13. Community Savings and Investment Promotion (COMSIP) (Annex 13). The largest savings groups program in Malawi is implemented by COMSIP which emerged out of the MASAF cash transfers for public works. Supported by MASAF, it has a membership which comprises of MASAF public works beneficiaries. COMSIP has a total of 99,153 members. People receiving cash transfers from the PWs have formed 4457 groups of which 61% are women. Average savings amount to MK6727 ($20) per member. The groups have mobilized MK434.6 million (US$1.3 million) in savings and invested in different income generating livelihood activities. In addition, 50% of Savings and Investment group members said they were no longer food insecure due to improvements in their financial status as a result of various income generating interventions the groups have engaged in. 14. Social Cash Transfers (SCT), The Malawi Mtukula Pakhomo (Annex 11).The Program is implemented by the SCT Secretariat in the MGC&SW and has begun piloting cash e-transfers in 8 districts (and is expected to cover 16 more by December, 2013 followed by all 28 districts by 2015). The roll out of the program is based on the poverty ranking of each 6 The 2011 and 2012 Public Works Annual Tracking Study 4 district. By 2015, the SCT Program is expected to have a database of the re-certified targeted households representing the poorest and most vulnerable citizens in the country and which comprise ten percent of the population. Funding for the first 7 pilot districts was drawn from UNICEF, Irish Aid and Global Fund since 2006. Beginning 2012, the programme started accessing new funding from the German Government (through KFW) for which there is a four year commitment of 13 million Euro. There is a further 35 Million Euro and 11 million Euro commitments from EU and German Government respectively, which will support scale up in an additional 8 districts. Irish Aid is currently supporting roll out of the program in Balaka district with a contribution of 3 million Euro. The funding is to run for four years up to 2016. The GoM has provided funding of MK 450 million in the current fiscal year, which is a significant increase from an initial contribution of MK 50 million in 2010/11 fiscal year. The EU is also supporting the piloting of electronic payments of transfers to beneficiaries in Mchinji and Machinga in the amount of 3.3 million Euro. The e-payment pilot funding is going through Save the Children (which has partnered with Airtel, Opportunity Bank of Malawi (OBM), Oxford Policy Management, and the Centre for Social Research). 15. The SCT Program is supported by GoM, KfW, EU, Irish Aid and UNICEF. The four year financing by KfW to the Program supports three components (i) investment in cash transfers and technology for targeting, manual payments and e-transfers; (ii) monitoring and evaluation through an impact evaluation of the Pilot (underway and coordinated by UNICEF); and (iii) technical assistance through a consultancy firm with experience setting up similar systems in Latin America and South Asia is developing the MIS system and E-payment system using the services of the cellphone company Airtel and through mobile banking services of Standard Bank. The Program will face a financing gap by 2014. The national rollout cost for the Program, over the next four years, amounts to US $141.0 million or MK 60.0 billion. There would be a US$90 million financing gap because the funding commitment over the next four years is 67 million Euros or USS 51.0 million. It is expected that as the Program rolls out, other CPs, who may be monitoring developments, may come in to play a role in closing the financing gap. The overhead costs, which are currently estimated to be 10%-19% of total costs and are relatively high, are expected to be reduced. As a result, the financing gap may also be reduced as the shift to e-transfers is completed. Overall Assessment 16. An Incidence Analysis of Social Protection benefits based on the IH3 dataset shows that targeting across the program has not been as effective as it needs to be (Annex 10). Equity in targeting is poor (e.g., in practice the SCT Program targets 10% in each district regardless of district poverty profile). Targeting is based on a mix of geographical and community-based identification. The Malawi Vulnerability Assessment Committee (MVAC) Report is used to determine how many beneficiaries per district should be identified. Improvements in targeting and administrative efficiency would need to include (i) a better method of identifying and segmenting the poor and the vulnerable; (ii) matching social protection benefits to needs; (iii) reducing administrative costs of management and delivery; (iv) coordinating programs to avoid overlaps; and (iv) addressing the challenges of political interference. 5 17. A highly positive development in the sector is that the National Registry System and National ID Card are under development. The GoM has begun a process to establish a Unified Registry System of all citizens in Malawi and is moving forward with the creation of a National Identification Card. There are also plans for linking citizen wealth ranking through a dedicated serial number to the National Identification Card. This will take time and will probably be implemented within the time frame of the MASAF IV implementation. These developments are very welcome and over time after implementation begins could be incorporated in the new social protection program for the purpose of client targeting and delivery of services. In addition, the SCT is piloting various transfer options including E-cash transfers in a few districts using magnetic swipe cards, Point of Sales (POS) devices and cellphone technology. By the end of 2015 it is expected that E-transfers under the program should be in all districts. World Food Program has also made E-transfers to 125,000 individuals in disaster prone areas. Going forward E-transfers would be the mechanism used for all cash transfers for the GoM’s social protection programs. 18. Community Driven Planning and Management. To ensure that initiatives meant to reduce vulnerability and increase the income and food security of the poorest and most vulnerable are effective, community identified and managed activities should be a priority approach for identification, implementation and management of the public works safety nets activities. “Community contributions” would focus on community participation in every aspect of the project cycle for productive public works. 19. As degradation of the environment and productive land is one reason for poverty levels, safeguarding people and the environment on which their livelihood depends is important. For this reason, following a development planning, integrated watershed management approach has been incorporated into the design of the productive safety nets and in the productive community driven public works. The watershed includes bio-physical and socio- economic dimensions comprising all natural resources, people and their socio-economic activities. Because of the mainly rural agricultural base of the poorest Malawians, it is important that development plans are integrated based on the watershed unit in a way that builds strong linkages between all sectors. All of the various relevant initiatives now emerging in Malawi have been taken into account and include: the Ministry of Agriculture and Food Security’s Extension Planning Area Development Approach, the Ministry of Water and Irrigation’s Water Resources Act, which empowers communities to undertake watershed management, in addition to the recent National Social Support Policy. MASAF IV would contribute, harmonize, follow, and be in line with these initiatives and guidelines in its productive safety nets in order to help the social protection program reduce vulnerability and increase incomes. C. Higher Level Objectives to which the Project Contributes 20. Relationship to CAS. The proposed operation helps Malawi move to a second generation of safety nets focused on strengthening and coordinating productive social safety nets for those Malawian citizens that are poor and vulnerable. The proposed operation is in line with the three themes for the Country Partnership Strategy (Board Date January 29, 2013).The new CAS aims to contribute to Malawi's efforts towards more diversified, competitive, shock-resilient socio- economic growth, through a program with the following three thematic areas: 1) Promoting Sustainable, Diversified, and Inclusive Growth; 2) Enhancing Human Capital and Reducing 6 Vulnerabilities; and 3) Mainstreaming Governance for Enhanced Development Effectiveness. The proposed operation will primarily focus on Outcome 2.4 of Theme 2 of the CAS: Improved social safety nets systems through improving effectiveness, better targeting mechanisms, appropriate interventions for reducing vulnerability and improved efficiency through cost effective delivery. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 21. The Project Development Objective of the proposed project is “to strengthen Malawi’s social safety net delivery systems and coordination across programs.” The PDO would be achieved through the strengthening of a Social Safety Nets system, which would increase productive assets and reduce the impact of shocks and vulnerability of the poor in Malawi and improve coverage of targeted benefits. The overarching goal of the PDO is to reduce vulnerability. In the PDO, strengthening delivery systems would mean providing coverage and support for the poor and vulnerable households for the purpose of improving incomes, resilience, assets and ability to manage risks. This would be assessed in terms of (i) targeting and coverage of benefits, (ii) adequacy of the benefit in terms of ability of households to invest in household level assets and human capital, and (iii) capacity of involved institutions to manage the program efficiently so that the costs of delivery are within established norms for effective safety nets. Project Beneficiaries 22. MASAF IV would cover approximately 752,960 poor households through cash transfers for productive community driven public works, social cash transfers and livelihood support in four years. The project is expected to reach and cover approximately 4.14 million of the poor in Malawi. Of the productive community driven public works beneficiaries. 50 percent of those working on public works are women. The related COMSIP program membership is 61 percent women. Under the SCT program, women beneficiaries comprise over 70 percent. A majority of households are rural and are dependent on agriculture for their livelihood and the program’s approach to productive public works and to livelihoods support will reflect the context and needs of the clients. Furthermore, the Social Cash transfers program is projected to reach approximately 319,000 households when it is fully operational in all 28 districts by the end of 2015. Of these, approximately 21,000 households would be covered with MASAF IV supported cash transfers in the two districts of Dedza and Nkhata Bay. However, the entire SCT target group of 319,000 households would benefit from the establishment of a well-functioning system based on unified registry, MIS and timely payments systems. If this total target group for the SCT program is also included as beneficiaries due to benefiting from the strengthening of systems then MASAF IV will benefit a total of 1.05 million households or 5.7 million people in a period of four years through systems strengthening, cash transfers, public works and livelihood support. This represents more than 30 of the 52 percent of the total population living under the poverty line and is expected to include most of the labor able and labor constrained ultra poor households. Poverty in Malawi is classified and divided into poor and ultra-poor. Approximately 22 percent of Malawi’s population is considered ‘ultra poor’ and 52 percent live under the poverty line. The criteria for the ultra-poor category, is an income of 10,029 MK or below per person per year (836 MK per person per month). A person who is categorized as moderately 7 poor has an income of MK 16, 165 or below per year (1,347 MK per month). Ultra poor households earn income very irregularly and it is often acquired through manual labor or by asking others for money or food. These households suffer from severe malnutrition, typically eating only one meal per day and usually own few productive assets. Most Malawians earn their livelihood from day labor in subsistence farming. They have inadequate and limited basic agriculture tools and limited access to soil conservation and appropriate farming techniques. MASAF IV will focus on productive public works that promote access to natural resources for the poorest. Over time as the targeting improves and households move out of poverty the safety net programs are expected to cover a reduced caseload of households. Please see Annex 6 for a detailed discussion on poverty and vulnerability in Malawi. PDO Level Results Indicators Project Development PDO level outcomes/impacts Performance Indicator Data Source Objective (PDO): Strengthen 1. Project coverage 1. Number of project IHS3/4 Malawi’s Social Safety net 2. Households able to beneficiaries by gender (core) WMS/ASPIRE delivery systems and cope with external shocks 2. % HHs with asset Study reports coordination across programs. 3. Integrated functional value above critical threshold 7 (Impact national social protection 3. Establishment of an Evaluation) systems integrated functional national safety net delivery systems (including , National Unified Registry, Targeting, MIS etc) III. PROJECT DESCRIPTION 23. The proposed MASAF IV would be implemented using an Investment Project Financing (IPF) for a period of 4 years starting in January 2014. The project financing estimates are about US$107.0 million over 4 years towards which this IDA Credit of US$32.80 million would contribute in order to meet immediate requirements for productive safety nets by the Government of Malawi in the period January- June 2014. It is planned that an additional financing of US$74.2 million for MASAF IV will be prepared once financing is secured either from IDA or other donors. Specifically, the project would be a second generation safety net which would improve key safety net programs and support the establishment of the building blocks for a coordinated and systematic approach to safety nets. MASAF IV would innovate by supporting and improving public works to be community driven and productive. It would support the Social Cash Transfers, savings and livelihood groups and the capacities of implementing agencies and ministries to support the key building blocks of a safety net system. 24. Integrated and Coordinated Social Safety Nets Platform. The goal of MASAF IV is to deliver timely and cost effective programs to reduce vulnerability through fostering cooperation and coordination with CPs and institutions focused on rural poverty reduction. To this end it is proposed that the Project would support the existing Social Safety Nets Platform as defined under the L NSSP. The Social Safety Nets Platform would be coordinated through MASAF IV under the LDF-TST mechanism with the objective to reduce vulnerability and extreme poverty and improve livelihoods, resilience and quality-of-life for the poor. The Platform would focus on 7 Critical threshold value of asset to support household livelihood to enable resistance to moderate shock will be defined during the implementation of MASAF IV. 8 safeguarding people and the environment, on which their livelihood depends, through linkages between agriculture, food security, water, irrigation, social welfare, vulnerability, poverty, children and gender issues. The program would be designed on the basis of the following principles: (i) fair and transparent client selection, (ii) timely, predictable transfers, iii) gender equity, (iv) participatory planning, and (v) environmental protection. The MASAF IV approach would be in line with and follow the in-country initiative and guidelines for area and watershed management and development for building food security, livelihoods, and resilience against natural disasters through community identified and managed PWs, livelihood programs and social cash transfers. Table 2: Malawi Social Safety Nets and Proposed MASAF IV Support Safety Net Source of Districts Target Group # HHs and Benefit Identified Need Programs and Funds and Targeting # persons per HH for Proposed IDA capacity building Method MK/US$ Support Social Cash GoM 8. 16 by Direct Cash 28,000 to a MK2700 Finance SCTs in Transfer Scheme MGCSW, end of transfers to labor final state of mthly two districts. Direct Cash EU, 2013. constrained 319,000 US$108 Strengthen capacity Transfers KfW, 28 by HHs. HHs. annually. building, MIS, Irish Aid, end of PMT/community Unified Beneficiary UNICEF 2014 verification. Registry, staffing. World 21,000 HHs Bank 318,000 HH from Capacity improvements MASAF-LDF The 35 Labor able poor. HHs: MK14,400 Annual block Cash for World Geographical, 586,000 per cycle grants: cash Productive Bank, Poverty two transfers, multiple Community GoM mapping/ Beneficiaries: cycles. PWs in same Public Works MVAC 2,900,000 annually communities for Assessment for ($48) multiple years, # beneficiaries grants for per district livelihoods. Introduce area development approaches. Strengthening targeting social accountability, safeguards. 400,000 HHs Community MASAF, 35 MASAF PWs 4457 groups. Average Grants and training Savings and World participants in 99,153 savings: for livelihoods Investment Bank., groups. people. MK6727 opportunities, and Promotion GoM ($20) training for health and nutrition, risk insurance for members. Strengthen system and regulations. 100,000 HHs Ministries of KfW, 28 N Capacity Building: GC&SW,MoAFS, UNICEF, recruitment/training MW&I, Irish Aid, and equipment. MoF, Dfid, MoLGRD LDF, EU.World Unified Registry, SCT. Bank MIS, Harmonize Safety Nets. 25. Institutional Arrangements for the new Social Safety Nets Platform would clarify the roles, responsibilities and coordination arrangements of implementers, and ensure that targeting 9 mechanisms are coordinated and harmonized across various safety nets programs. A Steering Committee led by the Ministry of Economic Planning and Development which would include several key Ministries would play a role in overseeing the coordination, harmonization and policy setting process. These Ministries would include the Ministry of Finance, the Ministry of Agriculture and Food Security, Ministry of Water and Irrigation, Ministry of Environment and Climate Change, and Ministry of Gender, Children and Social Welfare. The goal is to delivery timely and cost effective programs through fostering cooperation and coordination with CPs and institutions focused on rural poverty reduction. A. Project Components: 26. The proposed three components for MASAF IV are: (1) Productive Safety Nets: (a): Productive Community Driven Public Works designed to provide transfers to poor households through participation in community-driven public works; (b) Livelihoods and skills development designed to finance grants for increasing household level incomes and assets through Community Savings and Investment Promotion (COMSIP) groups;(c) Social Cash Transfers to finance cash transfers targeted to the poorest labor constrained households, as well as activities for capacity building and technical assistance (2) Systems and Capacity Building, and (3) Project Management. 27. The objective of implementing these components is to contribute to the GoM’s National Social Policy goals of: • supporting the most vulnerable and poorest households with • appropriate and easily accessible, timely cash transfers and support through • socially accountable, harmonized and coordinated set of programs which are flexible and able to respond to vulnerability and crisis. Component 1: Productive Safety Nets 28. This component would focus on three productive safety net programs: (a) productive community driven public works which build productive community assets and provide temporary employment; (b) livelihood and skill development interventions for poor households, (c) social cash transfers for those who are most vulnerable and labor constrained, including the elderly, disabled, and sick. (i) Productive Community Driven Public Works would finance public works and multiple community driven assets through investments in productive community driven public works and temporary employment. Community driven productive public works would create assets and provide temporary employment in the same communities for multiple years designed to increase impact on household level incomes and food security and reduce households’ exposure to risks associated with climate change and other disasters. (see Annexes 2 and 12 for more details) (ii) Livelihoods and skills development would finance livelihoods and skills development by providing grants for increasing household level incomes and assets through savings and investments in livelihood opportunities through Community Savings and Investment Promotion (COMSIP) groups. The grants would promote investments which would increase incomes and assets of households and reduce risks of food insecurity and promote better 10 nutrition and health. The sub-component would also finance training in nutrition, health and income generating enterprises. (see Annexes 2 and 13 for more details) (iii) Social Cash Transfers: This sub component would finance support to capacity building, technical assistance and cash transfers targeted to the poorest, and most vulnerable labor constrained households. The subcomponent would strengthen the ongoing process for establishing a unified registry system and finance cash transfers to another two districts and cover 21,000 ultra-poor labor constrained households in the two districts of Dedza and Nkhata Bay. (see Annexes 2 and 11 for more details) Component II: Systems and Capacity Building 29. This component would finance investments in strengthening unified registry, targeting and MIS systems, capacity building, technical assistance, training, staff and equipment including for the Safety Net Platform under the LDF Mechanism as well as for SCT. More details on the separate activities included in the subcomponent can be found in Annexes 2 and 10. Component III: Project Management 30. The LDF-TST mechanism has evolved over the years from implementing MASAF I which was focused on community development and participatory approaches for safety nets to having become the GoM’s key supervisory and coordinating capacity for carrying out several windows of financing for infrastructure programs. For example, school, block and teachers’ staff house construction under the multi-donor financed Education Sector Wide Approach Program (ESWAP). The LDF-TST has a capable staff that is professional and knowledgeable. However, additional capacity development, harmonization and training in community and watershed management approaches and building linkages with all development practitioners in these areas in the country would need to be supported. The window under the LDF-TST mechanism which is meant for MASAF will supervise and coordinate the World Bank-financed MASAF IV and would focus entirely on the new community driven Safety Nets Program. The LDF TST will manage the implementation of the new community driven safety nets program with MASAF IV resources ring-fenced for interventions in the community, local authority, and the local authority capacity enhancement windows under the LDF mechanism. B. Project Financing 31. The proposed MASAF IV would be implemented using an Investment Project Financing (IPF) for a period of 4 years starting in January 2014. The project financing estimates are about US$107.0 million over 4 years towards which this IDA Credit of US$32.8 million would contribute in order to meet immediate requirements for productive safety nets by the Government of Malawi in the period January- June 2014. It is planned that an additional financing of US$74.2 million for MASAF IV will be prepared once financing is secured either from IDA and/or other donors. 32. The activities implementation plan would ensure a seamless transition so that there isn’t a gap in financing for public works between MASAF III to MASAF IV. There are two cycles per year for public works, of 12 days per month, with 2 months per cycle which are implemented by MASAF-LDF. In a year the first cycle of PWs is in April-June and the second cycle is in July- December. The proposed MASAF IV is planned for a Board approval on December 18, 2013 and 11 an effectiveness date in January 2014 before the first cycle for the year 2014. To avoid any delays caused due to the change in approach in targeting, the first cycle of Public Works under MASAF IV would target the same caseload as that in MASAF III. Project Cost and Financing Project IDA Financing % Total Project Components cost Financing Gap Financing (US$ m) (US$ m) (US$ m) 1. Productive Safety Nets 95.0 28.8 66.2 87.8 (i) Productive Community Driven Public Works 75.0 24.8 50.2 75.6 (ii) Livelihoods and Skills Development 10.0 2.0 8.0 6.1 (iii) Social Cash Transfers 10.0 2.0 8.0 6.1 2. Systems and Capacity Building 4.0 2.0 2.0 6.1 3. Project Management 8.0 2.0 6.0 6.1 Total baseline costs Unallocated Total 107.0 32.8 74.2 100.0 C. Lessons Learned and Reflected in the Project Design 33. MASAF IV will build on the following lessons learned from the experience of Malawi, the region as well as globally on productive safety nets systems: 34. Primacy of Transfers: Productive Community Driven Public Works put high emphasis on the primacy of the transfer i.e. implementation of Productive Community Driven Public Works activities should not compromise the timeliness of transfer to the beneficiaries. 35. Generosity: The size of the transfer must be appropriate and sufficient to have an impact on the livelihoods of the poor and must be labor-intensive and use simple tools as much as possible. The ratio of labor to capital inputs should be flexible at the local level based on the nature of the activity, however the common practice is that the allocation of complementary administrative and capital budget ranges from 20% – 40% with 40% being the ceiling and 20% being the norm. Ideally, productive community driven public works should be predictable for a multi-annual resource framework. Program participants should be aware of the timing of Public Works, which should be scheduled to avoid periods of peak agricultural labor. 36. Community Participation. Promote community participation through the Village Development Committees and Area Development Committees in the selection, planning, implementation and monitoring and evaluation of sub-projects. Proximity to the beneficiary communities of Productive Community Driven Public Works allows for a higher impact. 37. Programs and Works should follow existing sectoral planning approaches for community development activities. Productive Community Driven Public Works achieve impact when planned according to the existing community based planning approaches of the relevant Ministries by ensuring complementarity and linkages of activities in a given area and incorporate mitigation measures for activities which may create environmental risks. For natural 12 resource related Public Work activities, it is essential to follow Community Based Participatory Watershed Management approaches and guidelines. To ensure sustainability public works should be integrated into the broader local/district development plan. 38. Gender Sensitivity: Productive Community Driven Public Works should be designed to enable women to participate, and priority should be given to works, which reduce women’s regular work burden. Productive Community Driven Public Works must be flexible to adapt to women’s activities (e.g. late arrival and early leaving for home). Women are overburdened with household activities, which must be recognized and catered for by reducing the number of hours in the workday for women. 39. Primary focus on creating community assets: The creation of community assets is the primary objective of the program. However, for natural resource management and land development activities, the watershed approach allows Public Works labor to work on private land if this work is necessary for the treatment of the watershed. In addition, Productive Community Driven Public Works activities can be undertaken on private land belonging to poor female-headed households with severe labor shortages. 40. Targeting in the programs should be based on a combination of community based targeting and district-level verification completed by Proxy Means Testing (PMT). The Program should refine the lists of beneficiaries based on continuous monitoring of the beneficiary registry. Beneficiaries will remain in the program for a number of years in order for the program to realize impact on substantively reducing vulnerability. While repeating beneficiaries would allow for a substantive impact on poverty outcomes, there have been concerns raised in the country about the coverage and that everyone in the country who is classified as poor should be reached. However, the outcomes expected on overall reduction of poverty through a focused approach of repeat beneficiaries outweigh these concerns. 41. Graduation. Cash transfers should be time bound with the goal to graduate beneficiaries when their income status improves. However, care must be taken not to graduate beneficiaries too early. It should also be recognized that some beneficiaries may never graduate from the Program (e.g. due to chronic illness). 42. Voluntary savings by individuals and households should be encouraged as an asset building and risk diversification, risk insurance and investment promotion opportunity through savings group formation. Savings groups and skills development should be demand driven and constantly find innovative approaches for building opportunities for members. Savings can also be an indicator of graduation capability of a household. 43. Skills development should promote life-cycle skills to enhance household ability to make informed choices and decisions to ensure economic and social well-being. Skills development should include promotion of risk diversification and risk management planning in addition to business planning skills to enhance income generation opportunities as well as to build resilience in case of crisis and shocks through a diversification strategy for income for households. Skills development should also promote a diversification in cropping and food intake to improve nutrition content and food security. 13 44. MASAF has been a flagship social program in Malawi. Over the years the program has evolved and the GoM views the LDF-mechanism as its main capacity for implementing infrastructure particularly in repairing rural roads and constructing schools and teachers’ staff houses in the education sector. However, under MASAF III APL II, Government decided to fast track using a top-down approach for the implementation of the education infrastructure by utilizing the LDF mechanism. This approach resulted in overtaking community participation and community decision making for what investments are needed at the village level. And resulted in addressing education infrastructure which was not the only priority at community level. The GoM has expressed a strong need to re-introduce community participation and community driven productive interventions. Community participation will play a key role in the design elements of MASAF IV to ensure that communities’ expressed needs are met. 45. The GoM has in the last one year put a renewed emphasis on raising livelihoods through a community development and community driven decision making approach. In addition, the National Social Policy as well as the National Social Support Program has recently been approved and both are focused on improving and protecting the lives and livelihoods of the poor citizens Malawi. 46. The GoM would like to reduce fragmentation of social safety nets programs in Malawi caused by a lack of coordination and a lack of integration of approaches between the programs and as such would like to rationalize limited resources to achieve a higher impact on reducing vulnerability. A Social Safety Net Support Platform which integrates and coordinates all safety net programs would assist in increasing impact and resources for safety nets. 47. Block Grants for District Councils through MASAF would address the issue of delays in payments and would allow districts and final beneficiaries to more effectively plan and utilize funds. 48. The GoM undertook two study tours to Tanzania and to Ethiopia to learn from the experience of productive safety nets. Key features have been incorporated into the design for MASAF IV for increasing livelihoods of households and building resilience learned from MASAF supported experience as well as from the Tanzania Social Action Fund (TASAF) in community participation approaches, targeting mechanisms and safety nets and from Ethiopia’s Productive Safety Nets Program in community participation, targeting, watershed management, safeguards, environmental impact and transfers. 49. Transparency and Ant-Corruption Measures: Lessons that were learned from the implementation of social audit tools, financial and procurement management during MASAF III inform the continuous accountability audit, monitoring and oversight measures in MASAF IV. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 50. Institutional Arrangements and Safety Nets Platform: The goal is to deliver timely and cost effective programs through fostering cooperation and coordination with CPs and institutions focused on rural poverty reduction. To this end it is proposed that the Project would 14 support the existing Social Protection and Safety Nets Platform as defined under the NSSP within 18 months of project effectiveness. The Platform would support a number of safety net programs focused on communities and households. This approach could serve as a national, integrated and coordinated multi-sectoral safety nets platform. This is in keeping with the National Social Support Policy and the National Social Support Program. LDF will supervise, coordinate, integrate and channel financing, knowledge and technical assistance to each sub- program. Such a structure would then allow the GoM to coordinate CPs support for safety nets in a rationalized, coherent, predictable and integrated manner to achieve impact on vulnerability as articulated in the National Social Support Policy and Program. 51. Role of District Councils. District Councils will be responsible for the implementation of the social protection programs. Following the program principles, Districts will also be responsible for supporting communities to identify Productive Community Driven Public Works, Social Cash Transfers and livelihood activities. 52. Coordination and Harmonization: MASAF IV will be coordinated and supervised by the LDF-TST Mechanism. The LDF mechanism is under the MoLGRD and would also have oversight from Ministry of Finance, Ministry of Economic Planning and Development and the Office of the President’s Cabinet. Under MASAF IV the MEP&D would play a key role in providing policy direction for safety nets. B. Results Monitoring and Evaluation 53. The Results Framework is based on a four year fully financed project. Year One in the Results Framework is financed by the MASAF IV US$32.8 million. Year 2-4 would be financed by Additional Financing as stated in the PAD section B Project Financing: MASAF IV would invest through the Systems and Capacity Building component in building the capacity of the GoM to systematically monitor and evaluate the identification of beneficiaries, the delivery of benefits and the impact of those benefits. The project will invest in building unified registry and delivery systems which would require a regular and systematic approach to the monitoring and evaluation of results (Annex 1) C. Sustainability: 54. Many safety net programs in Malawi are financed by CPs. Sustainability will require, over time, an increase in the financing of safety nets by GoM’s budget expenditures. MASAF IV would directly affect the issue of sustainability by addressing the current fragmentation and cost effectiveness challenges through harmonization of targeting and approaches across key programs. MASAF IV would rationalize programs and thus the costs of delivery. The transition to a social safety nets platform would allow for unified approaches to safety nets across the country and reduce overlap and inefficiencies. The Public Expenditure Review 2013 for Malawi recommends the rebalancing of the GoM budget to reduce expenditures in areas that are earmarked for the poor but are inappropriate for this target group, such as the FISP. The FISP expenditures should be rationalized and targeted to those who can productively benefit from this intervention. The remainder of the FISP current expenditures should be rebalanced in the budget for more effective impact on livelihoods through cash transfers and other safety nets for the 15 poorest population for off farm and on farm activities. Over the four years of project implementation, MASAF IV would also work with the Ministry of Agriculture to better target and design interventions suited to the poorest. MASAF IV would be able to increase its budget for cash transfers and other interventions from contributions from the GoM budget if such a rebalancing does take place. However, for the planning of MASAF IV it is envisaged that financing of cash transfers and administrative costs would be funded by the World Bank. During the project implementation period a continued dialogue with the GoM and other CPs on rationalization and sustainability will be carried out to build a sustainable Safety Nets Platform. V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Risk Rating Risk Rating Project Stakeholder Risks Project Risks - Stakeholder Risk Substantial - Design Moderate Operating Environment Risks - Social and Environmental Moderate - Country Substantial - Program and Donor Moderate - Sector and Multi-Sector - Delivery Monitoring and Substantial Sustainability Implementing Agency (IA) Risks (including Fiduciary Risks) - Capacity Moderate Moderate - Governance Substantial Moderate - Fraud and Corruption High High Overall Preparation Risk Substantial Overall Implementation Risk Substantial . B. Overall Risk Rating Explanation 55. Anti-Corruption Measures: The overall risk for the Project is rated as Substantial. In a recent incident, large-scale fraud has been committed through collusion by Government staff and potentially others by tampering the Integrated Financial Management Systems (IFMIS). The full extent of fraud is still unclear, but some Cabinet Ministers have since been dropped and action is being taken against some senior officials. Discussions are underway between GoM and development partners on developing a credible set of immediate and medium-term actions to strengthen the fiduciary and financial management systems in Malawi. This confirms the known control weaknesses in and around IFMIS at the national level. Investigation is in progress to take legal actions against the perpetrators. Agreement has been reached with the government to deploy additional technical and functional resources as well as to enhance information system security. Support is being provided under the Financial Reporting and Oversight Improvement Project (FROIP) and implementation of agreed actions will be monitored by the Bank team. MASAF- LDF is not affected by the national level IFMIS. The Bank will continue to play an active role in ensuring that the overall fiduciary environment is strengthened in Malawi and risks are highlighted and discussed with the authorities on an ongoing basis. 16 56. Governance and Anti-Corruption Measures. The risks at the macroeconomic level include vulnerability to exogenous shocks, such as weather, fiscal and foreign exchange risks. At the sub-national level, the risks include limited capacity of the local councils where MASAF IV interventions will be scaled up. Under MASAF IV a full set of measures are included to address the governance and corruption risks. These measures (spelt out below) build upon the systems already in place during MASAF III. It is important to note that MASAF III and MASAF IV have not been using IFMIS, but a different system at the sub-national level, which has been working reasonably well. But close monitoring of this would continue during MASAF IV. 57. Capacity Building: To overcome these challenges, a strong linkage will be created through the participation of communities, public sector agencies, civil society organizations, and the private sector to augment capacity. Capacity enhancement efforts at the district are directly supported by GIZ, Irish Aide and the DFID particularly on the issue of inadequate numbers of financial management and internal audit staff. In line with this, the Government has instituted changes at the district council level such that the councils are directly answerable to the Public Accounts Committee where audit anomalies are detected; previously the Ministry of Local Government Rural Development would respond on all the audit issues on behalf of the councils. This has set councils on a pathway to improving their performance. The Technical Support Team will provide technical backstopping and ensure that the handbooks are simplified and copies of implementation guidelines are available to communities. MASAF - LDF TST have an effective monitoring and supervision mechanism for tracking the districts that are lagging behind. 58. Transparency: An intensive Information, Education and Communication (IEC) process would be a continuous set of activities to ensure transparency and accountability and allow for citizens to have full knowledge of MASAF activities. Anti-Corruption Bureau: In addition, the sensitization process for the MASAF IV will include the participation of the Anti-Corruption Bureau in order to reinforce the understanding of whistle blowing and use of dedicated hotlines for reporting on corrupt practices. Social Accountability (Annex 14) sets out the measures of how Social Accountability (SA) will be strengthened during MASAF IV to ensure participation of beneficiaries and citizen groups in providing feedback and that service providers are held accountable for delivering the Program to the most vulnerable Malawians, without negative impact and in a transparent and accountable manner. The Financial Management measures (Annex 3) spell out the arrangements for funds flow which have proven to be transparent and accountable over years of MASAF-LDF experience. 59. Grievance Redress: Lessons that were learned from the implementation of social audit tools during MASAF III inform the continuous accountability audit in MASAF IV. MASAF III included a mechanism called “Tip-Offs Anonymous”, an independently managed fraud and ethics hotline. All stakeholders are able to report crime, theft and fraud confidentially. In addition to the hotline for reporting grievances, MASAF clients will also go to their Area Development Committee, District Commissioner, frontline staff (e.g. extension worker, etc.) and Village Chiefs with a complaint. In most cases, grievances are resolved by local leaders or the DCs office, informally and without written documentation. To guarantee timely and effective treatment for those who might have a complaint, MASAF IV will establish a community level grievance redress mechanism. This system should be separate from targeting and should report directly to 17 District Council. The mandate of this mechanism would be wide enough to also address grievances for COMSIP and the Social Cash Transfer Program. 60. Regular and continuous monitoring of public works is an important element of the program management. Local authorities through their M&E officers and technical staff will continue be the main responsible body for the regular monitoring and systematic reporting on the implementation status of public Works activities. At the national level the LDF-TST and sector ministries will have the responsibility to support the local council in developing appropriate M&E tools and provide necessary training and technical assistance in this regard. LDF-TST consolidates the monitoring report from each district on a regular basis and also conducts regular assessments and evaluations as required. In addition to the regular monitoring, annual technical public work reviews on sample Public Work sub-projects to evaluate the technical standards and financial and planning process would take place. MASAF IV envisages increasing usage of the transparent mechanism of e-transfers through the Social Cash Transfers program as e-transfers come on line. Independent verification through spot checks, social and technical audits carried out by external entities would continue to provide over sight for the Social Cash Transfers while the established recertification process of beneficiaries every three or four years and the application of the proxy means targeting formula for the identification of beneficiaries would continue to provide a validation mechanism for the program. The independent verification mechanism would be applied to all of the components of MASAF IV. Under the SCT E-transfers are being piloted in 8 districts and are expected to be used for all districts. E-Transfers would further strengthen an accountable and transparent distribution system to clients. 61. A continuous audit for cash transfers has been included in the design. This audit will be done by independent private auditors while the year-end financial audit will continue to be carried out by the National Audit Office. The ToRs for the audit will reflect the continuous audit requirement. The ToRs for the financial audit will also include the requirement to ensure that where the activities of MASAF III and IV overlap. Systems approach to build Accountability and Transparency: To summarize, MASAF IV would invest in systems that increase accountability and reduce the risk of corruption through unified registry systems, targeting methods that are poverty formula based and through systems based monitoring and evaluation of funds and beneficiaries. VI. APPRAISAL SUMMARY A. Economic Analysis (Annex 8) 62. Extreme poverty and vulnerability is a serious and persistent problem in rural Malawi, with extreme poverty increasing from 20% to 24% between 2005 and 2011. The inability of private markets to address this problem brings up the need for public sector intervention. The resources spent by the Government of Malawi (GoM) on Safety Nets in recent years are far less than what would be needed to effectively reduce extreme poverty and vulnerability. The introduction of the productive community driven public works program aims to have an impact on extreme poverty. Ultra-poverty is estimated at 28.1% in rural Malawi, which represents roughly 752,000 households (approximately 3.4 million people). If the program were to have perfect targeting of the poorest beneficiaries, reductions in poverty would average 8.6 percentage points (about 230,000 households getting out of extreme poverty). The effects would be variable 18 across districts, ranging from 2.5 to 17.6 percentage points. The poverty gap (depth) that shows how far below the poverty line households are on average, i.e., average of the ratio of the ultra- poverty gap to the ultra-poverty line (currently at 7.9%) would fall dramatically in 4.4 percentage points. Consistent with these results, overall inequality would fall from 0.38 to 0.37. These results suggest that, even though perfect targeting is never attained, this program has an important potential to reduce extreme poverty in rural Malawi. The Social Cash Transfers program in the districts have an impact on extreme poverty. Assuming that the program achieves perfect targeting of the most vulnerable of the poorest beneficiaries, in the two districts supported under MASAF IV for the SCT program, then reductions in ultra-poverty would average 10 percentage points in Nkhata Bay and 7.1 percentage points in Dedza These results underscore the gains that can be achieved by improving the targeting effectiveness in the program. Livelihoods and skills development, through Community Savings and Investment Promotion Groups (COMSIP), has a high potential to boost the effects of the safety nets program. Evidence from MASAF III suggests sizable benefits. Accounting for further improvements under MASAF IV, it is expected that this component constitutes a strong complement to the effects anticipated with the PW and SCT programs. Graduation of participants in those programs will be more likely with a successful intervention in the COMSIP front, which will help, therefore, ensure a long term sustainability of the Safety Nets Systems. (See Annex 8) B. Technical 63. Productive Community Driven Public Works (Annex 12) would follow a selection criteria and principles which select labor intensive, low capital cost works focused on increasing the livelihood and resilience opportunities of household and communities. The approach would be based on area, watershed and catchment management approach. Targeting and identification of beneficiaries would use the PMT and community verification methods. Over time the unified beneficiary registry and MIS developed under the SCT would be used for the public works as well. 64. Social Cash Transfers (Annex 11) would continue to be targeted to the labor constrained households and would use the PMT and community verification which has been developed by the program. The SCT has completed recertification of beneficiaries in 9 districts and is expected to complete recertification and roll out into all 28 districts by end of 2015. The program has started piloting E-transfers. The program is facing payment delays due to various reasons including delays in disbursements of funds from central banks to the district. These delays are expected to be reduced as the program becomes fully functional with further technical assistance and the transition to e-transfers is completed. MASAF IV would finance cash transfers in two districts while it would support the overall improvement of the targeting, registry, MIS and payment system for all districts. 65. Livelihoods and Skills Development (Annex 13). COMSIP Cooperative Union which evolved from a component under the Malawi Social Action Fund (MASAF 3 APL I) is the implementing agency for the savings and investment activities and would continue be supported by MASAF IV through financing through investment grants for savings groups and for their skills development. COMSIP has 135 cooperatives and is regulated by the Ministry of Industry and Trade under the Cooperative society Act 1998. The institution provides training to its members in livelihoods and skills development including financial literacy and business 19 planning. The COMSIP as an institution is a member-owned Savings and Investment institution created to provide financial services especially savings mobilization and investment promotion to the un-served and underserved peri-urban and rural communities. 66. Project Implementation Manual (PIM). The detailed implementation of the program components and various new approaches has been developed and discussed with project stakeholders and implementers. This comprehensive Project Implementation Manual (PIM) has been developed as part of the preparation work for MASAF IV and elaborates and details the technical, operational and management aspect of the program for each of the sub components of the project. 67. Unified National Registry, targeting, MIS and M&E systems, would be supported under MASAF IV to improve and consolidate targeting and payments for cash transfers for public works, social cash transfers and other safety nets programs. The system would create a unified registry for public works beneficiaries and social cash transfers beneficiaries—i.e. labor able and labor constrained poor and vulnerable households. The proposed project would move these approaches more clearly towards a safety nets platform. MASAF IV puts strong emphasis on building a national platform which would have a systematic approach to effective safety nets delivery based on the newly approved National Social Support Policy and Program. In this regard, a combination of Safety Net delivery instruments such as the development of unified national registry system, targeting system, MIS and M&E systems will be supported. The project is also aiming to strengthen the effectiveness and efficiency of payment systems by supporting the rolling out the use of electronic payment system already under piloting in the social cash transfers program and gradually reducing the use of the manual payment systems. In addition, efforts will be made to promote strong social accountability mechanism and social and environmental safeguards which will be mainstreamed during the project design and implementation 68. MASAF IV as a community and household level safety nets would focus on building resilience. The safety nets would be implemented through a combination of programs which will have a direct impact on the livelihood of the poor in a coordinated manner and in a way that will increase the impact in contributing to the country’s effort to reduce extreme poverty. There will be a shift in the way Public Work programs are designed and implemented. MASAF IV would support productive community driven public works which have an emphasis on ensuring the primacy of cash transfers to the poor while also promoting improving the livelihoods of the community and households to have an impact on building the asset base of households for resilience and food security following the country’s watershed management and social conservation guidelines. 69. MASAF IV will also put strong emphasis on coordination harmonization among stakeholders and capacity building to ensure effective delivery of project supports to the communities. In this regard, series of well-planned trainings will be carried out for the communities and local level implementers. Coordination and harmonization with the agriculture, water and irrigation sectors would be key for implementation of the productive community driven public works. 20 70. Block Grants to Districts: MASAF IV would disburse block grants to districts either on an annual, bi-annual or quarterly schedule in order to facilitate timely transfers of cash transfers in all programs and to allow for better planning ability for Districts. However, the frequency of block grants will only be determined after the remedial plan and recommendations of the diagnostic assessment for financial system capacity (see next section) have been completed. C. Financial Management 71. The ongoing financial management arrangements in MASAF III will continue in MASAF-IV also. There have been some challenges in the current project and they have been addressed and the current FM rating has been upgraded to Moderately Satisfactory. Reporting delays in the current Program have affected timely disbursement to the program and has affected transfers to the beneficiaries. To further understand whether these issues are financial system capacity related or staffing and logistical problems, a joint diagnostic assessment by the World Bank and the LDF has been carried out for all districts to determine the cause of the delays and to implement a remedial action plan based on recommendations. The assessment is now complete and a set of recommendations has been suggested which will be discussed and agreed with the government for implementation during the project. The overall project FM risk rating for MASAF-IV is Substantial. More details of the FM assessments are provided in Annex 3. D. Procurement 72. Procurement under the MASAF IV project will be undertaken by a full time Procurement Specialist for activities undertaken at its headquarters and will be supported by the LDF-TST in the preparation of bid specifications, Terms of Reference and Request for Proposals as well as Bid Evaluations. MASAF has its own Internal Procurement Committee (IPC) which is responsible for award of contracts and oversight functions. The current arrangement of the IPC is that the Executive Director is the Chairperson of the Internal Procurement Committee (IPC) with members of the TST as committee members. E. Social Safeguards 73. Social Sustainability. MASAF IV fully integrates social safeguards considerations into its design. Activities include consideration of social issues as part of the Environmental and Social Management Framework and Resettlement Policy Framework for the overall Program. Appropriate management of social risks in the construction of Productive Community-Driven Public Works subprojects will be incorporated into Environmental and Social Management Plans and Resettlement Action Plans. Communities will select and implement subprojects themselves. A more detailed description of social considerations, impacts and social safeguards instruments are further detailed in Annex 3. F. Environment Safeguards 74. During MASAF III the responsibility for safeguards implementation was transferred to the district level. However, there arose issues of capacity at district level to include environmental and social safeguards as part of their regular planning and implementation processes. Recognizing that poor performance was in part the result of a lack of committed budget; in 2012, the LDF TST allocated MK 50,000 per subproject for overall support to safeguards implementation and monitoring. ESMF screening has now improved and ESMP’s for all subprojects are also being implemented, under the oversight from the Ministry of 21 Environmental Affairs and Climate Change, which is now, undertaking quarterly monitoring missions. COMSIP has also made significant progress to develop and ensure implementation of ESMPs. While staff turnover is a challenge, there are developments within the GoM’s structure that have the potential to strengthen environmental and social safeguards implementation in the future. The Ministry of Environmental Affairs and Climate Change recently hired 27 Environmental Inspectors who will act as district focal persons. The new SP program would consider how to work with these inspectors to strengthen the monitoring of safeguards implementation and addressing the need to strengthen the capacity. Due to staff constraints at district level, the participation of the Ministry of Lands and Housing at district level, related to OP 4.12 Involuntary Resettlement, has been low. However, there is currently an effort to strengthen staffing at this level. These new GoM staff would be included in any training for social safeguards related to the new social protection program. Training has also been revised and improved over time based on the 2012 Environmental and Social Audit Report, which recommended continued and increased emphasis on training. Moving forward, it will be important to consider undertaking annual trainings to address issues related to staff turnover and also the hire of new GoM staff at district level, etc. Implementation of mitigating measures is improving and would continue to be strengthened along with M&E (including reporting from district to central level). 75. Social Accountability (Annex 14): The LDF-TST has working arrangements with the Anti-Corruption Bureau and an international auditing and consulting firm for implementing a mechanism which allows people to voice their concerns. In this initiative, the communities have been educated on how to identify fraud and corrupt behavior and report through an established hotline. The design of MASAF IV includes principles of social accountability (SA) and active engagement of the community in the development process. During MASAF III, the LDF TST made progress to mainstream SA methodologies, including: (i) the implementation of Community Report Cards (CRCs) in 2010 with another round planned for 2013, (ii) the facilitation of a Study Tour to Tanzania and India where a GoM Team 8 received training and orientation on how to implement CRCs; (iii) the planned introduction of “The Most Significant Change Technique” to the M&E system. Building on these initiatives, MASAF IV would strengthen SA to ensure that service providers are held accountable for delivering the program to the most vulnerable Malawians in a way that ensures that negative impacts are minimized. MASAF IV would take measures to ensure that information related to access and entitlement is widely disseminated and understood by client communities. While implementation of SA methodologies to date has been ad hoc and have been the responsibility of LDF TST and GoM, MASAF IV will consider the role of an independent body to implement SA activities that feed back into the project M&E system. To this end, the project would fund a local research institution to implement SA tools. SA activities would be integrated into the M&E system to allow for active follow-up and corrective measures to be taken, ensuring that clients are receiving the maximum benefit from the program and that the correct planning processes and procedures are being followed. 8 The Team included representatives from District level as well as the Director of Planning, Directory of Local Capacity Enhancement 22 G. Other Safeguards Policies Triggered 76. MASAF IV has triggered five World Bank operational policies, including: environmental assessment (op 4.01), Pest Management (op 4.09), Forest Management (op 4.36), Physical Cultural Resources (op 4.11) and Involuntary Resettlement (op 4.12). This Environmental and Social Framework (ESMF) covers four operational policies (environmental assessment, pest management, forest management, and physical cultural resources). The Resettlement Policy Framework (RPF) covers Involuntary Resettlement. The ESMF, PMP and RPF have been publically disclosed on October 22, 2013. 23 ANNEX 1: RESULTS FRAMEWORK AND MONITORING Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) Project Development Objectives PDO Statement Strengthen Malawi’s social safety net delivery systems and coordination across programs. These results are at Project Level Project Development Objective Indicators Responsibility Cumulative Target Values Data Source/ for Unit of End Methodology Data Collection Indicator Name Core Baseline YR1 9 YR2 YR3 YR4 Frequency Measure Target X Male 295,803 10 730,960 11 570,370 730,960 730,960 730,960 PWP (PWP) (PWP) (PWP) (PWP) Direct project beneficiaries Female 307,876 (50% (number), of which female female) Quarterly MIS LAs (percentage) 21,000 21,000 21,000 21,000 12 0 (SCT) (SCT (SCT (SCT) % HHs with asset value above No set No set No set No set No set Year 2 IHS/SWMS NSO % TBC 14 critical threshold 13 target target target target target 9 Year one is financed by the MASAF IV US$32.8 million. Year 2-4 would be financed by Additional Financing as stated in the PAD section B Project Financing: The proposed MASAF IV would be implemented using an Investment Project Financing (IPF) for a period of 4 years starting in January 2014. The project financing estimates are about US$107.0 million over 4 years towards which this IDA credit of US$32.80 million would contribute in order to meet immediate requirements for productive safety nets by the Government of Malawi in the period January- June 2014. It is planned that an additional financing of US$72.4 million for MASAF IV will be prepared once financing is secured either from IDA or other donors. 10 Based on MASAF III APLII Project achievements from PWP and COMSIP (total 603,679 with 51% female) 11 Based on MASAF IV Project committed resources, US$32.8 million for year 1 and US$74.2 million for three years (year 2 to 4); the following achievements are expected: Year1, three cycles of 12 days each (36 days in total) will be implemented with total wage transfers amounting to US$24,640,000 and a total of 570,370 beneficiaries reached; From year 2 to year 4, four cycles (48 days) will be implemented with a total of 160,590 households reached per year, representing 40% of ultra poor households with labor. A total of US$27,750,000 in wages is expected to be transferred in the three years. (Note: the National Social Support Program indicates 400,000 households as ultra poor with labor. 12 The program will support 10% of ultra poor households without labor in two districts of Dedza and Nkata Bay. 13 Critical threshold value of asset to support household livelihood to resist moderate shock will be defined 24 Year 4 Beneficiary Independent Assessment Evaluators Establishment of an integrated Process evaluation EP&D and functional national safety System System System System Year 2 net delivery systems (including, No. 0 in 10 in 17 in 24 in 35 1 Beneficiary Independent National Unified Registry, LAs LAs LAs LAs 15 Year 4 Assessment/Impact Evaluators Targeting, MIS etc) Evaluation Intermediate Results I Indicators: Improved Food security in household (PWs and SCT Transfers) Cumulative Target Values Data Source/ Responsibility for Unit of End Methodology Data Collection Indicator Name Core Baseline YR1 16 YR2 YR3 YR4 Frequency Measure Target Outcome indicators IHS/SWMS % of HH having at least 3 Year 2 NSO meals per day by member, age, 21.2% 17 Beneficiary % 70% gender Assessment/ Independent 40% 50% 60% 70% Year 4 Impact Evaluators Evaluation IHS/SWMS NSO Year 2 % of HH reporting that asset Information Beneficiary % Independent depletion is prevented as a not 10% 20% 30% 40% 40% Assessment Evaluators result of transfers (SCT, PWP) available Year 4 Impact Evaluation Output indicators % of participants paid within 54% 18 for Process Independent % Annual the agreed time frame (2 weeks PWP 60% 70% 80% 100% 100% 20 evaluation Evaluator 14 See footnote 13. 15 Assumes all aspects of the national social safety net system are achieved i.e. systems established in all LAs and are integrated to form one unified system and functional i.e. Government and all Development Partners are able to access the system to implement related social protection interventions 16 See footnote 8. Year 1 is financed by MASAF IV US$32.8 million. 17 Baseline based on National Support Programme, August 2012 for the period 2012/2013 to 2015/2016. The MASAF IV Project will just make a contribution to the national achievements, as such, follow up measurements relates to beneficiaries of the MASAF IV Project only. 25 for PWP and within the month for SCT) Community Civil Society 50% SCT 19 0 80% 90% 100% 100% Score Card Organization/ Citizen Report Card Process Independent evaluation Evaluator % of beneficiaries receiving % TBC 21 100% 100% 100% 100% 100% Annual Community Civil Society full entitlement (PWP, SCT) Score Card Organization LAs Process Independent evaluation Evaluator % of beneficiaries staying in the program for a minimum of 3 % 0 50% 22 60% 70% 80% 80% Annual Community Civil Society years (PW, SCT) Score Card Organization Intermediate Results II Indicators : Improved access to natural resources and social economic services - PWP Outcome level indicators Citizen Report X Card Year two % of beneficiaries that feel Information project investments/ PWP % not 50% 60% 70% 80% 80% Beneficiary Independent Year 4 reflected their needs (core) available Assessment/ Evaluator Impact Evaluation % of households who report No set No set No set No set No set Year 2 Citizen Report TBC 23 improved access to social target target target target target 24 Card Independent 18 Based on Public Works Tracking Study, 2011, under MASAF 3 APLII Project 20 100% achievement by end of Project based on the assumption that an electronic payment system is operational 19 National Social Support Programme for the period 2012/2013 to 2015/2016 21 To be confirmed in January 2014 22 This indicator will not be measured for SCT at the end of year 1 23 To be confirmed by January 2014 24 These are demand driven interventions based on community priorities 26 services- Year 4 Evaluator - (market % Beneficiary - Health % Assessment/ - education, % Impact - Irrigation % Evaluation - Potable water, - Road Output level indicators % of subprojects screened for Progress ESMF.& implemented % TBC 25 100% 100% 100% 100% 100% Quarterly reports/MIS LAs accordingly. % of projects for which Progress Safeguard mitigation plans are 100% reports/MIS % TBC 26 100% 100% 100% 100% Quarterly LAs developed and being implemented % of PW sub-projects selected Progress Information and implemented following reports/MIS % not 60% 70% 80% 100% Quarterly LAs participatory community based 100% available planning approaches X No set No set No set No set No set Progress Areas restored or re-afforested Ha 1,122 27 Quarterly LAs target target target target target 28 reports/MIS Roads constructed and X No set No set No set No set No set Quarterly Progress Km 30,923 29 LAs maintained target target target target target reports/MIS Number of Small scale No set No set No set No set No set Quarterly Progress No. 319 30 LAs irrigation schemes completed target target target target target reports/MIS % of Sub-projects or investment Progress for which arrangement for X 31 reports/MIS % 17% 30% 50% 60% 70% Quarterly LAs community engagement and or 70% operation and maintenance are 25 TBC= the two indicators’ baselines to be confirmed early January, 2014 with data from Beneficiary Assessment study of the Education Sector Wide Approach (ESWAP) subprojects which is scheduled to be implemented between November and December 2013. 26 To be confirmed in January 2014 27 Based on PWP achievements under ERP (MASAF 3 APLII Project) 28 These are based on community demands and sector priorities 29 Based on PWP achievements under ERP (MASAF 3 APLII Project) 30 Based on PWP achievements under ERP (MASAF 3 APLII Project) 31 Based on ERP PWP forestation subprojects only, while 100% has been achieved under Primary School Staff Housing project which is not relevant in the context of MASAF 4 Project. 27 established (core) Intermediate Results III Indicators: Increased household income opportunities and resilience to shocks (COMSIP & other livelihoods) Outcome indicators MIS 63% 65% 70% 75% 80% 80% Annual Citizen Report COMSIP Union Card % of people engaging in diversified % IGAs (off-farm and on-farm) Year 2 Beneficiary Impact Evaluation 0 (new Assessment / 32 Year 4 groups) 0 30 40 50 50 Impact evaluation MIS 84% 33 Annual Citizen Report 90% 95% 100% 100% 100% COMSIP Union Card % increase in household level % Year 2 savings 0 34 (new Beneficiary 0 40% 60% 70% 70% Impact Evaluation groups) Year 4 Assessment / Impact evaluation Citizen Report Card Annual TBC (old TBC TBC TBC TBC TBC groups) Beneficiary Assessment/ % Increase in household productive % Impact Independent Evaluators assets by type Evaluation Year 2 0 (New 0 10% 20% 25% 25% groups) Citizen Report Year 4 Card Output level indicators % of people with business plan Progress % 4% 35 20% 30% 40% 50% 50% Quarterly COMSIP Union to engage in IGAs reports/MIS 32 There are no funds for supporting new group formation in year 1 33 Based on Community Savings and Investment Promotion (COMSIP) groups only for the period 2009 to 2013. The Project will continue to track performance of old COMSIP groups 34 For new groups under COMSIP and other livelihood interventions, the baseline value (i.e. average household savings) is to be determined at the onset of group formation in year 2, while relative increase will start to be measured at the end of year 2. 35 Based on interventions under the COMSIP only 28 Type of IGAs implemented by No set No set No set No set No set Progress No. 25 36 Quarterly COMSIP Union the beneficiaries target target target target target 37 reports/MIS FLT=1275 Progress Number of training 38 No set No set No set No set >5000 39 reports/MIS interventions on livelihood and No. Quarterly COMSIP Union BMT=1275 target target target target skill development activities CME=149 Progress Number of COMSIP & other 4,457 40 6,697 reports/MIS COMSIP Union livelihood groups formed and No. 5,017 5,577 6,137 6,697 Quarterly strengthened Intermediate Results IV Indicators: Improved service delivery at community level (Capacity building and system strengthening) Outcome level indicators Number of councils implementing targeting Progress # 8 41 10 17 24 35 35 42 Annual MEP&D/LDF-TST instruments to select reports/MIS beneficiaries Community NSO/University Score Card % of beneficiaries that are Civil Society aware of project information X % Citizen Report 0 50% 80% 90% 100% 100% Annual organization and project supported Card investments (core) Independent Process Evaluators evaluation % of grievances registered Community Civil Society No related to delivery of project % 30% 60% 80% 100% 100% 43 Annual Score Card organization information benefits that are actually X 36 Based on COMSIP only-25 interventions which are categorized into four groups namely: service; process; production; and trading 37 No set target as type of IGAs implemented are based on individual group decisions 38 FLT=Financial Literacy Training; BMT=Business Management Training; CME= 39 This will be based on number of groups formed and related training needs 40 Based on number of groups formed under COMSIP only, while a total of 560 new groups are expected to be formed every year, to end up with a cumulative target of 6,697 groups by the end of Project 41 Based on number of councils currently implementing Social Cash Transfers 42 Assumes that all Local Authorities have targeting systems for PWP and that Government has rolled out the Social Cash Transfer to all LAs 43 Assumes that systems have matured and able to address grievances efficiently 29 addressed (core) Citizen Report Independent Card Evaluators Process evaluation Output level indicators Progress reports MEP&D/LDF-TST Operational targeting System 8 10 17 24 35 35 Annual mechanism Process Independent evaluator evaluation Progress MEP&D/LDF-TST reports Operational MIS System 8 10 17 24 35 35 Annual Independent evaluator Process evaluation Progress MEP&D/LDF-TST reports Operational M&E system System 8 15 20 30 35 35 Quarterly Process Independent evaluator evaluation % of Safety Net coordination % Progress MEP&D/LDF-TST 100% 100% 100% 100% 100% 100% Quarterly meetings held as planned reports Number of extension workers LAs/LDF-TST. trained and supported with No. 0 840 840 840 840 840 44 Quarterly MIS equipment 44 Based on Environment and Social Management Framework and the resettlement policy, 30 extension workers per district will be trained from three sectors (Agriculture; Community Development and Forestry) 30 Indicator Description table # Indicator Description PDO Level Indicators 1 # of Beneficiaries by gender Beneficiaries of all MASAF 4 Project interventions segregated by gender. These include beneficiaries of Public Works programs; Social Cash Transfer; training interventions (Project Management Committees; COMSIP and other livelihood groups; extension workers; LA and national level staff etc). 2 % HHs with asset value above critical threshold % of beneficiary households from livelihood groups (PWP; SCT) and COMSIP who improve their asset levels above a defined critical threshold value of asset as a result of MASAF 4 project interventions. A critical asset threshold is a point below which households cannot move out of poverty traps (Liverpool and Winter-Nelson, May 2010; IFPRI discussion paper 00971). 3 Establishment of an integrated and functional The MASAF 4 Project will support establishment of safety-net delivery systems including Unified national safety net delivery system (including , Beneficiary Registry (UBR), Targeting, and MIS in Local Authorities. The assumption is that all Local National Unified Registry, Targeting, MIS etc.) Authorities will have functional systems by the end of the Project (year 4) which will be integrated to form a National Unified Registry that will cater as a national data base for targeting eligible beneficiaries of various social protection programs that will be accessible to all organizations implementing these programs. This is expected to address issues of inclusion and exclusion and make social protection interventions more effective in helping the poorest and most vulnerable get out of the poverty trap. Intermediate Results I Indicators: Improved Food security in household (PWs and SCT Transfers) % of PWP and SCT beneficiary households supported by the MASAF 4 Project that are able to eat at 4 % of HH having at least 3 meals per day by least three meals per day. Basic information, including eating patterns of beneficiaries will be collected member, age, gender at the onset of the PWP and SCT programs. However, it is challenging to get accurate measurement of this indicator by member, age, gender. % of PWP and SCT beneficiary households supported by the Project who report that assets which % of HH reporting that asset depletion is 5 could have been sold to address various household basic needs were not sold because of the cash prevented as a result of transfers (SCT, PWP) transfers received under the Project. 6 % of participants paid within the agreed time % of PWP beneficiaries that were paid their wages within two weeks of completing work on public frame (2 weeks for PWP and within the month assets and SCT beneficiaries that were paid within the scheduled pay month. for SCT) % of PWP beneficiaries that received the appropriate wage rate for the number of days they worked on % of beneficiaries receiving full entitlement 7 the public asset and SCT beneficiaries that received the full amount of money as determined at (PWP, SCT) enrolment into the program. % of beneficiaries staying in the program for a % of PWP and SCT beneficiaries that are maintained in the programs for a period of three years i.e. 31 8 minimum of 3 years (PWP, SCT) from year 1 to year 3, to enable meaningful impact from the Project. Intermediate Results II Indicators : Improved access to natural resources and social economic services - PWP 9 % of beneficiaries that feel project investments/ % of PWP beneficiaries who feel that interventions being implemented in their area are those that PWP reflected their needs (core) address their most felt needs in line with what was incorporated in their Village Action Plans. 10 % of households who report improved % of PWP and SCT beneficiary households who report improved access to social services as a result of access to social services- Project interventions (To be re-defined based on clarification on components). - (market - Health - education, - Potable water, irrigation, road etc.) 11 % of subprojects screened for ESMF& % of subprojects implemented under the Project that were screened for ESMF that required implemented accordingly. development of ESM plans for which this was done accordingly. 12 % of subprojects for which Safeguard mitigation % of subprojects implemented under the Project for which Safeguard mitigation plans are developed plans are developed and being implemented and being implemented. 13 % of PWP sub-projects selected and implemented % of PWP subprojects funded by the Project based on community expressed needs generated through following participatory community based the Village Action Plans and further expressed through Project Interest Forms. planning approaches 14 Areas restored or re-afforested Number of hectares of bare ground replanted with trees through the Project. 15 Roads constructed and maintained Number of roads opened (new) or maintained (rehabilitated) under the Project. 16 Number of Small scale irrigation schemes Number of Small scale irrigation schemes implemented and completed under the Project. completed 17 % of Sub-projects or investment for which % of Sub-projects or investment funded by the Project for which arrangement for community arrangement for community engagement and or engagement and or operation and maintenance are established e.g. Village Natural Resource operation and maintenance are established (core) management committees for maintenance of forestation subprojects. Intermediate Results III Indicators: Increased household income opportunities and resilience to shocks (COMSIP & other livelihoods) 18 % of people engaging in diversified IGAs (off- % of people that directly beneficiated from the Project either through COMSIP or other livelihood farm and on-farm) groups such as beneficiaries of small scale irrigation schemes that engage in diversified IGAs. 19 % increase in household level savings measured from COMSIP and other livelihoods groups supported % increase in household level savings by the Project. 20 % Increase in household productive assets by % Increase in household productive assets by type measured from COMSIP and other livelihoods type groups supported by the Project. 21 % of people with business plan to engage in IGAs % of people under COMSIP and other livelihood groups supported by the Project that have business plan to engage in IGAs. 22 Type of IGAs implemented by the beneficiaries Type of IGAs implemented by COMSIP and other livelihood groups 23 Number of training interventions on livelihood Number of training interventions on livelihood development activities such as irrigation scheme and sill development activities management. 24 Number of COMSIP and other livelihood groups Number of COMSIP and other livelihood groups formed and strengthened with support from the 32 formed and strengthened Project. Intermediate Results IV Indicators: Improved service delivery at community level (Capacity building and system strengthening) 25 Number of councils implementing targeting Number of councils implementing targeting instruments to select beneficiaries instruments to select beneficiaries 26 % of beneficiaries that are aware of project % of beneficiaries that are aware of MASAF 4 Project information and project supported investments information and project supported investments (core) 27 % of grievances registered related to delivery % of grievances registered through a grievance redress system related to delivery of project benefits of project benefits that are actually addressed that are actually addressed. (core) 28 Operational Unified Registry of Beneficiary, A national safety net system is established by the end of the project targeting mechanism, and MIS in place 29 Operational targeting mechanism A targeting mechanism developed and operational in all Local Authorities by the end of the Project 30 Operational MIS A comprehensive MIS that supports development of a Unified Registry of beneficiaries and targeting mechanism in place and operational in all councils. 31 Operational M&E system All councils updating project information in the district data base on time and submitting reports to the LDF-TST on time. 32 % of Safety Net coordination meetings held % of quarterly PWP and SCT coordination meetings held as planned. as planned 33 Number of extension workers trained and Number of extension workers that are actively involved in MASAF 4 Project interventions that are supported with equipment trained and supported with equipment such as bicycles. 33 ANNEX 2: DETAILED PROJECT DESCRIPTION Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) 1. The proposed Project would be a second-generation safety net, which would improve key safety net programs: Cash for Productive Community Public Works through MASAF, Social Cash Transfers; Livelihoods and Skills Development through COMSIP and support to the building blocks for a coordinated and systematic approach to safety nets in Malawi. 2. Component I - Productive Safety Nets: This component would focus on three safety net programs: (i) Productive Community Driven Public Works which build productive community assets and provide temporary employment; (ii) Livelihood and Skills Development interventions for poor households; and (iii) Social Cash Transfers for those who are most vulnerable and labor constrained including the elderly, disabled and sick i. Productive Community Driven Public Works (Annex 12) would finance multiple Productive Community Driven Public Works and temporary employment, which would increase livelihood opportunities and assets through investments in communities and for households. Productive Community Driven Public Works would create assets in the same communities for multiple years designed to increase impact on household level incomes and food security and reduce households’ exposure to risks associated with climate change and other disasters. The design would be in line with and follow the in country initiative and guidelines for area and watershed management approach. Communities priorities include those related to water supply and irrigation, bridges, storage facilities for maize and other grains, maize mills, oil mills, afforestation, nurseries for seedling cultivation, soil and water conservation through check dams for gully transformation, solar stoves, fish ponds, solar panels, mobile bicycle ambulances, and health posts. ii. Livelihoods and Skills Development (Annex 13) would finance grants and technical support for increasing household level incomes and assets savings and investments in livelihood opportunities through Community Savings and Investment Promotion groups. The grants would promote investments, which would increase incomes and assets of households and reduce risks of food insecurity and promote better nutrition and health. Such grants would fund, for example, grain storage facilities, grain mills, livestock and crop diversification etc. and catering of food for school meals through kitchen gardens. The sub-component would also finance training in nutrition, health and income generating enterprises. During implementation potential for offering risk insurance against crop failure, to members will be explored. The Cooperative Society Act 1998, under the Ministry of Industry and Trade, requires cooperatives to have an office as a meeting place. This is a burden on the COMSIP groups whose savings would be better used to improve their productive assets and livelihoods. COMSIP is now seeking a waiver to delay this requirement so that members of cooperatives can use their savings for productive livelihoods. iii. Social Cash Transfers (Annex 11) would finance support to capacity building, technical assistance and cash transfers targeted to the poorest, and most vulnerable labor 34 constrained households. The subcomponent would strengthen the ongoing process for establishing a unified registry system and finance cash transfers to another two districts and cover 21,000 ultra-poor labor constrained households in the two districts of Dedza and Nkhata Bay. The support from World Bank would be utilized to provide Dedza and Nkhata-Bay District Councils with the requisite support for strengthening systems as well as for the cash transfers through financing and technical assistance for infrastructure, equipment, training, operational expenditure and direct transfers to implement the program for a minimum of four years from 2014 to 2017 These Social Cash transfers or direct transfers are regular, predictable transfers that are paid to extremely poor and labor-constrained households without the condition of work. Beneficiaries of this program are the most underprivileged households which consist primarily of elderly grandparents caring for young orphans, households who are headed by persons with chronic illness or disability and children headed households 3. Component II - Systems and Capacity Building: This component would finance investments in strengthening unified registry, targeting and MIS systems, capacity building, technical assistance, training, staff and equipment including for the Safety Net Platform under the LDF Mechanism as well as for SCT. i. Targeting (Annex 10): This sub-component would finance investments in technical assistance and capacity building to strengthen and refine the unified registry systems and targeting mechanisms for SCT and for MASAF-LDF. The proposed project would take an area development approach and would test, scale up and strengthen an existing mix (a hybrid) of targeting instruments. GoM plans to establish a Unified Registry System of all citizens in Malawi using a proxy means targeting formula and is moving forward with the creation of a National ID Card for all citizens. There are also plans for linking citizen wealth ranking through a dedicated serial number to the National ID Card. However, this will take time and will probably not be implemented within the preparation time frame for the proposed MASAF IV. Nevertheless, these developments could over time, during implementation, be incorporated into the new SP Program for the purposes of client targeting and delivery of services. ii. Unified Registries and MIS: This subcomponent will finance investments in a unified registry data base for all beneficiaries of social safety net programs that could be used for a number of cash transfers and service delivery programs targeted to the vulnerable. This subcomponent would strengthen and build on the SCT registry of the extreme poor as well as the beneficiary lists covered under the MASAF IV public works. The list would be refined on the basis of poverty criteria. iii. Monitoring and Evaluation: This sub component will finance investments in the MIS system for SCT and for MASAF. Under MASAF IV, community based participatory planning, monitoring and the maintaining and updating of databases would be strengthened for the MASAF and for the Social Cash Transfers programs. iv. Training of Staff: This subcomponent would finance the training of community extension workers and other District Council staff who would participate in the delivery of safety nets under MASAF IV. Districts as well as the Ministries such as Ministry of Gender, Children and Social Welfare expressed needs related to strengthening extension workers capacity through training in community development and mobility challenges that limit regular travel to villages for supervision and monitoring. 35 v. Social Accountability (SA): This sub component would finance the refining, strengthening and implementation of social accountability mechanisms. It would support developing the capacity of a local research institution to implement SA tools. vi. Increasing Environmentally Friendly Initiatives: This sub component would finance piloting and introducing environment friendly technologies into communities and it would strengthen the capacity of the line Ministries to undertake and implement such initiatives. Malawi faces countrywide challenges related to environmental degradation. 4. Component III - Project Management: The LDF-TST mechanism has evolved over the years from implementing MASAF I which was focused on community development and participatory approaches for safety nets to having become the GoM’s key supervisory and coordinating capacity for carrying out several windows of financing for infrastructure programs. For example, school, block and teachers’ staff house construction under the multi-donor financed Education Sector Wide Approach Program (ESWAP). The LDF-TST has a capable staff that is professional and knowledgeable. However, additional capacity development, harmonization and training in community and watershed management approaches and building linkages with all development practitioners in these areas in the country would need to be supported. The LDF TST will manage the implementation of the new community driven safety nets program with MASAF IV resources ring-fenced for interventions in the community, local authority, and the local authority capacity enhancement windows under the LDF mechanism. 5. Principles of Productive Community Driven Public Works: Under the LDF Social Safety Nets Platform, Productive Community Driven Public Works would adhere to the following fundamental principles of safety nets which have proven to positively impact the poor and vulnerable in the region and across the globe: • Primacy of Transfers: Productive Community Driven Public Works put high emphasis on primacy of transfer. This means that delay related to the planning and implementation of Productive Community Driven Public Works activities should not compromise the timeliness of transfer to the beneficiaries. • Generosity: The size of the transfer must be appropriate and sufficient to have an impact on the livelihoods of the poor. • Labor-based: Works must be labor-intensive and use simple tools as much as possible. The ratio of labor to capital inputs should be flexible at the local level based on the nature of the activity, however the common practice is that the allocation of complementary admin and capital budget ranges from 20 – 40% with 40% being the ceiling and 20% being the norm. • Community Participation: Promote community participation through the Village Development Committees and Area Development Committees in the selection, planning, implementation and monitoring and evaluation of sub-projects. • Predictability: Ideally, Productive Community Driven Public Works are provided through a multi-annual resource framework. Program participants should be aware of the timing of Public Works, which should be scheduled to avoid periods of peak agricultural labor. • Proximity: Productive Community Driven Public Works are provided as much as possible in the immediate localities of the people in need. • Follow existing sectoral planning approaches for community development activities: Productive Community Driven Public Works will be planned according to the 36 existing community based planning approaches of the relevant Ministries by ensuring complementarity and linkages of activities in a given area and incorporate mitigation measures for activities which may create environmental risks. For natural resource related Public Work activities, it is essential to follow Community Based Participatory Watershed Management approaches. • Integrated into an area and district development plan: To ensure sustainability, it is desirable to integrate public works into the broader local/district development plan. • Gender Sensitivity: Productive Community Driven Public Works are designed to enable women to participate, and priority is given to works, which reduce women’s regular work burden. Productive Community Driven Public Works must be flexible to adapt to women’s activities (e.g. late arrival and early leaving for home). Women are overburdened with household activities, which must be recognized and catered for by reducing the number of hours in the workday for women. • Primary focus on creating community assets: The creation of community assets is the primary objective of the program. However, for natural resource management and land development activities, the watershed approach would allow Public Works labor to work on private land if this work is necessary for the treatment of the watershed. In addition, Productive Community Driven Public Works activities can be undertaken on private land belonging to poor female-headed households with severe labor shortages. 6. Principles of Social Cash Transfers. • Beneficiaries include the extremely poor, labor constrained and most underprivileged households that are unable to meet their most basic food requirements and often have limited or no access to existing social and economic interventions in Malawi. These households consist primarily of elderly grandparents caring for young orphans, households who are headed by persons with chronic illness or disability and children headed households. • Targeting is based on combination of community based targeting and district-level verification completed by Proxy Means Testing (PMT). The Program refines the lists of beneficiaries based on continuous monitoring of the beneficiary registry. • Transfers. Transfers are regular, predictable and without the condition of work. • Linkages. Linkages to livelihood and skills development programs should be established. • Graduation. The Program must move to a time bound period of cash transfers that seeks to graduate beneficiaries when their income status improves. However, care must be taken not to graduate beneficiaries too early. It should also be recognized that some beneficiaries may never graduate from the Program (e.g. due to chronic illness). Principles of Livelihoods and Skills Development. (a) Promote voluntary savings by individuals and households. (b) Increase asset base through savings. (c) Supporting demand driven and innovative approaches. (d) Promote life-cycle skills to enhance household ability to make informed choices and decisions to ensure economic and social well-being. (e) Promote business skills to enhance employability and income generation opportunities to help diversity income and sustain the household. 37 ANNEX 3: IMPLEMENTATION ARRANGEMENTS Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) Project Institutional and Implementation Arrangements 1. MASAF LDF-TST: Would be responsible for the overall oversight, supervision, coordination and reporting for MASAF IV. LDF would be responsible for providing oversight, supervision and reporting on the strengthen implementation capacity for safety nets, and day to day running of the Fund, knowledge management and sharing, monitoring and evaluation; and Information, Education and Communication (IEC). MASAF-LDF has 20 years of experience in implementing public works and cash transfers. It has capacity for procurement and financial management and monitoring and evaluation. MASAF-LDF-TST would be responsible for coordinating with the Ministries of Agriculture and Foods Security, Water and Irrigation, Forestry and the Ministry of Local Government and Rural Development to ensure that sector guidelines and approaches are adhered to in the implementation of public works and cash transfers. Given the financing strength of the LDF mechanism and also to be in line with the approved National Social Support Policy and Program, it is proposed that the MASAF approach will be transformed into the Social Support Platform under the LDF. LDF would provide policy, knowledge and development financing through several sub programs or sub-windows, including: i. Productive Community Driven Public Works for households. ii. Social Cash Transfers (SCT) for labor constrained poor households. iii. Livelihoods and Skills Development. This would include Village Savings and Loans groups (VSLs) (e.g. COMSIP). 2. COMSIP: COMSIP as an institution is a member-owned savings and Investment institution created to provide financial services especially savings mobilization and investment promotion to the un-served and underserved peri-urban and rural communities. COMSIP Cooperative Union which evolved from a component under the Malawi Social Action Fund (MASAF 3 APL I) is the implementing agency for the savings and investment activities. It now has 135 cooperatives and is regulated by The Financial Cooperatives Act 45, under the Ministry of Trade, which requires COMSIP cooperatives to construct an office. 3. Social Cash Transfers: (See Figure 3) The Poverty Reduction Unit in the Ministry of Economic Planning and Development is responsible for providing technical guidance on the Social Cash transfers program. The program is housed in the SCT Secretariat housed in Ministry of Gender, Children Social Welfare. The program is implemented at the District level (see Figure 3). District Councils have financial control of the program. The District Social Support Committee approves of the applications for targeted beneficiaries. The District Social Support Secretariat approves targeting and payments for the transfers. 45 Government of Malawi. Financial Cooperatives Act. 2011. Ministry of Industry and Trade. 38 4. District Councils will be responsible for the implementation of the program at the district level. Districts will also be responsible for supporting communities to identify Productive Community Driven Public Works, Social Cash Transfers and livelihood activities. These subprojects must fall within the selection criteria and principles set out in the Program design, Project Implementation Manual and coordinated and overseen by LDF. Districts will continue to receive capital and administrative budgets based on annual work plans jointly identified and agreed to by all concerned parties including line ministries, area development and village development committees, and for this purpose based on a labor-capital ratio to be finalized once the IDA financing and coverage decisions have been made. Districts’ capacities for district level procurement and financial management has been invested in MASAF I, II and III. The strengthening of district level capacity in procurement, financial management and monitoring and evaluation will continue in MASAF IV. 5. Steering Committee: The LDF Steering Committee which is Chaired by Ministry of Finance and whose composition includes MEP&D, MoAFS, MW&I, MGC&SWMLGRD and the Civil Society will provide overall Policy oversight to MASAF IV. The Steering committee would coordinate and harmonize policy for multi sectoral approaches followed under MASAF IV. 6. Ministry of Economic Planning and Development: would be responsible for providing policy oversight in line with the approved Social Support Policy and Programme 2013. Such oversight will culminate into a strengthened Social Safety Net Platform. This will result in better coordination of social protection interventions for effectiveness for the unified registry system, targeting, MIS, setting norms and standards, national level data management, and monitoring and evaluation, and documentation of best practices. 7. Ministry of Gender Children and Social Welfare: Would be responsible for providing staffing to and for managing the Social Cash Transfer Program at the National level through the SCT Secretariat housed in the Ministry of Gender, Children and Social Welfare. 8. Ministry of Local Government would continue to provide oversight for the district councils to ensure that the councils are implementing the project according to the agreed PIM and FM manual. 9. Annual Work Plans: Districts will be responsible for submitting annual workplans to LDF TST for review and financing. These annual workplans will be developed and agreed upon by area development and village committees and by the District Consultative forum. 10. National Local Government Finance Committee: Funds would flow following the same process as in MASAF III through the National Local Government Finance Committee to the Districts. Apart from FM supervision by TST staff, the districts are also supervised by staff from NLGFC who bears direct responsibility for proper FM arrangements in the districts. The NLGFC supervision includes following up on actions recommended by both internal and external audits. 11. Institutional Arrangements and Safety Nets Platform: The goal is to deliver timely and cost effective programs through fostering cooperation and coordination with CPs and institutions focused on rural poverty reduction. To this end it is proposed that the Project would 39 support the existing Social Safety Nets Platform Platform as defined by the NSSP within 18 months of project effectiveness. The Platform would support a number of safety net programs focused on communities and households. This approach could serve as a national, integrated and coordinated multi-sectoral safety nets and social protection platform. This is in keeping with the National Social Support Policy and the National Social Support Program. LDF will supervise, coordinate, integrate and channel financing, knowledge and technical assistance to each sub-program. Such a structure would then allow the GoM to coordinate CPs support for safety nets in a rationalized, coherent, predictable and integrated manner to achieve impact on vulnerability as articulated in the National Social Support Policy and Program. The proposed program will clarify the roles, responsibilities and coordination arrangements of implementers, and ensure that targeting mechanisms are coordinated and harmonized, in line with the new features of MASAF IV. Several ministries will provide policy direction and technical support, as necessary while playing a role in overseeing the coordination and harmonization process. These include Ministry of Finance, the Ministry of Economic Planning and Development, Ministry of Agriculture and Food Security, Ministry of Environment and Climate Change and Ministry of Gender, Children and Social Welfare. Districts will be responsible for the implementation of all community driven livelihood enhancing safety nets programs. 12. Integrated and Coordinated Social Safety Nets Program. The overarching goal of the Program is to reduce vulnerability and extreme poverty and improve the lives and resilience and quality-of-life for the poor. The Program will focus on safeguarding people and the environment, on which their livelihood depends, through linkages between agriculture, food security, water, irrigation, social welfare, vulnerability, poverty, children and gender issues. The Program is designed on the basis of the following principles: fair and transparent client selection, timely, predictable transfers, gender equity participatory planning and environmental protection. The Program approach will be on area and watershed management and development for building food security, livelihoods and resilience against disasters through community identified and managed Productive Community Driven Public Works, Livelihoods and Skills Development and Social Cash Transfers. 13. Project Implementation Manual (PIM). The PIM for MASAF LDF has been revised to reflect the new approach of the project based on the principles for Productive Community Driven Public Works; Social Cash Transfers and Livelihoods and Skills Development. 14. Independent verification through spot checks, social and technical audits carried out by external entities would continue to provide over sight for the Social Cash Transfers while the established recertification process of beneficiaries every three or four years and the application of the proxy means targeting formula for the identification of beneficiaries would continue to provide a validation mechanism for the program. The independent verification mechanism would be applied to all of the components of MASAF IV. Under the SCT E-transfers are being piloted in 8 districts and are expected to be used for all districts. E-Transfers would further strengthen an accountable and transparent distribution system to clients. A continuous audit for cash transfers given the high inherent risk has been included in the design. This audit will be done by independent private auditors while the year-end financial audit will continue to be carried out by the National Audit Office. The ToRs for the audit will reflect the continuous audit requirement. The ToRs for the financial audit will also include the requirement to ensure that where the activities of MASAF 3 and 4 overlap, double dipping is not done. Systems approach to build Accountability and Transparency: To summarize, MASAF IV would 40 invest in systems that increase accountability and reduce the risk of corruption through unified registry systems, targeting methods that are poverty formula based and through systems based monitoring and evaluation of funds and beneficiaries. Project Components: 15. The proposed three components are: (1) Productive safety nets which would focus on three safety net programs: (a) cash transfers through labor on productive public works which build productive community assets; (b) social cash transfers for those who are most vulnerable and labor constrained including the elderly, disabled and sick; and (c) livelihood and skill development interventions for poor households. (2) Systems and capacity building to finance technical assistance, training, staff and equipment for improving targeting through the SCT and LDF; a unified registry system and databases for monitoring and evaluation. (3) Project management. 16. Safety Nets Platform: MASAF IV would support the establishment of a Social Safety Net Platform under the LDF mechanism within 18 months of project effectiveness. The Platform would support a number of safety net programs focused on communities and households. This approach could harmonize and coordinate safety net programs and policies and serve as a national, integrated and coordinated multi-sectoral safety nets platform. This is in keeping with the National Social Support Policy and the National Social Support Program. LDF will supervise, coordinate, integrate and channel financing, knowledge and technical assistance to each sub-program. Such a structure would then allow the GoM to coordinate CPs support for safety nets in a rationalized, coherent, predictable and integrated manner to achieve impact on vulnerability as articulated in the National Social Support Policy and Program. Several ministries will provide policy direction and technical support, as necessary while playing a role in overseeing the coordination and harmonization process. These include Ministry of Finance, the Ministry of Economic Planning and Development, Ministry of Agriculture and Food Security, Ministry of Environment and Climate Change and Ministry of Gender, Children and Social Welfare. Districts will be responsible for the implementation of all community driven livelihood enhancing safety nets programs. 17. Coordination and Harmonization: MASAF IV will be coordinated and supervised by the MASAF LDF Mechanism (An organogram and a flow Chart of the MASAF IV process and institutions is provided in this Annex). LDF mechanism is under the responsibility of MoLGRD with oversight from Ministry of Finance, Ministry of Economic Planning and Development and the Office of the President’s Cabinet. 18. Productive Community Driven Public Works: MASAF-LDF mechanism would implement the Productive Community Driven Public Works Component with the participation of District Governments, Area and Village level committees, the MGC&SW, MoA, MoW&I, Ministry of Forestry and Ministry of Environment. The Steering Committee for Social Protection under the Office of the President would have oversight of the overall Safety Net Program. Members of the Steering Committee for Social Protection include all relevant line ministries and CPs. 19. Social Cash Transfers: The Ministry of Gender Children and Social Welfare and the Ministry of Economic Planning and Development are responsible for the SCT. The Secretariat 41 for the Social Cash Transfers program is within the MGC&SW. The SCT program is implemented through the District Social Welfare Office through District Social Cash Transfer Program Secretariat; District Social Support Committee and the District Social Support Training Team. These are supported by other local government institutions and at the national level by the National Social Cash Transfers Program Secretariat (NSCTPS) under the Directorate of Social Protection Services in the MoGCSW. The Ministry will continue to maintain its policy oversight while the Councils will be responsible for implementation according to the Local Authority Window of the LDF Framework. 20. The activities implementation plan would ensure a seamless transition so that there isn’t a gap in financing for public works between MASAF III to MASAF IV. There are two cycles per year for public works, of 12 days per month, 2 months per cycle implemented by MASAF- LDF. In a year the first cycle of PWs is in April-June and the second cycle is in July- December. The proposed MASAF IV is planned for a Board approval December 18, 2013 and an effectiveness date in January 2014 before the first cycle for the year 2014. To avoid any delays caused due to the change in approach in targeting, the first cycle of Public Works under MASAF IV would target the same caseload as that in MASAF III. In addition MASAF IV will provide for retroactive financing of upto 20% should the GoM require it. 42 Figure 1: Institutional Set up of the Local Development Fund GOM/CP STEERING COMMITTEE Review Forum NTAC Anti- Corruption Local Ministry of Finance TST Development Bureau (Technical Support Fund Team) Basket NLGFC MoLGRD MEPD Line Ministries and Other Agencies Local Development Fund Local Authorities Transparency ADC IEC PSA Impact WARD Assessment VDC COMMUNITIES 43 Figure 2: Option for Social Safety Net Platform Under the LDF Mechanism (Funds would flow following the same process as in MASAF III through the National Local Government Finance Committee to the Districts) Safety Nets Ministry of Finance (Government Financing Budget) ) sectoral Steering Committee Multi MLGRD Policy and Local Development Funding Mechanism led by MEP&D includes MoAFS, Coordination MW&I, MGC&SW, MoF,etc: Policy and Coordination Local Government Infrastructure Programs: Malawi Social Safety Nets Platform: Coordination, harmonization, Technical Technical Assistance, Knowledge and financing Assistance, Knowledge and financing. Education Irrigation Others Productive Social Savings Community Cash Groups. Public Transfers (COMSIP) Works and other (SCT) livelihood (MASAF) activities Districts Communities (ADCs, VDCs, COMSIP Groups, VSL groups) 44 Figure 3: Social Cash Transfers Implementation Arrangements Organogram: INSTITUTIONAL FRAMEWORK FOR THE SOCIAL CASH TRANSFER PROGRAMME CABINET National Social Support Steering Committee (NSSSC) composed of the following line Ministries: Gender , Children & Social Welfare; Agriculture; Health; Finance; Local Government; Economic Planning Policy and Development; Development and CS partners National Social Support Technical Committee (NSSTC) Direction and composed of line Ministries; development and civil recommendation on society partners; and donors implementation Poverty Reduction and Social Protection Division (Secretariat to NSSSC & NSSTC) --------------------------------------------------------------- (Social Cash Transfer Technical Team, Dep. of Technical guidance and Poverty and MoGC&SW) supervision Local Council (LC) Financial Control District Commissioner (DC) District Executive Committee District Social Support Committee headed by DPD and composed of: DEM, M&E, DCDO, DoF, Approval of applications DSWO, DHO, DAC, DADO, SWA’s, NGOs District Social Support Secretariat Organises targeting, composed of: District Social Welfare approval and payment Officer (Head); Social Welfare activities Assistants and Trainers Village Development Committee Community Social Targeting and follow-up Support Committee 45 Project administration mechanisms 21. Financial Management, Disbursements and Procurement: Overall responsibility will reside with LDF as in MASAF III to supervise districts. Capacity for financial management and procurement will be strengthened Financial Management 22. The FM risk rating summary from the assessment done is represented in the table below: Risk Risk Risk Mitigating Measures Residual Rating Incorporated into Project Design risk rating Country Level H To address the recent frauds committed in the IFMIS through H collusion, the cooperating partners are working with the Lack of accountability; Government to plug the gaps in the system and to strengthen poor enforcement & the functional and system controls. The government has taken compliance with existing disciplinary actions against some of the perpetrators and a regulations/procedures; and forensic audit is being initiated to dwell into more details. The lack of and lukewarm government is implementing a PFM reform agenda supported implementation of auditors’ by cooperating partners. These reforms include strengthening recommendations; and the of the IFMIS and reporting and oversight functions which if lack of sanctions for properly implemented should be able to resolve some of the offenders. Weak accounting identified risks. However the impact of the reforms will take system, including poor time to be felt. Until then, some ring fencing arrangements will control environment of the be put in place. automated IFMIS, which affects the quality of The project will be using a different system at the subnational financial statements level in a separate platform which has been working reasonable produced by ministries well. implementing projects; (ii) weak audit committees in A continuous audit for cash transfers given the high inherent government ministries that risk has been included in the design. This audit will be done by do not follow up on the independent private auditors while the year-end financial audit issues raised in the audit will continue to be carried out by the National Audit Office. reports to ensure they are The ToRs for the audit will reflect the continuous audit addressed by the project; requirement. The ToRs for the financial audit will also include (iii) Weak legislative the requirement to ensure that where the activities of MASAF 3 scrutiny of external audit and 4 overlap, double dipping is not done. reports; (iv) problem of timeliness and regularity of various accounts reconciliations. 46 Risk Risk Risk Mitigating Measures Residual Rating Incorporated into Project Design risk rating Entity Level S A joint diagnostic assessment has been carried out for all S districts to determine appropriate method of disbursement for Possible reporting delays the Program. Recommendations from this study will be affecting timely implemented for this project. disbursement to the program and transfer to the beneficiaries Project Level S M As above an appropriate disbursement mechanism will The project requires be proposed after discussions with Government adequate and timely availability of funding and delays have been experienced in the past programs Budgeting S LDF has a lot of experience in implementing similar M projects during MASAF I to III and will use the Budgeting not including experience to do realistic annual work plans and budgets all activities expected to be done and incorrect assumptions used leading to significant revisions during implementation 23. The FM risk assessment for this project is rated Substantial and the FM system has been rated as moderately satisfactory. The FM is not satisfactory due to reporting delays in districts leading to delays in flow of funds and also capacity constraints in local councils. These problems are being adequately addressed as explained in the paragraphs below. 24. Diagnostic Study Reporting delays in the current Program are affecting timely disbursement to the program and affect transfer to the beneficiaries. To further understand whether these issues are financial system capacity related or staffing and logistical problems, a joint diagnostic assessment has been carried out for all districts to determine appropriate 47 method of disbursement for the Program. The recommendations for remedial actions are under review and will be implemented in consultation with the World Bank. Budgeting 25. The TST, working with the National Local Government Finance Committee (NLGFC) takes the leading role in consolidating budgets of the Project’s implementing agencies. The accounting system has been configured to analyze variances from budget. This ensures that project’s budgets are closely monitored. Accounting 26. TOMPRO accounting package which is widely used by other World Bank funded projects in Malawi has been acquired. The system has been successfully installed at LDF TST and is working as expected including production of expected reports. All local councils are now installed with the automated IFMIS and most of them are using the system for project processing and reporting. This should improve quality and timeliness of reports from councils. Staffing 27. TST has adequate qualified and experienced staff whose tenure has remained fairly stable for several years. It is expected that this will continue during MASAF IV. The FM staff at the councils is improving with the recruitment of internal auditors. This will be further improved when Chief Accountants are recruited. The advertisement for recruitment of Chief Accountant has been done and shortlisting followed by interviews is expected in the course of the current fiscal year Internal Control and Internal Audit 28. The internal control systems of the District Councils and TST were reviewed and assessed and while as the TST systems are adequate, the systems at districts require strengthening. Government has just recruited and posted internal auditors for all districts. These will need to be trained for them to start having a significant impact on improving FM, especially ensuring adherence to controls and procedures. LDF has accounting manual detailing controls and procedures for the TST and local councils. Apart from FM supervision by TST staff, the districts are also supervised by staff from NLGFC who bears direct responsibility for proper FM arrangements in the districts. The NLGFC supervision includes following up on actions recommended by both internal and external audits. The Government and the Bank have agreed that cash transfers will be subjected to continuous technical and financial audit and that this will be formulated as a covenant in the financing agreement Funds Flow and Disbursements 29. MASAF V will use the existing funds flow arrangement as shown below. The flow of funds takes a long route from MoF to communities passing through LDF, NLGFC and District Councils. In the past NLGFC has been reluctant to consider shortening the process and allow 48 funds to move from LDF to districts and then communities. The government has maintained that funds flow should remain as in MASAF III and as shown in the diagram below 30. It is recommended that MASAF IV should use SOE disbursement just like MASAF III. This will ensure better accountability of funds advanced to communities and districts. There have been delays in flow of funds mainly due to delays in justification of funds advanced to local councils for the benefit of communities. LDF has conducted training to staff aimed at improving timeliness and quality of funds justification reports. Disbursement arrangements 31. To ensure that funds are readily available for project implementation, the Borrower would open, maintain and operate a single Designated Accounts (DA) at the Standard Bank Limited-Malawi. Deposits into and payments from the DA will be made in accordance with the provisions stated in the financing agreement and disbursement letter (DL). Disbursements under this credit will be transaction based and include withdrawal applications for advances, direct payments, reimbursements and special commitments. Withdrawal applications will be prepared by the FLD and signed by authorized signatories, as designated by the representative of the borrower. The name of each of the authorized signatories and their corresponding specimen of signature will be submitted to the Bank before the first disbursement is claimed. 32. The amount to be claimed and advanced under the first application would be determined based on initial project needs. The Designated Account would be replenished monthly based on withdrawal applications supported by appropriate documentation. The Designated Account will be audited annually by external auditors acceptable to IDA as part of the overall project audit. Advances and replenishments to Designated Account will be made in accordance with specific provisions stated in the disbursement letter and legal agreement. The documentation supporting expenditures will be retained at the FLD and will be readily accessible for review by the external auditor and periodic Bank supervision missions. All disbursements will be subject to the conditions of the credit agreement and disbursement procedures defined in the Disbursement Letter. 49 Funds Flow Diagram IDA CREDIT DESIGNATERD Account in Dollars at Standard Bank Limited-Malawi LDF-Malawi Kwacha Holding Account at Standard Bank Limited-Malawi LGFC-Malawi Kwacha Holding Account at Standard Bank Limited-Malawi Local Authority Operating Bank accounts with Commercial Banks LDF Operating Accounts with Commercial Bank Suppliers Public works Financial Reporting 33. The project will be required to submit quarterly interim reports. These will be due 45 days following the end of calendar quarters. LDF is up to date with Interim Financial Reports 50 (IFRs) under MASAF III. The IFRs have consistently been of good quality in substance and form and are being submitted in a timely fashion. It is expected that under MASAF IV LDF will continue providing quality and timely reports. The project will also be required to submit monthly SOEs for the purposes of recording expenses and replenishing the designated Account. External Audit 34. The project will be required to submit to the World Bank audited financial statements together with management letter six months after end of fiscal year. The audit ToRs will be agreed between the Bank and government. Governance and anti-corruption 35. The project has a whistle blowing system in collaboration with Deloitte and the Anti- Corruption Bureau. Several cases have been reported and investigated with some being credible. This arrangement extends to the communities who are also sensitized on governance and corruption issues. The funds distributed to districts for the benefit of communities are published in the national newspapers and also displayed in respective districts. Some districts have community radios where project implementation issues are discussed and individuals in communities are allowed to phone in and make comments or ask questions. 51 Financial Management Action Plan ACTION PLAN Issue Action By who When 1 Delays in flow of The steps on NLGFC funds to flow of funds to communities communities should be reduced 2 Delays in Local councils NLGFC justification of should timely funds by local liquidate funds councils advanced to them 3 Weak FM Recruit and feel NLGFC capacity in local FM vacancies in councils the local councils and also provide appropriate training 4 Inadequate or no Ensure all local NLGFC internal audit councils are coverage covered at least once a year for internal audit 5 Lack of Ensure NLGFC compliance with compliance control and through training accountability and follow up issues using internal and external auditors 6 Reporting of Agree on format LDF/World IFRs and content of Bank IFRs 7 Audit ToRs Agree on Audit LDF/World ToRs Bank Procurement 52 36. Procurement under the new MASAF IV will be carried out in accordance with the Guidelines: Procurement of Goods, Works and Non Consulting Services under IBRD Loans and IDA Credits& Grants by World Bank Borrowers; January 2011; and "Guidelines: Selection and Employment of Consultants IBRD Loans and IDA Credits& Grants by World Bank Borrowers, January 2011. National Competitive Bidding (NCB) will be carried out in accordance with the Malawi Public Procurement Act of August 2003 which has been reviewed and found satisfactory to the Bank with a few exceptions. 37. MASAF has a Project Core Team headed by an Executive Director with its offices at Red Cross House, Lilongwe and it has a dedicated full time and experienced Procurement Specialist. Legal Aspects and Procurement Practices 38. Public Procurement in Malawi is governed by the Public Procurement Act of August 2003. The Act requires procurement Regulations to provide, inter alia, threshold for use of various procurement methods, bidding and bid evaluation procedures and contract management. The Law further establishes the Office of Director of Public Procurement (ODPP) with oversight for public procurement. The Office became operational in 2005 with the appointment of the Director and other substantive officers. The Government also established Internal Procurement Committees (IPC) and Specialized Procurement Units (SPU) in all Ministries and Departments as the responsible bodies for procurement in the Ministries and Departments. Procurement Regulations and Desk Instructions have been distributed to all procuring entities. The Office of Director of Public Procurement has also established a dedicated website for sharing of information, placing of adverts and notification of awards to the general public. Organization, Functions and Staffing 39. Procurement under MASAF IV project will be under taken by a full time Procurement Specialist for activities undertaken at its headquarters and will be supported by the Technical Support Team (TST) in the preparation of bid specifications, Terms of Reference and Request for Proposals as well as Bid Evaluations. 40. MASAF has its own Internal Procurement Committee (IPC) which is responsible for award of contracts and oversight functions. The current arrangement of the IPC is that the Executive Director is the Chairperson of the Internal Procurement Committee (IPC) with members of the TST as committee members. Community Procurement 41. The MASAF IV project is a CDD project and community procurement will be undertaken by local communities through Project Implementation Committees (PMC) who will be elected at various project sites. Projects will be identified by various communities and submitted to the district headquarters where they will be approved. Once projects are approved PMCs will be trained by district level staff on how to use the resources and undertake construction of projects on their own with technical support provided by the district technical team. Training of PMC will be a critical element in the success of implementation of the projects at the community level as empowered communities will be able to articulate 53 themselves very well and know exactly why they had applied for the resources. The communities should follow the principles of procurement such as economy, efficiency, transparency, and value for money in sourcing construction materials and recruitment of artisans to undertake construction of projects. A minimum of three quotations should be obtained before a decision is made as to where to procure the goods or who should be awarded a construction contract. 42. It is expected procurement records will be kept at both the local and district levels and these should include adverts for local contractors; their selection process, signed contracts, and financial records. 43. Based on the Post Procurement Review that the Bank had had undertaken in November 2012, it was noted that procurement under MASAF LDF was satisfactory as there was an updated Procurement Plan, record keeping was good, Bank Guidelines, MASAF Local Community Hand Book, Financial Manual as well as Malawi Public Procurement Law, Rules and Regulations were adhered to in undertaking procurement. There was no declaration of misprocurement. Facilities and Support Capacity 44. MASAF has adequate office space and office equipment at its headquarters in Lilongwe and so do the district government offices. Prior Review and Associated Thresholds under the Planned MASAF IV Project 45. All goods or non-consulting services contracts estimated to cost US$ 500,000 equivalents or more will be subject to IDA review in accordance with the procedures in Appendix I of the Procurement Guidelines and approved Procurement Plan. Works contracts estimated to cost US$ 3,000,000 or more will be subject to IDA review in accordance with the procedures in Appendix I of the Procurement Guidelines and approved Procurement Plan. 46. Consultancy contracts with firms estimated to cost US$ 200,000 equivalent or more, and consultancy contracts with individuals estimated to cost US$ 100,000 equivalent or more will be subject to IDA review in accordance with the procedures in Appendix I of the Consultant Guidelines and approved Procurement Plan. 47. The Bank will review the Procurement Plan as well as the set of Standard Bidding Documents to be used for goods and consulting services. The format of procurement plan, standard bidding documents, the procurement methods and the thresholds for prior review should be reviewed and jointly agreed by MASAF and IDA. 48. Contracts which are not subject to prior review will be selectively reviewed by the Bank or on behalf of the Bank by an independent Procurement Auditor during project implementation and will be governed by the procedures set forth in paragraph 4 of Appendix I to the relevant Guidelines. All documentation used for the procedures of contracting, recruitment of consulting services, evaluation and award shall be retained for subsequent examination by auditors and IDA supervision missions. 54 49. It is also envisaged that there will be annual procurement post review whose aim is to: (i) verify that the procurement and contracting procedures and processes followed for the projects were in accordance with the agreed procedure manual; (ii) verify technical compliance, physical completion and price competitiveness of each contract in the selected representative sample; (iii) review and comment on contract administration and management issues as dealt with by executing agencies; (iv) review capacity of executing agencies in handling procurement efficiently; and (v) identify improvements in the procurement process in the light of any identified deficiencies. Use of Bank Guidelines 50. Procurement of ICB contracts for goods will be carried out in accordance with the Guidelines: Procurement of Goods, Works and Non Consulting Services under IBRD Loans and IDA Credits& Grants by World Bank Borrowers; January 2011. Bank’s Standard Bidding Documents and Standard Bid Evaluation Forms for goods under International Competitive Bidding (ICB) will be used. Since the Government has prepared Standard Bidding Documents for procurement of goods under National Competitive Bidding (NCB), procurement of goods under NCB will be carried out using these documents. 51. Selection of Consultants estimated at US$ 200,000 equivalent or above, will be carried out in accordance with the Guidelines: Selection and Employment of Consultants IBRD Loans and IDA Credits& Grants by World Bank Borrowers, January 2011. Bank’s Standard Request for Proposals (RFP) and evaluation forms will be used where applicable. Use of National Standard Bidding Documents 52. Procurement below the prior review thresholds shall be carried through National competitive Procedures (NCB) in accordance with the Malawi Public Procurement Act and shall include: (i) an explicit statement to bidders of the evaluation criteria; (ii) award to the lowest evaluated responsive and qualified bidder; (iii) rejection of bids outside a range of bid values shall not be permitted; (iv) foreign bidders would not be precluded for participation in National Competitive Bidding (v) Registration and Classification of bidders may be used for establishing bidder qualification or preparing a list for use under price comparison procedure but not as criteria for bidding and (vi) artificial division of lots into small quantities and set aside for small and medium enterprises will not be used. 53. The overall capacity of MASAF LDF to carry activities under the project is Medium and Overall Risk is Low as currently there is adequate and experienced staff that can undertake procurement under the project and Project Management Committees will be trained as district teams which undertake training are already in place. 55 SUMMARY ASSESSMENT OF CAPACITY, RISK AND MITIGATION - ACTION PLAN Overall Consultancy Assessment Goods: $ Services Actions to be taken of Risk: 500,000 Firms: Low Works :$ $200,000 Date of the 3,000,000 Individuals: Assessment: 100,000 April 2, 2013 By: Steven Mhone (PS) Analysis of Issues/Risks Mitigation By When/Who Procurement Measures Capacity 1.Inadequate Capacity to Maintain MASAF- Continuous Procurement manage positions of Planning procurement TST and is limited Procurement resulting in Specialist. having no Procurement Plan. 2. Weak District staff District MASAF, Ministry of Local Govt/ capacity to are not teams are Continuous carry out available to maintained community train Project to train procurement Management Project efficiently Management under Project Committees Management in Committees community procurement procedures. 56 DRAFT PROCUREMENT PLAN I General 1.0 Project Information: 2.0 Bank’s approval date of the Procurement Plan : 3.0 Date of General Procurement Notice: 4.0 Period Covered by this procurement plan: 18 Months January 2014- June 2015 5.0 Applicable Procurement and Consultants Guidelines: Procurement will be carried out in accordance with the World Bank’s “Guidelines: Procurement of Goods, Works and Non –Consulting Services under IBRD Loans and IDA Credits& Grants by World Bank Borrowers, January 2011 and Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers, January 2011and the provisions stipulated in the Legal Agreement. National Competitive Bidding procedures will be in accordance with the Malawi Public Procurement Act of August 2003, its accompanying regulations and instructions and exceptions. II Goods and Works and Non Consulting Services 1.0 Prior Review Threshold: Procurement decisions subject to Prior Review by IDA as stated in Appendix 1 to the Guidelines for Procurement of Goods, Works and Non Consulting Services. Expenditure Contract value Procurement Contracts Category (Threshold) USD Method subject to Prior Review 1.0 Works >=5,000,000 ICB None are envisaged under the project. >=<5,000,000 NCB None <1,000,000 Shopping None All contracts >=1.0 Direct Contracting All contracts 2.0 Goods >=1,000,000.00 ICB All Contracts >=200,000<1,000,000 NCB None <200,000.00 Shopping None >=1.0 Direct contracting All contracts 57 2.0 Prequalification: In accordance with the provisions of paragraphs 2.9 and 2.10 of the Guidelines. N/A 3.0 Proposed Procedures for CDD Components (as per paragraph 3.19 of the Guidelines): Goods and Works with an estimated aggregate of US$23.04 million will be procured through community participation as described in paragraph 3.17 of the Bank Procurement Guidelines and detailed in the Procurement Handbook for procurement under Community Livelihood Support component. 4.0 Reference to (if any) Project Implementation Manual: Operational manual and Procurement Handbook 5.0 Any Other Special Procurement Arrangements: None 6.0 Procurement Packages for Goods and Works subject to Bank review with Methods and Time Schedule Procurement of Goods 1 2 3 4 5 6 7 8 9 Ref Contract Estimated Procurem Prequali Domesti Review Expect Comment No Description Cost ent fication c by ed Bid s US$ Method Yes/No prefere Bank Openi nce Prior/P ng Yes/No ost date 1 a) 173,000.00 NCB No No Post LDF Computers and associate Equipment - LDF b) 83,000.00 NCB No No Post COMSIP Computers and associate Equipment 2 850,000.00 NCB No No Post 2 - for COMSIP, 4 for District Motor Councils, Vehicles 20 Motor and Motor cycles for Cycles District Councils / COMSIP 58 3 MASAF 50,000.00 Shopping No No Post Brochers, 4, IEC leaflets Materials etc Brochures, Banners and Informatio n Kits 5 Printing of 40,000.00 Shopping No No Post MASAF 4- Guidelines 6 Technical 21,000.00 Shopping No No Post Camera, and GPS, Communic Radio ation and Equipment Decorder 7 Office 50,000.00 Shopping No No Post Furniture 8 Gen Set 100,000.00 Shopping No No Post 9 Beneficiary 0 Shopping No No Post Goods Registry requirem Equipment ents will for Four be clear Ministries after URB is set up Notes: URB, denotes Unified registry of beneficiaries 2: Number of motorcycles for COMSIP reduced since two were initially budgeted under MMASAF 3; 9: UBR equipment for Ministries pended as these are also benefiting from other funding agents 59 III Selection of Consultants 1.0 Prior Review Thresholds: Selection Decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants Expenditure Contract value Selection Method Contracts Category (Threshold) subject to USD Prior Review 3. Consultants >=200,000 QCBS,QBS All Contracts a) Firms <200,000 CQS,LCS,QBS,FBS None >=1.0 SSS All Contracts b) Individual >=100,000 ICS All Contracts >=1.0 SSS All Contracts 2.0 Short list comprising entirely of national consultants: Short list of consultants for services, estimated to cost less than US$200,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultants Guidelines. 3.0 Any Other Special Selection Arrangements: N/A 60 4.0 Consultancy Assignments with Selection Methods and Time Schedule 1 2 3 4 5 6 7 Ref Description of Estimated Selection Review Expected Comments No Assignment Cost Methods by Bank Proposal US$ Prior/Post Submission Date 1 Management 50,000.00 SSS Prior Consultancy in Organizational and Management Strengthening of LDF- TST 2 Development of 50,000.00 Administrative Post Registry of beneficiaries 3 Implementation 100,000.00 CQBS Post of a Community Score Card 4 Implementation 300,000.00 CQBS Post of 2nd round of Citizen Report Card 5 Implementation 0 CQBS Post of the most significant Change to measure Progress on Beneficiary 6 Technical 40,000.00 CQBS Post Assistance for Refining strengthening and coordinating the social Accountability Mechanism under MASAF 4 7 Impact 200,000.00 CQBS Post Evaluation (i. Baseline ii) process evaluation, iii) middle line iv) 61 end line 8 Beneficiary 0 CQBS Prior Assessment 9 Designing and 20,000.00 CQBS Post Implementation of M&E 10 Staff Training in 50,000.00 Administrative Post Planning, Social Protection, Environmental Management, social Accountability, M&E, Procurement and Financial Management. 11 Refresher LA 200,000.00 Administrative Post Training 12 Preparation of 80,000.00 Administrative Post VAPs and DDPs for projects and Social Protection Issues 13 Impact 80,000.00 CQBS Post Evaluation- COMSIP (i. Baseline ii) process evaluation, iii) middle line iv) end line 14 Product 50,000.00 CQBS Post Development for Self Sustenance- COMSIP 15 Market 40,000.00 CQBS Post Competitiveness Study- COMSIP 16 Project Tracking 100,000.00 CQBS Post System for LDF-TST 17 Financial Audit 200,000.00 CQBS Prior 18 Procurement 200,000.00 CQBS Prior Audit 19 Gender Analysis 50,000.00 CQS Post 62 20 Structural 20,000.00 CQBS Post Review for LDF-TST NON CONSULTING SERVICES 21 Cleaning 20,000.00 Shopping Services 22 Landscaping 10,000.00 Shopping Post Services 23 Security 30,000.00 Shopping Post Services 24 Motor Vehicle 60,000.00 SSS-Dealers Post maintenance Services 25 Genset 10,000.00 SS Prior Servicing 26 Office 20,000.00 Shopping Post Maintenance services adhoc 27 Telephone 15,000.00 Shopping Post service Contract 28 Internet Service 150,000.00 NCB Post Provider 39 Asset Auditing 20,000.00 Shopping Post Notes: 2: Development of URB reduced since it will be treated administratively 4: Citizen Report Card will be done as second round since the first round will be done under MASAF 3 7: Impact evaluation will start with construction of baseline, process evaluation, middle line and end line evaluation 13: COMSIP Impact Evaluation will be done as a separate study and as in 7. 63 IV Implementing Agency capacity Building Activities with Time schedule NO. Description of Estimated Estimated Start Date Comments Training Cost Duration US $ A/T MASAF 4 Launch 200,000.00 As in As in a) National – for training training 35 - DCs/ CE, plan plan 192 - MPs and 192x2 Councilors b) Regional launches for Council staff B/T Local Courses: M&E 20,000.00 As in As in Staff training; training training management; plan plan professional C/T LA Staff Training: 180,000.00 As in As in a) Safeguards training training training for 8x plan plan 35 DESC members, Extension workers D/T International 100,000.00 As in As in Workshops – Bank training training sanctioned: safety plan plan nets, procurement, disbursement, community of practice, South - South learning; E/T Training in new 50,000 As may As may Professional arise arise Innovations F/T Study Tours: URB etc 50,000.00 As may As may arise arise 64 Environmental and Social (including safeguards) 54. The parent-project (MASAF) was assessed as an environmental and social category B: Partial Assessment, due to likely subproject activities such as the rehabilitation of roads and construction of social infrastructure subprojects. This assessment will continue for MASAF IV, as similar subprojects will be constructed. In addition, there may be increased agricultural production as a result of an increased focus on watershed management. 55. OP/BP 4.01 Environmental Assessment. The principle instrument for ensuring that projects are designed to avoid or minimize negative environmental impacts under both the World Bank’s safeguard policies and those of the Government is Environmental and Social Management Framework (ESMF). The World Bank’s Environment Assessment Policy (OP 4.01) is applicable. However, being community-based, on a small scale, and not identified in advance, public works in the MASAF IV will not normally requite a separate EIA. Instead, the EIA requirements will be addressed through an Environmental and Social Management Framework (ESMF), which has been developed and publically disclosed by the Government. 56. OP/BP 4.12 Involuntary Resettlement. The policy is triggered due to the envisioned civil works to be undertaken under MASAF IV, which will likely require some acquisition of land with/without physical displacement of people, and/or loss of assets or source of livelihoods. So far, it was noted that due partly to staffing constraints at district level, OP/BP 4.12 Involuntary Resettlement has not received much emphasis under MASAF III. However, due to increased capacity and commitment of the Ministry of Lands and Housing, attention to this policy is expected to improve significantly in MASAF IV. MASAF IV will develop a community level grievance redress mechanism, which is in line with the ongoing work being done by the Ministry of Lands and Housing, which encourages transparency in land transactions. 57. OP 4.09 Pest Management and OP 4.36 Forests. The 2012 Additional Financing (a Rapid Response Package) triggered OP 4.36 after recognizing that some communities had begun to establish community woodlots (managing nurseries, planting the seedlings and then harvesting the wood) and the cumulative impacts of these activities was relatively large in scale district-wise. The Package also required OP 4.09 to be updated due to the fact that PW beneficiaries often use their transfer to access farm inputs from Malawi's Fertilizer Import Subsidy Program (FISP) and with respect to those project investments and subprojects that involve pesticide use. Because this Additional Financing was a Rapid Response Package, prepared quickly in response to a crisis, a window of 6 months after effectiveness was given for the completion of these updates. These updates were finalized as part of the updates to the ESMF for MASAF IV. 58. OP/BP 4.11 Physical Cultural Resources. The Physical Cultural Resources policy is being triggered for the first time during MASAF IV. The updated ESMF includes a chance finds procedure to address any new discovery of such resources during project implementation. After due consultation with Government counterparts it was agreed that Natural Habitats (OP/BP 4.04), Safety of Dams (OP/BP 4.37) and Projects on International Waterways (OP/BP 7.50) policies will not be triggered. 65 Environmental and Social Safeguards during MASAF III 59. During MASAF III the responsibility for safeguards implementation was transferred to the district level. However, there arose issues of capacity to include environmental and social safeguards as part of the Districts’ regular planning and implementation processes. The District Environmental Sub-committee (DESC) was not able to do proper environmental and social screening and/or develop Environmental and Social Management Plans (ESMPs) for all subprojects in all communities. Districts were also not able to cascade training to the community due to lack of budget; consequently, proper follow up on environmental and social safeguards requirements suffered during project implementation. 60. An Environmental and Social Safeguards Audit was undertaken in 2012 to review implementation of the ESMF and RPF in relation to subprojects that were funded under MASAF III. Key findings included: • Knowledge and Awareness. There was more focus on the environmental side of the ESMF as opposed to the social side and the RPF. Knowledge below the District Council level (at Area Executive Committee, Project Committees and the community in general) is weak. Training was not cascaded below the DESC level due largely to technical capacity issues. However, in District Councils where there is a full time EDO, there was more progress and commitment to implement safeguards. • Negative Impacts. The Public Works Program was found to generate negative impacts such as soil erosion from road rehabilitation and construction, health and sanitation of participants (especially in urban areas), loss of tools and equipment, conflicts due to eligibility of participation, etc. COMSIP negative impacts include deforestation, waste management, and smell-pollution from livestock and water-borne diseases from irrigation farming. • Screening. During 2009/2010-2011/2012, no funding was made available to implement safeguards under PWP and COMSIP. Therefore, no PWP or COMSIP projects had been screened. There was a misunderstanding that due to the short-term nature of PWP subprojects, screening would not be required. However, screening of PWP finally began in 2012/2013 and the COMSIP Secretariat developed tools for the screening process and trained a cadre of Environmental District Officers (EDOs) to roll-out the training to all extension workers. Overall, especially in relation to the PWP, there was insufficient training on screening. • Project Appraisal and Approval Processes. Before LDF approves a subproject, a “Field Appraisal Form” is filled out asking if the community is ready for the subproject by asking for availability of bricks, sand, land, etc. However, the form was found to not have appropriate criteria to identify environmental and social issues associated with a particular project. • Environmental and Social Management Plans (ESMPs) and implementation of mitigating measures. ESMPs were developed by DESCs, based on the screening. The ESMPs developed were found to be “generally appropriate and consistent with the findings from the screening”. ESMPs were produced only after subproject implementation has been completed (the plans were found only at district level, not community level, as required). However, implementation of the ESMPs was found to be only in early stages at the time of the Audit. The Audit also found that there was very limited participation and appreciation and ownership of the community regarding ESMPs and implementation of mitigating measures. • Coordination. The Audit found that sectors are generally coordinating well and that the DESC are the main platform for coordinating, advocating, implementing and monitoring 66 screening and implementation of ESMPs. • Reporting. Implementation of these plans was not reported on and implementation levels are not clear. 61. Lessons were learned from MASAF III that can strengthen safeguards implementation during MASAF IV, including: • Budget. Recognizing that poor performance related to social and environmental screening and development of mitigating measures was in part the result of a lack of committed budget; in 2012, the LDF allocated MK 50,000/subproject for overall support to safeguards implementation and monitoring. Allocation of this budget led to the screening of subprojects and the development of site specific ESMPs (although retroactively applied). • Monitoring. The Ministry of Environmental Affairs and Climate Change began to undertake quarterly monitoring missions, seen essential for proper follow-up and improved screening and implementation of mitigating measures. • Soil Stabilized Bricks Pilot. LDF initiated a Pilot to mainstream the use of Soil Stabilized Bricks (SSBs) for building construction, as an alternative to baked bricks, a practice which is widespread throughout Malawi for the construction of social infrastructure.. During the course of baking red bricks, natural resources, ranging from trees, soil and water are damaged which contributes to environmental degradation (especially deforestation). • COMSIP worked with EDOs and extension workers to develop a Guideline that was cascaded to “anchor” safeguards implementation at community level. Environmental subcommittees and village monitors were identified and trained. COMSIP focused on building capacity at the local level, “village monitors”, through DESC, which successfully anchored safeguards in village institutions. The emphasis was not only on extension workers but communities themselves. Extension staff act as facilitators. For sustainability, it is imperative that capacity is developed at community level so that community committees prepare these as part of the project application process. • Capacity Building. Training during MASAF III was ad hoc. A cost-cutting approach was taken to training which mainstreamed safeguards handling in Bank-funded operations; via a structural partisanship created between all 5 World Bank operations (SRBMP, IRLAD, ASWAP, EAD and MASAF). Environmental and Social Safeguards for MASAF IV 62. MASAF IV will focus on Productive Community Driven Public Works, Social Cash Transfers and Skills and Livelihoods Development. MASAF IV will place much more emphasis on safeguards capacity building, especially ensuring that communities have a good understanding of how and when to do screening in addition to development and implementation of mitigating measures, reporting and monitoring. 63. The GoM updated the ESMF and RPF instruments from the parent-project in a consultative and participatory manner with various stakeholders and with technical support from the World Bank. The updated instruments have been submitted for clearance to the World Bank to guide the implementation of social and environmental considerations and compliance with the triggered safeguards policies requirements during MASAF IV. The public disclosure of 67 both the ESMF and RPF, both in-country and at the World Bank InfoShop was done prior to Appraisal completion. 46 They were updated and expanded to ensure that: a) The specifics of MASAF IV including Productive Community Driven Public Works, Social Cash Transfers and Livelihoods and Skills Development are captured; b) To include lessons learned from MASAF III and findings and recommendations of the 2012 Environmental and Social Safeguards Audit; c) To ensure that templates are practical and easy to use; d) Clearer guidance to ensure that subprojects involving having the potential of loss of assets or access to assets or causing environmental and social degradation and other subproject ineligible under MASAF IV, are eliminated by the screening procedure; e) To include a chance finds procedure for the newly triggered safeguards policy OP/BP 4.11 Physical Cultural Resources; f) To ensure that each potential problem has a mitigating measure (subproject specific); g) To incorporate a stronger subproject level grievance redress mechanism; h) To include an adequate capacity building plan and budget in place for implementation during MASAF IV. 64. MASAF IV will continue to be implemented through the LDF-TST, an inter- governmental fiscal transfer agency that was established to coordinate financing and implementation of MASAF at district and community level. It is also responsible for backstopping related to environmental and social safeguards. 65. MASAF IV will take a more systematic approach to safeguards implementation with an emphasis on screening of all subprojects. MASAF IV will treat mitigating measures as part of subproject design to improve implementation and monitoring. Cascaded training to the community level will also anchor safeguards implementation as not just part of subproject planning but an ongoing process. Key indicators will also be reported on in the M&E system. 66. Capacity building. Staff at Central and District levels will participate in training courses for MASAF IV Public Works, which includes ESMF and RPF training. These trainings will be subject to an ongoing program of upgrading by LDF in cooperation with the Ministry of Environment and Climate Change and Ministry of Lands and Housing. Training will be provided by teams drawn from both of these Ministries in addition to LDF. To this end, both Ministries and LDF should also develop their capacity on environmental and social safeguards to be able to provide quality training and sufficient backstopping to districts. LDF should also ensure that it employs a technical environmental specialist with MSc in soil science, forestry or other related field to closely follow up and enforce safeguards implementation during MASAF IV (working closely with capacity building team at LDF in addition to Ministry of Environment and Climate Change and Ministry of Lands and Housing). Annual trainings will address issues related to high staff turnover at district level. The trainings should coincide with the planning cycle and reflect the productive and community driven nature of public works under MASAF IV. LDF should coordinate the Ministry of Environment and Climate Change and the Ministry of Lands and Housing to ensure that training is provided to District Councils, which should then be cascaded to AECs. This represents a shift to building capacity to implement safeguards at the community level during MASAF IV. 46 The ESMF and RPF were disclosed in country on October 21, 2013, the PMP Plan was disclosed in country on October 22, 2013. The ESMF, RPF and PMP Plan were disclosed at the World Bank InfoShop on October 22, 2013. 68 67. Monitoring. The application of the ESMF is vital to ensure that the subprojects are environmental and socially sustainable and that inappropriate subprojects are eliminated. However, the very large scale of the MASAF Program gives rise to monitoring problems. Sampling is the most obvious approach, but it must be structured sampling in order to be able to limit the sample size to manageable proportion. Another approach is the case study approach, which seeks to determine typical results for certain types of subproject. To examine the application of the ESMF, there are two dimensions to measure: frequency and quality. Frequency looks at screening implementation rates while quality is based on professional judgement, covering issues such as whether or not the screening form was signed, etc. An important aspect of ESMF monitoring is the question of follow up on the ground to ensure that mitigating measures are implemented and that ineligible subprojects are eliminated. This requires a more comprehensive approach than merely sampling and is best covered in a regular M&E system. The Ministry of Environment and Climate Change began to undertake quarterly monitoring on safeguards implementation in 2012. This arrangement should be continued during MASAF IV. Annual reviews should also examine the participatory planning process and feedback information to the M&E system. 68. Coordination. Moving forward, LDF should coordinate more closely with Ministry of Environment and Climate Change, and Ministry of Lands and Housing on all aspects of safeguards implementation including training, screening and monitoring of mitigating measures. 69. Budget. The cost of implementing the environmental and social safeguard measures will be covered by the program management budget at central and district levels and by the regular government staffing and overhead costs at all levels. For this reason, a precise costing of this specific aspect of the coordination, management and implementation of the PWs is not possible. Nonetheless, an approximate estimate of the costs can be made as follows: Table 1: Indicative Budget for Safeguards Implementation No Activity Budget (MK) Budget (USD) 1 National stakeholder awareness workshop 7,500,000 21,428.57 2 Preparation of checklists for environmental 1,500,000 4,285.71 and social impacts 3 Sensitization for communities 2,350,000 6,714.29 4 Training communities in screening process 5,900,000 16,857.85 5 ESMF screening 2,000,000 5,714.29 6 Preparation of Resettlement Action Plan 2,350,000 6,714.29 7 Implementation of mitigation measures 7,000,000 20,000 8 Monitoring activities 7,000,000 20,000 9 Administrative costs 2,500,000 7,142.85 TOTAL 38, 100, 000 Procedures for ESMF and RPF Implementation 70. ESMF implementation forms part of the subproject selection process, since ESMF screening contributes to the approval or non-approval of subprojects. This is especially important in MASAF IV particularly as the screening out of subprojects potentially involving negative environmental and social impacts is critical to the smooth operation of the Productive Community Driven Public Works. Under MASAF IV, a number of potential PWs are identified at community-level through a community-based area/watershed planning process that prioritizes 69 and selects activities contributing to improved watershed management and social infrastructure. The ESMF specifies criteria for all types of PWs eligible for PSNP support, avoiding locations or project design which might give rise to unmanageable impacts, and recommending design modifications where appropriate. 71. After the community has developed a shortlist of desired PWs design work is carried out with the assistance from the required District staff. The resultant MASAF PW plan is then submitted to the DESC where a simple ESMF screening procedure is adopted in order to ensure that negative impacts are avoided or minimized and that ESMPs are developed. 72. Technical staff at district level are guided by the planning guidelines set out in the MASAF IV Program Implementation Manual (PIM). Thus, the design of the PWs such as soil and water conservation and road works will have had standard environmental mitigating measures already incorporated into the design by the time they are screened by ESMF procedures. Thus, the screening will generally be quite rapid. 73. Only in exceptional cases will it be necessary for a PW subproject to be reviewed at a higher level in which case, the responsible authority will decide on whether a site specific ESIA/ESMP is required. Likewise, when it comes to land acquisition, the screening will reveal if site specific RAPs will be prepared, consulted upon and disclosed both in-country and at the InfoShop prior to project implementation. 70 ANNEX 4: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) Risks . Project Stakeholder Risks Stakeholder Risk Rating Substantial Risk Description: Risk Management: a) Description: MASAF is the largest Risk Management: Extensive consultations throughout the preparation process have with all stakeholders safety nets program in the country have been carried out. These consultations express the need to refocus MASAF IV as has been outlined in the and has been in place for almost 2 PAD. These consultations will continue throughout implementation. A key feature of preparation was a focus decades. Ring fencing the window on a stakeholders’ workshop which included central, district and community level partners including which will supervise and coordinate extension workers and clients to jointly design each project component. MASAF IV’s approach is backed up the World Bank-financed MASAF by extensive analysis carried out and supported by the PER which includes a social protection chapter IV under the LDF-Mechanism to focused on efficiencies and effectiveness of social protection expenditures; and by analysis of the current focus entirely on the Social targeting mechanisms and organizational structure of the LDF mechanism as well as MASAF’s institutional Protection program and ensuring that effectiveness. the window that implements, In addition the MASAF IV implementers and government officials were provided training through a study supervises, supports and coordinates tour to Ethiopia to learn from the Productive Safety Nets Program, and to Tanzania to learn from the the Social Protection Program Tanzania Social Action Fund how to establish a unified registry of beneficiaries. through MASAF may face resistance by stakeholders at the national level. Enhanced social accountability measures currently in place in MASAF through the use of community score cards, putting financial management and resource utilization in the public domain; a grievance mechanism b) MASAF is one of the Bank funded and a system of responses is also in place and the project is using a community targeting mechanism which projects that is very popular amongst will be enhance by the Proxy Means Testing. Communities. Politicians could influence the use of resources Information campaigns are proposed for communicating and sharing widely with the public and policy especially as the country is gearing makers on the benefits of reform of the safety nets system. up for general Parliamentary Resp: Status: Stage: Recurrent: Due Date: Frequency Ongoing elections in early 2014. It is possible Both Completed and Ongoing. that the project could be politicized. ongoing c) Resistance to increase PWP wages by those in estate farms 71 Implementing Agency (IA) Risks (including Fiduciary Risks) Capacity Rating Substantial Risk Description: Risk Management: a)Fiduciary Systems and Capacity building will be part of the proposed project. Government has recruited and is in the process of Management: recruiting staff for local councils in the finance, audit and procurement functions Financial Management: Resp: GoM Status: Stage: Recurrent: Due Frequency: Lack of capacity particularly in terms Ongoing Date: of FM staff at district level has l caused problems in timely reporting and reconciliation of statements, this effects implementation and causes delays because of delays in the report on expenditures at all levels. International Accounting and International Auditing standards are yet to be fully adopted. b) Procurement: Most procurement cadre positions are vacant and there is weak adherence to procurement laws by procuring entities, as well as weak monitoring by the center leading to reduced transparency Governance Rating Substantial Risk Description: Risk Management: Description: Appropriate anti- Risk Management: Project accounts are audited annually and appropriate follow-up action on audit issues is corruption instruments are in effect instituted regularly. Monitoring of the use of project resources includes the National Local Government (e.g. Code of Conduct, Internal Finance Committee (NLGFC). Malawi has established the Anti-Corruption Bureau which investigates and Procurement Committees and prosecutes corrupt practices in Government institutions and other stakeholders. Integrity Committees) but Resp: Status: Stage: Recurrent: Due Frequency: implementation/enforcement is weak Date: due to the lack of enforcement of rules Rating Substantial Risk Management: Risk Management: Government realizes the weaknesses in management of public procurement and controls, and also the need to strengthen key accountability institutions. In this regard, it has pronounced a “national 72 austerity drive’ to address some of these issues. Several existing interventions such as the Public Finance and Economic Management MDTF are expected to help address some capacity challenges. Resp: Status: Stage: Recurrent: Due Frequency: Date: Project Risks Design Rating Moderate Risk Description: Risk Management: a) Accountability on Financial There is strong commitment to strengthen capacity of staff in FM and procurement at council level through accounting: recruitment with the Local Government Commission reconstituted and in place. b) Drive to reform MASAF to be a Discussions during the preparation of MASAF IV reached consensus that the process of planning should be purely CDD project: in the hands of the concerned communities c) Targeting: Moving to a unified Design of the overall project ensures strong integration of project components. Strong element of capacity registry system: building at all levels, particularly at community level. Resp: Status: Stage: Recurrent: Due Date: Frequency d) Poor design of sub-projects Both In Progress 30-Nov-2013 leading to lack of integration of project components leading to unsustainability of outcomes. Social and Environmental Rating Moderate Risk Description: Risk Management: Description: a) During MASAF III Risk Management: a) The proposed project will ensure that the remedies started under the MASAF 3 to the responsibility for safeguards provide resources for ensuring monitoring and implementation of mitigation measures will be sustained. The implementation was transferred to oversight from the Ministry of Environmental Affairs and Climate Change, and the Ministry of Lands will be the district level. However, there part of the implementation arrangements for the project to ensure adherence to the ESM F and the RPF. Staff arose issues of capacity at district capacity augmentation is underway in the Ministry of lands to ensure quality monitoring of the mitigating level to include environmental and measures social safeguards as part of their Resp: GoM/MASAF- Status: Ongoing Stage: l Recurrent: Due Frequency: Ongoing regular planning and implementation LDF Date: processes. Due to staff constraints at district level, the participation of the Ministry of Lands and Housing at district level, related to OP 4.12 Involuntary Resettlement, has been low. 73 b) Social risk associated with scheme transfer particularly related to dealing with competing claims over the land and infrastructure in the areas mapped for the community roads and watershed management. c) Environmental risks in the catchments areas in the country due to massive deforestation Program and Donor Rating Moderate Risk Description: Risk Management: Description: The LDF-TST Risk Management: MASAF IV will follow a different design as laid out in thePAD. It will be driven by mechanism is funded by donors other community identification and management of priorities captured in area development plans and financed by than the Bank and include the GoM, MASAF IV with a flexible and voluntary approach to community contributions. The MASAF IV design has KFW, and the ADB for specific been discussed and consulted upon in country with all stakeholders since March 2013 and has included activities of infrastructure including stakeholders’ workshops and study tours. There is widespread agreement particularly in the top leadership in the building of schools and teachers the country that this is the right approach to take. staff houses under the E-SWAP the Resp: Status: Stage: Recurrent: Due Frequency: procedures for project identification Date: are top down and do not follow a community driven process other than a mandatory requirement that communities contribute in land and building materials. Following a different approach for the MASAF IV may prove to be a challenge for LDF and might result in an overload on the TST and causes delays in program implementation Delivery Monitoring and Rating Substantial Sustainability Risk Description: Risk Management: Description: Under the current Risk Management: The coordinating arrangement under the current institutional arrangements that exist for structure, local council staffs are supervision will continue where the LDF TST collaborates with the National Local Government Committee overloaded with work generated by and sector ministries. Capacity for enhancing the council staff motivation and the availability of staff at the the many projects over and above extension level expected to support delivery at the community level would be supported and strengthened their initial mandates; they are poorly through MASAF Component II. 74 paid, and look for allowances from Resp: Status: Stage: Recurrent: Due Frequency: projects for augmenting their income. Date: This is one source of technical capacity inadequacy that would result in poor technical supervision and poor quality assets created affecting sustainability of project’s benefits. Other (Optional) Rating Risk Description: Risk Management: Description: Because the LDF TST Risk Management: The design of MASAF III included principles of social accountability (SA) and active Mechanism has over the last several engagement of the community in the development process; 2) SA must be strengthened in the new social years followed largely a top down protection program to ensure that service providers are held accountable for delivering the new social approach to sub project identification protection program to the most vulnerable Malawians without negative impact. The new social protection there is a risk that it will be difficult program would ensure that information related to access and entitlement is widely disseminated and to move back to a participatory understood by client communities; LDF TST has already made progress to mainstream SA methodologies community approach of clients within MASAF III including: (i) the implementation of Community Score Card (CSC) in 2010 with another identifying needs and managing the round planned for 2013, (ii) the facilitation of a Study Tour to Tanzania and India where a GoM Team process by which these needs are received training and orientation on how to implement CRCs; (iii) planned introduction of “The Most financed and met. Significant Change Technique” in the LDF M&E Framework. While implementation of SA methodologies to date has been ad hoc and the responsibility of LDF TST and GoM, the new social protection program should consider the role of independent body to implement SA activities that feed back into the program’s M&E system. To this end, the design would include building the capacity of a local research institution to implement SA tools. SA activities would be integrated into the M&E system to allow for active follow-up and corrective measures to be taken, ensuring that clients are receiving the maximum benefit from the program and that the correct planning processes and procedures are being followed. The design of MASAF IV introduces other SA methodologies, grievance mechanisms, etc. Resp: Status: Stage: Recurrent: Due Frequency: Date: Overall Risk Overall Implementation Risk: Substantial Risk Description: Implementation risk has been downgraded to substantial due to the high level of preparedness and the endorsement by key stakeholders such as the district councils and the MEPD for the new design. 75 ANNEX 5: IMPLEMENTATION SUPPORT PLAN Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) Strategy and Approach for Implementation Support Implementation Support Plan 2. The Implementation Support Plan (ISP) takes into consideration the fact that MASAF IV marks a significant shift which would require regular coordination between several key Ministries and agencies to achieve a concerted and coordinated impact on reducing vulnerability. In order to ensure that this coordinated implementation takes place there will be a need to support the government through this transition, and other identified program risks. As such the ISP recognizes that the Government will benefit from increased interaction with the Bank team as well as other CPs which will enable a constructive dialogue to address emerging issues as the program is rolled-out. 3. The World Bank Task Team Leader will handle the day-to-day matters of the project which will include IDA support, adherence to World Bank policies and encouraging and fostering coordination between Bank sectoral teams relevant to implementation as well as CPs and GoM agencies. 4. For purposes of harmonization, the Bank team and CPs will have the opportunity to comment on the ToRs for the various process evaluations and spot checks programmed for the early years of implementation, as well as having the opportunity to hear and discuss their findings. Furthermore, they will have the option of participating in the regular LDF-TST implementation support missions which aim to provide trouble- shooting support to local councils and communities during the early years of implementation. 5. The Bank team and CPs and the Government will conduct yearly Joint Implementation Support Missions twice a year, led by the Bank. Initially these missions will likely focus on roll-out and implementation issues, but in later years will also attempt to review progress towards achieving intermediate outcomes. The Government and the WB will facilitate missions that will be carried out to deal with issues requiring urgent attention on financial management, procurement, safeguards and governance. 6. In addition to the joint implementation support missions, a Mid-Term Review (MTR) will be carried out after the first half of the project’s life, or once the project has disbursed 50% of the resources. The MTR will assess if the project design assumptions are still valid and consider ways to remove factors that constrain project progress towards achieving the PDO. The MTR, other missions and internal reviews will be complemented by external reviews that will include the following areas: financial management, procurement, monitoring and evaluation, and technical audits. Main areas of focus in terms of support to implementation: Time Focus Skills Needed Resource Partner Role Estimate First twelve - Capacity - Knowledge in US$60,000 TA months building for establishing a systems unified registry development of beneficiaries - initial roll out of - Engineer and interventions agriculture , US$45,000 (PWP watershed irrigation, water Management) supply specialist -Systems Livelihoods and Strengthening savings groups - Financial specialist management for - FM Specialist capacity building - Procurement - Procurement Specialist - Safeguards - Environmental capacity building and Social -Impact Specialists. Evaluation. Poverty Economist. Social Protection Specialists 12-48 Systems Systems US$70,000 per TA months maintenance Operation and year Capacity building Management. for systems Knowledge in development establishing a - initial roll out of unified registry interventions of beneficiaries (PWP watershed - Engineer and Management) agriculture -Systems specialist Strengthening Livelihoods and - Financial savings groups management for specialist capacity building - FM Specialist - Procurement - Procurement - Safeguards Specialist capacity building - Environmental -Impact and Social Evaluation. Specialists Poverty Economist. Social Protection Specialists Other Institutional Organization US$60,000 per Development development year 77 Skills Mix Required Skills Needed Number of Number of Comments Staff Weeks per Trips year per year Procurement 4 2 Country Office based Social Development 4 and 2 2 Regional/Country Specialist subsequent years 2 Office Environment Specialist 4 years and 2 2 Regional/Country subsequent years Office Financial Management 8 2 Country Office based Specialist ICT Support 2 1 Regional/HQ based Nutrition Specialist 4 Country Office based/Regional M&E Specialist 4 2 HQ Based SP Sector Specialist 4 2 Region based SP Sector Specialist 4 1 Region based Task Team Leader 8 2 HQ based Cooperating Partners Name Institution/Country Role WB WB Malawi Fiduciary, safeguards and program management, monitoring and evaluation; Systems development; cash transfers; public works and community savings and investment promotion Government Ministry of Gender monitoring and evaluation, cash transfers, EU, Kfw Malawi Systems development for Cash transfers Ministry of Malawi Coordination and Harmonization of Economic Planning procedures and processes regarding and Development the safety nets interventions under the SP agenda UNICEF Capacity building, IEC, monitoring and evaluation 78 ANNEX 6: VULNERABILITY AND POVERTY IN MALAWI 47 Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) Poverty and Growth in Malawi 1) Malawi has experienced some significant economic growth in most of the past decade, averaging 7% over the period 2006-2010. However, poverty remains widespread and persistent. Over half of the population remain poor and 24.5 percent of the population are estimated to live in extreme poverty, with total expenditure below the food poverty line level. Based on the data from the Second Integrated Household Survey (IHS2) 2004/05 and the Third Integrated Household Survey (IHS3) 2010/11, the national absolute poverty rate of 52.4 percent in 2004/05 declined only marginally to 50.7 percent in 2010/11. Poverty in rural areas followed a similar pattern: a rate of 55.9 percent in 2004/05 vs. 56.6 percent in 2010/11. 48 Malawi Urban Areas Rural Areas Selected Indicators 2005 2011 Difference 2005 2011 Difference 2005 2011 Difference Welfare Per capita Expenditure (103 MK) 48.6 54.6 6.0** 94.4 118.8 24.4+ 42.2 43.1 0.9 Share of food in total consumption 59.4 63.0 3.6** 53.6 53.7 0.1 60.3 64.8 4.5** Share of food in cash expenditure 38.3 43.5 5.2* 56.4 49.7 - 6.7** 35.6 42.4 6.8* Poverty Indicators (%) Poverty headcount 52.4 50.7 -1.7 25.4 17.3 -8.1* 55.9 56.6 0.7 Ultra-poverty headcount 22.3 24.5 2.2+ 7.5 4.3 -3.2+ 24.2 28.1 3.9** Poverty gap 17.8 18.9 1.1 7.1 4.8 -2.3+ 19.2 21.4 2.2** Poverty gap squared 8.0 9.3 1.3** 2.8 2.0 -0.8 8.6 10.6 2.0** Inequality Gini coefficient 0.39 0.45 0.06 0.48 0.49 0.01 0.34 0.38 0.04 Income share of bottom 50% (%) 24.6 21.1 -3.5 19.5 18.7 -0.8 27.2 24.9 -2.3 Income share of top 10% (%) 32.0 36.5 4.5 39.2 39.5 0.3 26.8 28.9 2.1 2) The observed patterns on poverty suggest that growth must be highly unequal (across sectors), and regressive, thus not increasing the incomes of the poor rapidly enough (or increasing them at all) to lift them out of poverty. As a result, more pro-poor growth measures are required, but it might also be worth considering larger and more effective redistributive transfers to the poor. 3) Indeed, real consumption growth has been regressive, with half of the Malawian population (the poorest) experiencing negative real consumption growth. There has been a significant growth at all levels in urban areas, with the poorest enjoying relatively lower, but statistically significant growth rates. The situation is extremely different and more strongly regressive in rural areas where about two- thirds of the households experience negative real consumption growth and only the very top 5-10% experiences some growth. 4) It is unlikely though that the Malawian government would want (or may be able) to provide transfers to half of its population to lift them out of poverty. The rest of this Annex explores the characteristics of this group and how this could inform the design and targeting of safety nets. Characteristics of the Poor and the Ultra-Poor 5) Given the wide spread of generalized poverty in Malawi, it is difficult to find characteristics that distinguish the ultra-poor. Housing conditions and the ownership of assets - similar among almost all of the rural population as shown in Table 3 below. Almost no households, except for the richest 10%, for example, have a flush toilet, piped water, electricity, or hard assets such as a sewing machine or 47 Effective and Inclusive Targeting of Social Support Programs in Africa: Malawi Country Case Study - Synthesis of Report: 48 The difference between the IHS2 and the IHS3 national absolute poverty rates is not statistically significant. The IHS3 rural poverty rate is also statistically indistinguishable from its IHS2 counterpart. kerosene stove. The composition of walls (mud brick) and roofing (grass/palm leaves) are almost identical among the ultra- poor and the bottom half of the population as a whole. Table 3: Household Characteristics by Consumption Decile Consumption deciles Riches All Poorest 2 3 4 5 6 7 8 9 t HOUSEHOLD DEMOGRAPHICS Household size (no.) 6.4 5.9 5.4 5.1 4.9 4.6 4.4 4.0 3.7 3.1 4.5 Number of children 0-18y.o. 4.2 3.6 3.2 3.0 2.7 2.4 2.3 2.0 1.7 1.3 1.9 Number of elders (65+ y.o.) 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.2 1: Household has disabled % 13.7 13.0 11.2 10.9 10.4 13.3 11.7 9.7 8.0 6.1 10.3 1: household has both-parents orphans aged 0-12 4.3 3.8 2.5 3.0 2.5 2.2 3.0 1.8 2.5 1.2 2.5 1: Female Head of Household (%) 30.0 24.6 24.0 24.7 25.7 23.9 23.2 23.0 20.0 19.0 23.3 DWELLING CHARACTERISTICS 1: Floor … smoothed mud 90.8 90.9 86.3 86.2 85.6 83.7 81.2 74.6 66.6 48.4 76.7 1: Roof … grass/palm leaves 91.6 88.8 85.3 84.2 82.1 79.4 78.2 70.7 63.0 43.6 73.7 1: Wall … grass/palm leaves/mud 18.3 14.7 12.5 11.4 11.6 12.0 8.6 9.4 7.7 7.4 10.7 mud brick 40.0 39.3 39.2 35.9 35.3 33.1 36.3 33.3 33.2 35.3 35.7 Number of rooms per capita 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.9 1.2 0.7 1: Household has electricity 0.1 0.4 0.2 0.7 1.1 1.8 2.4 4.6 8.2 25.4 5.9 1: Toilet type … traditional latrine with roof 50.4 53.3 53.2 56.5 56.2 58.6 59.2 61.5 62.8 58.4 57.6 traditional latrine without roof 23.5 24.1 26.0 22.5 23.0 21.8 21.4 21.5 17.6 14.9 21.0 none/other 24.9 21.1 18.6 19.1 18.6 16.9 16.9 13.9 13.7 9.1 16.4 1: Source of drinking water … communal hand pipe 55.7 48.5 48.6 48.0 48.1 47.8 46.4 41.7 44.0 31.1 44.8 OWNERSHIP OF PRODUCTIVE ASSETS 1: Household owns < 2 acres rain fed land 55.3 49.9 45.3 44.2 43.7 41.4 42.1 38.9 34.2 30.0 41.0 Cattle / oxen (number) 0.2 0.2 0.2 0.3 0.2 0.2 0.4 0.3 0.4 0.3 0.3 Goats / sheep (number) 0.6 0.8 0.9 0.8 0.9 1.0 1.0 1.0 1.1 0.8 0.9 DURABLES OWNERSHIP (% HHs Owning) Sewing Machine 0.8 1.8 2.1 1.6 1.6 2.4 2.8 3.2 3.8 6.0 2.9 Kerosene Stove 0.0 0.1 0.3 0.1 0.4 0.7 1.3 2.1 3.5 8.0 2.1 Bicycle 24.0 33.6 33.3 33.2 34.7 36.7 38.9 41.2 40.3 38.4 36.2 Motorcycle 0.0 0.0 0.0 0.0 0.2 0.3 0.2 0.5 0.7 1.0 0.4 Source: Background paper III: An Alternative Targeting Mechanism (Cnobloch (2011) 6) One characteristic that does seem to be related to extreme poverty is household size, particularly among those that are labour-constrained. The existence of labour constraints despite massively high underemployment may seem paradoxical, but it is related to the extreme seasonality of labour use in Malawi’s single-rainfall subsistence economy. On an annual basis 15.6% of adult males work less than 10 hours a week, while at the same time many households have insufficient labour to cultivate all of the land they potentially could. This is of course particularly true for those with very few working-aged adults. The SNNP has accordingly adopted the concept of ‘labour-scarce households’ defined as those with no able-bodied adult aged 15-65, or a dependency ratio of more than 3 persons per working-aged adult. 7) The links with poverty are not as straightforward as one might expect. For example, while the landless are more likely to be poor, size of landholdings does not appear to be highly correlated with nutritional status, nor even with food consumption – even in the top land quintiles 50% of individuals have food consumption below the recommended levels. (MPVA, Box 3). Similarly, while evidence suggests that the labour-constrained households are more likely to be poor, an assessment of the SCT 80 program (see Part 3 below) found only a weak correlation between labour-constraints and poverty status in rural Malawi (although it found a high correlation between dependency rates and poverty). Even female-headed households, while they are poorer than average – are spread across all of the consumption deciles (Table 3). What this means is that it is difficult to use only one set of criteria, or the measured attributes of a household, to identify who should benefit from transfer programs. What does seem to be closely related to food poverty is seasonality. 8) Based on the observed characteristics of the poor in Malawi, there are several groups among the poor that might make sense to target and through different types of interventions. As Figure 4 below shows, potential beneficiaries could fall into three categories: (i) the intrinsically destitute or extremely poor who may include orphan headed households and the abandoned elderly who will need support no matter what, (ii) the able-bodied poor households who are stuck in poverty traps with low productivity or with very few assets and small landholdings that could be pushed with supplemental income and complementary capital or agricultural inputs to improve their productivity, and (iii) the moderately poor whose consumption from subsistence agriculture keeps them in a reasonable position. Figure 4: Categories of the poor, their social support needs and proposed program interventions 81 Geographical Aspects of Poverty 9) Poverty is largely rural, and focused more in the south (which is more crowded, and less able to support the agricultural population; and the north (which is more isolated and less connected with the modern economy) than in the central region, which has a somewhat sparser population density, and greater concentration of cash crops. The table below shows the basic characteristics of geographic poverty: Ultra- Region Poverty Characteristics of the Region/Underlying Poverty Incidence Level Explanators Rural North 24.20% Weakly integrated with markets, isolation Rural- Central 16.20% Cash crops, moderately sparsely populated Rural – South 31.50% Densely populated, small land-holdings Urban 7.50% Limited employment growth; excess labour supply 10) Because the south is much more densely populated, the number of ultra-poor is much higher in the south (Figure.3) Fig.3 Where The Ultra-Poor Are: Absolute Numbers (2005 IHS) Rural North Rural- Central Rural - South Urban 82 11) The table below shows the distribution of poverty and ultra-poverty by District. What is worth noting, for purposes of considering targeting options is that the ultra-poor are widely spread across the country, so focusing geographically, while simple, would leave out a very large proportion of the ultra- poor. Poverty Incidence and share of population distribution by background characteristics, Malawi 2011 Background Poverty Ultra Populatio Poor Ultra poor characteristics poverty n (% (% (%) (%) (% ) populati population) on) Malawi 50.7 24.5 100.0 100.0 100.0 Urban 17.3 4.3 15.2 5.2 2.7 Rural 56.6 28.1 84.8 94.8 97.3 North 59.9 29.0 11.2 13.2 13.2 Centre 48.7 21.5 36.1 34.6 31.7 South 63.3 34.2 37.6 46.9 52.4 North 54.3 25.6 13.1 14.0 13.7 Centre 44.5 18.9 42.6 37.4 32.9 South 55.5 29.5 44.3 48.6 53.4 Chitipa 75.6 43.6 1.4 2.0 2.4 Karonga 61.7 26.0 2.1 2.5 2.2 Nkhatabay 44.5 17.7 1.6 1.4 1.2 Rumphi 37.3 10.8 1.3 1.0 0.6 Mzimba 60.9 31.7 5.6 6.7 7.2 Mzuzu City 15.9 2.1 1.1 0.4 0.1 Kasungu 33.6 10.8 4.9 3.3 2.2 Nkhotakota 32.1 11.2 2.3 1.5 1.1 Ntchisi 41.4 10.3 1.7 1.4 0.7 Dowa 45.6 16.6 4.4 4.0 3.0 Salima 41.1 16.5 2.6 2.1 1.7 Lilongwe 56.6 31.0 9.3 10.4 11.7 Mchinji 55.5 31.9 3.6 3.9 4.6 Dedza 56.8 25.1 4.7 5.3 4.8 Ntcheu 45.6 14.0 3.6 3.2 2.1 Lilongwe City 22.3 4.1 5.5 2.4 0.9 Mangochi 73.2 44.4 6.1 8.9 11.1 Machinga 75.0 39.2 3.7 5.5 6.0 Zomba 56.6 26.4 4.3 4.8 4.6 Chiradzulu 43.3 12.5 2.1 1.8 1.1 Blantyre 40.0 13.5 2.6 2.0 1.4 Mwanza 63.0 33.5 0.7 0.9 0.9 Neno 65.3 29.7 0.9 1.1 1.0 Thyolo 36.8 11.2 4.2 3.1 1.9 Mulanje 65.3 33.6 3.9 5.0 5.3 Phalombe 64.5 41.7 2.4 3.0 4.0 Chikwawa 81.6 59.0 3.3 5.3 8.0 Nsanje 81.2 56.0 1.8 2.9 4.1 Balaka 67.7 33.2 2.4 3.3 3.3 Zomba City 16.3 3.0 0.7 0.2 0.1 Blantyre City 7.5 2.0 5.1 0.8 0.4 83 ANNEX 7: SOCIAL PROTECTION PUBLIC EXPENDITURES REVIEW Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) 1. Social Protection expenditures because of their focuses on vulnerability and poverty are by definition a cross cutting and weave through many sectors. In the context of Malawi both agriculture and health expenditures focused on the poor and vulnerable can be considered as social protection where the majority of the population (84%) live in rural areas and where vulnerability including chronic illness affects a large portion (12%) of the population. 2. Agriculture expenditures in Malawi or the Farm Input Subsidy Program (FISP) are defined by the Government as Social Expenditures. In the context of Malawi vulnerability and poverty affect over 84% of the 15 million Malawians who live in the rural areas and are dependent on agriculture for their livelihood. Over half the population lives in poverty on one of lowest per capita income in the world of around US$330 (WDI, 2011). Of the 3.4 million ultra-poor, 96 percent live and depend on agriculture, and mostly tobacco and maize farming for their livelihood. It is therefore obvious that interventions in particular in agriculture are often defined as social protection. This chapter will provide analysis to assist in deciding whether expenditures on fertilizer subsidies to the poorest and landless farmers are justified as productive social protection measures or whether these expenditures are ineffective and disproportionate to the needs of human development investments for the poorest segments of the population through more direct social protection transfers to the poorest. 3. Health expenditures subsidies reaching the poor and the vulnerable could be considered as Social Protection as well, however, for the purposes of this review these are covered in Chapter 6 on health expenditures. The health expenditures analysis shows that health expenditures are largely donor financed (65.6%) while Government spending is low (18%); maternal health and reproductive health are under financed. There are inequities in health financing by wealth quintiles and there are regional differences. Benefits incidence analysis results are slightly progressive, that is, public subsidies slightly benefit the poor over the non-poor. But within this there is a higher share of public subsidies for the urban relative to the rural poor (see Chapter 6: Figure X Distribution of Government Subsidy by Wealth, Rural and Urban areas, 2011). 4. Pensions which are also Social Protection expenditures, amount to MK16.0 billion for 2012/13 and by contrast more than the total expenditures on safety nets for the poor and vulnerable for the same period (MK15.059 billion). Pensions are projected to reach MK21.0 billion in 2015. Expenditure review of pensions are an area which has in Malawi, have historically lacked analysis, presumably because of a greater focus on poverty and on non-contributory assistance. In Malawi pensions in public expenditures are for the civil servants and other Government retirees. 84 5. Social Protection Programs May Not Be Achieving Their Intended Objectives fast enough: E.g.: Ultra-poverty has not declined in all but one (Salima) SCTP pilot districts Ultra-Poverty Incidences in SCTP Pilot Districts Phalombe 42% 27% Chitipa 44% 30% IHS3 Mangochi 44% 29% IHS2 Salima 17% 25% Machinga 39% 38% Mchinji 32% 30% 6. FISP Dwarfs SP Spending and Crowds out SP Expenditures. As a result FISP crowd out other Expenditures in SP because it is defined as social protection? There are relatively low budgetary allocations to Social Support Programs and Farm Input Subsidy Program (FISP) is dominant in both Social Protection and Agricultural Sector budgets. It comprises 70% of Social Protection expenditures if FISP is counted as such and it comprises 60% of all agriculture expenditures. In either case it corwds out other more important and effective productive interventions in both sectors. Intra-Sectoral Equity/Benefit Incidence Analysis (Please Engage Rui To Help Develop This Sub- Section). Trends for Social Protection Allocations 15 10 5 0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total Social Support as % of Total Budget Subsidy as % of Total Budget Other Social Support as % of Total Budget Farm Input Subsidy Programs in Sector Budgets 100.0 95.7 96.7 98.6 89.5 65.0 99.6 80.0 67.5 60.0 74.8 68.0 58.0 50.8 40.0 47.4 20.0 0.0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Subsidy as % of Social Support Budget Subsidy as % of Agriculture Budget 85 7. Do FISP Expenditures focus on the poorest and most vulnerable? The main beneficiaries of FISP are not just the poorest farming households. By definition in order for expenditures to be considered as Social Protection they must be focused on the poorest and the most vulnerable. FISP subsidies particularly for fertilizer would be more effective if they were targeted to those farmers who have land while other inputs for increasing livelihoods could be targeted to the land poor. While Malawi produces food and has food sufficiency does not indicate that the FISP is working. It can be an indicator that FISP has worked for those who have land but that there may be an overemphasis on this subsidy at the cost of other sectors as the indicators on human development and poverty indicate. (a) FISP Net Subsidy share by Wealth Status Rural vs. Urban (%) 30 23 25 23 22 21 25 21 22 22 20 19 18 18 17 20 15 15 15 10 5 0 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Poorest Richest Poorest Richest Poorest Richest Malawi Urban Rural % Share of FISP Net Subsidy b) FISP Net Subsidy share, by Poverty Status (%) Rural and Urban 100 77 80 52 48 50 50 60 40 23 20 0 Poor Poor Poor Non-Poor Non-Poor Non-Poor Malawi Urban Rural % Share of FISP Net Subsidy 8. Distribution of FISP Expenditures (Net Subsidy to Households) Table 3. Distribution of FISP Net Benefits (%), by Wealth and Selected Characteristics, 2011 Poorest 3rd 4th Richest 2nd Quintile All households Quintile Quintile Quintile Quintile Malawi 17.6 21.0 22.3 21.5 17.6 100 Urban 23.3 24.6 22.8 14.8 14.6 100 Rural 17.2 19.9 22.4 21.4 19.2 100 Gender of head Male-headed 17.2 20.8 22.5 21.8 17.6 100 Female-headed 18.7 21.4 21.9 20.6 17.5 100 Rural Region North 21.3 19.6 20.5 19.9 18.6 100 Center 16.7 21.3 22.9 20.9 18.3 100 South 15.5 19.2 21.5 22.9 20.8 100 Source: IHS3 Survey data 9. Targeting and access to individual safety net interventions (Non FISP) is inadequate and not focused on Poverty and Vulnerability: FISP utilization is relatively pro-poor in urban and balanced/slightly regressive in rural areas; overall, there is greater access among female headed households. However, disadvantage persists at lower income, but gender gap closes with wealth. 86 Free Maize: Malawi and Urban vs. Rural (% of Households with Access) 4 3 3 2 2 2 2 3 2 2 1 2 2 2 2 2 1 1 1 0 Poorest Poorest Poorest Q2 Q3 Q4 Richest Richest Richest Q2 Q3 Q4 Q2 Q3 Q4 Malawi Urban Rural % Receiving Free Maize Food/Cash for Work Programs: Malawi and Urban vs. Rural 3 3 3 4 2 2 2 2 2 3 3 1 1 1 2 1 0 0 1 0 Poorest Poorest Poorest Richest Richest Q2 Q3 Q4 Richest Q2 Q3 Q4 Q2 Q3 Q4 Malawi Urban Rural % Food/Cash for Work Program (c) School Feeding Programs: Malawi and Urban vs. Rural 15 14 17 24 18 19 15 13 13 30 13 11 10 10 8 20 4 10 0 Poorest Poorest Poorest Richest Richest Richest Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Malawi Urban Rural % School Feeding Program Source: IHS3 Data I. SECTOR PERFORMANCE AND KEY ISSUES. 10. Most of the Social Protection resources are provided by Cooperating Partners (CPs). While the GoM has made efforts to reach the poorest ten percent of the population through safety nets such as cash for work programs, social cash transfers, school meals and food transfers during disasters, this expenditure analysis points to expenditures for social protection as being almost largely if not entirely funded by the donors through the Government budget, which would require Government agreement, implementation, administration and oversight as well as program through independent NGOs and bilateral programs which would require Government approval if not oversight and management. The National Social Support Technical Committee membership includes, Government Ministries, The World Bank, Bilateral CPs and International NGOs. 49 In addition to the World Bank CPs include KfW, EU, Norway, Irish Aid, UNICEF, UNDP, DFID,GEF,FAO, TerrAfrica Partnership, Plan Africa, Care 49 1.Ministry of Economic Planning and Development (Chair and Secretariat); 2. Office of the President and Cabinet; 3. Ministry of Finance;4. Ministry of Agriculture and Food Security; 5. Ministry of Education; 6. Ministry of Transport and Public Works;7. Ministry of Water Development and irrigation; 8. Ministry of Local Government and Rural Development;9. Ministry of Gender, Children and Social Welfare;10. Ministry of Labour;11. Ministry of Health;12. Ministry of Information;13. Ministry of Youth and Sports;14. Ministry of Disabilities and the Elderly Affairs;15. Department of Nutrition, HIV and AIDS;16. Department of Disaster Management Affairs; 17. Malawi Social Action Fund;18. Council for Non-Governmental Organisations in Malawi;19. The World Bank;20. Department for International Development Malawi National Social Support Programme, 2012/13 - 2015/16;21. UNICEF; 22. World Food Programme;23. Malawi Vulnerability Assessment Committee;24. Elderly People Association;25. Network of Organisations working with Vulnerable and Orphaned Children; 26. Chairperson, NGO Gender Network;27. Centre for Social Research ;28. National AIDS Commission;29. Action Aid;30. OXFAM;31. Plan Malawi; 32.DfiD;(Irish Aid and Norway may join). 87 and WFP. 11. The Malawi Social Action Fund supervised and supported by the Ministry of Finance’s Local Development Fund Technical Support Team (LDF-TST), under the Ministry of Local Government and Rural Development is the largest nationwide safety nets public works program in the country providing conditional cash transfers on the basis day labor for productive public works and direct cash transfers to the most vulnerable. 12. Public Works Program under the MASAF program have reached a total 9,023 subprojects and have been implemented addressing various sector gaps including reforestation (3,499 ha leading to improvements in environment); roads (28,023 km facilitating access to socio-economic services) and irrigation (1,339.6ha contributing towards increased food security and income). On the other hand, 12,202,644 person days have been provided in labor intensive works during the program. A total of 1,610,637 beneficiaries have received cash transfer through PWs. The 2012 PW tracking study indicated that 52% of beneficiaries reported to have an increased income as a result of their participation in the PWs. A total of 1,016,887 beneficiaries of the planned target of 900,000 had been reached with cash transfers through the Public Works program, representing 112.9% of the End of Project target with First Additional Financing. Of these 47.5% were women while 10% were beneficiaries under direct support (i.e. households with the elderly, orphans, disabled and chronically ill among others). Evidence shows that the cash transfers have assisted beneficiaries to address food security needs e.g. based on 2011 Tracking Study (62% of PWSP beneficiaries); and purchasing of farm inputs (35% of PWSP beneficiaries), as well as addressing basic health (10.6% of PWSP beneficiaries) and education (12.6% of beneficiaries) needs. 13. The MASAF Project which is considered the largest safety net in the country however it is not primarily focused on safety nets. It has over the years been directed to support the building of infrastructure in the form of three bedroom teachers’ staff houses and school blocks. This is done through three of the five programs in the Community Window and these include the Primary School Staff Housing Project; Crisis Response Program and Community Savings and Investment Promotion. In terms of infrastructure related subprojects in the Window, the Education SWAP program has contributed the highest amount of resources to the window, followed by the Primary School Staff Housing Program. The least funded program is the Community Open Menu which is solely funded by Government and resources to the program have been reducing at each program year even in the face of a huge and increasing demand from communities to address their priorities for livelihoods and service gaps. The figure below shows the resources allocation in the MASAF 3 APL II with the largest share going to the education sector. Series1, Series1, Crisis COMSIP, 4%, Response, 4% ESWAP 4%, 4% Series1, PSSHP Open Menu, Open Menu 6%, 6% Series1, Series1, ESWAP, Crisis Response PSSHP, 57%, 30%, 30% COMSIP 56% 14. Community Savings and Investment Promotion (COMSIP) is an excellent by product of the MASAF public works cash transfers. The clients of the public works have been assisted in forming 88 savings groups by extension workers of the Ministry of Gender, Children and Social Welfare. These groups are members of the COMSIP. A total of 99,153 people receiving cash transfers from Pubic works of which 61% are women have formed 4457 groups. The groups have mobilized MK434.6 million in savings and invested in different income generating livelihood activities. The 2012 Tracking Study shows that 79% of group members reported to have generated income above 50% of their initial cash transfer received. 15. The Malawi Social Cash Transfer Program (SCTP), implemented by the Ministry of Gender, Children and Social Welfare (MoGCSW) currently operates in 7 districts and was designed to alleviate poverty, reduce malnutrition and improve school enrolment and attendance by delivering regular and reliable cash transfers to ultra poor households and labor constrained households. The pilot program started in 2006 and has grown since to reach close to 30,000 beneficiary households by early 2012. Several donors have been contributing to the SCTP since the start of the program. From 2007 till 2012, the SCTP has largely funded by the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) through the National Aids Council. Technical assistance capacity building, financial and infrastructural support is being by United Nations Children Fund (UNICEF) and largely by KfW funded by the EU based on agreed and approved annual work plans since 2006, while in 2010/2011 Irish Aid provided financial support to cover a funding gap and has provided additional funding for capacity building in 2012. The European Union (EU) has topped-up the donor contribution through KfW to enable full coverage in the existing seven districts as well as scale-ups in additional districts. KfW is supporting the Social Cash Transfer Program through significant technical support and investments in technology, including the development of an MIS and financial management software, suitable for the Malawian context; By December, 2013, the SCT Program will be scaled up to 15 districts and by 2014 will cover the country and reach the most vulnerable and labor constrained households. The SCT Program has a high overhead administrative cost of 10-19% (expected at the start up of programs) and is facing a financing gap for scaling up to the rest of the districts. As the program moves towards E- transfers, these costs are expected to reduce. 16. E-Cash Transfers: The SCT Program is piloting e-transfers in a few districts. By 2014 e- transfers under the program should be in all districts. WFP has also made e-transfers to 125,000 individuals in disaster prone areas. 17. The Government of Malawi has approved the National Social Policy (March 2013) and National Social Support Program April 2013) Plan for implementation. It is anticipated that this development will unlock resources from CPs who could not provide them in the absence of such policy. The development may also enhance the sector's ability to secure parliamentary support for budgetary allocations. The National Social Support Policy goal is to reduce poverty and enable the poor to move out of poverty and vulnerability. The expected outcomes are (i) Human Capital formation promoted and the productivity of labour among the poor raised (ii) Resilience to asset erosion among the poor and vulnerable enhanced and their long-term income generating potential protected (iii) Local enterprises in rural areas supported leading to economic multipliers and (iv) An effective and secure state created through fostering social cohesion and promoting a sense of citizenship. It provides a holistic framework which supports social and economic human rights and freedoms for designing, implementing, coordinating, monitoring and evaluating social support interventions. The objectives and priorities of the Policy are as follows: (i) To provide welfare support to those that are unable to construct a viable livelihood; (ii)To protect the assets and improve the resilience of poor and vulnerable households; (iii) To increase the productive capacity and asset base of poor and vulnerable households to move them above the poverty line; and (iv)To establish coherent and progressive social support synergies by ensuring strong positive linkages to influence economic and social policies and disaster risk reduction. 18. Social Protection in Malawi is the responsibility of the Ministry of Economic Planning 89 and Development through its Department of Poverty Reduction and Social Protection, The Ministry of Gender, Children and Social Welfare, The Ministry for the Disabled and the Elderly and the Local Development Fund and its Technical Support Team. There is institutional fragmentation for the delivery of benefits. The costs of delivery range from 8% (MASAF) to 10%- 19% for the Social Cash Transfers. Current expenditures do not adequately cover the vulnerable and the programs are not well targeted. 19. These institutions supervise and monitor the budget transfers from the Ministry of Finance to the various line agencies who are responsible for implementing the programs. These include the Ministry of Agriculture (for FISP), Malawi Social Action Fund, and the Ministry of Gender, Children and Community Development. These Ministries in turn channel funds to local authorities, NGOs, CBOs and community associations. Currently, many of the social support interventions in Malawi are fragmented, not well coordinated, systematic or integrated. The current national policy framework is laid out in the recently approved National Social Support Policy (NSSP) as well as a National Social Support Program which is yet to be operationalized. 20. Vulnerability and poverty affect over 84% of the 15 million Malawians who live in the rural areas and are dependent on agriculture for their livelihood. Over half the population lives in poverty on one of lowest per capita income in the world of around US$330 (WDI, 2011). Of the 3.4 million ultra-poor, 96 percent live and depend on agriculture, and mostly tobacco and maize farming for their livelihood. For decades, Malawi’s economy has been highly susceptible to adverse shocks partly due to its landlocked geography and the structure of the economy. The country has a narrow export base (tobacco), and is highly dependent on imports and unpredictable aid inflows. Malawi Social Protection Programs and Implementing Agencies. Social Responsible Institutions Expenditures Public Works MoLG&RD, LDF, DAs, MoI, MoAFS, MoT, Department of Forestry, NGOs and CBOs, Beneficiaries Village Savings and Loans MoGCSW, MoLGRD, MoF, RBM, MFIs, NGOs and CBOs, Village Agents, Beneficiaries Social Cash MoGCSW, MoLGRD, UN Agencies, PPPs, NGOs, Transfers CBOs, Volunteers, Beneficiaries School Meals MoE, UN Agencies, NGOs, MoLGRD, MoAFS, Department of Forestry, Volunteers, Beneficiaries Farm Inputs Ministry of Agriculture Subsidies 21. Malawi is one of the least developed countries ranked 171st out of 187 countries surveyed in the United Nations Human Development Index of 2011. Despite strong economic performance registered during 2005-2010, poverty remains widespread and concentrated in rural areas. Income also remains unevenly distributed (the gini-coefficient deteriorated from 0.39 in 2005 to 0.45 in 2010), reflecting inequities in the access to assets, services and opportunities across the population. Within rural areas, the same index rose from 0.34 to 0.38, while within urban areas inequality stayed roughly constant at about 0.49. 90 22. Poverty remains widespread and persistent, particularly among female headed households. Based on the data from the Second Integrated Household Survey (IHS2) 2004/05 and the Third Integrated Household Survey (IHS3) 2010/11, the national absolute poverty rate of 52.4 percent in 2004/05 declined only marginally to 50.7 percent in 2010/11. The trends in rural poverty followed a similar pattern: a rate of 55.9 percent in 2004/05 vs. 56.6 percent in 2010/11. 50 Focusing on the gender dimensions of poverty, while the absolute poverty rate among male-headed households was estimated at 49 percent in 2010/11, the comparable figure among female-headed households was 57 percent. 51 23. Estimates for cash transfers in March 2012 for the purpose to mitigate vulnerability which resulted from the FOREX crisis provide an idea of the scale required for social protection expenditure increase if all urban and rural poor in the first 3quintiles or 1.7 million HH which comprise more than half the country’s population, were covered without any further targeting at 33% and 50% levels of compensation. (Malawi: A Comprehensive Package for Competitiveness, Growth and Poverty Reduction Presentation to Government by the World Bank, March 2012). These estimates for cash transfers range between US$138.0 million and approximately U$$209. A Social Protection system, however, outside of a crisis, would cover a subset of these households in the range of 500,000-700,000 households and would expand to cover more during a crisis. Overtime, due to graduation and improvements incomes and livelihoods, this number would reduce to approximately 150,000 HHs to 300,000. Therefore the annual expenditures on a Safety Net would be more in the range of US$100.0 million annually a decreasing over time. 50 The difference between the IHS2 and the IHS3 national absolute poverty rates is not statistically significant. The IHS3 rural poverty rate is also statistically indistinguishable from its IHS2 counterpart. 51 Proposed Analytical Work Program on the Evaluation of the Farm Input Subsidy Program Wendy Karamba , Paul Winters , and Talip Kilic . 91 PER SUMMARY POLICY RECOMMENDATIONS MATRIX Short Term Issues to Address Actions to Take Institutions to be Fiscal Impact responsible/coordinated to Expect Total Budget Rebalance Budget in by redistribution MoF/MEP&D 0 Expenditure between sectors to increase SP MOA/MoGC&SW/MoLRD Intra-sectoral Allocations. allocations for cash transfers. and LDF. transfer: Implementation of FISP as safety net MK15billion needs of the with other social support programs cash transfers vulnerable. Currently FISP should not be defined as Social (either thru Expenditures in FISP Protection but recognize the SP MoA or are: Not well targeted aspects of FISP through SCT to reach those most in Should be better targeted towards Program or need and ineffective only rural farming households with through and unproductive. land MASAF IV) Should focus on the second and third FISP is not effectively quintile and produce Maize and other and efficiently food crops. reaching the poorest Those FISP expenditures currently farming households going to poor urban and rural landless and cannot be defined poor and to the richest urban and rural as social protection in quintile, are ineffective as SP, could the current be considered being reallocated to implementation mode. Programs that do reach the poor effectively and equitably Social Protection Harmonize SP fragmented projects of MEP&D/ MGC&SW and expenditures are cash transfers and other interventions MoD&E, MoLRD, LDF fragmented. and schemes into systems In most cases, Expedite work on unified registry of MEP&D/ MGC&SW and Commitments expenditures are beneficiaries on the basis of Poverty MoD&E, MoLRD, LDF in place work uncoordinated, the and Income Profile and link it to the on going. KFW-EU funds flow and national registry system. Additional agencies involved do Invest in E-Transfers. funds not allow for timely, US$1.0 transparent, million accountable delivery of funds with minimal risk of duplication. Benefit levels are too Transfer levels should be revised MEP&D/ MGC&SW and US$150 low to achieve the annually to enhance effectiveness of MoD&E, MoLRD, LDF million intended objectives interventions. KFW-EU and are hardly revised SP expenditures on cash and non-cash (e.g. the SCTP the benefits should be increased to new proposed adequately cover the poor and increases in benefit vulnerable. levels eroded substantially due to devaluation. Fragmented Merge the Ministries of Gender, MEP&D/ MGC&SW and Savings in Institutions for Social Children, Social Welfare and the MoD&E terms of front Protection Ministry of Disabilities and Elderly office of the into a Ministry of Social Protection Ministry. with Departments for each sub sector. However a Social Protection 92 Ministry or even the current MoGCSW needs to increase its capacity especially of Extension workers. Intra sectoral transfers from other sectors of a minimum of MK100 million Medium Term Issues to Address Action to Take Institutions to be Fiscal Impact to responsible/coordinated Expect SP expenditure to be Strengthen the registry of MoF/MEP&D, OPCS Work underway. adjusted, monitored beneficiaries based on poverty profile (national bureau of registry, Further work and reviewed to through the unified registry of National IDs) required for ensure that they cover beneficiaries and link it to the costing. MOA/MoGC&SW/MoLRD the needs of the National Registry of all Citizens In the range of and LDF. poorest and US$ vulnerable. US$5.omillion Design SP programs on the basis of a a) Targeting is review of trade-offs in outcomes and MoF/MEP&D, OPCS On going reviewed and adjusted benefits between direct cash transfers (national bureau of registry, through Bank, to reach those most in versus cash transfers for Public Works, National IDs) GoM and KfW need school meals and other interventions. and other Enhance horizontal and vertical MOA/MoGC&SW/MoLRD Donors. b) Need for MoE and LDF. linkages. expenditures to be 0 cost to GoM coordinated so that the funds flow and A unified system of targeting, transfers agencies involved and monitoring and evaluation of cash allow for timely, transfers and other benefits will need to transparent, be developed. accountable delivery of funds with minimal risk of duplication. 93 ANNEX 8: ECONOMIC ANALYSIS FOR MASAF IV Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) 1. Background Extreme poverty and vulnerability is serious and persistent in rural Malawi. Over the past few years, attempts to reduce extreme rural poverty and vulnerability have had limited success. Between 2005 and 2011, the proportion of extremely poor rural households in Malawi has increased from 24% to 28%. In the same period inequality has also risen in those areas. The resources spent by the Government of Malawi (GoM) on Safety Nets represent less than 2.6 percent of total GoM expenditures and 1.1 percent of GDP, which is far less than what would be needed to effectively reduce extreme poverty and vulnerability. Food or cash for work program benefits approximately 12 percent of the population in Malawi on a seasonal basis. Evidence suggests that those who do receive these benefits have seen improvements in their food security, consumption and purchasing power. A tracking study on the public works (PW) transfer program (World Bank, 2013) indicates that about 52% of beneficiaries reported to have an increased income as a result of their participation in the PW program. Improvements have also been noted on food security – about 54% of PW program beneficiaries used program wages to meet their basic food needs. The program has also contributed to savings mobilization, resulting in investments in income generating activities. Fifty percent of Savings and Investment group members said they were no longer food insecure due to improvements in their financial status as a result of various income generating interventions promoted through the groups. Furthermore, over a third of PW program beneficiaries have reported improvements in maize production due to their increased ability to procure productivity enhancing inputs with the wages earned through the PW program. In addition to these findings of the PW Program Tracking Study, The MASAF III Impact evaluation preliminary results also give indications of purchasing power improvements and asset accumulation as a result of the safety nets interventions. MASAF IV will expand interventions in the areas of public works, direct cash transfers, and savings groups and expects to improve incomes, reduce food insecurity and extreme poverty. It is expected that the interventions are sustainable in that they will allow households to improve their economic independence and reduce dependency on safety nets over the long-term. 2. Justification for Public Sector Intervention and Bank Involvement Government intervention on social protection measures like those contemplated under MASAF IV are justified on two grounds. First, on utilitarian terms, it is a fact that households and communities are rarely able to fully insure against many forms of risk associated with their extreme poverty and vulnerability situation, often due to asymmetric or incomplete information. The negative implications of those failures in private insurance markets are compounded by failures in private markets for labor, credit and human capital, which limit poor households’ accumulation capabilities. As a result, welfare losses can hardly be overcome. By contrast, public action can prevent or compensate for those losses, being therefore, justified as a way to address the challenges of the extremely poor and vulnerable. Second, on social grounds (social rights approach), public sector intervention is 94 justified by the obligation of the state to provide for its citizens a minimum ground of social and economic rights that are legally enforceable claims imposed on the state. The World Bank has been supporting the planning and implementation of social protection systems and has a large pool of experts in the different areas that comprise such undertaking ready to assist country clients. Relevant country experiences include Ethiopia (PRSP) and Kenya. In the case of MASAF IV, the Bank support adds to the effort of other Donors and brings some essential contributions to maximize the benefits to the beneficiaries, and improve efficiency and accountability to the safety nets system. 3. Scope of the Economic Analysis This economic analysis is focused on the impacts on extreme poverty outcomes in the targeted districts of the safety nets programs included in MASAF IV: (a) cash transfers through labor on productive community driven public works which build productive community assets (PW); (b) social cash transfers for those who are most vulnerable and labor constrained (SCT); and (c) livelihood and skill development interventions for poor households, including community savings and investment promotion (COMSIP) with clients of the MASAF Public Works and SCT components that form savings groups. While the economic analysis touches and highlights the importance and potential impact of each of these three components, due to the limitations of the available data, the simulation exercises in the economic analysis are focused on components (a) and (b), that essentially embeds (c). The Analysis takes information on the design of those programs and tests the effects on extreme poverty outcomes under alternative assumptions regarding effectiveness of targeting in delivery. Indications about the impact of component (c) in MASAF III are highlighted through preliminary findings in the MASAF III progress report and, more generally, through the expected implications on sustainability of asset building and investments in livelihoods and skills development. See Annex 9. 52 Given the focus of targeting the most vulnerable and extremely poor in rural areas, the analysis focuses on the impacts on ultra-poverty (the poverty level based on the food poverty line), rather than the poverty measure per se. The adequacy of the measure lays on the fact that highly successful programs will raise incomes for those primarily at the bottom of the income distribution, improving their welfare and getting them out of extreme poverty, but not necessarily place them above the total poverty line, an achievement only possible through interventions of much larger magnitude and generally targeted beyond the extremely poor. The following sections explain the methods, assumptions, and discuss the results and implications of the analysis. 4. Methods and Assumptions (a) Productive Public Works Program The Productive Community Driven Public Works Program (PCDPWP) is designed to improve income and food security and reduce risks, as well has support the creation of 52 It also infers on the effectiveness of these programs in reducing extreme poverty vs. the Farmer Input Subsidy Program (FISP). Given the inability to make a perfect comparison, using exact and similar methodologies, the comparison cannot be taken as accurate, but rather indicative. 95 community assets, through labor-intensive public works program. It is primarily aimed at ultra-poor and labor unconstrained households. This program is expected to cover the 28 rural districts of Malawi. The program is intended to target poor households with labor intensive Productive Community Driven Public Works. The estimated benefit per household in kind or cash is 14,400 MK per year. A full description of the program and implementation details is presented in Annex 12. The analysis uses IHS3 data to estimate baseline ultra-poverty (head-count, depth, and severity). 53 The number of households to be allocated to each district, out of the total program beneficiaries, is determined by the relative proportion of ultra-poor households in the districts. The districts with the highest number of ultra-poor households are allocated the largest number of beneficiaries. The actual identification of beneficiaries for the simulation is similar to a “Means Testing” geographic targeting approach. In the IHS3 database, households are ranked according to consumption expenditure per capita (welfare indicator). Then, the poorest, up to the total number allocated to the district receive a transfer. Annex Table 1, summarizes the resulting by district. As designed, and assuming perfect targeting, i.e., the program being able to benefit the poorest, exclusively, it will reach about 68% of the extremely poor in rural Malawi. Then using information on program implementation regarding overall coverage, and transfer amounts per household we simulate the effect of a transfer on beneficiaries. The transfer is converted to per capita terms and added to baseline level per capita expenditure, i.e., increases welfare levels for each beneficiary household. Ultra-poverty measures and Gini concentration ratios are then re-calculated and compared to baseline levels. (b) Social Cash Transfers Programs The Social Cash Transfer Program (SCTP) consists of providing direct cash transfers to the most vulnerable. This program is expected to cover two new rural districts of Malawi - Dedza and Nkhata Bay. The program will cover 21,000 in those two districts. The expected benefit per household is estimated at KW 2,700 per month. SCTP is designed to cover households that are both extremely poor and labor constrained. Due to the difficulty of assessing the percentage of households that meet both criteria (being both ultra-poor and labor constrained), ultra-poverty criteria is, therefore, combined with a food-vulnerability criteria. This combination was used to prioritize the districts. For more details on the SCTP, see Annex 11. IHS3 data for the two districts is used to estimate baseline ultra-poverty (headcount, depth, and severity) and food vulnerability incidence. The number of households to be allocated to each district, out of the total program beneficiaries, is determined by the relative proportion of households in the districts that meet both criteria, ranked by a composite total score. The districts with the highest scores are allocated the largest number of beneficiaries. As indicated in Annex Table 2, while Nkhata Bay exhibits a relatively lower ultra-poverty incidence rate, it has relatively higher incidence of food vulnerable households, resulting in 53 IHS3 asks questions about public works transfers. About 2.6% of rural households reported receiving it. Extrapolating to the general population this results into significantly less households than those reported by the program. The amounts reported seem to be highly underestimated, averaging MK 2,200 per household annually, substantially below the 14,400 considered here. On average, removing the transfer from the recipients, does not impact the baseline poverty levels. Under these circumstances the approach presented here appears to be appropriate to test the effects of the program. 96 a relatively close total score across the districts. In absolute terms, the more populous Dedza district has a higher number of vulnerable households. The identification of beneficiaries for the simulation is similar to the one described earlier. In the IHS3 database, households in each district are ranked according to a composite measure. 54 Then, the poorest, up to the total number allocated to the district receives a transfer. Annex Table 2, summarizes the resulting numbers for the two districts. As designed, and assuming perfect targeting, i.e., the program being able to benefit the poorest, exclusively, it will reach about 40% of the vulnerable (by the ultra-poverty/food security criteria) in each district. In Nkhata Bay it reaches 66.0% of the ultra-poor, while in Dedza about 44.7%. Then using information on program implementation regarding overall coverage, and transfer amounts per household we simulate the effect of a SCT. The transfer is converted to per capita terms and added to baseline level per capita expenditure, i.e., increases welfare levels for each beneficiary household. Ultra-poverty measures and Gini concentration ratios are then re-calculated and compared to baseline levels. (c) Community Savings and Investment Promotion (COMSIP) This is designed as a complementary program to finance grants to support group members from SCT and PW to increase their incomes and assets to reduce risk of food insecurity and promote better nutrition and health. Under MASAF III, 4,457 groups composed of members of the PW program (99,153 members, 61% females) have been formed. Savings mobilized over three years amounted to MK 6,727 per individual. In addition to this financial gain, there were benefits related to increased exposure to financial institutions, training in financial literacy, etc. Reports from MASAF III indicate the groups have invested in small-scale income generating enterprises, including agricultural trade, livestock and processing. Under MASAF IV, it is expected that this dynamics continue and the spread of benefits of the interventions allow more households to improve their livelihoods through the savings generated through income from the SCT and PW, and the investments resulting from support to savings and investments through COMSIP. MASAF IV will target about 100,000 households in COMSIP through mostly PW program participants in the 28 districts. Anticipated benefits in this analysis are derived from reported results in MASAF III and other considerations (see Section 5 of this Annex). (d) Sensitivity Analysis of Effective Targeting Performance The process, as described above, for each Program, resembles a program that achieves “perfect targeting”, i.e., 100% of the expected beneficiaries are among those meeting the eligibility criteria in each district. Evidence from Malawi (Cnobloch, 2011; Kilic et al., 2013) suggests that historically a share of ineligible beneficiaries gets the program. Kilic et al, (2013) find that the percentage of ineligible households getting FISP benefits ranges from 52 to 57 percent, depending on the eligibility indicator used. Cnobloch (2011) simulates using IHS2 (2004/5) data and a cut off point roughly around the ultra-poverty 54 The actual SCTP will use a combination of community based targeting and district level verification using “Proxy Means Testing”. Since we have actual welfare data in the IHS3 database, we use “Means Testing” for the identification of beneficiaries in the simulations. 97 line, and finds a range of targeting effectiveness (national level) of 27-30% under-coverage and 51-54% leakage (See Annex 10 on “Targeting Tools in Programs in Malawi”). In this economic analysis, therefore, in order to account for the sensitivity of the results to the effectiveness of targeting, we present results under alternative scenarios: (a) Perfect targeting, i.e., 100% of the anticipated program beneficiaries are reached and no ineligible beneficiaries receive the program; (b) Eighty percent of the beneficiaries are eligible and 20% are ineligible households that receive the program; and (c) Fifty percent of the program recipients are eligible, and 50% are ineligible households that get the program. The selection of recipients among eligible and ineligible beneficiaries is implemented through random selection process subject to the size of each intended subsample. This will provide an idea about how sensitive program impacts are to alternative effective targeting performance. 5. Assessment of Impacts on Extreme Poverty (a) Productive Public Works Program Ultra-poverty is estimated at 28.1% in rural Malawi, which represents roughly 752,000 households (approximately 3.4 million people). The introduction of the productive community driven public works program has a substantial impact on extreme poverty. Assuming that the program is successful in targeting exactly the poorest beneficiaries, reductions in poverty would average 8.6 percentage points (about 230,000 households getting out of extreme poverty). The effects are variable across districts, ranging from 2.5 to 17.6 percentage points. The poverty gap (depth) that shows how far below the poverty line households are on average, i.e., average of the ratio of the ultra-poverty gap to the ultra-poverty line (currently at 7.9%) would fall dramatically in 4.4 percentage points. The poverty gap squared (severity) that is more sensitive to gains at the bottom and takes into account the income gap and inequality among the ultra-poor (currently at 3.2%) would fall on average 2.1 percentage points. Consistent with these results, overall inequality would fall from 0.38 to 0.37. Results are presented in Figure 1 (first bar that assumes perfect targeting in each case) and Table 3. Figure 1. Public Works Programs Impacts on Extreme Poverty Source: Malawi IHS3 Survey. 98 The analysis also looks at the implications of alternative effective targeting performance. It looks at two scenarios: effective targeting at 80% and 50%, respectively. First, if program implementation results in 20% of the beneficiaries being ineligible households, i.e., households that do not meet the eligibility criteria, ultra-poverty would fall in only 8.0 percentage points, i.e., only about 214,000 households getting out of extreme poverty. The poverty gap and poverty gap squared would fall in only about 3.9 and 1.8 percentage points, respectively. So, on average, missing the target in 20% cost about 16,000 households not getting out of extreme poverty. As illustrated in Table 3, there is a wide variation across districts. Second, if 50 percent of the beneficiaries are ineligible households, the effects on extreme poverty would be seriously compromised. In fact, results indicate that compared to base line there would be a reduction of the poverty incidence of only about 7.3 percentage points, i.e., about 191,000 households escaping extreme poverty, which is about 35,000 households less than under the perfect targeting scenario. Likewise, the extent of the effects on ultra-poverty depth and severity would also be smaller, a fall in only 3.1 and 1.4 percentage points, respectively. Results are detailed in Figure 1 and Table 3. Table 3. Effects on Ultra-Poverty and Inequality of the Public Works Program Effects of Public Works Program on Ultra-Poverty Baseline By Targeting Performance Districts Perfect Targeting 80% Targeting 50% Targeting Level Level Change Level Change Level Change Ultra-Poverty Headcount Chitipa 43.6 38.0 -5.6 38.9 -4.7 37.2 -6.4 Karonga 26.0 22.4 -3.6 25.0 -1.0 23.4 -2.6 Nkhata Bay 17.7 9.9 -7.8 11.2 -6.5 12.5 -5.1 Rumphi 10.8 6.3 -4.5 6.8 -3.9 7.7 -3.0 Mzimba 31.7 17.7 -14.0 18.5 -13.2 20.3 -11.4 Kasungu 10.8 8.3 -2.5 8.7 -2.1 8.7 -2.1 Nkhotakota 11.2 4.9 -6.2 5.7 -5.5 6.8 -4.4 Ntchisi 10.3 5.7 -4.6 6.8 -3.5 8.4 -1.9 Dowa 16.6 9.4 -7.2 10.3 -6.3 12.0 -4.6 Salima 16.5 13.8 -2.7 14.5 -2.0 14.5 -2.0 Lilongwe 31.0 26.8 -4.1 26.3 -4.7 25.4 -5.5 Mchinji 31.9 20.3 -11.6 22.0 -9.9 23.9 -8.0 Dedza 25.1 19.1 -6.0 19.9 -5.2 21.0 -4.1 Ntcheu 14.0 7.8 -6.2 8.4 -5.5 9.2 -4.7 Mangochi 44.4 27.4 -16.9 29.4 -14.9 31.1 -13.3 Machinga 39.2 29.4 -9.8 29.6 -9.6 29.9 -9.4 Zomba 26.4 17.5 -8.9 17.2 -9.2 19.1 -7.4 Chiradzulu 12.5 5.2 -7.3 5.7 -6.8 7.9 -4.6 Blantyre 13.6 7.3 -6.3 7.9 -5.8 8.9 -4.7 Mwanza 33.5 15.9 -17.6 19.4 -14.1 22.5 -11.0 Thyolo 11.2 5.0 -6.2 5.0 -6.2 6.0 -5.2 Mulanje 33.4 18.8 -14.6 19.6 -13.8 20.9 -12.5 Phalombe 41.7 30.7 -10.9 31.3 -10.4 32.6 -9.1 Chikwawa 59.0 49.2 -9.7 47.7 -11.3 45.6 -13.4 Nsanje 56.0 45.1 -11.0 46.0 -10.0 46.0 -10.0 Balaka 33.2 18.8 -14.4 21.0 -12.2 22.4 -10.7 Neno 29.7 23.7 -6.0 24.2 -5.5 23.4 -6.3 All Rural 28.1 19.5 -8.6 20.1 -8.0 20.8 -7.3 All Rural Districts Ultra-Poverty Gap (Depth) 7.9 3.5 -4.4 4.0 -3.9 4.8 -3.1 Ultra-Poverty Gap Sqd (Severity) 3.2 1.1 -2.1 1.4 -1.8 1.8 -1.4 Gini-Coefficient 0.38 0.37 -0.01 0.38 0.0 0.38 0.0 Source: Malawi IHS3 Survey. Figure 2 presents the Cumulative Distribution Curves for household per capita consumption under the alternative scenarios to illustrate the relative welfare distributions. The scenario that reflects perfect targeting dominates all the other scenarios – the lower the effective targeting rate, the lower the welfare achieved by households. 99 Figure 2. Impacts of Public Works Programs on Welfare Note: Vertical line is extreme poverty line level. Source: Malawi IHS3 Survey. These results suggest that this program has a huge potential to reduce extreme poverty in rural Malawi. If the program is to be sucessful in achieving that goal, efforts will have to be concentrated in maximizing the extent of effective targeting of the more vulnerable and extremely poor households. (b) Social Cash Transfers Program The cash transfers program will be implemented in two new districts of Nkhata Bay and Dedza covering a total of 21,000 households. Baseline ultra-poverty rates poverty rates in these districts are 17.7% (8,173 households) and 25.1% (34,929 households), respectively (Table 4). Using a combined measure of vulnerability, which, combines ultra-poverty and food insecurity (see Annex 11 on the Social Cash Transfers Program), those numbers increase to 13,611 and 39,379 households, respectively. Table 4. Effects on Ultra-Poverty of the Social Cash Transfers, Nkhata Bay and Dedza Districts Effects of Public Works Program on Ultra-Poverty Baseline By Targeting Performance Districts Perfect Targeting 80% Targeting 50% Targeting Level Level Change Level Change Level Change Nkhata Bay Ultra-Poverty Headcount 17.7 7.6 -10.1 8.7 -9.0 10.4 -7.3 Ultra-Poverty Gap (Depth) 4.8 0.2 -4.6 0.7 -4.1 1.7 -3.1 Ultra-Poverty Gap2 (Severity) 2.0 0.3 -1.7 0.5 -1.5 0.9 -1.1 Gini-Coefficient 0.34 0.33 -0.01 0.33 -0.01 0.33 -0.01 Dedza 0 Ultra-Poverty Headcount 25.1 18.0 -7.1 18.8 -6.3 19.1 -6 Ultra-Poverty Gap (Depth) 7.1 2.3 -4.8 2.9 -4.2 3.7 -3.4 Ultra-Poverty Gap2 (Severity) 2.7 0.5 -2.2 0.7 -2.0 1.2 -1.5 Gini-Coefficient 0.36 0.33 -0.03 0.34 -0.02 0.34 -0.02 Source: Malawi IHS3 Survey. The social cash transfers programs in the districts have an impact on extreme poverty. Assuming that the program achieves perfect targeting of the most vulnerable of the poorest beneficiaries, reductions in ultra-poverty would average 10 percentage points in Nkhata Bay (about 4,645 households getting out of extreme poverty) and 7.1 percentage points in 100 Dedza (9,912 households). Essentially, supporting 21,000 households in these two districts with SCT, if well targeted, will allow over 14,000 of them getting out of extreme poverty. On average, the ultra-poverty gap (ultra-poverty depth) would fall in 4.6 percentage points in Nkhata Bay and 4.8 percentage points in Dedza, indicating a significant improvement in income distribution. The ultra-poverty gap squared (ultra-poverty severity) would fall 1.7 and 2.2 percentage points in Nkhata Bay and Dedza, respectively. Consistent with these results, overall inequality would fall from 0.34 to 0.33 in Nkhata Bay and more dramatically from 0.36 to 0.33 in Dedza. Results are presented in Table 4 and Figure 3. The analysis also looks at the implications of alternative effective targeting performance of the Social Cash Transfer program. Like in the public works case, it looks at effective targeting at 80% and 50%, respectively, i.e., if 20% and 50% of the beneficiaries end up being inelegible households. Figure 3. Social Cash Transfer Programs Impacts on Extreme Poverty Source: Malawi IHS3 Survey. First, if program implementation results in 20% of the beneficiaries being households that do not meet the eligibility criteria, ultra-poverty would fall in only 9.0 percentage points in Nkhata , resulting in only 4,142 households (500 less than under perfect targeting) getting out of extreme poverty. In Dedza, the fall would be only 6.3 percentage points, resulting in 8,769 households (1,150 less than under perfect targeting) getting out of extreme poverty. Ultra-poverty depth and severity would fall less than in the perfect targeting scenerio, but would still be remarkable. As a result, the Gini-coefficient would still fall in both districts indicating improvements in the distribution of income as a result of the uplift of a great deal of the poorest. Second, missing 50% of the intended beneficiaries would have more devastating effects on the ability of the program to claim improvements in the incidence of extreme poverty, particulalrly in Nkhata Bay where ultra-poverty would only fall in 7.3 percentage points or 3,385 households (1,260 less than in the perfect targeting scenario), which is more than double the negative effect under the 80% tergeting scenario. In Dedza, the fall would be 101 only 6.0 percentage points, resulting in 8,990 households (1,521 less than under perfect targeting) getting out of extreme poverty, a result not dramatically different from the 80% effective targeting scenario. Figure 4. Impacts of Social Cash Transfer Programs on Welfare in Target Districts Note: Vertical line is extreme poverty line level. Source: Malawi IHS3 Survey. The reductions on the ultra-poverty gap and ultra-poverty gap squared would be relatively weaker. Inequality would still fall from baseline at a pace similar to the previous scenario in both districts (Table 4). Figure 4 shows the cumulative distribution functions of household per capita expenditure under the baseline (dotted line) and the alternative scenarios of targeting effectiveness in each district. These results underscore the importance of improving the targeting effectiveness in the program. They particularly highlight the potential limited reach of the results if there is a massive under-coverage of the intended beneficiaries. (c) Livelihoods and Skills Development through Community Savings and Investment Promotion (COMSIP) 102 As indicated earlier, the Livelihoods and Skills Development through Community Savings and Investment Promotion (COMSIP) of MASAF IV will target about 100,000 households through mostly PW program participants in the 28 districts. Actions will be focused on grants and training for improved livelihoods, training for heath and nutrition, risk insurance and strengthening systems and regulations. It is expected that the benefits from this component will be at least at the level reported for MASAF III (See Section 4 of this Annex and Annex 9 of the PAD). In this economic analysis we highlight two elements that are likely to lead to even greater benefits. First, we highlight the fact that MASAF IV will reinforce the need to remove a burden to COMSIP groups brought by current administrative requirements (under the Cooperative Society Act of 1998) 55, and allow members to maximize the use of the savings primarily in productive livelihoods. Second, the prospect to offer members risk insurance against crop failure (to be considered in MASAF IV) will be of great importance, as most beneficiaries are farmers. It is, therefore, expected that the benefits of the MASAF IV COMSIP are even higher in terms of returns to participants than those reported under MASAFIII. The Livelihoods and Skills Development Component, through COMSIP groups is a powerful complement to the effects generated by the more direct cash injections through the PW and SCT programs. Graduation of participants in those programs will be more likely with a successful intervention in the COMSIP front, which will help, therefore, ensure a long term sustainability of the Safety Nets Systems. (d) Some considerations on Safety Nets and the FISP In addition to this analysis, we make some considerations on these programs vis-a-vis the Farm Input subsidy Program (FISP), an intervention that has national rural coverage like the public works program, and covers about 1.4 million households. First, in budgetary terms, the total annual cost of the FISP is estimated at MK 54.9 billion, representing 11.5% of the government budget and about 4.6% of GDP. The Safety nets targeted at the poor and vulnerable (PWs and SCT) are estimated at only about a quarter of that amount (MK 12.8 billion), representing only 2.6% of the budget and 1.0% of GDP. Delivery costs of the FISP, given its nature, are higher. Second, while those programs are of a different nature - as the FISP is designed to improve productivity and agricultural output for better food security, nutrition and income, the public works are mainly designed to increase purchasing power of ultra-poor and vulnerable households, for illustrative purposes, we set up a simulation for FISP transfers, assuming that actual cash transfers are made available to households in the amount equivalent to the coupons received. The average value of coupons received, conditional on receiving any FISP voucher, is estimated at MK 7,075 per household per year (Kilic, 2013). This value is about half of the annual average transfer under the public works program, and less than a quarter of the social cash transfer allowance. Also, with the FISP reaching over 50% of ineligible households, it will certainly be less pro-poor than a well target safety nets program, such as the PW or SCT. So, if we were to assume a transfer equivalent to the value of the FISP coupons and a targeting performance as reported by Kilic (2013), the other programs will dominate the FISP. Finally, given the prevalence of high rates of extreme poverty, and also the need to address low productivity issues and generate sustainable food security, both this programs are 55 It is a requirement that cooperatives have an office, which puts a burden on groups and limits their ability to maximize the use of the savings in productive assets and livelihoods. 103 important for Malawi. In a resource constrained environment, it is important to strike the balance in interventions and resource allocations and targeting to maximize overall benefits to the economy and ensure long-term sustainability of these interventions. Annex Table 1. Distribution of Ultra-Poor Households and Public Work Program Beneficiaries Population Baseline Ultra Poverty Distribution of Resulting Number of Program Beneficiaries by District by District Ultra-poor Districts Households As share of As share of Households Rate (%) Households across districts Households Population (%) Ultra-poor (%) (%) Chitipa 39,251 43.6 17,105 2.3 11,568 29.5 67.6 Karonga 58,613 26.0 15,264 2.1 10,322 17.6 67.6 Nkhata Bay 46,237 17.7 8,173 1.1 5,527 12.0 67.6 Rumphi 37,441 10.8 4,030 0.5 2,725 7.3 67.6 Mzimba 171,269 31.7 54,314 7.3 36,732 21.4 67.6 Kasungu 138,108 10.8 14,894 2.0 10,073 7.3 67.6 Nkhotakota 67,972 11.2 7,602 1.0 5,141 7.6 67.6 Ntchisi 49,527 10.3 5,105 0.7 3,452 7.0 67.6 Dowa 127,431 16.6 21,134 2.9 14,292 11.2 67.6 Salima 76,081 16.5 12,546 1.7 8,485 11.2 67.6 Lilongwe 271,593 31.0 84,102 11.4 56,877 20.9 67.6 Mchinji 103,322 31.9 32,966 4.5 22,294 21.6 67.6 Dedza 139,140 25.1 34,929 4.7 23,622 17.0 67.6 Ntcheu 111,200 14.0 15,533 2.1 10,505 9.4 67.6 Mangochi 180,904 44.4 80,232 10.9 54,260 30.0 67.6 Machinga 116,744 39.2 45,818 6.2 30,986 26.5 67.6 Zomba 140,731 26.4 37,189 5.0 25,150 17.9 67.6 Chiradzulu 71,564 12.5 8,927 1.2 6,037 8.4 67.6 Blantyre 86,650 13.6 11,797 1.6 7,978 9.2 67.6 Mwanza 21,453 33.5 7,185 1.0 4,859 22.7 67.6 Thyolo 149,337 11.2 16,708 2.3 11,299 7.6 67.6 Mulanje 125,464 33.4 41,923 5.7 28,351 22.6 67.6 Phalombe 76,154 41.7 31,735 4.3 21,462 28.2 67.6 Chikwawa 106,308 59.0 62,687 8.5 42,394 39.9 67.6 Nsanje 60,697 56.0 34,004 4.6 22,997 37.9 67.6 Balaka 77,760 33.2 25,808 3.5 17,454 22.4 67.6 Neno 25,661 29.7 7,627 1.0 5,158 20.1 67.6 All Rural 2,676,609 28.1 752.127 100.0 500,000 18.7 67.6 Source: MASAF IVPAD and Malawi IHS3 Survey. Annex Table 2. Distribution of Households for SCTP Populati Distributi Baseline Ultra Poverty/Food Vulnerability by on by on of Resulting Number of Program Beneficiaries District District Ultra- Districts poor As share of Ultra- Food Total As share of As share HHs across HHs Vulnerable HHs Poverty Vulnerable Score Population of Ultra districts (%) (%) (%) (%) (%) poor (%) (%) Nkhata Bay 46,237 17.7 41.2 29.4 13,611 25.7 5,394 11.7 39.6 66.0 Dedza 139,140 25.1 31.5 28.3 39,379 74.3 15,606 11.2 39.6 44.7 All Rural 888,598 23.2 36.4 29.8 52,990 100.0 21,000 11.4 39.6 48.7 Source: MASAF IVPAD and Malawi IHS3 Survey. 104 ANNEX 9: MASAF III DETAILED PROGRESS REPORT Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) Table 1: Progress at Outcome Level Income Levels Improvement in the income level. At the end of December 2012, improvements in income through PWs and COMSIP have been reported. A total of 1,610,637 beneficiaries have received cash transfer through PWs. The 2012 PW tracking study indicated that 52% of beneficiaries reported to have an increased income as a result of their participation in the PWs. On the other hand a total of 99,153 people mostly from PWs (4457 groups) formed COMSIP Groups –Average savings per member is MK6727. 61% Women. The group has mobilized MK434.6 million in savings and then investing in different income generating activities. The 2012 Tracking Study shows that 79% of group members reported to have generated income above 50% of their initial cash transfer received. Food Security 2011 and 2012 Tracking studies show that 62% and 54% of PW Program beneficiaries respectively used waged to meet their basic food needs. 50% of COMSIP group members indicated that they were no longer food insecure due to improvements in their financial status as a result of various income generating interventions. Agricultural According to 2011 and 2012 tracking study, 34.6% and 30% of PW Production beneficiaries have indicated that maize production has improved as a result of and ability to procure farm inputs through wage earnings. In addition, 67% of PW Productivity beneficiaries have directly benefited from fertilizer subsidy program Access to 1,442 schools staff housing were built through PSSHP. In addition the 2011 and Education 2012 PW tracking studies show that 12.6% and 10.6% of PW beneficiaries used Services and wage earnings to address education related needs such as school fees and Facilities purchasing of school supplies. Access to According to same study, 10.6% and 2.7% PW beneficiaries for 2011 and 2012 Health respectively have reported using the wage earning to pay medical bills. Capacity Performance Assessment Report (PAM) indicates improvements in the capacity building of of local government implementers in the areas of governance, participatory local planning, M&E, service delivery, capacity building in financial management and government: procurement. Table 2: Progress at Implementation Level (by component) Community Primary School Staff Housing Program: This has been prioritized by the Window government and most of the resource for the community window has gone to this component. A total of 1,442 have been constructed Crisis Response: This has helped in the reconstruction of education infrastructure that was damaged by the earthquake in some districts in 2009. A total of 47 staff houses and 79 classroom blocks have been constructed. In addition, 39 structures including school blocks, teachers’ houses, girls’ hostels, laboratories and kitchens and 16 VIP latrines have been rehabilitated. COMSIP: A total of 4,457 COMSIP groups with 99,153 members (33,712 male and 65,441 female) were formed with cumulative saving of MK 434.6 million. 68 cooperatives have been formed among the COMSIP groups. Open Menu Community Managed Subprojects: This component is highly valued by the community. However, the resources allocated for this program is very small and reducing over years. A total of 618 sub projects have been 105 implemented covering education, health water and transport sectors among others. Local PW Program: The PW program is the only component under this window. The Authority PW has reached over 1.6 million households (50% Women) with cash transfer. Window In 2012/2013 the Rapid Response PW Program alone has reached a total of 581,572 beneficiaries. A total of 42,806 KM of access roads rehabilitated. 3,499 ha of land have been planted with tree seedlings. 3,550.6 ha of land got access to irrigation facility. Local The project has facilitated the establishment and implementation of Annual Authority Local Authority Performance Assessment (PAM). The assessment results have Capacity revealed that the overall performance of the Councils remains average with the Enhancement improvement from 37% in 2011 to 49% in 2012. At the local level a total of 33,034 Project Management Committees have been trained in project management and 871 local artisans trained in construction techniques. National • Management of program resources and dosing of new phase institutional • Project performance monitoring and evaluation strengthening o Project performance tracking and program o Technical studies (PW Tracking study) management o Promotion on Public and Social Accountability: Introduction of Citizens Report Card in is progress. o Development of electronic data management system is in progress. • MIS development • Communication systems Environmental Efforts have been made to ensure that the project activities have minimal and Social negative effect on the environment. The project has facilitated an Safeguards Environmental and Social Audit undertaken in 2012. The study findings have indicated that the district councils have high level of awareness and knowledge on environmental and social safeguards. The study also indicated that almost all sub-projects have been screened 1in 2012 for Environmental and Social issues. The identification mission visited the some districts in southern part of the country has also observed that local implementers are making deliberate efforts to take into account safeguard issues in the planning and implementation of sub-projects. Environment specialists have also been assigned in all districts visited. However, the big concern is in the use of huge volume of Red Bricks for the construction of various project infrastructures. The preparation of this bricks require use/burning of large number of trees (3-4 trees for each staff house construction). Different mitigation measures were reported including tree planting. In addition, LDF has recently distributed machines to make SSBs. 106 ANNEX 10: TARGETING TOOLS IN PROGRAMS IN MALAWI Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) 1. The conclusion of the Effective and Inclusive Targeting of Social Support Programs in Africa: Malawi Country Case Study - Synthesis of Report (February 2012) was that all of the targeting mechanisms used in Malawi i.e. community targeting, self-targeting, geographical targeting, and proxy means testing hold some appeal; the issue would appear to be better implementation. Strengthen Community- Critically evaluate the functioning and Undertake research to consolidate and develop a single Based Targeting: Tendency performance of all of the existing community system of community targeting (as opposed to the many to spread benefits thinly, to targeting systems different systems currently in place under different in order to avoid exclusion programs) Develop categorical criteria for community and social divisiveness – and targeting that correspond to the very poorest households this largely undermines the Determine what is needed, in terms of institutional benefit of community support, for effective community targeting (i.e. what is targeting. Can be needed in terms of training and continuous support for supplemented with PMT. community structures, in order for them to be sustained and to make real decisions on who to include and who to exclude from transfers.) ; and what costs would be involved Targeting on Time: During Estimate and/or simulate the poverty-reducing Assess the program options for targeting in only the lean the Lean Season: Under- impact of targeting transfers temporarily, in season. utilized least cost way of only the lean season. For the majority of poor reaching majority of Malawians who experience extreme poverty Malawians only seasonally each year, benefits targeted at the four-month ‘lean season’ window would probably be the lowest-cost way of achieving higher welfare gains through targeting. Improve Self-Targeting: Assess what is needed To effectively self- Determine separately the amount of transfer that it is Good option of the proxy is target use the wage rate in public works desirable to make to each household annually, and the the size of the benefit. employment. Only option for most of those combination of wage rate and days worked required to who are not destitute, and cannot be achieve the intended transfer, while keeping the wage rate distinguished by community targeting on a at a self-targeting level. categorical basis; to do this it is absolutely critical that the level of benefits right. Another option is to overlay the self-selection process with another filter for determining eligibility for public works employment Refine Proxy Means Test some of the models for PMT and see how Administration of the PMT system would require a large Testing: Useful tool for as a effective they are compared to; and/or when effort at national and local levels to develop a PMT secondary filter in used in conjunction with, categorical, system and build administrative capacity to implement it. conjunction with community geographical, and lean-season targeting. Given the similarity in characteristics among the bottom targeting 40-60% of the population it seems unlikely that a PMT will be able to accurately identify the poorest 10-15% of the population; however it may be a useful tool for as a secondary filter in conjunction with community targeting (for cash or food transfers), or self-targeting (in PWP are over-subscribed). Assess the Role of Estimate the proportion of ultra-poor that are A program that delivered universal benefits only in the Geographical Targeting potentially covered, and potentially missed, by rural south would potentially reach 58% of the ultra-poor. the total of all existing programs based on their But such a strategy would be unlikely to be politically geographical coverage. On this basis , come feasible, and geographic targeting can miss out on a large up with recommendations for maintaining, or proportion of the poor. For example, focusing only on the reducing, geographical targeting as a means of poorest third of Districts (as many food-security-based reaching the poorest in Malawi. programs tend to do) would have missed 44% of the ultra- poor in 2005. 56 56 Author’s calculations, based on share of District population living below the food poverty line (2005,IHS, Annex Table 1-). Increasing this to the poorest half of Districts would leave out about 30% of the ultra-poor 107 2. On balance the conclusion is that a PMT may well prove a useful adjunct to other targeting methods in Malawi – most notably community targeting and self-targeting. Malawi needs a harmonized Social Safety Nets System able to address chronic poverty and respond to concerns over the potential impacts of future shocks; and global and local economic challenges. A unified targeting strategy and policy to harmonize targeting across the programs would be a good entry point and core to developing such a harmonized system. Building a national database and unified national beneficiary registry could be first step in harmonizing the targeting across the programs and developing national SSN system. The study made the following the broad recommendation to institute a system independently monitoring and evaluating who current programs are reaching – their poverty profile and characteristics: Table 1: Overview of Malawi Social Protection Programs Outreach, Target Groups All Social Source of Districts Intended Targeting Method # HHs # Benefit per Cost of GoM Budget Protection Funds Target Group persons HH in kind Delivery Expenditure Expenditures or MK % of 2012/13 MKs Total (000) Farm Input Subsidy GoM, (MoA) 28 Fertilizer Local Leaders/ MoA 300,000 1,600,000 500 annually 54,904. 50 Program , CPs (i.e. Subsidy Extension Workers. DfID) coupons to DADO officers brief their Poor EPA staff on who to household choose who later brief farming Extension Workers.Open families: community forum: Villagers/Chief/Police/Re ps, NGOs, attend decide School Feeding GoM (MoE), 13 Primary Schools based on 630,000 Daily 170 Program WFP, Mary School going enrolment, attendance/ Meals, children drop-out rates, food security situation Social Cash GoM 8 Direct Cash Recertifying 10% poorest 28,000 100,000 2700 mthly 10%-19% 100 Transfer Scheme (MoGCSW), transfers to. in each district. EU, KfW, Ultra community Targeting, Irish Aid, poor/labor IH3, and PMT UNICEF constrained HHs Income Generating The 15 Poor HH Community Targeting GoM to Public Works European /vulnerable provide Program (The Union persons or with program is now (MLRD) a vulnerable referred to as Rural person as a Infrastructure member. PWs Development that create Program (RIDP short term employment. MARDEF/ 1,000 YEDEF MASAF Public The World 28 Poor with Geographical, Poverty 586,000 2,900,000 14,400 8% 13,783.87 Works Program Bank, GoM labor capacity: Targeting; MVAC annually (MASAF is now Labor Assessment report to LDF) intensive PWs determine # beneficiaries that create per district short term employment. Ministry of Gender 28 Poor, sick and PMT, IH3, Geographical, 982.81 Children and Social vulnerable Community Targeting. Welfare children, men and women Ministry of 28 Disabled and 293.09 Disabilities and Elderly Elderly. Pensions GoM Retirees GoM Retirees 16,000 108 Experiences with Targeting of Existing Programs Table 2 - Malawi: Experience with Targeting Tools in Malawi Targeting Method Programs That Have Successes Challenges Used It - Public Works - only very limited success – wage Self-Targeting - Fertilizer Input rate appears to have been too high Program (to a lesser (MASAF), and value of fertilizer extent) vouchers too high (FISP) relative to widespread generalized poverty. - program design not primarily intended to reach the poorest in FIP; and appears not to have understood the principal of trying to target the ultra-poor (as opposed to the poor in general) in MASAF Community Targeting - some success when intensively - almost all have suffered from supervised (OXFAM) problems of: - communities finding it difficult to understand & apply criteria; - failure to distinguish ultra-poor from poor in general. - tendency to inclusiveness – spreading benefits widely - preferential treatment , or domination of selection process by chiefs; Proxy Means Targeting Social Cash Transfers SCT Program has just started (See Program Annex 10 on Targeting) Geographical Targeting -WFP Food & Cash for -Reportedly large Assets exclusion/inclusion errors based - MASAF PWP on using VAM data (same areas - School Feeding always receive benefits; not updated frequently/accurately enough,) 3. In summary there exists one very big program that is not really poverty targeted (the FISP); one large program (school feeding) which is geared more towards educational objectives than to raising consumption, and is primarily geographically targeted; and then there are a range of quite small programs, none of them reaching more than about 1% of the population (e.g. MASAF and EU Public Works, the Social Cash Transfer scheme, etc.) which use a mix of community targeting and self-targeting (in the case of the employment schemes. 109 Different Targeting Methods And Options in Malawi Implementation and Costs Pros Cons. Monitoring Geographic Easy Low cost Differences in living Geographical targeting alone, however, implies that part of al targeting in short run standards between the non-poor residing in the targeted poor areas will communities or inevitably benefit from the program, while some poor regions are often residing in the non-targeted areas will not be covered. larger than the differences within communities or regions Community Easy. involves Low cost Community The problem is that building the capacity to do community Targeting. community groups, in short run targeting is often the targeting well needs a lot of support, and continuous usually an elected only way of monitoring to keep the system working – committees need committee or leadership identifying which to be trained, and selections double-checked; there can be group, identifying the individuals fill very favoritism, and/or committees may be unwilling to make families or individuals in specific criteria (for divisive decisions about who benefits, and decide to a village who qualify for example not all spread benefits equally among all of the poor – again, support in accordance orphans or disabled defeating the purpose of the system. Finally, the practical with certain criteria people in a village experience is that while villagers can manage categorical are poor or destitute distinctions (destitute elderly, orphans, etc.) they often – local knowledge is have difficulty in distinguishing the very poor from the necessary to poor in general on ‘poverty’ grounds. determine this.) Means Require more Investment Costly Per-capita income is one measure of the welfare, but its testing and involves correctly drawback is that it is very difficult to obtain correct measuring the welfare of earnings data, especially in the context of countries with a household, and it is large informal or subsistence economies, or in rural areas. deemed to be the best way to determine the eligibility when the poor are potential beneficiaries. Proxy The method uses easy to Costly in Addresses the Due to the restrictions on the indicators to be used (easy- means verify indicators (at short run weaknesses of the to-obtain and to observe), the final score is not perfectly testing household and individual means testing, and correlated with the welfare indicator of choice (generally level) as proxies for a has increasingly consumption or poverty status). Such targeting systems welfare measure (e.g. per been used for the thus either address better the leakages but suffer from capita consumption). The implementation of under-coverage (or vice versa), or their effectiveness less demanding collection social safety nets varies with location (e.g. some systems perform better in and verifiability of urban areas but not so well in rural areas). 57 Grosh and information usually Baker (1995) find that some fine-tuning of the basic appeals in the developing system, such as calibrating for the poorest half of the country context. population or calibrating separately for rural and urban areas, improves results considerably in some cases, but not always. Self- Easy to do but hard to Low cost The poor select Policy-makers often have difficulty keeping to the low Targeting monitor in short run themselves to benefit levels, defeating the objective of the system; or if to participate in a extreme poverty is widespread, a large share of the implement program: benefit population may self-select even at very low benefit levels, but costly sufficiently low that in which case some other form of filter is needed. Also, in terms of only those who are public works programs, the most common form of self- leakage extremely poor will targeting, are expensive to operate relative to pure transfer and errors take it. programs (often costing $3 or more per $1 of benefits of transferred), so are only worth it if labor-intensity can be inclusion kept high, and/or the assets they create – roads or and irrigation works – contribute effectively to growth and exclusion. poverty reduction. 57 Grosh, M. and Baker, J. “Proxy Means Tests for Targeting Social Programs: Simulations and Speculation.” LSMS Working Paper No.118. The World Bank, Washington DC. 110 Evaluating a Targeting Formula for Proxy Means Testing in Malawi 58 4. Using the most recent survey data available 59 the Targeting Study explored 60 the challenges in targeting the bottom 25 percent (largely corresponding to the 2005 level of the ultra-poor) if a proxy means formula is used 61. While there is some improvement over current targeting, the overall simulations suggest that it is very difficult to target the bottom ten percent. Some fine-tuning methods, such as including rural community variables and at the same time calibrating different PMT models for rural and urban separately can improve the results, but not for identifying the bottom 25 percent of the population. The broad implication of this exercise is that a program that is targeting the bottom 25 percent of the population (or those affected by different shocks) would need to go beyond a proxy means approach to be effective; and a PMT is unlikely to be effective for targeting the ultra-poor. 5. To evaluate the performance of the PMT, individuals are classified in four groups, according to their status based on their true and predicted welfare levels. Those whose true welfare level falls below a certain cut-off point constitute the target population (e.g. poor), and those whose predicted welfare falls below the eligibility threshold represent the selected eligible population. Based on this typology, the targeting errors most commonly used in evaluating a formula are (i) the exclusion errors (or under-coverage), which is the percentage of the target group who are missed by the program (or E1/N1 in the Table below); and (ii) the inclusion errors (or leakage), which is the percentage of eligible individuals who are not in the target group (or E2/N3 in the Table below). 62 Table 3. Measurement of PMT performance Target group Non-target group Total (e.g. poor) (e.g. non-poor) Eligible Correctly identified - Total eligible population Inclusion error (as predicted by the targeting success according to the PMT (E2) PMT) (S1) (N3) Non-eligible Correctly identified - Total eligible population Exclusion error (as predicted by the targeting success according to the PMT (E1) PMT) (S2) (N3) Total population in the Total population in the Total target group non-target group N (N1) (N2) 6. Various options for a PMT for Malawi have been developed and tested 63. The PMT formula objectively links various observable household characteristics with household welfare. 64 In this case the variables considered were: (a) household demographic composition: household size, number of elders (65 58 See background Paper III: An Alternative Targeting Mechanism (Cnobloch (2011)) for details 59 Malawi Integrated Household Survey (MIHS), carried out by the National Statistical Office between March 2004 and March 2005. The survey is a nationally representative of 11,280 households, specifically designed to provide district level estimates of welfare indicators. 60 Using SP ADEPT 61 See background Paper III: An Alternative Targeting Mechanism (Cnobloch 2011) for methodology and detail analyses 62 In this context, the literature refers also to type I and type II errors: an individual incorrectly excluded by the PMT is a case of type I error, while an individual incorrectly included by the PMT is a case of type II error. 63 See background Paper III: An Alternative Targeting Mechanism (Cnobloch (2011)). 64 In our case, the formula is derived from an Ordinary Least Square (OLS) model. Given that the objective of most social support programs in Malawi is targeting the (ultra-)poor, we employ the logarithm of per-capita annual consumption64 as our welfare measure.64 A stepwise specification is used for all the models tested below, in order to retain only the set of predictors whose statistical significance is above 90 percent. 111 years old or older), number of children 0-4 years old, 5-12 years old, and 13-18 years old; whether the household has a member who is mentally or physically handicapped, with self-reported chronic illness, or with problems in performing daily activities (such as sweeping or walking for 5km); whether the household has mother-only, father-only, or both-parents orphans in the age groups of 0-12 and 13-18 years old; (b) characteristics of the household head: gender, marital status, education, whether the household head is impaired in any way (handicapped, suffering of chronic illness, or with difficulties in performing daily activities), and whether the head is employed in the formal sector; (c) characteristics of the dwelling: Whether the dwelling is household owned or has electricity, number of rooms per capita, type of floor, roof and walls; (d) ownership 65 of durables: fan, AC, TV, sewing machine, washing machine, refrigerator, kerosene stove, gas stove, bicycle, motorcycle car, boat; 66 (e) ownership of productive assets, especially land holdings and livestock: ownership of rain-fed and dimba land; whether the household owns cattle/oxen, goats/sheep, or pigs; (f) location variables - we account for possible unobservable characteristics of poverty which are location-specific by introducing location variables for the 26 administrative Districts, and for the 8 Agricultural Development Districts (ADDs). 67 7. The study measured the effectiveness of different models for the country as a whole, separately for rural and urban areas, and with and without geographical variables for different Districts. 8. Optimal selection of variables to predict welfare depends on four main criteria: (i) correlation with the welfare indicator (the higher the better, as this determines the power and precision of the prediction); (ii) easy measurability (they can be easily collected and updated using a simple questionnaire); (iii) verifiability (easily observed by the targeting team or by community observers, depending on the implementation arrangements); and (iv) not easy to manipulate by the potential beneficiaries. The performance of the models was assessed based on the goodness-of-fit (as expressed by the R-squared), and on the targeting effectiveness (through under-coverage and leakage rates). The R-squared values for the Malawi test model range from 0.60 to 0.57; which compares well with models developed for other countries, which range from 0.20 in Armenia to 0.57 in Bangladesh. 68 9. Figure 6 below presents the trade-offs between under-coverage and leakage rates for the choice of different cutoff points. It is clear that as the cutoff point increases and more households become eligible for the program the under-coverage rate decreases, but the leakage rate increases. 65 The issue with using the ownership of different durable goods is that we have information only on the ownership of a certain asset but not on whether the respective asset still functions. 66 The durable goods can be introduced in the model through an ownership variable (“Does your household own [ITEM]?”) or through the number of items the household owns (“How many [ITEM] does your household own?”). We run models using both the ownership and the number of assets owned. Still, the explanatory power of the models using the numbers was not much different than that of the models using the ownership only. Given that the ownership requires less information to be collected and is harder to fake than asking the number of a certain durable good, we preferred the models using the ownership of durables. 67 The eight ADDs are basically a higher level of aggregation than the 26 districts. 68 See Sharif (2009) for a brief review. Note also the fit is much better for the urban models (0.77) in Malawi than for the rural models (which varies from 0.52 to 0.48) 112 Figure 6. Trade-offs in the Choice of the Cutoff Point (Malawi PMT – nationwide model with districts) 100% 80% 60% 40% 20% 0% 10th 20th 30th 40th 50th 60th 70th 80th 90th Percentiles of the predicted welfare Undercoverage Leakage 10. While the choice of a cutoff point will ultimately be the choice of the Government based on particular goals and budget, for illustrative purposes the cutoff point was set at the 25th percentile 69, roughly corresponding to the incidence of ultra-poverty (22.3 percent of the population) in 2004/05 (although a wide range of cut-off points are evaluated in BPIII). The following table presents the range of targeting effectiveness found for three national models, and also for a combination of the urban and rural models (see Background Paper III for detailed results). Table 4. Targeting Efficiency in Identifying the Poor - Simulated Performance of Malawi PMT (Range of Predicted Targeting Errors – Models 1-6 Background Paper III) Range R-squared 0.57-0.61 Under- Poorest 44-46% coverage 10% Performan Leakage 66-70% ce of Under- Ultra-poor 27-29% National coverage (22.4%) Level Leakage 51-54% Models Under- Poor 12-13% coverage (52.4%) Leakage 28-31% 11. Implementation of the PMT formula. The simulations summarized above indicate how accurate a PMT could perform if it were well-implemented. However there are a number of significant barriers to implementation. The data demands are large: for example the presented model 70 involves a total of about 30 variables. While the PMT that actually gets developed would certainly have fewer variables, the institutional capacity may well not exist at the local level in Malawi to operate such a system. Furthermore, to get the degree of accuracy predicted by the model would require using the same questions included in the IHS, and following the same guidelines for data collection as used by the National Statistical Institute in collecting the IHS data. 69 25% of the constructed PMT score (predicted welfare) 70 See background Paper III: An Alternative Targeting Mechanism (Cnobloch (2011)). 113 Social Cash Transfers Program: Mtukula Pakhomo 71 12. In order to be considered for Mtukula Pakhomo, households must meet a series of eligibility criteria, based on geographical location, household composition, dependency ratio, and poverty level. These criteria are described in greater details in the following sections. A. Eligibility Criteria for Households 13. An eligible household must meet the following eligibility criteria: 14. An “Ultra poor” household - identified by the CSSC targeting members- having in consideration the following characteristics: a. The household has on average only one meal per day; and/or b. The household survives from begging; and/or c. The household is undernourished; and/or d. The household does not possess any valuable assets; and/or e. The household does not receive any monetary help, food, or gifts from others. 15. A “Labour-constrained” household has no member in the age bracket 19-64 years fit for work or with a dependency ratio > 3, where: (Household size) = ∑(19−64 ). 16. The CSSC targeting members shall identify the households that meet these criteria. Given the community-based targeting method, all identified households shall be considered ultra-poor, while the MIS facilitates the verification of the labour-constraint criteria. B. Ranking 17. Pre-eligible households (those considered ultra-poor and labour constrained) are ranked using a ranking formula. The following information is used in ranking:  Dependency ratio and  Ultra-poverty 18. The ranking formula is as follows: = ( + 2 ). Maximum score is 16. 19. The purpose of ranking is to prioritize the households according to their vulnerability status; a specific percentage – currently this is set at 10% - of the most vulnerable households are selected as beneficiaries for the program. 20. The ranking formula produces the following results: 71 71 TARGETING MANUAL FOR THE MTUKULA PAKHOMO SOCIAL CASH TRANSFER PROGRAM 114 Table 1: ranking scores 21. The ranking formula is developed by the Ministry of Economic Planning and Development (MEP&D) based on the Malawi Integrated Household Survey 2010-2011. 72 TARGETING PROCESS 22. The targeting process comprises all the operations required to identify households and determine eligibility including planning, training, data collection, entry and analysis. More specifically, the targeting process comprises the following steps: Figure 1: Targeting Process 23. The DSCTPS organizes the presence of a photographer during this meeting. Pictures must be taken from each beneficiary household head and his/ her representative. The purpose of the pictures is for the production of Beneficiary Program ID Cards. 72 Integrated Household Survey 2010-2011. Household Socio-economic characteristics Report. August 2012. 115 Figure 2: Template Beneficiary ID Cards MALAWI SOCIAL CASH TRANSFER MALAWI SOCIAL CASH TRANSFER PROGRAM PROGRAM Household Program ID Number: LL-10001 Household Head: LAURENT KANSINJIRO Household Representative: Village: MATEYO FEDDA BWANA GVH: ZULU TA:ZULU District: MCHINJI 24. The ID Cards shall be distributed to the beneficiary households during the first transfer exercise. FORMS Form B-1: Targeting Form contains 7 sections. This form is filled out by the CSSC member in the presence of the household representative. 116 ANNEX 11: SOCIAL CASH TRANSFERS PROGRAM-MUKULA PAKHOMO (Prepared by Ministry of Economic Planning and Development) Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) INTRODUCTION 1. The Malawi Poverty and Vulnerability Assessment (MPVA, 2007), shows that poverty in Malawi has disastrous consequences for individuals and households caught in its shadow. These consequences are persistent and mutually reinforcing in that the many effects of poverty often turn into the causes of its persistence, hence creating the ‘vicious cycle of poverty’. This is typically characterized by poor households often having limited cash or purchasing power, access to health services, clean water and sanitation, children out of school, no or few secure food sources and few income generating opportunities. This affects not only cash in hand, but also the ability to invest for future earnings potential and creates a cycle leading to intergenerational transmission of poverty. Thus children from poor households have a higher chance of growing up to become impoverished adults and, in turn, have impoverished children. Malnutrition also leads to reduced mental and physical development of children through stunting in their growth and results in health issues, poor school performance and therefore low academic and professional achievements. Although primary health and education are provided for free by the state, private expenses such as transportation, food and opportunity costs such as lost labor income from children and care givers, and lack of knowledge of healthcare and education systems pose real barriers to access by the poor. Extremely poor households are more likely to suffer chronic and acute malnutrition due to constant exposure to hunger and food insecurity. 2. According to the 2010 Integrated Household Survey (IHS 3), 50.7% of the population living below the national poverty line and 24.5% are ultra-poor. The ultra poor are unable to meet the minimum daily food requirements, typically consuming only one meal a day and suffering from chronic hunger and malnutrition. 3. In an effort to reduce poverty, the Government of Malawi has prioritized social support together with disaster risk reduction by including it as the third theme in the Malawi Growth and Development Strategy 2011-2016 (MGDS II). On 5th July, 2012 the Cabinet approved the Social Support Policy. The Policy provides for an institutional framework that is led by the National Social Support Steering Committee (NSSSC) which provides policy direction and anchored by the National Social Support Technical Committee (NSSTC) which provides implementation guidance. The Policy mandates the Ministry of Economic Planning and Development (MEP&D) to coordinate all Social Support programs. It advocates that these programs be implemented in a coordinated manner at local authority level in order to enhance linkages within the programs and with other socio-economic programs to achieve maximum positive impact. Deliberate efforts at creating and enhancing linkages will target programs that promote education, health, nutrition, food security and income generation amongst others. 4. The National Social Support Program (NSSP) has been developed as a four-year program, running from 2012-2016, that identifies five priority areas of intervention and sets out key strategies and actions that are required to achieve the specified targets. The five key interventions are Social Cash Transfers, School Meals, Public Works, Village 117 Savings and Loans and Microfinance programs. SOCIAL CASH TRANSFER PROGRAM 5. MASAF IV financing for the implementation of the Social Cash Transfer Program in Dedza and Nkhata-Bay will directly contribute to the reduction of extreme poverty of a total of approximately 21,000 households in the two districts. 6. The Social Cash Transfer Program (SCTP) began as a pilot in Mchinji in 2006 and was expanded to an additional 6 districts in 2007 under a Cabinet directive. In 2007/8, the pilot SCTP was rigorously evaluated by Boston University and University of Malawi - Centre for Social Research. 7. The external evaluation concluded that the program was feasible within the institutional context of Malawi, that the implementation has been cost-effective and that the impact on household level in terms of improved food security, nutrition, health and education was significant. With the approval of the Policy, the Government of Malawi is planning to scale up the program nationwide in collaboration with its CPs. Selection of the districts to be targeted by the program first is done using the ultra poverty rate in combination with food insecurity. According to the latest Integrated Household Survey (IHS 3), 24.5% of the population corresponds to ultra-poor households. Of that amount, a large percentage is also labor-constrained. However, currently there are hardly any statistics signaling the exact percentage of households complying with the two criteria: being both ultra poor and labor-constrained. 8. The ultra poverty criterion must be combined with food vulnerability. It is therefore necessary to choose and prioritize districts with a population presenting the highest levels of vulnerability, as well as ultra poor and labor-constrained households since they are the ones that suffer the most during shocks. Otherwise, districts with high levels of food vulnerability would be chosen first, but not necessarily those with the highest ultra poverty percentage or density. A combination of the criteria therefore, is ideal in prioritizing districts to enter the program. 9. Based on the criteria above, it is therefore proposed to choose and prioritize districts which comply with both characteristics i.e. high levels of extreme poverty and vulnerability, to have preference on entry to the program. 10. In accordance with the proposed objective to strengthen Malawi’s social safety net delivery systems and coordination across programs to reduce vulnerability, MASAF IV would provide resources to expand implementation of the SCTP to Dedza and Nkhata-Bay Districts to enable coverage through direct cash transfers to 21,000 ultra-poor, labour constrained households. The support from World Bank would be utilized to provide Dedza and Nkhata-Bay District Councils with the requisite support for strengthening systems as well as for the cash transfers through financing and technical assistance for infrastructure, equipment, training, operational expenditure and direct transfers to implement the program for a minimum of four years from 2014 to 2017 11. These Social Cash transfers or direct transfers are regular, predictable transfers that are paid to extremely poor and labor-constrained households without the condition of 118 work. Beneficiaries of this program are the most underprivileged households which consist primarily of elderly grandparents caring for young orphans, households who are headed by persons with chronic illness or disability and children headed households. These households are unable to meet their most basic food requirements and often have limited or no access to existing social and economic interventions in Malawi. The Social Cash Transfer Program (SCTP) uses a combination of community based targeting and district-level verification completed by Proxy Means Testing (PMT) to ensure the appropriate households benefit from the program. 12. On average, a household on the program receives a regular income of around MK2,700 a month. This is set to increase once an annual review of the transfer amount is made in line with recommendations from the Study on Costing and Analysis of Transfer Levels for the Malawi SCTP conducted in April, 2012 using the methodology recommended in the report referred to in this Annex. This is the average transfer amount that has been used for the purpose of costing this proposal. The cash transfers are intended to enable beneficiary households to satisfy their life-cycle needs, particularly food, shelter and healthcare. By providing a consistently reliable income source over a long period of time, the program encourages investment in income generating activities. Moreover, additional money is given to households with school-going children in order to support and encourage investments in their education. In this way the program is designed to have both an immediate impact on households’ well-being and a substantial positive long-term effect on poverty. 13. As of July 2013, the program covers over 30,000 households (around 100,000 individuals) in 7 districts (Mchinji, Likoma, Salima, Machinga, Mangochi, Phalombe and Chitipa,). Additionally two more districts, Balaka and Thyolo have started the processes of targeting in order to begin making transfers to the beneficiaries. Implementation of the program is done through District Councils who receive assistance, guidance and supervision from the National SCT Secretariat housed in the Ministry of Gender, Children and Social Welfare (MoGCSW). The Government intends to scale the SCTP out to the entire country to reach an estimated 319,000 households by 2015, aiding directly approximately over 1.5 Million individuals. The Government therefore plans to substantially scale up its financing of the program over the next 5 years. However, to reach this goal, the Government will require co-financing from CPs. 14. Funding for initial 7 pilot districts was drawn from UNICEF, Irish Aid and Global Fund since 2006. Beginning 2012, the program started accessing new funding from the German Government (through KFW) for which there is a four year commitment of 13 Million Euro. There is a further 35 Million Euro and 11 million Euro commitments from EU and German Government respectively, which will support scale up in an additional 8 districts. Irish Aid is currently supporting roll out of the program in Balaka district with a contribution of 3 Million Euro. The funding is to run for four years up to 2016. Malawi Government has provided funding of MK 450 Million in the current fiscal year, which is a significant increase from an initial contribution of MK 50 Million in 2010/11 fiscal year. The European Union is also supporting the piloting of electronic payment of transfers to beneficiaries in Mchinji and Machinga to the tune of 3.3 Million Euro. The e-payment pilot funding is going through Save the Children (which has partnered with Airtel, Opportunity Bank of Malawi (OBM), Oxford Policy Management, and the Centre for Social Research). 119 Overall Goal 15. The goal of the Social Cash Transfer Program is to improve the well-being of the poorest and most vulnerable households (ultra-poor and labour-constrained) and promote investment in human capital in terms of nutrition, food security, health, education, shelter and investment in productive assets. Specific Objectives 1. To reduce poverty, hunger and starvation among all households that are extremely poor and at the same time labour-constrained; 2. To increase school enrolment, attendance and retention among children in target beneficiary households; 3. To strengthen the capacity of District Councils in the planning, implementation and monitoring of the SCTP through capacity building, cash transfers and support to the operational costs of the district; and 4. To support District Councils to link the SCTP with other social economic programs thereby holistically addressing multiple vulnerabilities with maximum poverty reduction impact; Expected outcomes: • Reduced poverty, hunger and starvation among beneficiary households; • Increased school enrolment, attendance and retention among children in beneficiary households; • Increased income levels among beneficiary households; and • Improved health and nutritional status among members of beneficiary households. Linkages with Other Social Services 16. Additionally, key lessons have been learned over the past 7 years of program implementation that must be integrated into program design to maximize poverty impact and improve efficiency. Although the positive impact of the SCTP has been demonstrated by the rigorous impact evaluation study in 2008, it has become clear that beneficiaries need additional support in order to ensure a positive and sustained impact from the cash assistance they receive. Strong linkages between SCTP beneficiary households and other available services must be made. Particular focus will be made on improving this program component, with specific attention paid to increasing both food and nutrition security and education of children of these very vulnerable households. Improvements to the Program 17. The German Government through KfW has committed €24 million to the SCTP, part of which will be utilized to build management and monitoring capacity of the National Social Cash Transfer Secretariat (NSCTS). A management consulting firm, was contracted to provide technical support which includes, among others, the development and implementation of an MIS system accompanied by the operational manual, guidelines and other instruments required to operate the program more efficiently. The operational 120 manual and guidelines includes components for targeting, enrolment, payment, administration and case management. A situation analysis of the SCTP, including operational and financial assessments; and the re-designing of the program to enhance program efficiency and performance have been completed. The key components that have been redesigned by the consultancy firm in collaboration with MoGCSW among others include: targeting processes, financial management system, transfer mechanism, case management mechanism and management information system. 18. The European Union is supporting the piloting of an alternative, electronic delivery mechanism for the cash transfers (e-payment pilot). Under the alternative mechanism, beneficiaries would receive payments electronically into bank accounts, smart cards, mobile phones or equivalent stores of value. It is envisaged that e-payments will facilitate faster and more reliable payment of transfers to beneficiaries, improving client satisfaction; it will reduce the administrative burden on District Councils by reducing the effort required to deliver cash manually on a monthly basis and having to conduct manual reconciliation of accounts and; it will strengthen the fiscal integrity of the program by reducing exposure to error, fraud and theft. It is also expected that e-payments will facilitate financial inclusion of hard to reach populations and provide beneficiaries with the flexibility on when and possibly where to collect their transfers and provide an opportunity for beneficiaries to save part of their entitlement for future use or to facilitate asset accumulation. IMPLEMENTATION APPROACH 19. The expansion of the SCTP to Dedza and Nkhata-Bay districts will use the approach that is currently in practice where the program is implemented through the district councils with The National Social Cash Transfer Secretariat (NSCTS) housed in the Ministry of Gender, Children and Community providing technical assistance to the district councils. The NSCTS will also be responsible for monitoring and supervision and general program oversight. JUSTIFICATION AND RATIONALE FOR EXPANDING SCTP TO Dedza and Nkhata-Bay 20. MASAF IV would support Dedza and Nkhata-Bay District Councils to implement the Social Cash Transfer Program for a minimum of 4 years. Dedza district has an ultra poverty rate of 25.1% while Nkhata-Bay has an ultra poverty rate of 17.7% according to the 2010 IHS (IHS 3). Ultra-poverty rates ranking using IHS 3, for Dedza and Nkhata- Bay are 16th and 17th respectively. However using the combined indicator of ultra poverty and food insecurity they are ranked 17th and 18th respectively. With current Government plans and according to the expansion strategy for the Malawi Social Cash Transfer Program, the next phase of scale up takes up 8 districts of Thyolo, Nsanje, Chikhwawa, Mwanaza, Neno, Mzimba, Zomba and Mulanje based on the combined indicator of ultra-poverty and food insecurity. Therefore the next two districts in the next phase of the expansion are Dedza and Nkhata-Bay. Table 1 clearly illustrates ranking of the districts using the criteria as discussed above. 121 a) TABLE 2: ULTRA POVERTY AND FOOD VULNERABILTY LEVELS PER DISTRICT ULTRA FOOD DISTRICT POVERTY VULNERABILITY TOTAL SCORE LEVEL % % Nsanje 56,0 77,8 66,9 Chikwawa 59,0 74,6 66,8 Mwanza 32,5 57,8 45,1 Neno 29,7 56,4 43,1 Balaka 33,2 44,7 39,0 1 Phalombe 41,7 29,7 35,7 Mzimba 31,7 32,9 32,3 Zomba 26,4 36,6 31,5 Mulanje 33,6 28,5 31,1 Mangochi1 44,4 17,7 31,1 1 Chitipa 43,6 18,4 31,0 1 Salima 16,5 44,9 30,7 Thyolo 11,2 49,4 30,3 Nkhatabay 17,7 41,2 29,5 Dedza 25,1 31,5 28,3 1 Mchinji 31,9 24,4 28,2 1 Machinga 39,2 14,4 26,8 Dowa 16,6 35,9 26,3 Lilongwe 31,0 21,1 26,1 Kasungu 10,8 39,9 25,4 Ntcheu 14,0 36,2 25,1 Karonga 26,0 23,0 24,5 Rumphi 10,8 34,2 22,5 Ntchisi 10,3 34,4 22,4 Chiradzulu 12,5 29,2 20,9 Nkhotakota 11,2 28,9 20,1 Blantyre 13,5 25,7 19,6 (1) Districts already in the SCTP. 21. The SCTP is expected to address the lack of a substantial and reliable income source for the target households. As a result, it is anticipated that poverty, hunger and starvation among all targeted extremely poor and labour-constrained households in Dedza and Nkhata-Bay districts shall be reduced. School enrolment, attendance and retention among children in target beneficiary households shall also be increased alongside experiencing improved nutrition and health. IMPLEMENTATION ARRANGEMENTS 22. Institutional Framework for the Social Cash Transfer Program from which the following implementation arrangements are drawn is discussed below. Implementing Ministry 122 23. The MoGCSW is the institution responsible for program implementation. The Ministry shall provide day to day managerial oversight and operational backstopping for the program through the National Social Cash Transfer Secretariat (NSCTS). The Ministry will receive technical backup and policy direction from the Ministry of Economic Planning and Development (MEP&D) and the National Social Support Technical Committee (NSSTC) at national level. The National Social Cash Transfer Secretariat 24. The National Social Cash Transfer Secretariat (NSCTS) shall provide technical and operational support to Dedza and Nkhata-Bay District Councils to ensure quality and efficient program delivery. The Secretariat shall lead the capacity development of Dedza and Nkhata-Bay District Councils which shall include training of district teams, facilitating exchange visits, attachments to implementing districts to enable learning and experience sharing and general managerial oversight to program implementation. The Secretariat shall also be responsible for promoting documentation of the good practices at the district level in order to facilitate learning from successful districts and ensure effective integration of lessons learned from past implementation experience. Dedza and Nkhata-Bay District Councils 25. The District Councils will set up a management system, team and secretariat to roll out the program and to manage, administer and monitor the program on a daily basis. The Malawi Government will bear the cost of salaries of personnel, office space and administration in relation to implementation of the program. MASAF IV financing would support technical assistance, capacity development and operational support at district and community level including start up costs for the program in the two districts. Dedza and Nkhata-Bay will require continuous support until the desired program quality and efficiency is attained. 26. Establishment of a District Social Support Committee (DSSC) will be prioritised before program execution. The DSSC is a sub-committee of the District Executive Committee (DEC). It is composed of line Government Departments and Civil Society Organizations (CSO) engaged in Social Support. The committee is chaired by the Director of Planning and Development with policy oversight and guidance from the District Commissioner. The District Social Welfare Office will house the Secretariat. Full composition of the District Social Protection Committee will be drawn as per agreement at the District Executive Committee level as is the current practice. 27. Technical and administrative assessment of Dedza and Nkhata-Bay District Council are the responsibility of MoGCSW in collaboration with MEP&D prior to financing. Deliberate attention shall be directed towards the Directorate of Planning and the Directorate of Finance. This assessment shall also extend to the roles and responsibilities of Chiefs, Members of Parliament and other key stakeholders. Not only shall efforts be directed towards assessment of human capacity but also to look into necessary infrastructure such as office equipment, filling system, district mobility and ensuring that there is availability of a Desk Officer with technical support from the District Social Welfare Officer. 28. The DSSC shall be responsible for the following activities: 123 • Develop a 4-year implementation plan for Dedza and Nkhata-Bay; • Train implementers of the Program at both district and community levels; • Scrutinize applications of potential beneficiary households; • Approve or disapprove applications of potential beneficiary households; • Deliver cash transfers to approved beneficiary households; • Collect and document information related to the Program; • Monitor and evaluate the Social Cash Transfer Program; and • Promote linkages among the social services for the SCTP beneficiaries; Community Social Support Committee 29. At village level, targeting of potential beneficiary households shall be done by the Community Social Support Committees (CSSC) which are sub-committees of the Village Development Committees. Members of the CSSC are nominated to the committees by their respective communities. These CSSC members shall be trained in the methodologies of the Program and shall be responsible for the identification, targeting and verification of eligible beneficiaries. They also assist in the approval process at the district level related to confirming and endorsement of eligible beneficiary households. Selection is reviewed by the Village Development Committee (VDC). 30. A comprehensive description of roles and responsibilities is contained in the Revised Operations Manual for the program, which explains in detail the steps that need to be undertaken to establish, maintain, administer and implement a successful social cash transfer program. 124 INSTITUTIONAL FRAMEWORK FOR THE SOCIAL CASH TRANSFER PROGRAMME CABINET National Social Support Steering Committee (NSSSC) composed of the following line Ministries: Gender , Children & Social Welfare; Agriculture; Health; Finance; Local Government; Economic Planning Policy and Development; Development and CS partners National Social Support Technical Committee (NSSTC) Direction and composed of line Ministries; development and civil recommendation on society partners; and donors implementation Poverty Reduction and Social Protection Division (Secretariat to NSSSC & NSSTC) --------------------------------------------------------------- (Social Cash Transfer Technical Team, Dep. of Technical guidance and Poverty and MoGC&SW) supervision Local Council (LC) Financial Control District Commissioner (DC) District Executive Committee District Social Support Committee headed by DPD and composed of: DEM, M&E, DCDO, DoF, Approval of applications DSWO, DHO, DAC, DADO, SWA’s, NGOs District Social Support Secretariat Organises targeting, composed of: District Social Welfare approval and payment Officer (Head); Social Welfare activities Assistants and Trainers Village Development Committee Community Social Targeting and follow-up Support Committee OPERATIONAL PLAN 31. The NSCTS will engage the Dedza and Nkhata-Bay District Councils to conduct a district assessment, mapping out of administratively feasible village clusters, developing an implementation plan, budgeting and commencing the targeting and enrolment process. It is envisaged that rolling out the SCTP will commence in early March 2014 and involve the following activities: 125 a) District Consultative Meeting Forum In order to develop and generate understanding of the program goals and objectives, a district consultative forum is held before actual program is commenced. This activity draws together all district stakeholders including Traditional Authorities, members of Parliament, District Executive Council members and Councilors. One of the key agenda items during the forum includes selection of Traditional Area where to commence roll-out. The Forum also informs the stakeholders about the type and nature of beneficiaries for the program and eligibility criteria. It is also at this forum that a District Social Support Committee and training teams are selected. b) Training of the District Team The training of a district training team entails an officer experienced in implementing the SCTP taking the training team through a practical exercise of targeting in a real village cluster. The team comprises of 14 members drawn from key sectors at district level including social welfare, community development, education, agriculture and health. In the case of Dedza and Nkhata-Bay upon completing the practical based training members will be grouped into pairs. Each pair will then be assigned to undertake targeting in the estimated 217 and 63 clusters for Dedza and Nkhata-Bay respectively within Six months. c) Targeting and Enrolment The process of targeting begins with the training of the district team. The first village cluster to target also serves as a training field for the training team. A total of 21,000 beneficiaries are expected to be on the program on completion of the targeting process. Based on the total number of beneficiaries, 280 villages clusters are expected to be created. A cluster is made up of between 750 to 1500 households (out of which 10% will be selected for the program). The targeting process is community based and takes 30 days to complete per cluster. It is expected that in Month 2, targeting will begin, reaching 7 clusters a week, thus it is expected that it will take 23 weeks to identify 21,000 beneficiaries in 280 clusters. The exercise should therefore be completed by mid-August 2014. A targeting manual is already in place to support the process. 32. The targeting process comprises the following steps: I. Sensitizations with stakeholders – all stakeholders at district level are sensitized about the program and its activities. II. Preparation of the Logistic Plan - the objective of the logistic plan is to obtain and move resources in a timely fashion to the locations where they are needed. III. First Community Meeting – the first community meeting intends to inform the communities and their leaders about the program and its methodologies of implementation and to get their cooperation. 126 IV. Training Process – the training serves as a tool to build capacity amongst the stakeholders and to prepare them for their tasks and activities during the targeting process. V. Data Collection and Quality Check – this step includes the collection of household data through a specifically designed form and the packaging, labeling and submission of forms to the DSCTPS. VI. Data Entry and Ranking – the objective of data entry is to create a database with all necessary information about interviewed households and to rank the households according to their vulnerability status in order to facilitate all future processes of the program. VII. Second Community Meeting - this step is used to confirm the identified household, their composition and their ranked position by the communities and community leaders. During this step, inclusions and exclusion errors can be reported. VIII. Data Entry (appeals) and Re-ranking – the information from the appealing households is entered into the MIS and the ranking is adjusted. IX. Final Approval of ranked households – the final lists of households is approved in the District Social Support Committee meeting. 33. The routine activities of case management, linkages and referrals and monitoring and supervision shall commence as soon as the targeting exercise has been completed. d) Provision of cash transfers Cash transfers to eligible beneficiaries would occur every month using a manual payment system implemented by Dedza and Nkhata-Bay District Councils that will gradually evolve into an electronic payment system once systems and procedures have been put in place drawing from lessons and experiences from the e-payment pilot I which is being implemented through Save the Children with support from the European Delegation. The manual payment system involves a district council team composed primarily of an accounts assistant, district social welfare assistant, a driver and two armed police guards using a district council vehicle to deliver payments to beneficiaries at predetermined payment points organized according to clusters and striving to provide a pay point for each beneficiary at distances of no more than 5km from their village. The Consultant is developing systems to strengthen the current manual payment system, making it faster, easier to reconcile and audit until the e-payment system can be adopted. e) Case Management, Monitoring and Linkages Creation After the beneficiaries have been enrolled into the program and have started to receive transfers, then this is followed by Case Management activities and Monitoring. The program has a case management system which seeks to address claims, complaints, referrals and updates, in case of changes in beneficiaries. The program is monitored by both the district team and the Community. In addition, the program also has a mechanism for creating referrals and linkages to other social services. This is done to maximize the potential benefits of the program on beneficiaries. Creating and strengthening linkages shall involve training extension workers conducting social 127 service mapping, developing seasonal calendars based on which extension workers will provide beneficiary education. f) National Level Support and Supervision Intensive technical backstopping and supervision through the NSCTS will be made available by a physical presence of experienced officers in the beginning, which will scale down to the usual quarterly monitoring and supervision visits and quarterly reviews as the Dedza and Nkhata-Bay District Councils gains experience and confidence to continue implementing the program with minimal support from the NSCTS. Quarterly supervisory visits shall be undertaken jointly with national level partners such as the Ministries of Economic Planning and Development, Local Government, Disability & the Elderly, civil society and CPs. g) Advocacy Advocacy activities with CPs and High Level Government officials shall be undertaken. This is one way of raising the profile of the program and a tool for mobilizing political support and resources for the financing of the program beyond the 48 months. This also entails development of IEC materials. h) Secretariat Operations In order to manage the program in Dedza and Nkhata-Bay, the Secretariat will require resources to cover operational costs of utilities, insurance, transport and stationery. i) Oversight costs for Ministry of economic Planning and Development (MEP&D) MEP&D in collaboration with MoGCSW will play a leading role and provide technical backstopping as well as guidance to the district councils on the following: • Establishment of District Social Support Committees • Harmonized Targeting Implementation • Unified/Single Beneficiary Registry Operational Plan for Start-up, Targeting and Scale-up 128 Activity Description Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Targeting and Enrolment District Consultative meeting Training of District training team Implement 280 cycles of targeting (21,000 hh) Transfers Actual transfers Delivery of cash transfers District Operational Costs Monitoring of the activity by the district team Case management Creation/strengthening of Linkages for SCT beneficiaries (once every Quarter) Central level Support Secretariat operational Costs Quarterly Supervisory Visits Advocacy with Senior Officials Development of IEC Materials SCT Equipment & office renovations Development of Single Registry & Harmonized Targeting Conduct external learning Visits on harmonized targeting and single registry Consultations to Develop guidelines on harmonized targeting and single registry ( 3 consultative meetings of 2 days each) Testing of the harmonized targeting tool and single registry for 3 weeks Training of Districts in Utilization of harmonized Targeting tool and single registry FINANCIAL REQUIREMENTS AND ARRANGEMENTS Total Financial Requirement ($10,982,265) 34. The total financial requirement to implement the Social Cash Transfer Program for 48 months is $10,819,966. A summary breakdown of expenditures is discussed below and a detailed budget is presented in Annex 3. Enrolment and Targeting ($590,586) 35. The Ministry of Economic Planning and Development will lead the process of targeting as part of piloting harmonized targeting mechanism and establishment of a single beneficiary register. As part of its efforts to improve planning and coordination of all social support programs in Malawi, the Ministry of Economic Planning and Development with support from the World Bank commissioned a study on harmonized targeting which was conducted in 2011. One of the recommendations that came out of the study is that there is a need to harmonize targeting of all social support programs at district level. The Ministry of Economic Planning and Development in close collaboration with the Ministry 129 of Gender, Children and Social Welfare will lead the process of establishing the necessary structures at district as well as community level for implementing the harmonized targeting mechanism. 36. The districts will target all households in all clusters from which beneficiaries for SCTP will be drawn. However the information collected will also be used by other social support programs such as public works, Village Savings and Loans as well as Farm Input Subsidy Program (FISP) as a basis for targeting their own beneficiaries. This will be part of the process of establishing a unified registry for all social support programs. A total of $590,586 is budgeted for program start-up including targeting and enrolment. Activities shall include training of all implementation tiers at district and community levels in program implementation including orientation of communities and supporting communities to identify 21,000 eligible households for SCTP in Dedza and Nkhata-Bay. Infrastructure and Equipment + Technical Assistance ($816,877) 37. $816,877 has been earmarked for the provision of infrastructure, which may include refurbishment of offices where these are made available; provision of motor vehicles including 3 4X4 vehicle and motorcycles and; provision of equipment such as computers, printers, photocopier, digital camera and other durable goods necessary for program implementation in each of the two districts. Considering that some areas in Nkhata-Bay are not easily accessible by vehicles, there will be a need for a motor boat. A comprehensive explanation of this expenditure is contained in the addendum referred to as Annex 3 Transfers ($8,170,764) 38. The amount required for transfers is determined by the number of beneficiaries and the level and frequency of transfers. Each of these factors for Dedza and Nkhata-Bay district councils is broken down as follows: Number of Beneficiaries 39. The number of beneficiary households that shall be targeted to receive the social cash transfer in Dedza is 16,302 and 4,688 beneficiary households will be targeted to receive the cash transfer in Nkhata-Bay district totaling 21,000 households in the two districts, comprising 10% of all households in Dedza and Nkhata-Bay. The number of households is calculated from the 2008 Population and Housing Census. The number of households in 2008 is then adjusted using intercensal annual growth rate in order to arrive at the number of households for Dedza and Nkhata-Bay in 2014. The number of potential beneficiary households for the two districts is then calculated as 10% of the total number of households in each district. Level and Frequency of Transfer 40. The amount of transfer that a beneficiary household receives depends on the household size and whether or not the household has any children of school-going age. The level of transfer is determined by the ultra-poverty gap as established by the Integrated Household Survey and reviewed periodically as directed by the National Social Support Technical Committee. As a result of these periodic reviews transfers levels might be revised upwards depending on the recommendations that are likely to come out from the reviews. 130 41. The current average transfer per household is estimated at MK2,700. The financial requirement for transfers to 21,000 households in Dedza and Nkhata-Bay for 48 months is estimated at $8,170,764. However as has been already highlighted above this figure is likely to be revised upwards due to increased inflation which impacts on the ultra-poverty gap. Delivery 42. The monthly entitlement will be paid to beneficiary households on monthly basis. Delivery of the transfers shall be done initially by the district council as is currently the practice in other districts. The cash delivery has been reviewed to accommodate emerging e-payment lessons. The delivery of cash in a manner that is transparent, safe, reliable, accessible to beneficiaries and cost effective remains an important objective for the SCTP. Improvements to the program design will continue to be undertaken based on emerging evidence on what works, what is feasible, what is cost effective and sustainable. District Operational Costs ($1,145,094) 43. Operational costs for Dedza and Nkhata-Bay have been estimated at $1,145,094.93 out of the transfer amount. This provision shall be expected to cater for costs of case management, administration of changes, district coordination and promotion of linkages and monitoring. Central Level Support ($913,520) 44. $913,520 has been budgeted as a contribution to central level operations to facilitate monitoring and supervision including support to the Ministry of Economic Planning and Development for the Implementation of Harmonised targeting and a unified registry. The National Social Cash Transfer Secretariat of the Ministry of Gender, Children and Social Welfare and, the Ministry of Economic Planning and Development are expected to provide operational and technical backstopping and quality assurance for the program to Dedza and Nkhata-Bay District Council, as well as documentation and advocacy for the same. Contingency ($162,299) 45. A 1.5% contingency is proposed for unforeseen circumstances. One very real risk where this contingency may be applied is in the event that procurement of vehicles and equipment has not been completed before program commencement. This is likely because procurement will be done off-shore and the process usually takes 4 to 6 months to delivery of items. This contingency may be utilized to hire vehicles and equipment until the procurement process is complete. 46. Another area where contingency fund is likely to be used is when the transfer levels have been adjusted upwards so the contingency fund could be used to cover up for this upward adjustment. FINANCIAL MANAGEMENT AND CONTROLS 47. It is envisaged that the financing for the expansion of the Social Cash Transfer Program in Dedza and Nkhata-Bay will be channeled through 3 streams as explained below. 131 Stream 1 48. World Bank will channel funds for beneficiary transfers and district operational costs from World Bank to the Reserve Bank of Malawi where the Local Development Fund (LDF) has a holding account managed by the Ministry of Finance. Under this stream, the funds will be transferred to the District Councils through the National Local Government Finance Committee (NLGFC). The NLGFC will be responsible for disbursement of funds to the Local Authorities for Transfers and Operational Costs in the District Development Fund account. The NSCTS will work with Dedza and Nkhata-Bay District Councils to draw up an implementation plan and budget, which will form the basis for the disbursement of funds to the district and will be a key tool for the management of the interaction between NSCTS and Dedza and Nkhata-Bay District Councils. This stream will evolve to reflect progress on the e-payment pilot where new streams may be introduced as new delivery mechanisms are proven feasible, cost-effective and sustainable. Thus it is expected that the manual transfer system will evolve initially to a hybrid manual and electronic system and possibly to a pure electronic delivery system. It is recognized that using a third party financial service provider to deliver cash electronically may be more efficient and effective particularly as delivery infrastructure is expanded and complementary technologies continue to develop at the current rate alongside declining service costs. The e-payment pilot is well positioned to capture these advances and it is expected that they will be integrated into the program as they are proven to be suitable. Financial reports will be generated by the LDF which will be submitted to World Bank and copied to MGCSW. Stream 2 49. Will channel funds to MGCSW for the purposes of capacity building, operational costs and monitoring and supervision of the SCTP in the two districts of Dedza and Nkhata-Bay. The MGCSW will use their holding account, managed by the Ministry of Finance. Stream 3 50. Will channel funds for technical assistance, refurbishment of district offices and procurement of vehicles and from World Bank, through LDF to MEP&D and Dedza and Nkhata-Bay District Councils as appropriate. The funds transferred through this stream will also be used for harmonized targeting, establishment of a single registry, mapping of social services as well as training the district officers on the same. MONITORING AND EVALUATION 51. Dedza and Nkhata-Bay District Councils, with support from the Ministry of Gender, Children and Social Welfare and the Ministry of Economic Planning and Development, shall use internal monitoring systems and provide quarterly monitoring reports to all stakeholders involved in implementing the Program. Stakeholders will include members of the District Social Support Committee, the District Executive Committee, The National Social Cash Transfer Secretariat and the National Social Support Technical Committee. The monitoring system shall enable reporting on the following: • Activities implemented as part of the Program; • Amount of inputs/costs used to implement the Program; • Outputs, positive and negative impact of the Program. • Monthly cash transfers to approved beneficiary households; 132 • Implementing cycle of targeting and approval of additional Group Village Headmen; • Administration of changes in beneficiary households; • Overhead costs not accounted for; • Status of program accounts; and • Perceptions and problems of the Program from the perspective different stakeholders. 52. Dedza and Nkhata-Bay District Council will also be expected to participate in the SCTP quarterly review meetings that have participation from the rest of the social cash transfer districts. 53. Annex 5 outlines the proposed logical framework for the Dedza and Nkhata-Bay SCTP. RISK ANALYSIS 54. This section presents a preliminary risk assessment for implementation of the SCTP in Dedza and Nkhata-Bay. A more comprehensive analysis will be undertaken once the District Assessment has been conducted. Assumptions • Dedza and Nkhata-Bay District Councils are willing and able to implement the program • Program will reach full scale within one year (capacity building, procurement of vehicles and equipment, and targeting, enrolment and payment of 21,000 households). • Transfers can be delivered manually at no more than 5% of transfer amount and that an electronic delivery mechanism can be adopted at the same or less cost. Risks • Dedza and Nkhata-Bay District Council may not have adequate staff particularly in the Social Welfare directorate • Procurement and delivery of equipment and vehicles may take a long time, roll-out of targeting, enrolment and payment to full scale may take longer than expected due to limited capacity • E-payment may not be feasible for the entire district depending on infrastructure (power, connectivity and roads) especially considering mobility constraints of the majority of potential clients • Different financial management requirements by principal financiers may not allow a single funding mechanism Mitigation Measures • Conduct district assessment to determine capacity and make provision for additional staff if necessary • Fast track procurement process, provide for hiring or borrowing of vehicles and equipment if necessary 133 Detailed Budget Activity Description Year 1 Year 2 Year 3 Year 4 Total (MK) Total (USD) Targeting and Enrolment District Consultative meeting 1,050,600.00 - - - 1,050,600.00 3,136.12 Training of District training team 11,715,000.00 - - - 11,715,000.00 34,970.15 Implement 280 cycles of targeting (21,000 hh) 185,081,000.00 - - - 185,081,000.00 552,480.60 Subtotal 197,846,600.00 - - - 197,846,600.00 590,586.87 Transfers - Actual transfers 368,550,000.00 680,400,000.00 680,400,000.00 680,400,000.00 2,409,750,000.00 7,193,283.58 Delivery of cash transfers 81,864,000.00 81,864,000.00 81,864,000.00 81,864,000.00 327,456,000.00 977,480.60 Subtotal 450,414,000.00 762,264,000.00 762,264,000.00 762,264,000.00 2,737,206,000.00 8,170,764.18 District Operational Costs - Monitoring of the activity by the district team 1,368,000.00 18,936,000.00 18,936,000.00 18,936,000.00 58,176,000.00 173,659.70 Case management 30,572,000.00 46,560,000.00 46,560,000.00 46,560,000.00 170,252,000.00 508,214.93 Creation/strengthening of Linkages for SCT beneficiaries (once every Quarter) 15,498,800.00 46,560,000.00 46,560,000.00 46,560,000.00 155,178,800.00 463,220.30 Subtotal 47,438,800.00 112,056,000.00 112,056,000.00 112,056,000.00 383,606,800.00 1,145,094.93 Central level Support - Secretariat operational Costs 14,827,200.00 14,827,200.00 14,827,200.00 14,827,200.00 59,308,800.00 177,041.19 Quarterly Supervisory Visits 6,755,200.00 6,755,200.00 6,755,200.00 6,755,200.00 27,020,800.00 80,659.10 Advocacy with Senior Officials 3,983,200.00 3,983,200.00 3,983,200.00 3,983,200.00 15,932,800.00 47,560.60 Development of IEC Materials SCT 12,571,428.57 12,571,428.57 12,571,428.57 12,571,428.57 50,285,714.29 150,106.61 Equipment & office renovations 166,020,000.00 - - - 166,020,000.00 495,582.09 Subtotal 204,157,028.57 25,565,600.00 25,565,600.00 25,565,600.00 280,853,828.57 838,369.64 - Development of Single Registry & Harmonized Targeting - Conduct external learning Visits on harmonized targeting and single registry 14,550,500.00 - - - 14,550,500.00 43,434.33 Consultations to Develop guidelines on harmonized targeting and single registry ( 3 consultative meetings of 2 days each) 6,227,400.00 - - - 6,227,400.00 18,589.25 Testing of the harmonized targeting and single registry for 3 weeks 2,830,000.00 - - - 2,830,000.00 8,447.76 Training of Districts in Utilization of harmonized Targeting approach 1,567,540.00 - - - 1,567,540.00 4,679.22 Sub Total 25,175,440.00 - - - 25,175,440.00 75,150.57 162299 Contingency - Grand total (MK) 925,031,889.57 899,885,621.00 899,885,621.00 899,885,621.00 3,624,688,689.57 10,982,265 Grand total (USD) 2,761,289.22 2,686,225.73 2,686,225.73 2,686,225.73 10,982,265 135 Logical Framework Logic of intervention Objectively Verifiable Sources of verification Risks and assumption Indicators Overall objective Improve the well-being of the % reduction of labour Malawi Integrated Political and macro- poorest and most vulnerable constrained households living Household Survey (IHS) economic stability is households (ultra-poor and below the ultra-poverty line in presumed. labour constrained) in Dedza Dedza and Nkhata-Bay and Nkhata-Bay District Project Purpose Reduce hunger, increase school % increase of people who have Malawi Vulnerability Political and macro- enrolment, improve the health food throughout the year; Assessments reports economic stability is and nutrition and promote the presumed. accumulation of assets of ultra- % of households having at least Famine and Early Warning poor, labour constrained three meals a day Systems reports Favourable weather. households. % increase of school enrolment MDHS, Existence of education facilities of reasonable % reduction in prevalence of Welfare Monitoring Survey quality at reasonable underweight children under- (WMS), distances five years of age Integrated Household Availability of drugs and % reduction in prevalence of Survey (IHS) health personnel. stunted children under five years of age SCT MIS data Positive perception and attitude of beneficiaries on % reduction of under-five National Health Statistics health services mortality National Education % reduction in Infant mortality Statistics % increase of ultra poor labour constrained households visiting health centres % increase of people who acquire assets base for livelihood 136 Output Activity Objectively Verifiable Sources of verification Indicators 1. Capacity of Dedza and 1.1 Provision of adequate Suitable office space Office space Nkhata-Bay District infrastructure Councils and Vehicles and equipment Asset register 1.2 Provision of vehicles and community members equipment built 1.3 Training of DSSC and Number of trainings Training manuals and CSSC reports 1.4 Continuous improvement Operational manual change log 2. 21,000 households in 2.1 Targeting and Enrolment Number of households reached Operational and Financial Dedza and Nkhata- with cash transfer Reports, SCTP MIS, IHS Bay selected, enrolled 2.2 Payment of Transfers Number of months and receiving transfers beneficiaries received the in a regular and 2.3 Case Management transfer on time reliable manner for 4 years 2.4 Monitoring Fully functional district database 3. Monitoring and 3.1 M&S visits Number of M&S field visits Back to office reports and record of actions taken supervision, advocacy, 3.2 Quarterly Reviews Number of reviews documentation Review reports 3.3 Media and dignitary visits Number of media and dignitary visits Media diary 137 ANNEX 12: PRODUCTIVE COMMUNITY DRIVEN PUBLIC WORKS: Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) 1. Introduction: 1. Productive Community Driven Public Works are labor-intensive community-based sub- projects designed to increase household level income and food security and reduce households’ exposure to risks associated with age, health, income, asset depletion, climate change and other disasters. In addition, Productive Community Driven Public Works will also have an important role in creating important community assets including various social infrastructures, promoting natural resource rehabilitation and contributing to agricultural production and productivity. Recently, Safety Net Public Works are gaining growing interest and preference among many African countries including Malawi. Because they are seen as contributing to a productive economy as well as reinforcing a community capacity to plan and manage such activities, Public Works are gaining strong public and political support. Public Works generate predictable income support while maintaining works dignity through appropriate accountability mechanism, and improving status of vulnerable group. 2. Generally, there are two broad approaches of a Public Works program. The first approach which MASAF IV will follow is Public Works as an important Social Protection instrument where they are primarily community based and Safety Net oriented. Under this approach, the primary function of Public Work programs is to provide the poor and vulnerable households with a source of income when they need it the most, through creation of temporary employment and smooth consumption. In addition to this primary objective, safety net Public Works also create beneficial community assets such social infrastructure (schools, health facilities, roads, market infrastructure etc.), various natural resource management outputs through soil and water conservation infrastructure and promote agricultural productivity through creation of irrigation and other land development activities. The second approach is where the primary focus of Public Works is infrastructure oriented. Such Public Works aim to create and maintain assets for broader economic and social development while creating some level of employment as allowed by chosen physical asset and technology. This was the approach followed by the previous phases of MASAF. Therefore, while it is important to recognize the importance of both approaches of Public Works Programs in the context of Malawi, it is useful to make it clear that the MASAF IV approaches of Productive Community Driven Public Work Program is mainly linked with the first approach – Safety Net oriented, since the primary objective of the project is to provide predictable and timely support for the poor and vulnerable. Therefore, the primacy of transfer will be an important design feature of MASAF IV PW program. 2. Core Principles for MASAF IV PW activities 3. Similar to other Public Work Programs, MASAF IV Productive Community Driven Public Works will follow the following fundamental principles of safety net public works: • Labor-based: Works must be labor-intensive and use simple tools as much as possible. The ratio of labor to capital inputs should be flexible at the local level based on the nature 138 of the activity, however the common practice is that the allocation of complementary admin and capital budget ranges from 20 – 40% • Community participation: Promote community participation through the Village Development Committees and Area Development Committees in the selection, planning, implementation and monitoring and evaluation of sub-projects. • Predictability: Ideally, public works are provided through a multi-annual resource framework. Program participants should be aware of the timing of public works, which should be scheduled to avoid periods of peak agricultural labor. • Proximity: Public works are provided as much as possible in the immediate localities of the people in need. • Follow existing sectoral planning approaches for community development activities: Public Works will be planned according to the existing community based planning approaches of the relevant Ministries by ensuring complementarity and linkages of activities in a given area and incorporate mitigation measures for activities which may create environmental risks. For Natural Resource related Public Work activities, it is essential to follow Community Based Participatory Watershed Management approaches. • Integrated in to an area and district development plan: To ensure sustainability, it is desirable to integrate public works into the broader local/district development plan. • Gender Sensitivity: Public works are designed to enable women to participate, and priority is given to works which reduce women’s regular work burden. Public works must be flexible to adapt to women’s activities (e.g. late arrival and early leaving for home). Women are overburdened with household activities which must be recognized and catered for by reducing the number of hours in the work day for women. • Primary focus on creating community assets: The creation of community assets is the primary objective of the program. However, for natural resource management and land development activities, the watershed approach allows public work labor to work on private land if this work is necessary for the treatment of the watershed. In addition, public works activities can be undertaken on private land belonging to poor female-headed households with severe labor shortages. • Primacy of transfer: Safety Net Public Works put high emphasis on primacy of transfer. This means that delay related to the planning and implementation of Public Works activities should not compromise the timeliness of transfer to the beneficiaries. 3. Planning and selection of PW activities 4. During the preparation process of MASAF IV, extensive consultations were held with the communities in different localities through the VDCs and ADCs. Communities expressed the need for the project to give due emphasis on productive community assets encompassing various sectors, including natural resource rehabilitation, agriculture and water, and social services. According to community preference, priority examples of subprojects included those 139 related to water supply and irrigation, bridges, storage facilities for maize and other grains, maize mills, oil mills, afforestation, nurseries for seedling development, soil and water conservation activities, solar stoves, solar panels, mobile bicycle ambulances, and health posts. Communities felt that such interventions, chosen through a participatory planning approach, would contribute to improving their household incomes creating more sustainable livelihoods and thereby increasing their resilience to shocks and reducing their risk of food insecurity. 5. While the above list is a quick snap shot of what the communities generally believe as important priority areas of intervention, MASAF IV will support and promote a process where specific sub-projects are determined locally through an annual, participatory planning process that focuses on area development approaches in line with the District Development Planning System, that recognizes the village as the lowest planning unit. Such approaches will revolve around community based integrated water watershed management which foster diversification of sustainable agriculture based livelihoods, natural resource management and environmental rehabilitation related activities. Public Works are meant to be just in time interventions: they are seasonal and are timed so that resources are available to households during lean periods for income and work. Therefore works are undertaken at the most appropriate time in terms of weather conditions and when labor demand from alternative agricultural activities is at its lowest. In the case of Malawi there are two cycles per year for public works, of 12 days per month, 2 months per cycle implemented by MASAF-LDF. In a year the first cycle of PWs is in April-June and the second cycle is in July-December. 6. A large portion of the poor rural (and peri urban) population works on the basis of daily wages for other farmers, large estates, or as farm and construction labor at homesteads and abroad. This work is referred to as Ganyu, which means short-term rural labor the most common of which is piecework weeding or ridging on the fields of other smallholders, or on agricultural estates nearby or far even in neighboring countries. Ganyu is the most important coping strategy for most poor households in the crucial hungry period between household food stock running out and the next harvest. 7. MASAF implemented public works would be considered as Ganyu with a critically important difference. These public works would not only provide income in daily wages but be part of an investment in a community level productive asset which would benefit the labourer for the long term. 8. As mentioned earlier, the selection of sub-projects to be carried-out under the public works component is driven by the local planning process in order to identify community needs and prioritize sub-projects. The implementation of Public Works plans may not necessarily be limited to one year as the completion of some projects, especially natural resources management through soil and water conservation activities in a given watershed may take more than one year. Therefore, a comprehensive planning process is crucial to the success of the public works sub-projects, allowing a pipeline of public works sub-projects to be developed. In this regard, MASAF IV will support the district and communities to prepare a an initial comprehensive area development based Public Work plans over the life of the project which would then be revised and made specific during the annual planning process. 140 9. The planning process at the district level would include representation from Village and Area Development Committees, with facilitation from extension staff within the sectors of Gender, Children and Social Welfare, Agriculture, Water and Irrigation, Transport and Public Works and Forestry among others. The plans will be consolidated into the District Annual Investment Plan (AIP). 10. Planning starts by first identifying the communities through the poverty mapping and targeting process. Then community level extension workers would facilitate work with community members in village development committees identifying and prioritizing the key community wishes and then developing an appropriate list of sub-projects that will be implemented. Possible areas of Public Works interventions based on which specific sub-projects could be identified will include, but not limited to, the following: (a) Activities that improve the management of natural resources and prevent land degradation through afforestation and appropriate biophysical soil and water conservation activities such as hill side terracing, soil and stone bunds, micro basins, gully control and treatment structures, tree planting, area closures etc. (b) Improved agricultural land productivities through technologies that promote soil fertility and conserve soil moisture (agro forestry, forage development, compost making, etc.) (c) Promote access to existing water sources and also promoting rain water conservation and harvesting technologies. (d) Improved market infrastructure through construction of rural farm to market roads, bridges and community level grain and food storage facilities; (e) Improved access to drinking and irrigation water through development of springs shallow wells, and water ponds; (f) Increased availability of fodder through vegetative fencing and multi-purpose nurseries; and (g) Improved school and health facilities through repairing and constructing classroom and health facilities (h) Other community identified social service infrastructure 11. Certain sub-projects are not eligible under the public works. These include five main types of sub-projects: (a) Sub-projects that solely benefit private, for-profit organizations. (b) Sub-projects to undertake regular, minimal maintenance activities on assets that the community should already undertake as an in-kind contribution to the protection of those assets. (c) Sub-projects for military or defense purposes. (d) Sub-projects that degrade the environment (e) Sub projects which are a significant burden to and deplete the communities existing resources. 4. PW implementation: 12. Public Works participants from communities will be organized into work groups managed by a community group leader selected by participants from among the group. They 141 will be supported and overseen by technical supervisors (selected by the Councils for each sector specific project – foremen / women) Payment of public works is based on the achievement of work norms, it is therefore up to supervisors and public work groups to agree the working tasks which should be appropriate to other labor demands on households. Achievement of these work norms will be supervised by Extension Agents or community level PW community facilitators prior to transfers being disbursed. The Council Staff will undertake periodic technical quality assessment to assess compliance with sector design norms. Guidance on appropriate technical design of common public works will be made available by the project and accurate assessment of non-labor inputs will be made. During implementation, the TST will facilitate appropriate backstopping by specialists drawn from TST and relevant sector ministries. Extension staff will take advantage of the implementation period from group formations to the days when wages are disbursed to also provide educational messages to communities on savings and investment, and social issues: social messages will include aspects of nutrition, public health, gender, and HIV/AIDs. 5. Maintenance of Community Public Work infrastructure 13. As part of the planning process, all community public works should have a clearly defined maintenance plan after completion. The communities and other parties benefiting from the PWs will have a user rights and therefore the obligation to maintain and manage the assets created this will be however governed by community arrangements. Such user rights arrangements could be formalized through creation of group by-laws governing access, management and obligations. The group may also require the establishment of a system to collect user fees for future maintenance. These user rights and maintenance responsibilities need to be defined during the planning process to establish a sense of ownership by the benefitting community or group. With regard to social infrastructures created through Public Works (schools, clinics, water points, etc.), the relevant sector offices should undertake proper takeover and allocate appropriate budget in advance for the operation and maintenance of these infrastructure. 6. Targeting and identification of Productive Community Driven Public Works Beneficiaries 14. The MASAF IV Public Works program will target mainly the rural and pre- urban poor households with able bodied family members and willing to work on the public work activities. The targeting of eligible beneficiaries will based on the combination of different targeting mechanism. Given a wide spread level of poverty and the aim of the government to ensure equity, the project is aiming to reach all the districts. However, given the resource limitation and differences in the severity of vulnerability in different districts, the project could achieve greater impact if most vulnerable districts are selected though geographic targeting and selected beneficiaries receive continues support over the life of the project. The vulnerable households from each district will be selected based on the ratio of the existing poverty mapping supported by a combination of proxy mean testing and community targeting mechanisms. The level of Wage Rate is also an important factor to include the real needy in the Public Works program. The Public Work Program will focus on the vulnerable population falling under Quintile 1 and 2. 142 15. While the major target beneficiaries of PW component are poor households that have able bodied member and can participate in the implementation of physical activities, provisions will be made for labor constrained households as direct support in areas that are not benefiting from the Social Cash Transfer. Direct support could be provided through the MASAF existing channels or could under the proposed MASAF IV design go through SCT . However, these households can still participate in community activity which may not require physical labor. This could include, caring for children at the PW sites, managing PW hand tools, involving in educational training on nutrition, HIV/AIDs awareness raising etc. Given that the Social Cash Transfer Program (SCT) is also gradually expanding to all districts, the plan for direct support should be properly coordinated with SCT plans. Once the SCT is rolled out to all MASAF IV districts, the direct support arrangement may not be necessary. 7. Wage rate and payment modalities 16. MASAF IV will follow a general principle for setting wage rates for Safety Net Public Works. The wage rate will be kept low enough to attract only those in need of temporary work but it should be high enough and timely enough to provide a meaningful level of transfer in line with the objective of the project. While the wage rate in principle should be variable from place to place due to purchasing power variation in different localities, the project will adopt a uniform average wage rate at the national level. However, it is important to review the purchasing power of the cash transfer wages annually taking into account price increase for food and other commodities. 17. The beneficiaries receive their transfers on a monthly basis and within two weeks of completion of any twelve days of tasks. To ensure timeliness of transfer from LDF to Districts and from districts to the beneficiaries, specific performance targets will be put in place and will be monitored regularly. During the implementation of Public Works, the participation of beneficiaries will be recorded in an attendance sheet, which will be submitted to the District through the Extension Workers / Community Facilitator. The district will be responsible for preparing the payroll and making payments to beneficiaries. While the current payment modalities are through a manual system, MASAF IV will aim to pilot and introduce electronic payment system. 8. Implementation season and duration of labor contribution 18. The public work activities will be implemented in two phases; a)during the slack seasons of the major source of livelihood which is mainly agriculture and when the vulnerable people have the most need for additional income to cover their family need including food and non- food expenditure and inputs for agricultural activities, and b) after harvesting in order to ensure that beneficiaries have cash at hand to use in homes to avoid sale of all farm produce. It is anticipated that the majority of public works will therefore take place during this season. Under current MASAF program there are two cycles per year for public works, of 12 days per month, 2 months per cycle implemented by MASAF-LDF. In a year the first cycle of PWs is in April- June and the second cycle is in July-December. Under MASAF IV, it is proposed that each targeting able bodied person can get an employment of 48 days/per year and over 1 (one) year for the urban communities and at least 2 years for the rural Districts. 143 9. Institutional arrangement for implementation: 19. Adequate capacity and appropriate institutional arrangements for the oversight, coordination and management of public works is critical. For this, appropriate institutions at the national and local levels will have to play a strong technical and leadership role in public works planning and implementation. In MSAF IV, there will be more ownership and involvement of relevant sectoral ministries such as the Ministry of Agriculture, Ministry of Water and Irrigation, Ministry of Forestry, Ministry of Environment, Ministry of Gender, Children and Social Welfare, Ministry of Local Government and Rural Development and others. LDF-TST will provide the overall management and coordination function, but the actual implementation and technical support responsibility will be taken by the sector ministries and the technical units in the district council. Appropriate budget will also be allocated for those technical Ministries and Units for technical supervision and monitoring of Public Work activities on the ground. 10. PW budget allocation 20. At a National level PWP allocation will use an Inter- Governmental Fiscal Transfer Allocation where poverty and population will be the main factors employed. The major budget for the Public Work implementation is the transfer payment for unskilled labor. However, to ensure the quality of public work activities, it is important to allocate appropriate budget for administrative costs and capital inputs to provide the necessary complementary inputs as well as technical supervision and monitoring for public works activities. This could also include the financing of small complementary civil works contract to support implementation of public works such as building or renovating social infrastructure, building of small culverts, bridges etc. Appropriate finance will have to be transferred from the LDF to districts before the start of the Public Work implementation season to ensure that tools and materials are procured to start activities in a timely way. Technical guidelines and work-norms will have to be developed for different types of labor-intensive public works. For planning purpose an average capital and admin budget of 25% can be applied of which 20% is for capital and 5% is for admin budget. 11. Monitoring and Evaluation: 21. Monitoring and evaluation of public works is an important element of the program management. Local authorities through their M&E officers and technical staff will continue be the main responsible body for the regular monitoring and systematic reporting on the implementation status of public Works activities. At the national level the LDF-TST and sector ministries will have the responsibility to support the local council in developing appropriate M&E tools and provide necessary training and technical assistance in this regard. LDF-TST will also be responsible for consolidating the monitoring report from each district on regular basis and also conduct impact evaluations as required. In addition to the regular monitoring, annual technical public work reviews on sample Public Work sub-projects to evaluate the technical standards and planning process would be introduced. Elements of Public Work impacts assessment can be incorporated in the general program impact evaluation. 144 ANNEX 13: COMMUNITY SAVINGS AND INVESTMENT PROMOTION (COMSP) Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) Introduction 1. COMSIP would be one of the key institutions for the implementation under Component One sub component (ii) Livelihoods and Skills Development. It would finance grants for increasing household level incomes and assets for COMSIP members and their groups. The grants would promote investments which would increase incomes and assets of households and reduce risks of food insecurity and promote better nutrition and health. Such grants would fund, for example, grain storage facilities, grain mills, livestock and crop diversification etc. and catering of food for school meals through promotion of savings and investment groups around schools to leverage resources as social responsibility towards kitchen gardens. 2. The sub-component would also finance training in nutrition, health and enterprises through grants for technical assistance either sourced through the COMSIP institution or through service providers based on the articulated need of group members. COMSIP has successfully facilitated the organization of many PW participants (99,153 members) into savings groups (4,457 groups). This is a sustainable outcome of the PW Program under MASAF III. These groups have been successfully mobilized by extension workers from various ministries including the Ministry of Gender, Children and Social Welfare. These groups have the potential to be powerful catalysts to community planning processes for this component as well as a channel for messaging and training on health, nutrition, literacy including financial literacy and improving livelihoods and asset building among beneficiary households 3. COMSIP would respond to the demand, identified by UNICEF and COMSIP Union for SCT clients to participate in COMSIP savings groups. Currently SCT clients are not members of COMSIP groups. However they do often participate in savings in Village savings and Loans(VSL) but they have limited access to the capacity building and practice share out concept that COMSIP members can access. These SCT are deemed labour constrained due to their state of old age, physical challenges, sickness etc. These clients would need proxy membership in investment activities for them to be able to increase their incomes in savings groups. In the villages and in the families themselves such interventions as 73mbumba culture of helping the least able member best suits assistance to these vulnerable groups and is considered a social responsibility by the savings group or the village. 4. The Cooperative Society Act 2011 74, under the Ministry of Industry and Trade, requires cooperatives to have an office as a meeting place This in their infancy stage is a burden on the COMSIP groups whose savings would be better used to improve their productive assets and livelihoods before venturing into a stipulated construction or renting structures for an office which has little productive value for them.COMSIP in its strategic plan shared with the Cooperative Division of the Ministry of Industry and Trade as a regulator has indicated that the 73 Mbumba culture is a village system where the village work as a team to plough a members field/ or do jointly as village an activity to assist the sick/old members of the village at no cost. This best fits the SCT members. 74 Government of Malawi.Financial Cooperatives Act.2011. Ministry of Industry and Trade. 145 primary cooperatives will be gradually constructing offices as per the law. It envisages with time each cooperative will operate within their built structures. COMSIP administrators think that it is in the interest of cooperatives that the offices also be used to generate income as business premises or rented/hired for other activities at a cost.. 5. Clients of the public works component of MASAF have formed savings groups with a portion of their cash payments from Public Works. Activities under this sub component aim at creating opportunities for community savers and entrepreneurs especially beneficiaries of Public Works Program to move into higher income trajectories hence improve livelihoods and in the process graduate from safety nets and also become resilient to shocks such as drought. The savings and investment interventions in the PWSP are a response to closing the sustainability gap that exists in the implementation of PWSP. Over years the implementation of PWSP tended to end at the disbursement of wages. This initiative brings in a scope beyond the wage disbursement function. It has become a PWP Plus initiative that sustains beneficiaries beyond the PWP implementation period through asset creation but also through utilising and sustaining existing community assets such as dams, irrigation schemes, land conservation among other productive PWP activities. 6. COMSIP through the mobilization efforts of the community development extension workers of the Ministry of Gender, has successfully facilitated the organization of many PW participants (99,153 members) into savings groups (4,457groups). This is a sustainable outcome of the PWP under MASAF. Average savings amount to MWK 6,727 per individual. The groups have formed 135 cooperatives. These groups have the potential to be powerful vehicles for messaging and training on health, nutrition, literacy and increasing livelihoods and assets. Implementation Modalities 7. Implementation of activities under this sub component follows a Graduation model that entails these stages; Group formation: Institutional building: Financial Literacy: Business Management: Cooperative/ Association management. At every stage of the graduation model groups and members meet qualification criteria in order for them to move to a higher level of services and receive capacity building support. As groups move to higher level of services, their maturity improves and sustainability is ensured. 8. COMSIP as an institution is a member-owned savings and Investment institution created to provide financial services especially savings mobilization and investment promotion to the un- served and underserved peri-urban and rural communities. The vision of COMSIP is to “create a culture of vibrant, sustainable savings and investments amongst its cooperative societies in Malawi”. Its mission is to “deliver flexible savings and investment products and services to economically empower Malawians to improve their livelihoods through member owned savings and investment cooperatives”. 9. COMSIP Cooperative Union which evolved from a component under the Malawi Social Action Fund (MASAF 3 APL I) is the implementing agency for the savings and investment activities. It now has 135 cooperatives and is regulated by the Ministry of Industry and Trade under the Cooperative society Act 1998. 146 1.0 Update on Progress 10. Funds available for the savings and investment amounting to US$ 3.72 million have so far been used to mobilize communities to form savings and investment groups; and to build the capacities of communities and extension workers in financial literacy and business management over a three year period. The beneficiaries of this initiative include communities participating in Public Works program and other phased out community empowerment projects such as the Skills and Income Generation Project funded by AfDB. COMSIP has successfully facilitated the organization of many PW participants (99,153 members) into 4,457 savings groups of which 61% are female covering all the 28 Districts Councils in Malawi. Over the three years, communities have mobilized MWK667 million in savings. Average savings amount to MWK 6,727 per individual. These groups have opened their bank accounts with commercial banks and this contributes towards their financial inclusion and exposure to financial institutions for other financial services. 11. The savings mobilized have been invested by the groups for on lending to members and in some cases for group investment such as bee keeping, piggery, irrigation farming among other group investments. The members in turn are using the savings to invest in small scale enterprises. The types of enterprises include buying and selling of agricultural produce, investment in livestock cash crop farming such as cotton, production such as bakery, winery, and mushroom growing among others. 12. All the 4,457 savings groups which have been formed have gone through institutional development to ensure group cohesiveness for sustainability of the groups. Further the group members have been trained in Financial Literacy and Business Management and some have been trained in cooperative member education and have been registered as cooperatives with the registrar of Cooperatives in the Ministry of Trade and Industry. The training program in Financial Literacy equips the groups with skills to enable them to manage group savings through proper savings management procedures and record keeping, and also build individuals towards money management and financial freedom, while the Business Management Training program equips the groups with skills to enable them manage their businesses successfully. A total of 1,275 groups with 27,252 beneficiaries of which 65 percent are female have been trained in financial literacy and business management. The skills gained have helped improve their business performance and leverage more savings. 2.0 Justification for AF II 13. Results of the Beneficiary assessment study revealed that the savings and investment initiatives has contributed greatly to the communities’ access to savings and loans which has resulted in employment generation through business ventures and has in turn led to improved household welfare. The rural communities is poorly served by financial institutions and the creation of the savings and investment groups has greatly improved access to financial services provided by these groups. Through the COMSIP Union that provides support in products and services suited to the community environment, banking alike services with associated accountability tools have been embraced by various community members. 14. The perceived demand by communities to engage in savings and investment 147 activities is overwhelming. The AF II amounting to US$2.25million will be used to facilitate the training of groups in financial literacy and business management to close the current gap between groups that have been formed and those that require capacity building in this area which currently stands at 32%. The funds will also be used to train the groups in higher enterprise development initiatives such as value addition skills as such leveraging more savings and improving their livelihoods. Additionally, the AF II will also be used to facilitate the formation of more cooperatives from the PWP beneficiaries and affiliation of cooperatives to the COMSIP Cooperatives Union for sustainability. 15. As more and more community members embrace the savings and investment concept through the Public Works Program (PWP) Plus initiative and move into higher income trajectories, their involvement will help create room for other community members to enter into safety nets as they graduate from them. Thus the graduation model is geared to nurturing community members understand their roles in moving out of their poverty through activities initiated by them while getting initial support from government and donors. 16. It has been observed that PWP assets once created during the period of implementation, the maintenance of such structures is not considered and the creation of the savings and investment groups cans be a source of community resource to take over the maintenance as advocates of development in their respective villages. One of the tools that COMSIP uses is the 8 Jobs as pillars for COMSIP that members of COMSIP need to adhere to and community development is one such element in the 8 jobs. It will be encouraging bringing into practice this type of intervention so that the created assets are sustainable as these are useful in conveying products to markets; the very same products the members are producing. 148 ANNEX 14: SOCIAL ACCOUNTABILITY Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) I. Background 1. This Annex outlines how Social Accountability (SA) will be strengthened during MASAF IV to ensure that service providers are held accountable for delivering the Program to the most vulnerable Malawians, without negative impact and in a transparent and accountable manner. It will also outline lessons that were learned from the implementation of SA tools during MASAF III that will inform the methodology for MASAF IV. II. Social Accountability in MASAF III 2. Steps towards mainstreaming. MASAF has already taken steps to mainstream SA methodologies within MASAF III including the implementation of Community Score Card in 2010 and 2013. LDF also facilitated a Study Tour to Tanzania and India where the Government of Malawi Team received training and orientation on how to implement Citizen Report Cards. LDF also planned to introduce “The Most Significant Change Technique” into the M&E framework. 3. Objectives. The main objectives of implementation of SA tools to date were to assess performance of service providers (i.e. District Staff and Project Management Committees) responsible for delivering subprojects, specifically focusing on implementation stage processes. SA tools allowed for communities to engage in performance monitoring. 4. Lessons Learned. Implementation of these tools generated lessons learned that can inform the methodology for implementation of SA tools in MASAF IV. Lessons learned include the following. a. Because District staff and extension workers were trained to facilitate the SA tool application, there was an inherent bias in the process as the ‘facilitators’ were also the service providers; b. There was a general lack of will on part of district management to implement SA tools; c. The SA tool process requires a lot of time for preparation and training of facilitators; d. There are resource limitations and considerable resources are required to cover a significant sample of districts and subprojects; e. CSOs (particularly those involved in community-driven development) involvement is vital for facilitation of tool application process; f. The quality of outputs from the SA tool application process are largely dependent on the quality of the facilitation; g. Community Score Card process proved to be a very valuable tool for generating reliable feedback; h. Findings from the Citizen Score Card process have been instrumental in influencing program design changes, responsiveness of service providers, community empowerment, etc.; and i. SA tools useful to update indicators in results framework. 149 5. Grievance Redress. MASAF III included a mechanism called “Tip-Offs Anonymous”, an independently managed fraud and ethics hotline. All stakeholders are able to report crime, theft and fraud confidentially. MASAF clients will also go to their Area Development Committee, District Commissioner, frontline staff (e.g. extension worker, etc.) and Village Chiefs with a complaint. In most cases, grievances are resolved by local leaders or the DCs office, informally and without written documentation. III. Social Accountability in MASAF IV 6. Strengthening Social Accountability. SA will be integrated into the MASAF IV M&E system to allow for active follow-up and corrective measures to be taken, ensuring that clients are satisfied and receiving the maximum benefit from the Program and that the correct planning processes and procedures are being followed. MASAF IV will include more participation of clients in the monitoring and implementation of the Program. 7. Tools. The Program will use SA tools to measure various aspects of Program performance, including: beneficiary satisfaction, timeliness of transfers, improvements and impact, etc. Tools such as the Community Score Card, Citizen Report Cards and the “Most Significant Change” will be applied. 8. Independent Body. Building on a lesson learned from MASAF III, MASAF IV will contract an independent body to implement the SA tool application process. In particular, LDF will focus on building the capacity of a local research institution and has begun to engage with the Lilongwe University of Agriculture and Natural Resources and the National Statistic Office. 9. Grievance Redress. To guarantee timely and effective treatment for those who might have a complaint, MASAF IV will establish a community level grievance redress mechanism. This system should be separate from targeting and should report directly to District Council. The need for this mechanism is confirmed by the ongoing work of the Ministry of Lands and Housing, to encourage transparency in land transactions. The mandate of this mechanism would be wide enough to also address grievances for COMSIP and the Social Cash Transfer Program. 10. Communications Strategy. There is a need to increase the visibility of SA aspects of MASAF implementation related to client, implementer, managers and decision-makers, in addition to the wider citizenship of Malawi. SA within MASAF IV will be communications centered. A Communications Strategy for MASAF IV will focus on ensuring that clients understand their rights and responsibilities, not just within MASAF, but across all the Programs supported by the Social Safety Nets Platform. MASAF IV must ensure that information related to access and entitlement is widely disseminated and understood by client communities. Early sensitization of District Councils will also be important. It is important to ensure widespread understanding of Program objectives, processes and procedures. 150 ANNEX 15: SOCIAL SUSTAINABILITY Strengthening Safety Nets Systems Project – Fourth Malawi Social Action Fund (MASAF IV) (P133620) 1. Social Safeguards. The Program will support Productive Community Driven Public Works, which may require acquisition of land or have an impact on assets, including economic and natural resources. The Program recognizes that land scarcity is intensifying in Malawi and it is likely that there will be more resistance to land loss in the future. The Borrower has therefore prepared a RPF to protect against community land donation, which can be the result of coercion from the community upon select individuals. The RPF also allows for monitoring mechanisms to be put in place to ensure no person is worse off as a result of Program activities. The RPF for MASAF IV was strengthened to include a community-level grievance mechanism that is in line with the ongoing work of the Ministry of Lands and Housing which would see the creation of committees and tribunals empowered to carry out the function of land allocation, adjudication, adjunction, management and settlement of customary land disputes in an effort to increase transparency in customary land transactions. The RPF also sets out a clear budget for compensation. The ESMF screening process, which is mandatory for all subprojects, assesses and minimizes potential impacts such as increased pressures on human settlement, disturbance to religious sites, increased social tensions over asset allocation, etc. Subprojects presenting considerable social risk should be placed on a negative list and disallowed. The Ministry of Environment and Climate Change is currently working with UNDP to develop guidelines for mainstreaming HIV/AIDS into Environmental Impact Assessment (EIA) for Malawi. Once completed, those guidelines should be mainstreamed into the ESMF for MASAF IV. 2. Targeting. Targeting for MASAF III is based on a mix of geographical and community- based identification. The Malawi Vulnerability Assessment Committee (MVAC) Report is used to determine how many beneficiaries per district should be identified. There are reports of inclusion and exclusion errors.75 MASAF IV will review and adjust targeting methods to ensure that the Program is reaching the most vulnerable Malawians. As part of MASAF IV, the Communications Strategy will be enhanced to ensure that communities are well informed of the targeting criteria for, and objectives of, the Program. At the same time, community-level grievance redress mechanisms will be strengthened. 3. Most Vulnerable Program Beneficiaries. MASAF IV targets the poorest of the poor. The Program thus captures this population within its caseload and is designed to meet the needs of this group. However, within this caseload are the ‘most vulnerable’. They include: a) Beneficiary households unable to provide PW labour. They include, for example, the elderly, people living with HIV/AIDS (PLHIVs) and labour-poor households; b) Female-headed households; and c) Children. It is important that MASAF IV builds on past experience to sustain/maximize its impact on these groups. Most importantly, it is important to show that MASAF IV is not negatively impacting these groups. 4. Community Selection and Implementation of Subprojects. MASAF IV will focus on a community-driven approach to subproject selection. The PIM outlines that a Participatory Rural Appraisal (PRA) process that will be conducted as part of the district planning process. 75 Government of Malawi. Ministry of Finance. Comprehensive Report of the Community Score Card Process. 2010. The Local Development Fund. Lilongwe, Malawi. 151 Communities will carry out needs assessment through PRA techniques facilitated by the DEC and extension workers. Improved Watershed Management has the potential to reduce conflicts within and among communities caused by a depleting resource base, and promote cohesion among communities with sub-catchments. 5. Gender. Women in rural Malawi have a heavy workload of both productive and reproductive tasks and their participation in decision-making can be limited. Productive Community Driven Public Works are designed to enable women to participate, and priority is given to works, which reduce women’s regular work burden. Productive Community Driven Public Works must be flexible to adapt to women’s activities (e.g. late arrival and early leaving for home). Women who participate in Public Works are required to work for fewer hours than male participants in recognition of their productive work. The PIM also stipulates that 40% of committees (planning, management, etc.) be comprised of women. Women’s livelihoods, in particular, are likely to be improved by the Program through an increased focus on watershed management what will not only reduce long hours that women often spend each day to collect water but also through COMSIP which will enhance incomes and income opportunities and increase empowerment (i.e. acquiring skills). While the Program is designed to be gender sensitive, as part of MASAF IV Gender Contextual Analysis will be undertaken to assess gender roles, responsibilities, relationships between women and men (e.g. division of labour, access to and control over Program benefits, decision-making and rights) more deeply leading to improvements in the PIM. MASAF IV will also pay special attention to capacity building related to gender objectives. 6. Linkages. MASAF IV will consider linkages with other programs that will enable maximum benefit for MASAF beneficiaries. The degree to which beneficiaries access other programs and services in conjunction with MASAF will be explored with the aim to assess the necessary linkages and to formulate recommendations on ways in which these linkages might be strengthened as MASAF IV moves forward. Nutrition is one such area in which linkages should be more clearly established during the early phases of MASAF IV implementation. 7. Nutrition. Malnutrition remains a major concern in Malawi and MASAF beneficiary households are some of the most vulnerable to this. The creation of community assets from Productive Community Driven Public Works in addition to transfer payments and grants through COMSIP will not only promote investments, which will increase incomes, and assets of households but reduce risks and promote better nutrition and health. MASAF IV will not only finance training in nutrition and health but will promote the provision of nutrition outreach and to encourage households to participate in nutrition counseling. 8. Monitoring and Evaluation. The Program will promote participatory community M&E through the use of Social Accountability tools to ensure that MASAF IV is not negatively impacting beneficiaries. The MASAF IV M&E system will include gender disaggregated data in measure levels of satisfaction related to the delivery of the Program. Impact Evaluations will focus on added value of MASAF for communities and the most vulnerable, in particular. The M&E system will also track planning process to ensure that the community driven process set out in the PIM is being followed. 152 IBRD 33440R1 32°E 34°E 36°E To To Song we Mbeya TA NZA NIA TANZANIA Tunduma Chitipa MALAWI Karonga 10°S Chisenga 10°S To Muyombe Nykia Chilumba (2,606 m) Chelinda Mkondowe To Muyombe Livingstonia Katumbe Rumphi Ruarwe s. Kafukule Mzuzu Mtn Euthini Nkhata NORTHERN Bay ZAMBIA a Viphy Mzimba Chinteche (MALAWI) Lake Mala 12°S 12°S Luwawa To Lundazi Nkhunga wi Kaluluma Nkhotakota Kasungu MOZAMBIQUE Ntchisi C E N T R A L Dowa Makanjila Bua To Mchinji Chipata Salima 14°S LILONGWE 14°S Namitete Monkey Bay To To Cuamba Furancungo Dedza Mangochi To Ulongwe SOUTHERN To Cuamba Ntcheu Balaka MOZAMBIQUE 32°E Machinga ire Sh Lake Neno Chilwa MALAW I To Lirangwe Zomba Tete Mwanza Chiradzulu CITIES AND TOWNS Blantyre Phalombe DISTRICT CAPITALS* 16°S Chikwawa Mulanje Sapitwa 16°S (3,002 m) REGION CAPITALS Thyolo To NATIONAL CAPITAL Liciro N’gabu RIVERS To Morire MAIN ROADS RAILROADS Nsanje 0 20 40 60 80 100 Kilometers DISTRICT BOUNDARIES REGION BOUNDARIES This map was produced by the Map Design Unit of The World Bank. 0 20 40 60 Miles The boundaries, colors, denominations and any other information To INTERNATIONAL BOUNDARIES shown on this map do not imply, on the part of The World Bank Vila de Sena *District names are identical to the District Capitals. Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 36°E MAY 2012