Document of The World Bank

Report No: 27194

IMPLEMENTATION COMPLETION REPORT(IDA-29530 COFN-04270 TF-20452 TF-26373 PPFI-P9980 TF-26803)

ON A

CREDIT

IN THE AMOUNT OF SDR 21.7 MILLION (US$30 MILLION EQUIVALENT)

TO THE

REPUBLIC OF YEMEN

FOR A

SOCIAL FUND FOR DEVELOPMENT PROJECT

November 24, 2003

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 2003)

Currency Unit = Yemeni Rial (YER) YER1.00 = US$ 0.005US$ 1.00 = YER183.75

1997: US$1.00=YER129.281998: US$1.00=YER135.88

1999: US$1.00= YER155.75 2000: US$1.00= YER161.73 2001: US$1.00= YER168.63 2002: US$1.00= YER178.88

FISCAL YEAR January 1- December 31

ABBREVIATIONS AND ACRONYMSCAS Country Assistance Strategy CGAP Consultative Group to Assist the Poorest CBO Community-Based Organization ESF Egypt Social Fund GTZ Technical Cooperation Association (Germany) ICR Implementation Completion Report IDA International Development Association IGP Income-Generating Programs KfW Credit Institute for Reconstruction (Germany) MIS Management Information System NGO Non-Govermental Organization OPEC Organization of Petroleum Exporting Countries PAD Project Appraisal Document PHRD Policy and Human Resources Development- Japan Trust Fund PPF Project Preparation Facility QAG Quality Assurance Group SDR Special Drawing Rights SFD Social Fund for Development UNCDF United Nations Capital Development Fund

Vice President: Christiaan J. PoortmanCountry Director: Mahmood Ayub

Sector Director: David Steel (Acting) Task Team Leader: Yasser El-Gammal

REPUBLIC OF YEMENSOCIAL FUND DEVELOPMENT PROJECT

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 55. Major Factors Affecting Implementation and Outcome 186. Sustainability 207. Bank and Borrower Performance 228. Lessons Learned 239. Partner Comments 2510. Additional Information 29Annex 1. Key Performance Indicators/Log Frame MatrixAnnex 2. Project Costs and FinancingAnnex 3. Economic Costs and BenefitsAnnex 4. Bank InputsAnnex 5. Ratings for Achievement of Objectives/Outputs of ComponentsAnnex 6. Ratings of Bank and Borrower PerformanceAnnex 7. List of Supporting DocumentsAnnex 8. Beneficiary Survey ResultsAnnex 9. Stakeholder Workshop ResultsAnnex 10. Trust Fund Assessment Annex 11. Microcredit Program

NOTE: This report reflects a comprehensive analysis of the implementation experience and the achievements of the Social Fund for Development (SFD) project. The lessons learned are expected to further guide the Government of Yemen, the SFD, the Bank, donors, and other stakeholders in two ways: to imbue improvements in their programs aimed at assisting Yemen's poor communities and vulnerable groups and to provide guidance to similar operations in the region. The participatory process adopted in preparing this report helped build the local stakeholder capacity in carrying out multi-sectoral program evaluations. The first phase of a comprehensive impact evaluation, including household surveys, community surveys, and participative surveys, was completed in September 2003: its findings are reflected in the report and detailed in Annex 8. A stakeholder workshop was held in September 2003: its findings are reflected in the report and detailed in Annex 9.

Project ID: P041199 Project Name: SOCIAL FUND DEVPTTeam Leader: Yasser El-Gammal TL Unit: MNSHDICR Type: Intensive Learning Model (ILM) of ICR Report Date: December 8, 2003

1. Project DataName: SOCIAL FUND DEVPT L/C/TF Number: IDA-29530;

COFN-04270; TF-20452; TF-26373; PPFI-P9980; TF-26803

Country/Department: REPUBLIC OF YEMEN Region: Middle East and North Africa Region

Sector/subsector: General water/sanitation/flood protection sector (25%); Health (25%); General education sector (25%); Other social services (19%); Micro- and SME finance (6%)

Theme: Civic engagement, participation and community driven development (P); Small and medium enterprise support (P); Social risk reduction (P); Rural services and infrastructure (P); Poverty strategy, analysis and monitoring (S)

KEY DATES Original Revised/ActualPCD: 06/04/1996 Effective: 09/24/1997 09/24/1997

Appraisal: 02/27/1997 MTR: 12/31/2000 10/27/1999Approval: 05/22/1997 Closing: 06/30/2003 06/30/2003

Borrower/Implementing Agency: GOVERNMENT/SOCIAL FUND FOR DEVELOPMENTOther Partners: Arab Fund for Economic and Social Development, Government of the

Netherlands, European Union

STAFF Current At AppraisalVice President: Christiaan J. Poortman Kemal DervisCountry Director: Mahmood A. Ayub Inder SudSector Manager: George SchieberTeam Leader at ICR: Yasser El-Gammal Qaiser KhanICR Primary Author: Willem Struben

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: HS

Borrower Performance: HS

QAG (if available) ICR

Quality at Entry: S SProject at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:To reduce proverty by establishing a demand-driven mechanism that (a) improves the living conditions of the poor through community-development services and (b) supports income-generating activities throught the development of small and micro-enterprises (SME). The project objective reflected government priorities for improving the social and economic conditions of the poor and was consistent with the government's overall development strategy to promote broad-based economic growth, develop the country's human resource base, reduce infrastructure constraints, and promote self-reliance. The objective was also in line with the objectives set out in the CAS (No. 15286-YEM, January 19, 1996): poverty-targeted investments and development of human resources. The SFD was specifically mentioned in the CAS as complementing the structural adjustment program (Economic, Financial, and Administrative Reform Program) and as offering the government an alternative mechanism for providing social services and assistance to the poor.

Subsequent studies, reports, and government and Bank policy decisions have reconfirmed the importance of the project objective, including the government's Interim Poverty Reduction Strategy Program (I-PRSP) of April 2000, followed by the PRSP of May 2002, and the Bank's CAS of August 2002 and Poverty Update of December 2002 (Report No. 24422-YEM). The government documents made explicit references to the "need to increase expenditure allocations to the social sectors and infrastructure" and identified four pillars: (i) achieving economic growth, (ii) developing human resources, (iii) improving infrastructure, and (iv) ensuring social protection. Indeed, the project aimed at all, particularly the last three. The latest CAS, building on the PRSP, mentioned: (i) improved governance, (ii) better human capital, (iii) ensuring environmental sustainability, and (iv) improved investment environment to generate job opportunities. Again, the project aimed at all, particularly the first two.

3.2 Revised Objective:N.A.

3.3 Original Components:Three kinds of activities were to be implemented over a five-year period; a four-year period sufficed.

Component 1- Community Development, US$38.3 millionIdentification and implementation of subprojects mainly education, health, water supply, and sanitation for small-scale labor-intensive works and for the delivery of community services. In accordance with the Operational Manual, subproject selection was to be transparent and based on efficient resource use and on sustainability, measured as the ability to recover operations and maintenance costs. Intermediary organizations, including NGOs and local governments, would assist communities in preparing and implementing subprojects identified by the poor communities as priorities.

Component 2- Small and Micro-Enterprise (SME) Development, US$27.4 millionDevelopment of SMEs through technical assistance, training, and access to credit. During the initial phase, the focus would be on capacity building. The micro-enterprise subcomponent would deliver credit, technical assistance, and training to micro-enterprises through NGOs. The small enterprise subcomponent would provide training, technical assistance, and loan guarantees to banks and other financial intermediaries to assist them in developing a portfolio of small enterprise loans. Technical assistance and training for small enterprises would be provided through NGOs, commercial banks, and other financial

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intermediaries.

Component 3- Capacity Building, US$14.3 millionStakeholder assistance to improve effectiveness in identifying, implementing, and operating development subprojects. It would help local associations and groups develop and execute subprojects, enhance the ability to execute sustainable micro-enterprise programs, and provide technical assistance to small contractors and consulting firms on engineering and construction standards, bids, and the undertaking of small-scale works. It would also provide for nationwide poverty monitoring.

Project implementation experience and interviews with a wide variety of stakeholders (see Annex 8) confirm that, with one exception (see below), the components were appropriate and formed an integral part of the government policy aimed at providing poor communities with better living conditions and income-generating opportunities.3.4 Revised Components:The small enterprise development subcomponent proved problematic from the start (see paragraph 4.2), was suspended in late-1998, and subsequently was canceled officially. As a result, the total cost of the second component was reduced from US$27.4 million to US$1.6 million and the IDA allocation from US$8.9 million to US$1.3 million. The reallocated amount went almost fully to the first component (see paragraph 5.4 and Annex 2). Based on the 1999 Mid-Term Review findings and other assessments, in 2000 the SFD consulted closely with the Bank and added social protection activities and cultural heritage works to its menu, as well as initiated a pilot effort in four extremely poor and isolated communities aimed at a more comprehensive approach to development ("cluster" approach). Both decisions were in line with changes introduced by the more experienced Social Funds elsewhere in recent years.

3.5 Quality at Entry:Satisfactory, as assessed by the Quality Assurance Group (QAG) in 1998. The QAG panel gave the preparation effort a marginally satisfactory rating, "The project was well conceived and can be commended for the establishment of an efficient, autonomous, new institution. However, inadequate attention was paid to the institutional/financial arrangements for the SME credit component. This meant that the conditions for that component had not yet been met at project appraisal/negotiations. It would have been better to have a pilot component first on credit and then have a follow-up operation if the pilot is successful. The other two components of the project are overall satisfactory, although the large technical assistance part will require close attention during supervision. Social assessment was carried out, but the quality of the end product and its use during project design were found to be inadequate. Project would have been rated 2 (satisfactory) had the component on credit been better prepared." Panel recommendations were to "rethink the SME component and to pay special attention to the implementation of the TA aspects of the whole project." The region responded that the credit component was being piloted but that ample attention would be paid to both recommendations.

As explained in paragraph 4.2, the small enterprise effort had problems from the start, but in the end, the micro-enterprise effort was quite successful. As far as the social assessment is concerned, little documentation on poor communities was available at the time of project preparation, but the project more than made up for this by funding a range of highly relevant studies (see Annex 7).

Project preparation, facilitated by Japanese PHRD funding and access to a PPF advance, benefited from various initiatives, including the temporary contracting of an experienced staff member of the Egypt Social Fund, a number of visits of SFD staff to existing Social Funds, and SFD staff attendance at relevant international meetings on Social Funds. The Bank project team worked closely with a project preparation

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committee, including representatives from relevant ministries, NGOs, cooperatives, chambers of commerce, and other stakeholders. There were extensive field visits and two workshops were held.

With the benefit of hindsight, there were two design shortcomings: (i) The preparation and appraisal of the SME component did not foresee the political difficulty of providing technical assistance to commercial financial institutions and did not sufficiently assess the financial soundness of some of those institutions. The small enterprise development subcomponent later was dropped. (ii) The Beneficiary Assessment carried out at the project preparation stage should have used a more systematic approach to collect data and to construct a baseline in order to be able to measure the project's impact in the future. The respective correction was considerable.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:Satisfactory. In the first two years, the very difficult work environment induced intensive learning and experimenting, which in the long run bolstered the project’s objectives. The new demand-driven concepts have proven successful. The community development infrastructure is of good quality and is provided cheaper and faster than similar works provided by line agencies (see Annex 3); practices, thus costs, have experienced positive impacts. The SFD indeed functions as a source of innovation in Yemen, with successful new approaches in different sectors applied on a larger scale by the line agencies and by continuously adjusting its coverage and approach based on changes in demand and lessons learned.

Income generation was improved through additional temporary and permanent employment provided by the community works construction activities, as well as through micro-enterprise development activities channeled through NGOs. As a result, the community development and capacity building components generated about 2.4 million person-days in temporary employment and about 11,000 additional permanent jobs. The SFD promoted labor-intensive methods through the use of small contractors and the prohibition of machine-cut stones, ready-mix concrete, and heavy machinery. The December 2002 consultant report on Findings from the 1999 National Poverty Survey and the September 2003 consultant report on Key Findings-Yemen SFD Impact Evaluation attest to the respective impacts. It should be noted that SFD operation is ongoing, and in mid-2000 a second project complemented the first; therefore, the data of the most recent study cover more than just the first project. Its conclusions, nonetheless, apply (for further detail see Annex 8). In addition, the SME component was assessed and described in the November 2000 consultant report on MSE Baseline Survey-Yemen and in the September 2003 report.

Poverty Targeting. The project was a Program of Targeted Intervention. No agreed formula existed during the first year. In 1998 an index of relative poverty based on data from the 1994 Census and the 1998 Household Budget Survey was used to prioritize target areas, and the SFD designed a two-stage procedure to allocate funds. Stage One was an allocation by governorate based on population (75 percent) and aggregate poverty index (25 percent), and Stage Two by district level based on the same criteria. Initially, this resulted in a regressive allocation of resources. The 1999 data show that "SFD's funding is distributed very closely in proportion to the total population of each governorate, but it is not proportional to the burden of poverty carried by each governorate." The study added that "the findings should be interpreted in the context of Yemen's very high level of poverty and relatively flat income distribution," making "leakage" to the relatively better-off less problematic than in countries with a skewed income distribution. In 2000 the allocation formula was adjusted: 70 percent to governorates and districts (half based on population and half based on a poverty index) and 30 percent to supply-driven special programs and for socially marginalized groups. Poverty targeting improved substantially.

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As shown in Table 1, the data from the second study (2003) show improvements, with a strongly progressive allocation of resources by level of household poverty. A high proportion of SFD resources is benefiting the poorest households, with 17 percent going to the poorest decile, 31 percent to the poorest quintile, and 44 percent to the poorest three deciles. This surpasses other Social Funds where the analysis was carried out and is especially impressive in Yemen because of the previous regressive allocation and the high level of poverty across the country appreciably making the targeting of relatively poor households more difficult. It should also be noted that these results was consistent across subproject types, except for microcredit.

Table 1. Household Level Targeting Outcome*Poverty Decile

Population (Percent)

Resources (Percent)

Population (Accumulated)

Resources (Accumulated)

1 10.0 16.6 10.0 16.62 10.0 14.5 20.0 31.13 10.0 12.6 30.0 43.74 10.0 10.7 40.0 54.45 10.0 11.4 50.0 65.86 10.0 7.4 60.0 73.27 10.0 8.2 70.0 81.48 10.0 8.3 80.0 89.79 10.0 6.0 90.0 95.7

10 10.0 4.3 100.0 100.0 *Source: Key Findings - Yemen SFD Impact Evaluation.

As for microcredit, the SFD initially focused on lending only. Since best practices show that the poorest of the poor benefit more from saving services, they were introduced successfully in the 2000. Over time, the average loan size of the lending services decreased, showing an increase in the depth of poverty targeting.

Sector Impact. The SFD provided a great number of subprojects, mainly in education, health, water supply, and rural roads (see paragraph 4.2). A substantial and increasing sectoral impact resulted: between 1998 and 2001 total SFD country investment expenditures in education and health increased from 3.5 percent and 1.3 percent to 19.5 percent and 8.4 percent, respectively. Data from the studies showed that these four sectors had the most beneficiaries; together they generated 79 percent of all direct beneficiaries, 97 percent if environmental subprojects are included. Indirect beneficiaries only add 19 percent to the number of direct beneficiaries. Gender distribution showed more or less equal shares, except for education, where the female percentage is still below par. Sector-specific findings are listed below:

Education: The SFD impact on the education sector has been highly satisfactory. The 1999 data show that by the end of 1999 the "program already had a clearly positive impact on girls' enrollment and grade-for-age attainment in primary education. In the beneficiary communities, girls' enrollment rates were almost 20 percent higher than in the comparison group, up from 41 percent to 48 percent." The 2003 data confirm that, as a result of the project, the number of students increased by 29 percent, with the highest increase in female students, 38 percent. The number of classrooms increased 12 percent in general and 29 percent for female-student classrooms. The average class size rose by 38 percent though only 8 percent for female students. And, the proportion of girls enrolled increased from 42 percent in 1999 to 56 percent in 2003. Over the same period, male student enrollment increased from 76 percent to 78 percent. As a result, for all students, enrollment went up from 60 percent to 68 percent, confirming the major impact of the SFD on this important point.

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Health: The SFD impact on the health sector has been satisfactory. The first study's findings regarding the impact on health were ambiguous. A very positive impact was recorded on the vaccination status of children in the beneficiary communities but was not matched by a measurable increase in the take-up of curative medical services in the case of illness. The latter was consistent with the Ministry of Health building facilities but not supporting or using them and caused a policy shift to secure support and use. The 2003 data show that in the completed health facilities the proportion of male and female patients who received curative health care services for illnesses rose from 56 percent to 70 percent.

Water Supply: The SFD impact on the water sector was highly satisfactory. The subprojects, on average, benefited 9.8 communities; the number of persons covered increased from 1,251 to 3,251 per subproject; and the number of covered households increased from 109 to 328. The proportion of households with tap water in their dwelling increased by 23 percent, replacing cisterns with or without hand pumps, and wells and dams off the premises. The subprojects also led to a clear increase in the per-capita consumption of water, frequency of supply, and time and effort gained by those who fetch water off the premises.

Feeder Roads: The SFD impact on the feeder roads sector was highly satisfactory. The 2003 data showed that subprojects, on average, served 19.5 communities and about 17,000 people and had a positive impact on travel times and costs, both declining by 40 percent on average. A sharp increase in the number of trips per day, on average 180 percent, reflects in large part additional visits to market local products in town.

Microcredit: The SFD impact on the MF sector is satisfactory. The small enterprise development activities were dropped, but the microcredit outcome was positive. Before the SFD started operations, there was no formal microfinance sector in Yemen. Informal microfinance was limited to supplier-credit, and moneylenders were and are virtually nonexistent for religious reasons. The SFD helped to establish the foundation of an emerging microfinance industry and to create awareness among policymakers on issues such as interest rates, sustainability, and best practices. In the early years, the SFD mainly focused on experimenting with different microfinance models, thus creating a working knowledge base. Recently, the UN Capital Development Fund selected the SFD as its partner to implement the Micro Start program, which has been highly successful worldwide supporting “breakthrough” microfinance organizations. GTZ and KfW have also started discussing possible cooperation with the SFD.

Capacity Building: All facets of the project were greatly affected by the capacity building efforts. The start was slow going: the demand-driven, community-based concept was completely new to the country, and staff at the SFD and in-country NGOs had little or no experience. Stakeholders were trained while capacity was being built among beneficiary communities, participating NGOs, contractors, and central government officials (see paragraph 4.2); in brief, subject knowledge kept evolving. Training also covered operation needs, maintenance of completed works, and handling by subproject committees, e.g., parents and water-user committees, and was later expanded to cover central government agencies.

These positive assessments were confirmed by the participants at the stakeholder meeting held in Sana'a in September 2003 (see Annex 9), which was attended by community representatives, NGOs, line agencies, and local councils, including a great number of women. The overall assessment of SFD objectives and performance was positive. Issues of concern were the remaining weaknesses in community training and women’s participation, and the coordination with central government line agencies and increasingly with local councils to ensure adequate operation and maintenance of completed facilities.

Sector Policies: The SFD works in close association with relevant sector agencies and has helped to introduce new concepts of community participation and subproject operation and maintenance. Into the project cycle, the SFD initiated innovative, NGO-based social program activities dealing with the needs of

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the most vulnerable groups. The project has had a positive impact on the evolving decentralization efforts aimed at establishing the roles of governorate and district councils and in helping the line agencies improve designs and technical standards. All of these activities should assist in strengthening the government's poverty approach. The project's impact on sector policies is thus rated substantial.

4.2 Outputs by components:Components 1 and 3, Highly Satisfactory; Component 2, Satisfactory.

Project Component 1. Community Development. Highly Satisfactory.

Table 2. Number and Amount of Subprojects by Sector* Sector Number

(Projected at Appraisal)

Number (Achieved)

Amount (Projected in US$M)

Amount (Achieved in US$M)

** Education 727 46.1 Health 136 7.1 Water Supply 164 12.6 Environment 21 4.3 Rural Roads 15 1.8 Integrated Intervention

1 0.0

Cultural Heritage 6 0.9 Special Needs Groups

16 3.9

Total 2,056 1,086 38.3 62.9 **Source: *SFD MIS. **The SFD MIS does not provide for separate data on the cost of works and goods contracts by sector needed in this table; thus, the data shown in the last column include training. Paragraph 10 provides data on the cost of contracts for works, goods and services for all project activities.

Clearly, the figures show a dichotomy. The number of completed subprojects was 53 percent of the number projected at appraisal, and the disbursed amount was 164 percent of the amount projected. This reflects an average subproject cost of US$58,000, instead of US$19,000 projected at appraisal. The higher subproject cost can be explained largely by an early decision by the SFD, in agreement with the Bank, to give priority to larger facilities covering more than one community, resulting in 2.4 million beneficiaries instead of 950,000 (see Annex 1). Another factor was the decision to implement relatively high-quality infrastructure, reducing the need for early maintenance expenditures, which curtailed the number of smaller subprojects. Since both the number and cost of the completed subprojects are reasonable, both by local and international standards, it is evident that the figures used at appraisal (and set out in Annex 1 of the PAD) were unrealistic.

Specific Sector Information is given below:

Education: There were 727 education subprojects reaching approximately 600,000 students directly, of whom 43 percent were female. They were mainly for the construction and rehabilitation of school buildings and other facilities in basic education. Data from the Ministry of Education's education census were used to select the priority schools; SFD field staff verified the actual conditions in the selected schools. A GIS-based database was supported by the SFD and reflected existing educational facilities, completed in 2002. It was made available to other subsector parties. Parent maintenance committees were established for all school subprojects and were effective in 63 percent of the schools. A pilot program has now been started in four schools for more comprehensive capacity building. The 2003 impact evaluation found that there

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were some community complaints about the quality of construction materials and lack or low quality of doors or fences; the study also showed low teacher absenteeism and a high level of parental involvement.

Health: There were 136 health subprojects reaching 650,000 people. Establishing new health services in deprived areas was the initial goal but was expanded to included expansion and improvement of training facilities. The policy shift led the SFD to focus on the rehabilitation and equipment of existing health facilities. Interventions in new areas were phased; medical services started in temporary premises with the SFD providing minimal equipment, and only starting construction after those services were functioning.

The 2003 impact evaluation found that about half of the completed health facilities had no access to water in the building or compound. In addition, 38 percent of the clinics had no access to electricity, neither the net nor a generator. Lack of staffing was seen as an issue, but, when assigned, staff absenteeism was relatively low. Of the available equipment, 83 percent was deemed to be in good condition. Health committees were established for all health subprojects, only two-thirds of the clinics had effective health committees.

Water Supply: There were 164 water supply subprojects benefiting about 600,000 people. They were mainly in rural areas. To avoid depletion of ground water, they used surface water resources. Because mechanized systems proved expensive to operate, were risky in the absence of regulations on the digging of boreholes, and were unlikely to be sustainable, the SFD shifted to nonmechanized systems during implementatioin. The SFD designed a special program for water harvesting systems in order to increase water supply during the dry season (rehabilitation of traditional cisterns and construction of new ones). At the same time, water quality was improved through fencing of cisterns and the introduction of sand filters and hand pumps.

The impact evaluation found that 72 percent of the installed pumps were still in good condition. Payment for water was arranged in 42 percent of newly completed works. More than four-fifths of the subprojects had effective community water committees. Some completed subprojects cited in the report stated that communities identified water leakage, shortage or bad quality of cement, and design problems.

Feeder Roads: The 15 feeder road and street pavement subprojects were mainly in poor areas and benefited about 300,000 people.They used labor-intensive methods and required the establishment of a road user committee, as well as a maintenance plan. The 2003 impact evaluation mentioned that, for some completed subprojects, communities found roads too narrow, delays in implementation by the contractor, and design problems.

Environment: The 21 environmental protection subprojects included sanitation networks targeting poor urban and semi-urban areas, awareness activities, garbage collection, and terrace rehabilitation. Pilot activities provided for appropriate technology treatment plants, mostly oxidation ponds or septic tanks, including the establishment of wetlands in some of the urban and semi-urban areas to re-use treated water for agricultural purposes. In some urban areas with sufficient treatment capacity, new networks were connected to the main sewerage network, in cooperation with local authorities, such as the National Water and Sanitation Authority.

Special Needs Groups: As of 2000, the SFD had completed 16 subprojects aimed at improving facilities and services for the disabled, children-at-risk (orphans, children in conflict with the law, street children, children of imprisoned women), women-at-risk (women in prison or coming out of prison), and the socially marginalized (mentally ill, elderly, returnees, shanty dwellers). Interventions were decided based on the capacity of the implementing organization, the priority of the targeted population group, and the prospects

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of sustainability. This subcomponent was affected especially by the implementing agencies' lack of capacity.

Cultural Heritage: This activity was added in 2000. The six subprojects were all located in Sana'a and included gardens and street pavements in the "old city" as well as the expansion and restoration of the National Museum. The subprojects focused upon creating employment for local artisans and using local materials and traditional techniques. They also aimed at encouraging a new generation of artisans to specialize in the traditional techniques of rehabilitating old buildings.

Integrated Interventions: The ongoing pilot program in four different geographic areas also started in 2000 and aims at testing a more integrated ("cluster") approach to increase the impact of SFD interventions. This includes the establishment of development committees, intensive training of those committees in planning and implementation, the formulation of development plans by the committees, and the implementation of successive subprojects according to agreed priorities. Achieving genuine women's participation was a considerable effort.

Technical Quality: Apart from some minor quality issues mentioned above, the subprojects were generally of good quality and well operated and maintained, although this varied by sector. Operation and maintenance is an explicit requirement in the framework agreement signed between the beneficiary community, the SFD, and the responsible line agency prior to subproject implementation, but line agency follow-up varied considerably. Completed education facilities were generally managed well by the Ministry of Education, but completed health facilities received little attention from the Ministry of Health. As mentioned above, this caused the SFD to limit new health subprojects to those evidencing clear community commitment. The operation and maintenance of water supply and sanitation subprojects was always the responsibility of the communities. The latter was facilitated by increasingly effective community training (see below), focusing on both technical and financial training, including agreement on fees for long-term sustainability of the completed works.

In more recent years, the SFD also introduced, on a pilot basis, the contracting of subprojects by the communities themselves, thus giving them responsibility for the full subproject cycle. This effort is still ongoing and not yet replicated on a large scale. Similarly, the SFD has started to adapt its procedures to allow for an increased role to be played by local governments, following the introduction of the Local Authorities Law in 2000 and the subsequent election of Governorate and District Local Councils. However, this is subject to training of councillors in development concepts.

Project Component 2. Small and Micro Enterprise Development. Satisfactory, despite the cancellation of the small enterprise development activities. (i) The SFD created awareness and understanding among policymakers of the importance of microfinance and best practices, (ii) the SFD developed microfinance models appropriate for the country, (iii) progress was made to build sustainable intermediaries, but more time and capacity-building efforts are required, and (iv) a large number of borrowers and voluntary savers were reached.

When the project started, there was no experience with microfinance in the country. The SFD had not only to build capacity of microfinance intermediaries, but also its own capacity. Eligible intermediaries received an SFD loan for on-lending (instilling financial discipline right from the start) and a grant for operational cost coverage until break-even.

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Active Clients per Type of Clients

0

1000

2000

3000

4000

5000

6000

7000

8000

1997 1998 1999 2000 2001 2002 2003

Microfinance borrowers who also save

Microfinance borrowers only

Microfinance savers only

IGP borrowers

An analysis of microfinance clients over time, shown in the above graph, illustrates the learning curve of the SFD and a shift from Income-Generating-Programs (IGPs) and credit-only programs in the early years, to savings-and credit oriented programs in later years. The initial focus on IGPs was because IGPs appeared “easier” and “cheaper” to implement. However, as shown in the graph below, the implementation of IGPs proved to be more expensive and less sustainable than the development of microfinance programs. It was extremely difficult to find eligible and reliable implementation partners – usually cooperatives.

T o t a l C o s t s p e r D i r e c t B e n e f i c i a r y

T o t a l C o s t s i n c l u d e : G r a n t s t o M F I s f o r o p e r a t i o n a l c o s t s , s a l a r i e s S F D a n d f o r e i g n t e c h n i c a l a s s i s t a n c e

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0

1 0 0

1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3

US

D

M F p l u s I G P D i r e c t B e n e f i c i a r i e sM F D i r e c t B e n e f i c i a r i e s O n l yIG P D i r e c t B e n e f i c i a r i e s O n l y

\

In the early years of its operation, the SFD focused on the development of two microfinance intermediaries, but those experienced quite a few problems. Eventually, one of these intermediaries developed well, and has now been selected by UNCDF "Micro Start" as a break-through organization with good prospects of becoming financially sustainable within the next three years.

The PAD had projected 28,500 microentrepreneurs to be assisted, but this was not achieved. The microenterprise programs together served 13,308 borrowers. In addition, over time, voluntary savings were introduced as a financial service for women (who do not necessarily wish to borrow). As of June 30, 2003,

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over 3,000 women are actively saving and the number is increasing rapidly. These women consider savings a financial service that they need very much; they do not necessarily want to borrow ( another 3,000 borrowers were served who participated in programs that were closed down). Furthermore, 5,235 microentrepreneurs were trained, more than double the number projected at appraisal.

Project Component 3. Capacity Building. Highly Satisfactory, although the activities got off to a slow start. As shown in table 3, the number of training activities for a range of stakeholders was impressive and far exceeded the appraisal numbers. Similarly, the cost was much higher: US$24.9 million (including US$7.7 million for the SFD operating cost and fixed assets), compared to the projected amount of US$14.3 million.

Table 3. Training Activities*Entity Number - Projected Number - Achieved

NGOs/Cooperatives 82 197 Community Groups 81 131 Microentrepreneurs 2,500 5,235 Small Enterprise Owners 645 canceled Financial Institutions 9 canceled Contractors 30 100

*Source: SFD MIS.

The approach to community capacity building was developed gradually. It started with providing training to SFD staff and consultants in participatory development and methods to identify priorities in collaboration with the communities, the establishment of local community committees, and their training in subproject implementation and operation, including basic finance and management. In total, about 1,000 community committees were established and received training; 131 committees received more intensive training, including four for the integrated pilot programs and eight on health and environmental issues for the water harvesting schemes.

The NGOs and CBOs that received training were selected based on agreed criteria, giving priority to those that were successful in securing SFD funding for subprojects. In addition, priority was given to CBOs in the poorest areas, which would not otherwise be able to prepare subproject proposals. Training depended on the specific subproject needs, but almost all subprojects received training in bookkeeping and resource management. During this first phase of the SFD operation, priority was given to training of trainers, refinement of training methods, development of training modules, and the implementation of a select number of well-defined capacity-building efforts. In addition, organizational support was provided to increase the capacities of intermediary structures; 197 NGOs were assisted through training and/or material support, and 1,155 NGO staff members (of whom 618 women) received training in a range of subjects (e.g., literacy programs, handicraft production, home economics, and basic accounting for agricultural cooperatives).

Private consultants and contractors received major training: 100 engineers in design and supervision of water harvesting schemes, 45 engineers in appropriate design standards for feeder roads, 22 engineers in design and supervision of sanitation subprojects, 18 professionals in health education for water supply subprojects, 50 consultants in community participation techniques, and 25 consultants in medical equipment.

Government agencies too received training. The Ministry of Education received support for its literacy activities, and the Ministry of Health for health personnel (150 traditional midwives and 160 scholarships

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for paramedics in the Health Training Institute), on management and technical issues, as well as on pro-poor cost recovery systems and outreach to remote areas. The Ministry of Social Affairs and Labor received a variety of support, in particular to its Social Welfare Fund (organization and management of cash transfer programs) and the National Program for Community Development and Productive Families..

The component has also funded poverty monitoring and impact assessment studies to ensure that SFD resources were being used to effectively reduce poverty, with a major emphasis on the needs and participation of women. It funded the housing, equipping, and staffing of the SFD, which enabled the establishment of an organization with a unique ability to improve poverty-related issues. Staff did receive ample training. To summarize, the component started slowly but was actively pursued and now covers a wide variety of relevant policy and operational activities. The outcome was positive.

4.3 Net Present Value/Economic rate of return:Because of the difficulty of quantifying the benefits of some of the activities, such as health and nonformal education, the PAD did not have a calculation of the economic rate of return for the overall project, but a cost-effectiveness analysis was carried out, including a study of the cost-effectiveness of the SFD approach compared with the delivery of services by line agencies. Ex-post, this study did not calculate the net present value and economic rate of return. However, the study had access to a comparison of SFD and line agency unit costs, data on the administrative efficiency of the SFD, and the cost per beneficiary, which received detailed attention during the 1999 mid-term review (see Annex 3). The data confirm that the SFD is an extremely efficient delivery mechanism when compared with other agencies, with lower unit costs for each type of infrastructure. The data also show that a relatively small number of staff (128 by June 30, 2003) have been able to process a substantial program, leading to an administrative overhead of slightly less than 10 percent, a percentage far below the overheads shown by most Social Funds.

Subproject evaluation criteria have evolved over the years, and are described in the Operational Manual. They cover all relevant economic, financial, and technical aspects, including environmental assessment criteria. The microcredit activities are covered by their own manual, describing criteria for eligibility of implementing partners (NGOs and cooperatives), and procedures for program design, appraisal, implementation, supervision, and reporting.

4.4 Financial rate of return:N.A.

4.5 Institutional development impact:Substantial. The SFD revolutionized development work in Yemen. It highlighted the positive impacts of the participation approach and provided incentives to other line ministries to begin testing with that approach. The SFD has proven to be a productive, transparent, and cost-effective model that can be adopted in Yemen if the appropriate circumstances are provided. It is also a flexible mechanism for implementing small-scale social and economic infrastructure subprojects and for introducing new concepts of poverty targeting, community participation and responsibility, operation and maintenance of completed works, as well as microcredit operations, very much relying on non-government sources, mainly NGOs and the communities themselves. As a result, community development has been brought to the foreground of the government’s poverty reduction agenda, and fostered (i) a service delivery culture, as well as responsiveness, transparency, and accountability toward communities where there was practically none prior to the project, (ii) ownership at the community level, and (iii) improved understanding at the central level of community development and working across sectors.

The central line agencies, both in Sana’a and in the regions, have benefited from the SFD’s substantial

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experience with infrastructure, leading to designs better adjusted to the local needs and availability of local materials. The agencies were also exposed to the SFD’s efficient relationship with contractors, local governments, and communities, including on issues related to procurement, disbursement, environmental assessment, and operation and maintenance of completed community works. This has been particularly beneficial to the Ministry of Education, which has seen a considerable drop in its unit costs in recent years, and has now established a community participation unit. Furthermore, this Ministry, as well as the Ministries of Health and Social Affairs and Labor, received substantial training support (see paragraph 4.2).

As shown in Table 3, NGOs and cooperatives have received a great deal of explicit and implicit capacity building, all aimed at having them play a central role in community capacity building. This included in particular accounting and needs assessment. As a result, both the number and the capacity of local NGOs has increased substantially over the years.

Community capacity has increased exponentially over the years, and a limited number of communities has been given full authority for the full subproject cycle. As mentioned above, community training had a slow start, mainly because it was a new concept and there was no NGO experience at the start. However, the country’s social capital seems to have increased considerably because of the drastic increase in community participation, from subproject identification to operation and maintenance including an understanding of their rights and obligations.

Institutional development of microfinance intermediaries is another area where the SFD has achieved considerable results where it started from a non existent base. Now, a number of intermediaries are well in their way into applying international standards in their operations.

The local contracting industry and consultants have improved considerably. Contractors were exposed to the SFD’s strict rules on design standards, procurement, and funding, and gained much experience. Consultants too were associated with various studies, and gained additional experience and knowledge.

The SFD itself was new at the start of the project and has grown into a unique, experienced, efficient, effective, transparent, and flexible organization that is respected as being fundamental to the social sectors.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:Complex Donor Coordination: The Bank played a very positive role in augmenting the number of donors, all of whom accepted the community-based SFD approach and various of which provided valuable technical assistance. However, they also had different administrative and financial procedures, which added to the SFD's burden.

Local Bank Staff Assignment: As mentioned in the PAD, during the early years of project implementation, the Bank located its task manager in its Sana’a office, giving him ample opportunity and time to provide ongoing, hands-on guidance and support, including arranging for a wide range of technical assistance, which was largely funded by the Bank-managed Dutch and OPEC trust funds. In addition, a full-time consultant was hired to support the SFD during its establishment and to help with the development of the Operations Manual, the set-up of the SFD, and design and implementation of the pilot subprojects. This hands-on support very much helped accelerate project implementation, but also resulted in higher supervision costs.

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Limited Experience of Intermediary Organizations and Executing Agencies: The capacity of existing NGOs, CBOs, and cooperatives to play an intermediary support role was extremely limited and required extensive and intensive training of trainers, slowing down initial project implementation. Also, contractors, and consultants were not familiar with SFD procurement guidelines. Corrective training was required and was delivered systematically.

Cultural Constraints: The participatory approach was new to most SFD staff, members of possible intermediary organizations, local consultants, and relevant line agencies. This too slowed down initial project implementation.

This applied even more so to the role of women. To deal with this, the SFD decided to mainstream gender by (i) having female SFD staff or consultants interview women beneficiaries at the subproject identification stage and (ii) ensuring a substantial percentage of female SFD staff, including at the management level.

Religious Constraints: The use of Islamic finance practices increases costs, since loan officers have to purchase the goods for the borrower, because the borrower is not allowed to get cash. This increases the transaction cost and, hence, “interest rate.” In some cases, borrowers have started asking for commercial loans, knowing them to be cheaper. In other cases, the SFD itself tries to start with commercial loans.

5.2 Factors generally subject to government control:SFD Autonomy: Law Number 10 of 1997 provided substantial operational autonomy for the new SFD, and the Government did not exert undue political pressure (except on the inclusion of the small enterprise development subcomponent). It also allowed the SFD to use more efficient disbursement procedures. All of this helped establish a more efficient and effective organization.

Strong SFD Management: The Government allowed for the recruitment (open competition in selection) and adequate remuneration of highly qualified individuals; the Government also ensured their continuity. This is of critical importance in ensuring an efficient and effective operation.

Mixed Cooperation with Line Agencies: Cooperation with line agencies was facilitated by relevant ministers being members of the SFD Board of Directors. Still, despite written agreements with all relevant agencies, cooperation in the field was not always ensured. Cooperation with the Ministry of Education has improved substantially over the years, but cooperation with the Ministry of Health and the water and road agencies has been disappointing. As a result, the SFD had to do more itself, and also delegate more responsibilities to the beneficiary communities.

Increasing Cooperation with NGOs: As mentioned above, project implementation was affected by the weak capacity of NGOs and cooperatives, and the project had to provide for major training and financial management support to ensure adequate involvement of these organizations. The new law on NGOs, designed in part with Bank and SFD assistance and passed in 2001, very much facilitates NGO operations.

5.3 Factors generally subject to implementing agency control:Strong SFD Management and Staff: The commitment, dedication, and flexibility of SFD management and staff, including a high percentage of women, have been instrumental in enabling the project to advance rapidly. To endorse this, management introduced performance-based contracts and provided ample training.

Evolving SFD Organization: The SFD has been receptive to new ideas and lessons learned and has regularly adjusted its policies and practices, as set out in the Operational Manual, to reflect “best

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practices.” The SFD has also been cost-effective, with a very low overhead compared to those in most other Social Funds. In addition, the SFD established seven field offices with substantial responsibilities, thus greatly facilitating community-client contact.

Improving Poverty Targeting: As confirmed by the recent Impact Evaluation, the SFD has improved its poverty targeting over the years.

Strong Cooperation with Donors: The SFD has actively pursued donor funding and been responsive to donor demands, leading to co-financing by a substantial number of multi- and bilateral organizations. However, with the great variety of donor reporting requirements, there has been an attached cost.

Strong Cooperation with Other Project Agencies: In 2002, the SFD sponsored the establishment of a coordination group consisting of all local parties dealing with IDA-supported projects and now has regular meetings to exchange information on, a.o., project implementation, work procedures, contractor and consultant performance, and co-financing.

Evolving Management Information System (MIS): The MIS has evolved over the years, and now connects headquarters with the seven regional offices, thus allowing the SFD to quickly monitor physical and financial progress. Today it produces readily available progress reports for each donor, component, and region.

5.4 Costs and financing:At appraisal, the total cost of the project was estimated at the equivalent of US$80.0 million. As detailed in Table 4 and Annex 2, the cost at completion was US$89.4 million, mostly for the Community Development component.

Table 4. Costs and Financing (US$ million)*Activity Total

CostIDA

FundingGovernment

FundingCommunity

FundingOther Donor Funding***

Community Development 62.9 17.2 1.2 6.5 38.0 Small and Micro- Enterprise Development 1.6 1.3 0.0 0.0 0.3 Capacity Building and SFD Operating Cost 24.9 11.3 1.8 0.0 11.7 Total 89.4 29.7** 3.1 6.5 50.1

*Figures may not add up due to rounding. **At the time of negotiations, the amount of SDR21.7 million amounted to the equivalent of US$30.0 million, but US$0.7 million was "lost" due to a change in the SDR/US$ exchange rate. On the other hand, the SFD "gained" the equivalent of US$0.4 million in interest, which it also invested in the project. ***The Netherlands, OPEC, Arab Fund for Economic and Social Development, European Union, and USA Counter Value Aid Program.

As set out in the table, IDA funded the equivalent of US$29.7 million, the Dutch US$13.6 million, USA US$6.8 million, OPEC US$6.0 million, and the Arab Fund US$19.5 million. The Government provided the equivalent of US$3.1 million, a relatively small contribution, but still much more than projected at appraisal. The beneficiary communities funded US$6.5 million; the latter represents 7.3 percent of total project cost, or 10.3 percent of the cost of the Community Development component. Community contributions, excluding the value of land, were in cash or kind (materials, labor), and were supposed to amount to at least 5 percent for schools, 15 percent for water supply, and 20 percent for sewerage; however, the percentages are adjustable, depending upon the community's ability to pay. The community was also expected to commit to adequate funding of operation and maintenance of completed facilities. The 2003 impact evaluation confirmed substantial community participation, including contributions in labor or construction materials. Between two-thirds and four-fifths of the communities contributed money, and the highest contribution in labor was for feeder roads. Community contributions as a percentage of

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completed subproject costs were estimated at 6.9 percent for education, 7.3 percent for health, 16.5 percent for water supply, and 11.3 percent for rural roads, well above the minimum requirements.

6. Sustainability

6.1 Rationale for sustainability rating:

Sustainability of the SFD Organization: The SFD has built up an excellent reputation as an innovative, transparent, and efficient organization, aimed at providing assistance to poor communities and vulnerable groups and incorporating the latest techniques of community participation and local government development. Now a recipient of regular and increasing government funding, continued and ample donor funding should be ensured for poverty reduction in the years to come, particularly given the SFD's operating at a relatively low cost. In addition, the increasing capacity of the country's intermediary organizations, to a large extent because of SFD training, will allow the SFD to delegate more and more to capable partner organizations, as well as to communities and local governments. The SFD is also providing increasing support to other central and local government agencies, and thus strengthening its role and impact as a critically important and long-term actor in the government's poverty reduction and decentralization efforts.

Sustainability of Subprojects: SFD's track record in sub-projects sustainability is very good and by far the best in Yemen. The SFD is the only agency that continues to follow up on its sub-projects two years after funding phases out. The community subprojects are well maintained and operated, benefiting considerably from Yemen's tradition of strong community organizational structures and major community participation.

It also should be noted that ample attention has been paid to appropriate design standards (e.g., for schools, designs differ by region; for feeder roads, new standards were developed and agreed upon with the Road Maintenance Fund, particularly for drainage; and for water supply, mechanical components have been kept to a minimum to reduce the maintenance burden) and the provision of substantial training in operation and maintenance, especially for water supply subprojects.

In the case of water supply and rural road subprojects, the 2003 impact evaluation showed some interesting results. For water, the upgrading of piped systems has led to an increase in operating costs by about 200 percent on average, due to the use and maintenance of electromechanical pumps; however, average revenue generation quintupled. As a result, there is still a shortfall of, on average, 35 percent of the total cost, as compared to almost 70 percent in times past. This points to the increasing likelihood of being able to establish sustainable piped systems.

In addition, the study found that for rural roads 86 percent of the beneficiary communities had signed an agreement on road maintenance of completed subprojects. In most communities, maintenance follow-up committees had indeed been established, and in about one-fifth of the communities did the population contribute funding. Training by the SFD took place for one subproject.

Overall, the project (organization and subprojects) is likely to be sustainable.

6.2 Transition arrangement to regular operations:The SFD will continue to operate on the same basis as before, with increasing community involvement in all phases of the project cycle and with menus and methodologies adjusted as needed. The government is expected to continue its support of the SFD as a critically important mechanism in its poverty reduction efforts. Government resources to the SFD is on the increase. An increasing number of donors are using the SFD to reach the country's poor communities and vulnerable groups, including IDA through the ongoing Second SFD project (Cr. 3353-YEM) and the proposed Third SFD project.

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7. Bank and Borrower Performance

Bank7.1 Lending:Satisfactory. The Bank-designed activities benefited from funding under a Japanese PHRD grant and a PPF, allowing for the start of pilot activities, which provided both the government and the Bank with substantial relevant experience. In addition, preparation benefited from the experience gained by the Egypt Social Fund (ESF), including the assignment of an experienced ESF staff member to the SFD. The Bank team also realized from the beginning that a "hand-holding" approach will be needed to ensure the appropriate set-up of the SFD, which was followed during the design. This performance rating would have been higher were it not for some of the quality-at-entry weaknesses flagged by QAG, including the lack of hard data on developing the small enterprise subcomponent and the lack of baseline data coming out of the Beneficiary Assessment. In addition, as mentioned in paragraph 4.2, some of the appraisal estimates (particularly the figures in Annex 1 of the PAD) were unrealistic.

7.2 Supervision:

Highly Satisfactory. The QAG's Quality of Supervision Assessment, carried out in 2000, gave this a 1 (highly satisfactory) rating. The assessment noted: "The quality of supervision was judged of a high standard on many aspects. Particularly noteworthy was the intensity of supervision, from both headquarters and the field, consistently encompassing all required areas; the adoption of an action plan for financial management and procurement capacity strengthening; excellent documentation; and efforts to mobilize additional funding for capacity building. These activities were accomplished through close and intensive cooperation of staff and management at headquarters and the local office, and arrangements for substantial complementary technical assistance funded by other donors. Although the panel notes that the performance indicators could, at this stage, have been somewhat more outcome-oriented, particularly in terms of social and economic outcomes, it is appreciated that the project was designed in 1997, and that the state of the art of assessment and monitoring of social investment funds has improved since then. However, the progress on social development outcomes should be documented. It is also understood that the follow-up project is incorporating a more effective approach to impact monitoring." The QAG suggested, "as already decided by the task team in the context of the follow-up project, agreement on more detailed monitoring indicators, including, e.g., gender, could have provided both client and Bank with better information on effectiveness of targeting and activities, in turn improving project implementation."

The task team continued to provide intensive supervision and to arrange for technical assistance (partly funded by donors grants) on a range of issues, including microfinance, operational procedures, procurement, community contracting, MIS, and impact studies. It arranged for the immediate suspension and subsequent cancellation of the small enterprise subcomponent when it became clear that this could not be successfully implemented. It also followed up on the QAG's recommendations regarding impact monitoring and arranged for the comprehensive impact evaluation studies mentioned in paragraph 4.1 and Annex 8.

7.3 Overall Bank performance:Highly Satisfactory.

Borrower7.4 Preparation:Satisfactory. The government and the SFD were instrumental in preparing the project and helped establish the SFD through the approval of Law No.10 of 1997, which allowed for the SFD's exemption from some common but cumbersome government regulations.

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7.5 Government implementation performance:Satisfactory. Although, as mentioned above, government counterpart funding has always been minimal and was not provided during the first two years, the government did provide SFD management with substantial autonomy and allowed it to operate with relatively little political pressure. The government also followed up on SFD initiatives with NGO participation and on decentralization. Furthermore, the government allowed for the recruitment of highly qualified and well-paid staff.

7.6 Implementing Agency:

Highly Satisfactory. The Social Fund for Development has developed into a unique, transparent, effective, and efficient organization, playing a critically important role in the country's poverty reduction efforts. This has been achieved by using an approach that depends on community demand, as expressed by the communities with the help of NGOs. The approach is also adjusting in line with evolving local and international knowledge on Social Fund policies and operations.

It also should be noted that the SFD has been increasingly careful in the management of its fiduciary responsibilities. A recent procurement post review found no major issues, apart from (i) some lack of records for works contracting and (ii) some inadequate evaluations of consultant selection, but both only during the early years of the project, and fully corrected since 2000. The review also found that the SFD’s central staff was fully qualified but recommended further training branch officers, which would be of even more importance given the proposed build-up of community contracting.

Financial management has been quite too, both as far as the SFD’s financial reporting and its external auditing is concerned.

Environmental assessment, initially, did not receive any attention. This too was corrected in 2000, and the SFD technical staff is now well versed in the Bank’s environmental assessment guidelines.

The 2003 impact evaluation showed that the overall duration of the subproject production process was 576 days, comprising 221 days from community request to committee approval, 16 days from committee approval to contract with community, 102 days from contract with community to construction contract, and 237 days from construction contract to completion. There were some sector differences, with shorter periods for water supply and health subprojects and longer periods for feeder roads. Even more interesting was that this time period has increased substantially over time, from 282 days in 1997 to more than 600 days in 2000 and 2002. This no doubt reflects the increasing number of subproject requests awaiting processing, the larger size of the subprojects mentioned before, the increasing number of fiduciary issues the SFD has to deal with, and the increasing focus on up-front community training, and is acceptable by international standards.

7.7 Overall Borrower performance:Satisfactory. The country is extremely poor and complex, also politically, but the government and the SFD were able to agree upon and implement a transparent and essential approach to community development.

8. Lessons Learned

This intensive assessment benefited from substantial work, in particular the Impact Evaluation Report and the Stakeholder Meeting. In addition, the project received considerable donor scrutiny over the years, and this is reflected in the observations mentioned above and in the lessons mentioned below:

A. PROJECT DESIGNProject Concept: The quite positive outcome of SFD activities, both in quantitative and qualitative terms, confirms that even in a country with such human and financial capacity constraints as Yemen the Social

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Fund concept can work in an effective and efficient manner.

Poverty Targeting and Monitoring: At the start of the project, the country's poverty data were far from reliable. Although the SFD had an agreed system of regional targeting as of 1998 (see paragraph 4.1), its management preferred to use data on the lack of services in each client community. This did not help establish a progressive allocation to the governorates and districts in accordance with their level of poverty. Assisted by various studies on project impact, this was corrected in 2000. In hindsight, the Beneficiary Assessment that was carried out at the project preparation stage should have used a more systematic approach to collect data and to construct a baseline. Credit Operations: The preparation and appraisal of the small and microenterprise component did not foresee the political difficulty of providing technical assistance to commercial financial institutions and did not sufficiently assess the financial soundness of some of those institutions. The small enterprise development subcomponent was later dropped. In addition, looking back, before making loans the SFD should have invested much more time and effort in the training of financial intermediary staff, as well as on systems, procedures, and the MIS. Savings services, furthermore, are essential to increasing the number of female clients.

B. PROJECT OPERATIONCommunity Participation and Contracting: Community participation in all phases of the subproject cycle was a major element of the initial SFD design, but implementation by the communities and training by SFD-funded NGOs proved more time-consuming than expected. This experience shows that full community participation leads to better subproject quality and lower costs, and that the prospects for proper maintenance of completed works are better too. It should also be noted that increasing community involvement in the subproject cycle, with the need for substantial training, has been a large factor in the more than doubling of the average time of subproject identification through implementation.

Government Agency Cooperation: Despite written agreements with the line agencies on adequate operation and maintenance, these agencies mostly were unable to deliver, particularly when it came to routine and major maintenance. Consequently, communities had to be trained, at least in carrying out routine maintenance and in learning how to obtain government support for operations and major repairs. The success of support provided by the SFD to central government agencies and officials depends primarily on their interest and cooperation (provision of incentives). It worked reasonably well with the Ministry of Education, and was inadequate in the case of the Ministry of Health.

Unit and Subproject Costs: The introduction of proper technical design and procurement requirements by the SFD led to increasing competition among contractors and lower unit costs for basic infrastructure, such as school construction. At the same time, the average subproject cost was about three times the cost estimated at appraisal, due to a decision to build larger facilities of longer-term quality, and to cover bigger geographical areas.

C. ORGANIZATION AND MANAGEMENTOperational Autonomy and Management Implications: Because of its ability to function with considerable autonomy, the SFD was able to quickly establish its credibility as a neutral and professional outfit. This was possibly the most important point in ensuring the project’s successful outcome. The recruitment of highly qualified and well-paid managers and staff was also a critically important condition for the success of the SFD. The willingness of these managers to pursue the latest local and international knowledge on Social Fund policies and practices helped establish a progressive and flexible mechanism.

Gender Sensitization: The initial consideration of a separate gender office in the SFD, copied from the

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Egypt Social Fund, was rejected in favor of "mainstreaming" the gender issue. A gender sensitization workshop for the SFD was held by an international consultant, a substantial number of female managers was appointed, and a specialist was assigned in the SFD to screen all subproject proposals on this issue. In addition, each regional office had to recruit female staff to ensure that this aspect was fulfilled.

Bank Staff Resources and Technical Assistance: The Bank proved willing to deliver on the PAD statement that project staff should be assigned to the field office; this provided the SFD with quick and ongoing access to Bank supervision and technical assistance, although this did have budgetary implications. The availability of Bank-managed technical assistance allowed for easy and fast access when and where needed.

9. Partner Comments

(a) Borrower/implementing agency:Yemen is among the least developed countries in the Middle East with an estimated GDP per capita of US$314 in 1995. In the same year, it was estimated that 19 percent of the population lived in poverty, meaning that 2.6 million persons had insufficient resources to meet their basic food and nonfood requirements. Strengthening the nexus between growth and poverty reduction is crucial for the long-term development of Yemen. The establishment of the SFD is one of a series of social protection measures that the Government of Yemen has adopted toward achieving these objectives.

Summary of Findings and Key Lessons LearnedThe outcome of the SFD performance in implementing subprojects is highly satisfactory, as well as of the financiers’ performance. The success of the SFD is due in large part to its flexibility and adaptability, as well as to its motivated national professionals. A number of lessons were learned from the implementation of the first phase and have been taken into account in SFD Phase II. These can be summarized as follows:

• The arrangement of the SFD to be managed outside the traditional government entities tends to be more efficient and flexible in getting quick results in the field and in serving communities. The SFD was able to recruit on a contractual basis and motivate competent and dedicated staff.

• The effectiveness of the SFD was reinforced by the “contracting approach” that was adopted, which has led to formal contracts with a wide range of actors: community-based organizations, NGOs, government agencies, local consultants, small contractors, etc… Transparent and clear contract procedures, as well as quick payments, are essential elements of a cost-efficient implementation of subprojects.

• The SFD has always attempted to implement best practices in the different sectors and subsectors in which it is operating, constantly learning from implemented subprojects.

• Communities have been placed at the center of project activities as primary actors responsible for project identification, implementation, operation, and maintenance. In this respect, establishing Branch Offices during Phase I was integral to enabling communities to present and defend their requests at the local level.

• To tackle poverty and reach remote impoverished districts, the SFD has shown the importance of developing multipronged target mechanisms.

• The SFD is well aware that coordination with key line ministries and regional authorities is important to achieve a lasting impact, to exchange experiences, and to adapt to new institutional and sectoral reforms.

• In a project comprising several components of a different nature, one should expect some components to work better than others.

• To run a complex Social Fund project that is funded by seven donors, a well-designed Management

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and Information System (MIS) is of tremendous importance to monitoring implementation and reporting back to the different donors.

(b) Cofinanciers:Consultants funded by the European Commission completed a Mid-Term Review report in April 2003. The report was quite positive on the SFD’s achievements and made a range of useful recommendations regarding targeting of the poor, improving the quality of subprojects, promoting gender issues, and improving the functioning of community committees. On capacity building, the report made recommendations on emphasizing vision development, strategic planning, and financial and institutional sustainability of NGOs for women, enhancing the income-generating capacity of women, exchanging visits between good practice organizations and less mature ones, and introducing innovative pilots and gender-responsive planning at the community level, community mobilization and organization, and training for effective and efficient implementation, operation, and maintenance. On credit activities, the report recommended that this continue to be supported by the donors and that the SFD arrange for an in-depth study to assess the feasibility of alternative and proven methodologies. Finally, the report referred to the importance of ensuring close coordination with the local governments.

(c) Other partners (NGOs/private sector):

10. Additional Information

Table 2 in paragraph 4.2 gave numbers of completed subprojects by sector; however, it could only give the total cost of works and goods. Since the SFD MIS only gives cost data for the combined works, goods, and services by subproject and thus sector, the sector breakdown could not be provided. The following table gives the breakdown of the total project cost by sector:

Sector Cost in US$ million

Percentage

Education 46.15 56 Water Supply 12.60 15 Health 7.09 9 Environment 4.35 5 Special Needs 3.90 5 Micro-Credit 2.71 3 Organizational Support/Training 2.17 3 Feeder Roads 1.81 2 Cultural Heritage 0.92 1 Integrated Intervention 0.01 0

Total 89.42 100

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

A. COMMUNITY DEVELOPMENT PROGRAM SUB-PROJECTS 1. Number of Sub-projects 190 1,0862. Number of Beneficiaries

3. Target Average Cost ($)

950,000 (of whom at least 20% female)

30

2,408,306 (of whom 49% female)

26B. MICRO-ENTERPRISE DEVELOPMENT LOANS1. Number of Microentrepreneurs 28,500 16,3082. Target Average Cost ($) 100 NAC. SMALL ENTERPRISE DEVELOPMENT LOANS1. Number of Enterprises 2,150 Dropped2. Target Average Cost (4) 20,000 DroppedD. CAPACITY BUILDING1. Number of NGOs/Cooperatives Trained ( 82 1972. Number of Community Groups Trained 81 1313. Number of Micro-entrepreneurs Trained 2,500 5,2354. Number of Small Enterprise Owners Trained

645 Dropped

5. Number of Financial Institutions Trained in Small Enterprise Lending

9 Dropped

6. Improved portfolio performance through repayment of loans (in %)

7. Skills developed by small contractors to carry out SFD-financed labor intensive works.

8. NGOs and communities carrying out projects financed by SFD.

80

60

183

more than 90

100

263

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

PROJECT OUTPUT:

1. SFD operational and fully staffed by September 1997.

yes yes

COMMUNITY DEVELOPMENT COMPONENT:

1. 924 social infrastructure sub-projects completed.

924 907

2. 1,132 economic infrastructure sub-projects completed.

1,132 179

SMALL AND MICROENTERPRISE DEVELOPMENT COMPONENT:

1. Training delivered in functional aspects of delivering micro-enterprise credit to NGOs by July 1998

2 2

CAPACITY BUILDING COMPONENT:

1. Training provided to community groups in sub-project proposal design, implementation and O&M.

91 131

- 22 -

2. NGOs trained in design, implementation, and supervision.

82 197

3. Training modules provided to small contractors on issues related to labor intensive works.

4. Training financial institutions involved in credit provision to small enterprises.

5. NGOs received TA and training in establishing microfinance programs to assist microenterprises.

30

9

5

0

Dropped

15

1 End of project(Projected in PAD (Annex 1)

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ million1. Community Development 38.30 62.90 164

2. Small and Micro Enterprise Development 27.40 1.60 63. Capacity Building and SFD Operating Cost 12.90 24.90 193

Total Baseline Cost 78.60 89.40 Physical Contingencies 0.40 0.00 Price Contingencies 1.00 0.00

Total Project Costs 80.00 89.40Total Financing Required 80.00 89.40

Part of the third component is the operating cost, which was financed under the Dutch TF and IDA Credit No.2953-YEM.

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

a

Otherb N.B.F. Total Cost

1. Works 0.00 5.30 5.30 10.70 21.30(0.00) (1.30) (3.80) (0.00) (5.10)

2. Goods 0.00 0.00 4.00 6.80 10.80(0.00) (0.00) (4.00) (0.00) (4.00)

3. Services 0.00 0.00 18.60 27.00 45.60(including credit, TA and training, and PPF)

(0.00) (0.00) (18.60) (0.00) (18.60)

4.Miscellaneous ( incremental operating cost)

0.00 0.00 2.30 0.00 2.30

(0.00) (0.00) (2.30) (0.00) (2.30) Total 0.00 5.30 30.20 44.50 80.00

(0.00) (1.30) (28.70) (0.00) (30.00)a. IDA-financed US$3.80 million for Works category through "Other" procurement method is for community contracting. b. IDA-financed US$4 million for Goods category through "Other" procurement method is for International Shopping (US$3.6 million for equipment) and National Shopping (US$0.4 million for vehicles).

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 0.68 16.46 0.95 44.83 62.92(0.65) (15.64) (0.90) (0.00) (17.19)

2. Goods 0.69 1.40 0.19 6.50 8.78(0.65) (1.33) (0.18) (0.00) (2.16)

- 24 -

3. Services 0.00 0.00 4.76 5.23 9.99(including credit, TA and training, and PPF)

(0.00) (0.00) (4.76) (0.00) (4.76)

4.Miscellaneous ( incremental operating cost)

0.00 0.00 5.58 2.13 7.71

(0.00) (0.00) (5.58) (0.00) (5.58) Total 1.37 17.86 11.48 58.69 89.40

(1.30) (16.97) (11.42) (0.00) (29.69)Note: Incremental operating cost includes charges incurred for office space, supplies and equipment, furniture, salaries for higher level professional and support staff, telephone, facsimile, photocopying, printing, and office supplies.

1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2/ Includes civil works and goods to be procured through shopping, community participation, consulting services, services

of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component a) b) (in US$ million equivalent)

Component a) b) Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.1. Community Development

10.70 2.90 24.60 17.20 7.70 38.00 160.7 265.5 154.5

2. Small and Micro Enterprise Development

8.90 1.90 16.70 1.30 0.90 0.30 14.6 47.4 1.8

3. Capacity Building and SFD Operating Cost

10.30 0.20 3.70 11.30 1.80 11.70 109.7 900.0 316.2

Total 30.00 5.00 45.00 29.70 9.60 50.10 99.0 192.0 111.3

a) Figures may not add up due to rounding. b) Government contributions include beneficiary community contributions. c) Cofinanciers include The Netherlands, Japan, OPEC Fund for International Development, Arab Fund for Economic and Social Development, USA Counter Value Aid Program, and European Union.

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Annex 3. Economic Costs and Benefits

Appraisal did not provide for an economic rate of return calculation, given the difficulty of quantifying benefits of some of the activities supported, such as health services and non-formal education. However, it did carry out a study of the cost-effectiveness of the SFD approach as compared to the alternative of delivering the same services through the line agencies. The average cost of overhead per dollar of investment in these agencies was estimated and compared to the SFD average cost and showed that the SFD was more efficient by a factor of three. The study also calculated maximum unit costs per beneficiary, providing the SFD with ceilings for different types of activities (see Annex 5 of the PAD). This study was repeated in 1999, and its results were described in Annex 4 of the PAD for the Second Social Development Project (Report No. 20291-YEM) of April 11, 2000. Those results were as follows:

Cost-Effectiveness of SFDThe investments of the SFD should also be cost-efficient. During the Mid-Term Review in 1999, the efficiency of the SFD was assessed using three criteria: (a) unit costs achieved by SFD compared to other projects; (b) administrative efficiency to be determined by SFD overhead compared to similar projects, and average processing and completion time by category; and (c) cost per beneficiary by category.

Unit costs lThe SFD in Yemen is an extremely efficient delivery mechanism when compared with other agencies, like ministries and public agencies in general. The following tables show the unit cost of various activities by category of subproject across different agencies (Ministry of Education, construction, public works, etc.). In every single case the social fund overperforms the other agencies.

Average cost in selected activities for Education Sub-projectsItem Unit of

measureSFD Public Works Ministry of

constructionExcavation of usual earth (for foundation)

Cubic meter 2.05 2.4 7.5

Foundations Cubic meter 98.72 118.42 183.3Roofs Cubic meter 110.58 126.19 195.8Bazelt stone walls Cubic meter 29.46 39.26 52.08Squared stone walls Cubic meter 40.76 57.86 NaWalls Square meter 2.25 2.44 3.75Ceiling Square meter 1.98 2.09 3

Average cost for civil works in education projects, US$, 1999Item SFD Public Works Education Sector

Investment ProjectBasic

EducationCost per square meter 145 170 170 188Cost per square meter double floor 122-174 Na 149 Na

Average cost of equipment for health units by different agencies, US$SFD* Ministry of health**

September 1998 13,957 15,372April 1999 6,959 13,555October 1999 13,583 24,806

* Including lab equipment; **Excluding lab equipment

Average cost per unit, SFD Vs. Government, Water Supply Projects (US$), 1999Item Unit SFD GARW

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4" dia medium LM 12 213" dia medium LM 6.5 17.22.5" dia medium LM 7.3 14.42" dia medium LM 5.6 12.51.5" dia medium LM 4.34 9.4Water tanks M3 128 187.5Pump house M2 191 218Pumping unit (pump + engine)(head 100m-150m & discharge 4-6 lit/s)

Per unit

13,470 14,062

It should be noted that cost minimization is one of the technical criteria used by the SFD in order to decide whether to fund a project. The criteria differ by category, and in most cases minimum cost is not necessarily a barrier to the funding of a project, as long as the other criteria are fulfilled. In general the procedure adopted by the SFD is the following: based on the database of existing projects, an estimate of unit costs is obtained. This database, together with informal assessments by SFD staff, is used as a guideline in order to assess the viability of a project. When the bids are received, the SFD has an estimate of the cost of implementing a project. If the bids received exceed such cost then a new bid is called. However there is no formal cutoff point for the unit cost, and a database by governorate is in construction now and has not yet been implemented.

Unit costs have decreased over time. For example the average unit cost for education projects is now $145 per square meter, compared with $163 in 1997/1998.

Cost per square meter of civil works (US$)Item Unit Cost per square meter

1997/98-1999Stone wall school 148Mud wall school 98Stone wall school with 2 floors 155142Stone wall school with 1 floor 180151Average cost 163145Total Schools built 7498

Administrative Efficiency lThe SFD has made remarkable efforts and achievements in strengthening its institutional capacity, as evidenced from the size, results and further expansion of its portfolio in almost every sector of the economy. Its overhead and administrative expenses have a direct bearing on the social rate of return of its portfolio. The SFD staff is now capable of delivering training and technical assistance as part of the subproject in the absence of local or international expertise. They have been doing this for almost two years now and will continue to do so until the local institutions are prepared and equipped with skills to deliver the services. Although this has added to the work of staff, who already have defined responsibilities to carry out their work with tight deadlines, it has indirectly benefited and prepared SFD staff to get hands-on experience in the field work and built their capacity to handle bigger sized projects, delivering them with full accountability.

It is estimated that each project officer in SFD can now develop an average of 15 projects per year. In addition, SFD now has six regional offices, enhancing its ability to reach target groups and assess the needs of groups not yet benefiting from SFD programs. The capacity of SFD in tracking the progress of their programs and managing the funds is growing. This can be attributed to the development of MIS with

- 27 -

advanced data inputting and reporting features, specifically designed to capture SFD performance on all aspects of project, such as fund allocations, costing and disbursements; and program progress indicators on trainees, beneficiaries and job creation.

To assess its efficiency, SFD set up a staff-time recording system to record time spent on different tasks ranging from community mobilization, to appraisal, to procurement. This will be integrated in the future into the MIS system and can be used as a management tool. In the future, central technical groups such as procurement in the social fund will charge their time to specific subprojects providing management with a full range of information needed to deploy staff and increase efficiency.

Yemen SFD has kept overheads very low in community mobilization projects by making its staff cover more subprojects. Yemen SFD projects cover an average of 20 subprojects, as compared to the global norm for Social Funds of 12 subprojects.

Management Unit overheads

Sub-project support & supervision

Construction

5%

7,5 to 9,5

85.5 to 87,5 %

The above presentation illustrates that 85.5- 87.5 percent of the total for community development subproject cost goes to the community for implementation purposes. Secondly, it is estimated that a large percentage of the subproject support and supervision costs (7.5-9.5 percent) helps the community implement the project and can be considered as on-the-job training. Overall, it can be concluded that approximately 90 percent of total project cost benefits the communities. This includes supervision by SFD staff and consultants. This is very low when one considers that the SFD works in many inaccessible project sites.

The microfinance program has a slightly higher overhead, because SFD staff provide a great deal of technical assistance and support to the microfinance apex agencies. The higher level of overhead is also justified when viewed in the context of leaving in place a financially and technically sustainable microfinance agency serving the population well after Social Fund support is withdrawn. The overall overhead for the SFD is still dominated by the overhead for the community development program; its accounts for 80 percent of expenditures, whereas microfinance is less than 10 percent.

Compared to other institutions that provide development services, the Ministry of Education's school construction unit has overhead ranging from 20 percent to 30 percent: this refers only to the school construction unit and not to other Ministry staff who may also play a role in school construction. On top of this, their unit costs are significantly higher (US$250-$350 per square meter). Overhead in other agencies that manage investment programs is even higher: in some cases overhead is greater than investment. Another comparison is the number of personnel. The SFD uses 85 people, including secretaries, drivers and messengers, to deliver a program of over $20 million dollars per year in 640 locations, some being very remote. In comparison the school buildings unit uses 500 people to deliver a program of investment of US$3 million. A group of other agencies responsible for running development programs in different regions use over 3,300 people to deliver a program of transfers and investment of US$5 million.

- 28 -

Cost per Beneficiary lCost per beneficiary for most of SFD’s subprojects decreased until 1999 and increased thereafter. There are many possible explanations for this phenomenon: all of the projects for year 2000 are under preparation and thus the number of beneficiaries has not been assessed accurately, resulting in a high cost per beneficiary. Also, the SFD decided to expand its scope to remote areas and to direct implementation of projects, which tends to increase the cost per beneficiary, though offset by additional benefits (like capacity building at the community level).

Average cost per beneficiary by year and category (simple average, US$)Cost per beneficiary (Direct beneficiaries only) Cost per beneficiary (direct plus indirect beenficiaries)

1997 1998 1999 1997 1998 1999 Sector

$$ Sample $$ Sample $$ Sample $$ Sample $$ Sample $$ Sample

Education 117.6 19 133.9 145 69.1 226 98.3 19 102.9 145 65.2 226

Health 5.7 11 14.5 50 9.1 40 5.1 11 13.0 50 8.9 40

Water 32.4 10 16.5 32 22.6 42 32.4 10 15.9 32 22.4 42

Capacity Building 119.8 6 118.3 20 40.7 37 119.8 6 105.2 20 39.3 37

Roads -- -- 11.9 -- -- 6.5

Sewerage 48.8 6 15.8 9 9.3 6 15.8 9

Microcredit 46 2 96 3 7 2 16 3

Education, microcredit, and capacity building are the most expensive activities when direct beneficiaries are considered. However microcredit has many more indirect beneficiaries, reducing the cost per beneficiary significantly. Also, as health and water projects tend to be spread over a large number of individuals, the cost per beneficiary is significantly lower than the other activities. Education on the other hand has many more projects and fewer beneficiaries than health, explaining the difference in cost.

The way beneficiaries are estimated varies across categories, affecting the perceived cost per beneficiary. For example, education projects in general will have fewer beneficiaries, since only students currently enrolled in the school that is being upgraded are considered. On the other hand, in health related projects the number of beneficiaries is much higher and extends to the entire village/community.

Projects vary notedly in terms of scope of beneficiaries and total cost. The following table shows the maximum and minimum cost per beneficiary by category of SFD subprojects in year 1998 and 1999; it has been observed that some Social Funds in other countries rely on cost per beneficiary as an additional criterion to determine which subprojects will be funded. If applied, this indicator should not be used as the only criterion, since high cost per beneficiary may imply among other things that the project is being implemented directly by a community, which is usually more expensive but fulfills other goals like capacity building. It may also signify that the project is being implemented in remote areas, where development may be another spillover or objective of channeling the funds through those subprojects. The criteria to determine the cut-off points should be clearly specified and based on past experiences. The SFD currently uses a cut-off value of $100 to screen water projects.

Cost per beneficiary, selected indicators

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1998 1999 Sector

Minimum Maximum Median 75th percentile Minimum Maximum Median 75th

percentile

Education 6.5 722.3 152.7 251.1 0.5 902.6 166.0 232

Health 1.2 753.9 14.6 26.2 0.9 218.7 14.3 23.0

Water 1.3 106.4 40.3 60.3 3.3 120.3 39.4 58.5

Capacity Building 2.4 1055.5 15.4 338.9 3.5 500 96.2 216.5

Note: in this case the median indicates the cost per beneficiary such that 50 percent of the projects have a lower cost per beneficiary than the median.

As we can see, the median value shows that a good number of projects are well below the maximum cost per beneficiary. The fact that the median values for some categories is significantly lower than the means (e.g., capacity building 1998) shows that there are a few very expensive projects that drive the average cost per beneficiary up. This is even more clear when observing the 75th percentile. For example education in 1999, even though the maximum cost per beneficiary is 902.6, 75 percent of the projects have a cost per beneficiary below 232. For every single category the 75th percentile is lower in 1999 than in 1998.

Recent UpdateThe recent report on Key Findings- Yemen SFD Impact Evaluation provided some further relevant information. Its findings are described in Annex 8.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation03/03/1996 5 TTL, SME Development

Specialist, Community Development Specialist, Small Scale Labor Intensive Works Specialist, Social Anthropologist, Economist

12/8/1996 2 SME Development Specialist, Community Development Specialist

01/15/1997 2 SME Development Specialist, Community Development Specialist

Appraisal/Negotiation03/09/1997 5 TTL, Social Fund Specialist,

Procurement/Disbursement Analyst, Labor Intensive Works Engineer, NGO Specialist

Supervision05/31/1998 4 TTL; Social Fund Specialist;

SME Specialist; Small Community Works Specialist

S S

10/28/1998 1 Financial Management Specialist S S11/18/1998 3 TTL; Social Fund Specialist;

SME SpecialistS S

11/15/1999 6 TTL; Community Contracting Specialist; Operations Officer; Operations Analyst; Senior Economist/Impact Assessment Specialist; Research Analyst; Procurement/Disbursement Specialist

HS HS

05/18/2001 5 TTL; Microfinance Specialist; Techinical Auditor; Operations Officer; Impact Assessment Specialist

HS HS

05/06/2002 2 TTL/Social Fund Specialist; Program Assistant

HS HS

ICR09/13/2003 4 TTL; Social Fund

Specialist; Micro-Finance Specialist; Operations

HS HS

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Analyst

TTL: Task Team Leader, SME: Small and Micro-Enterprise

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation NA 122,780Appraisal/Negotiation NA 100,000Supervision NA 367,000ICR NA 45,000Total NA 634,780

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

Capacity Building of NGOs and CBOs and SDF Community Development Officers, A.al Dalli, IBRD, March 20, 1997.

Country Assistance Strategy (24372-YEM), IBRD, August 8, 2002.

Key Findings- Yemen SFD Impact Evaluation, ESA, September 2003.

Mid-Term Review, IBRD, October-November 1999.

MSE Baseline Survey-Yemen (final report of a nation-wide baseline survey among micro and small business enterprises (MSEs) in Yemen), NEI, November 2000.

Phase II Report: Findings from the 1999 National Poverty Survey, ESA, November 2002.

Poverty Reduction Strategy Paper: 2003-2005, Government of the Yemen, May 31, 2002.

Project Appraisal Report, Social Fund for Development Project, IBRD, April 24, 1997.

Project Appraisal Report, Second Social Fund for Development Project, IBRD, April 11, 2000.

Republic of Yemen- Poverty Update, IBRD, December 11, 2002.

Social Assessment of the Social Fund for Development of the Republic of Yemen, R. Detalle and E. Volpi, IBRD, July 1999.

Social Fund for Development, Establishment Phase, SFD, 1998.

Social Fund for Development, Evaluation Mission, European Commission and Republic of Yemen, July 1999.

Social Fund for Development, Mid-Term Review, European Community, April 2003.

Social Fund for Development, Second Phase, Opertional Manual, May 2001.

Social Protection and Structural Adjustment in Yemen: Potential and Limitations of the Social Fund for Development, German Development Institute, December 1998.

Yemen Social and Employment Fund Project, Beneficiary Assessment, S. Meenakshy, IBRD, May-July 1996.

Yemen Social Fund for Development, A Participatory Rapid Appraisal, S. Meenakshy and R.el Rashidi, IBRD, Dec. 19, 1997.

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Annex 8. Beneficiary Survey Results

The Key Findings-Yemen SFD Impact Evaluation, completed by ESA Consultores in September 2003, resulted in some interesting findings that influenced the SFD management to consider further adjustment of its policies and practices. The most relevant sections have been copied below. It should be noted that the data are based on a July 2003 assessment and include financing provided under the IDA-funded Second SFD Project (Credit 3353-YEM). It also should be noted that this survey covered 97 subprojects (collecting data from 2,038 households), for which baseline data existed from the 1999 exercise, as well as 101 pipeline subprojects (collecting data from 2,029 households). These covered education, health, water supply and microfinance.

1 SFD’s Operational efficiency

1.1 Number and type of projects/amount of funding

As of July 2003, the Social Fund for Development had committed a total of US$213 million in 3,063 projects, of which 1,686 (US$94M) had been completed, 1,232 (US$111M) were under implementation and 117 (US$8M) had been approved pending implementation (see Table 1.a).

Table 1.a - SFD Investments by sector to July 2003

Number of projects Budgeted value of investmentApproved Underway Completed Total Approved Underway Completed Total

Education 59 577 888 1,524 4,167,302 56,630,861 53,452,350 114,250,513 50 54Water 28 218 284 530 1,616,404 14,694,706 16,743,512 33,054,622 17 15Health 11 93 177 281 548,281 7,236,693 9,360,550 17,145,524 9 8Roads 3 65 32 100 306,657 7,641,489 2,984,188 10,932,334 3 5Special Needs Groups 3 102 41 146 65,000 8,508,334 2,416,324 10,989,658 5 5Environment 4 36 41 81 563,711 5,105,128 4,273,255 9,942,094 3 5Cultural Heritage 3 26 8 37 453,680 4,618,825 654,370 5,726,875 1 3Micro Credit 16 26 42 2,698,838 1,417,463 4,116,301 1 2Organizational Support 5 53 86 144 650,057 1,852,086 1,234,140 3,736,283 5 2Training 29 96 125 1,084,271 1,166,441 2,250,712 4 1Integrated Interventions 1 16 5 22 76,000 1,037,890 110,813 1,224,703 1 1Small Entreprises 1 2 3 126,000 13,706 139,706 0 0Total 117 1,232 1,686 3,035 8,447,092 111,235,121 93,827,112 213,509,325 100 100

3.9% 40.6% 55.6% 4.0% 52.1% 43.9%

% of projects

% of investment

1.2 Number of beneficiaries Table 1.b summarizes the number of direct and indirect beneficiaries of SDF projects by type of project and by year of completion. Education, health, water and road projects generate 79 percent of all direct beneficiaries, a figure which goes up to 97 percent if environment projects are included in the group. Indirect beneficiaries add only 19 percent to the number of direct beneficiaries. The number of direct beneficiaries varies by type of project, from small-scale ventures such as training (55 beneficiaries per project) or special needs groups projects (302) to wider-scaled road (9,630) or environment (14,348) projects, through medium-size developments in education (713) or water (2,867).

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Table 1.b - Summary of direct and indirect beneficiaries of SFD projects by type of project and year of completion

Completion Year

Cultural Heritage Education Environment Health

Integrated Intervention

Micro Credit Projects

Organizational Support Roads

Special Need

Groups Training Water Grand Total1997 900 5,200 784 6,884

0 1,006 0 1,0061998 48,848 1,523 91,958 782 97 64,277 207,485

13,778 0 5,000 0 0 7,400 26,1781999 129,530 10,500 182,075 40 442 223 124,895 447,705

19,498 0 27,000 0 0 0 0 46,4982000 34,249 10,770 139,863 9 3,657 2,964 5,000 200 477 40,472 237,661

3,515 0 9 0 8,040 2,720 3,000 0 0 724 18,0082001 14,900 95,694 105,877 144,710 939 1,846 4,260 61,409 8,791 1,229 219,257 658,912

0 21,339 0 17,500 0 10,833 155 26,494 45,377 4,500 1,200 127,3982002 950 249,631 278,040 165,238 18,572 662 11,214 157,869 2,909 1,783 274,029 1,160,897

4,900 25,967 36,000 6,006 112,270 3,738 2,074 39,980 3,591 22,900 89,555 346,9812003 46,893 181,540 57,631 245 3,513 83,876 498 1,504 81,876 457,676

1,838 7,000 650 5,060 524 37,028 903 10 159 53,172Total Direct 15,850 605,745 588,250 786,675 19,520 6,450 23,175 308,154 12,398 5,313 805,590 3,177,220Total Indirect 4,900 85,935 43,000 57,171 112,270 27,671 5,473 106,502 49,871 27,410 99,038 619,241# projects 8 849 41 176 5 26 86 32 41 96 281 1643Direct beneficiaries /project 1,981 713 14,348 4,470 3,904 248 269 9,630 302 55 2,867 1,934

Source: MIS

Gender distribution, as calculated through project statistic,s shows that the distribution is more or less equal by gender except in education.

Table 1.c - Proportion of female beneficiaries by type of sub-project

Proportion of women beneficiaries Direct Indirect Education 43.3 34.7 Health 50.3 52.8 Water 50.1 49.9 All projects 48.9 47.8

1.3 Project cycle performanceThe concept of project cycle performance refers to the relative speed of the different steps needed to complete the project. The are five milestones that permit defining the major steps in the process: the request for project funding, approval of the project by the committee, signature of a contract with the requesting community, adjudication of construction contract and completion of works. The measure used in this section is the median rather than the average, since the average can be strongly influenced by very few outliers. Of the data available from 1,035 projects including civil works, the overall duration of the process is 576 days, that is 19.2 months, distributed as follows:

- from request to committee approval: 221 days (38.4 percent of total time)

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- from committee approval to contract with community: 16 days (2.8 percent)- from contract with community to construction contract: 102 days (17.7 percent)- from construction contract to completion: 237 days (41.1 percent).

There are, however, some internal differences: for instance, water projects are quicker to approve and, along with health projects, have a shorter actual civil work time, resulting in an overall median duration of 520 days. On the other hand, road projects are longer to approve and complete, for an overall median duration of 648 days (the corresponding figures are 562 days for health projects and 580 days for education projects).

Another interesting difference is related to the year of implementation. Figure 1.a below shows the distribution of median duration of the same main four steps, with the projects distributed according to the year completed. The overall picture is that of an increasing length of the project cycle, from 282 to 631 days, in all likelihood linked to the increase in the number of projects to be managed, and possibly to the decentralization of the program, which may imply the use of less qualified or competent staff in the branch office, or the need to move project documents back and forth between HQ and branch offices. It may also be linked to increased stringency in the appraisal and monitoring norms of the SFD as the institution matured.

Figure 1-a -Project Cycle Performance – By Year

0 100 200 300 400 500 600 700

1997

1998

1999

2000

2001

2002

Number of days (median)Request to approvalApproval to community contractCommunity contract to construction contractConstruction contract to completion

2 Cost – Efficiency of SFD Investments

2.1 Cost per beneficiary

Based on the data provided by the Fund’s MIS for completed subprojects, the study calculated the average cost and the average number of direct beneficiaries per category of subproject, then the average cost per direct beneficiary. The results, presented in Table 2.a, range between US$5.68 for integrated interventions and US$220.91 for training ventures. Projects with a larger number of beneficiaries obviously tend to be less expensive on a per capita basis. For comparison, the PAD for the SFD II Project quoted the costs of education projects at US$69-134, health projects at US$6-15, water projects at US$17-32, and roads projects at US$12, for the period from 1997 to 1999.

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Table 2.a - Cost of SFD completed subprojects per beneficiary

Type of sub-projectAverage cost per

project (US$)

Number of direct beneficiaries per

projectAverage cost per

beneficiaryIntegrated Interventions 22,163 3,904 5.68Environment 104,226 14,348 7.26Roads 93,256 9,630 9.68Health 52,884 4,470 11.83Water 58,956 2,867 20.56Cultural Heritage 81,796 1,981 41.29Organizational supprt 14,350 269 53.35Education 60,194 713 84.42Special Needs groups 58,935 302 195.15Micro credit 54,518 248 219.83Training 12,150 55 220.91

55,651 1,934 28.78

3 SFD’s Targeting Outcomes

3.1 Benefit Incidence Analysis

The study shows estimates of the proportion of total SFD funding going to each decile of population, by type of project and globally for all SFD projects. Table 3.a shows the results of this analysis.

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Table 3.a - Benefit Incidence of SFD – 198 Projects with Data from MIS of SFD and the IES 2003

Populations deciles from poor (1) to rich (10)/11 2 3 4 5 6 7 8 9 10 Total

Total program resources SFD

Distribution Index /4

Education 102,769,793 16.8 14.5 12.1 10.9 11.7 6.1 8.8 8.8 6.3 4.0 100.0 0.201Water 32,559,350 18.2 13.9 14.1 10.5 10.8 9.9 7.0 6.9 6.5 2.3 100.0 0.176Health 16,302,332 15.6 14.4 12.8 9.6 12.0 7.8 7.9 7.8 5.2 7.0 100.0 0.242Rural Roads 11,284,867 15.2 18.9 14.2 10.9 10.9 8.9 6.5 6.6 2.3 5.5 100.0 0.256Micro Credit 3,890,501 8.2 7.0 9.8 10.5 7.5 14.1 7.7 14.1 7.6 13.6 100.0 -0.072

Total /3 166,806,843 16.6 14.5 12.6 10.7 11.4 7.4 8.2 8.3 6.0 4.3 100.0 0.204

% of resources based on potential beneficiary population/2 for education, water, health, rural roads and micro credit

Notes1/National Population deciles based on income data from NPS 1999 ajusted to january 2003 with CPI, acumulating population in order of percapita income with cut-off points determined by the accumulated population of the households and set at 10%, 20% etc of the total population.2/ Potential beneficiaries are the population located in the IES 2002 sample considered to be within the area of influence of the 198 SFD projects analyzed.3/ Total for the project types analysed here to december 2002. Other projects account for 14.1% of 194,244,249 SFD resources in total . The total is based on the sector-specific estimates weighted by the investment amount in each sector for the whole SFD program. It is valid only for the project types reported here.4/ See text for definition.

The results are very positive and show that a high proportion of SFD resources are benefiting the poorest households in Yemen: 17 percent going to the poorest decile, 31 percent to the poorest quintile and 44 percent to the poorest three deciles. These figures seem much better than those found in other Social Investment Funds where the same analytical procedures were applied. This is especially good to find in Yemen, where the generally high level of poverty across the entire population might be expected to make it more difficult to target the RELATIVELY poor households.

It is also noteworthy that the pattern is consistent across subproject type (with distribution indexes ranging between 0.176 and 0.256, except for microfinance (where the distribution index of –0.072 shows a regressive pattern, perhaps linked to the fact that people benefiting from microloans tend to be more “entrepreneurial” and thus less likely to be poor than the average target population. However, this group of projects has a little weight in the total distribution. It should also be mentioned that the project sample for microfinance was small but was virtually a census of all SFD microfinance projects. It, therefore, is representative of those projects.

The difference from the 1999 data (presented in the Phase 2 Report: Findings from the 1999 NPS Survey), which found less favorable results, is interesting. It might reflect an improvement in targeting by project officials since 1999.

4 Consultation, Participation, Ownership and SFD’s Impact on Social Capital

4.1 Consultation on project design

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Key respondents in the project survey were asked to estimate the extent of community involvement in the discussions held prior to project implementation. The results are presented in Table 4.a.

Table 4.a - Proportion of main respondents, community leaders and community representatives involved in subproject discussions

Educat ion Health Water Road EP BL EP BL EP BL EP BL Main respondents informed

91 95 95 92 100 96 100 85

Leaders/persons involved in the discussion Shaikh 76 74 80 59 84 92 79 77 Member of Parliament 66 50 45 36 61 33 43 45 Staff of institution 59 61 45 45 16 8 Local Council 21 43 20 23 21 31 29 29 Dist rict Gvt. Office 21 25 20 23 12 Governorate Office 7 32 25 41 NGO 10 4 15 18 21 20 14 12 Communit y beneficiaries

90 86 100 86 100 92 100 94

Source: IES 2003 – Project survey

The respondents themselves, in most cases managers of the subproject or otherwise involved in its current work, were overall well informed about the project design. Their answers with regards to other persons’ involvement indicate the frequent occurrence of involvement of individual political leaders (shaikh or Parliament member), either to initiate or to support the project, which is a traditional way for politicians or customary leaders to maintain their status. Staff of the concerned institutions is consulted in more than half of the cases for education and health subprojects. The district and governorate-level offices of the line ministries seem to be only peripherally involved, which may indicate the effectiveness of the Fund’s interventions in bypassing common administrative barriers and bottlenecks and establishing itself as an action-minded organization. On the other hand, it may also reflect a lack of intersectorial coordination, which may be prejudicial to the future operations and maintenance of the subproject.

Although the project survey shows that in almost all cases some members of the community were consulted, it is not the same as all members of the community being informed of or consulted about the project. The evidence from the household survey shows that between one-third and two-fifths of the population knew about the SFD project (40.2 percent in the ex-post group and 36 percent for the baseline group). When households in the ex-post group were asked which kind of project was supported by the SFD, those who knew there was one mentioned the correct type in 91-96 percent of the cases.

4.2 Community contribution to the project

The direct participation of communities can take several forms: donation of money or working days, donation of materials for construction of the main building, etc. Table 4.b shows, for each type of participation and each type of project, the proportion of communities that participated in the projects and the average amount (money-equivalent) of this participation, according to the main respondents.

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Table 4.b - Frequency and amount of community contribution to SFD subprojects

Education Health Water Roads Type of participation

% Amount (YR)

% Amount (YR)

% Amount (YR)

% Amount (YR)

Money 71.9 445,750 77.8 376,389 83.3 1,066,666 64.3 425,143

Working days 37.5 61,515 44.4 54,889 33.3 138,444 57.1 201,071

Stones 34.4 68,125 33.3 133,472 11.8 150,000 57.1 655,721

Sand 28.1 28,125 0.0 22.2 9,036 7.1 7,143

Water 25.0 15,000 22.2 13,333 27.8 7,333 14.3 10,000

Other materials 18.8 24,000 33.3 29,167 47.1 2,612,292 14.3 35,714

Other 15.6 21,594 5.6 11,111 26.7 41,111 7.1 357,143

Total N= 32 664,109 N= 18 618,361 N= 18 4,024,903* N= 14 1,691,935

Source: IES 2003 – Project surveyNote: one isolated contribution for YR40M in “other materials” has a large impact on the average water project community contribution. Discarding this outlier, the average total contribution for water projects would be: YR1,558,504, similar to that of the road projects.

Between two-thirds and four-fifths of the communities contribute money to the subproject, which is the easiest way to participate, provided there is some money available in the community. Direct labor contribution is highest in the road subprojects (57.1 percent), as well as contribution in materials (stones). Using an average exchange rate of YR160 per US$, the community contribution estimated by the main respondents corresponds to 6.9 percent of the completed project costs (as assessed by the SFD) for education projects; 7.3 percent for health projects; 16.5 percent for water projects and 11.3 percent for roads projects. These figures are above the 5 percent that constitutes one of the requirements for SFD funding, and their relative importance could also indicate the grade of priority that communities give to each type of subproject.

Of the visited households, 38.7 percent said they had contributed to the subproject. Individual contributions by categories show similar patterns, as seen in Table 4.c, with monetary contributions being the most common. As subprojects are getting under way, the labor and materials contribution make up an increasing share of community contribution, as opposed to financial contributions, which dominate before the beginning of a subproject.

Table 4.c - Proportion of households contributing to SFD subprojects by type of contribution

Ex-post Baseline Type of contribution Educ. Health Water Roads Educ. Health Water Roads

Donating labor 32.8 45.9 32.8 42.6 15.2 27.2 18.5 22.7 Donating materials 6.7 23.5 22.7 16.3 13.7 16.8 16.1 6.7 Donating money 67.2 50.6 67.2 54.7 78.7 64.0 72.0 70.6 Donating or lending tools 2.1 2.4 2.5 4.7 0.5 1.5 3.0 2.5 Other 6.7 3.6 2.5 11.1 2.0 3.7 4.2 3.4 Number of households 238 84 119 190 197 136 168 119

The average household contribution is estimated, in the ex-post group, between YR6 and YR25, as seen in Table 4.d. Education and rural road subprojects seem to have the highest level of household contribution.

Table 4.d - Average household contribution to subprojects by category

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Monetary value of household contributions (in YR)

Education Health Water Roads # hhlds donating

Donated labor 4,997 2,241 2,177 3,265 237 Donated materials 1,203 1,362 1,682 3,851 94 Donated money 5,190 1,683 3,432 7,766 387 Donating or lending tools 143 71 32 319 19 Other w ays 13,917 1,250 25 2,732 42 Total 25,450 6,607 7,348 17,933 Number of households 238 84 119 190

Source: Household survey. Note: Averages calculated on the basis of all households in project groups.

4.3 Consensus on priority of SFD Project

Both the main respondents in the project survey and the interviewees in the household survey were asked whether they thought the project actually was a priority for them and the results are shown in Tables 4.e and 4.f.

Table 4.e - Subproject Priority as Perceived by Main Respondents (ex-post)

Level of priority Education Health Water RoadsHigh 90.6 100.0 100.0 100.0Worthwhile 9.4 0.0 0.0 0.0Not a priority 0.0 0.0 0.0 0.0Num. of projects

Obviously, the main respondents, most of them currently involved in the subprojects, are quite unanimous. For education projects, alternative priorities were one water and one health project. The household perspective is slightly more diverse, with 60-89 percent of interviewees concurring with the fact that the subproject implemented was actually the one with the highest priority, with the best ranking going to microfinance projects. For the 195 persons dissenting, water projects were the preferred alternative in 52.2 percent of the cases, health in 17.1 percent, education in 13.2 percent, rural roads in 5.6 percent and electricity projects in 7.8 percent.

Table 4.f - Priority of subproject as perceived by households (household, ex-post survey)

Level of priority Education

Health Water Roads Micro finance

Would have chosen same project

60.0 74.2 73.8 78.9 88.8

Would have chosen other project

32.8 18.9 19.5 17.9 8.6

Did not know 7.2 7.0 6.7 3.2 2.6Number of households 595 387 344 308 233

4.4 Ownership of project

One way to assess ownership of the project by the community is to investigate the perceived quality of the

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work done, under the assumption that community members will cherish and better maintain a work deemed to be of acceptable quality. Again, the same question was asked from the main respondents in the project survey and the interviewees in the household survey.

Table 4.g -Perceived quality of SFD work among main respondents (project survey)

Perceived quality of work

Education Health Water Roads

Excellent 71.9 85.7 57.9 71.4Average 25.0 14.3 26.3 7.1

Bad 3.1 0.0 15.8 21.4

For education projects, reasons for perceived bad quality included: bad quality of the stones employed in the construction; presence of surface cracks or roof leakages; absence or low quality of doors; and fences. For water projects, reasons for dissatisfaction with quality included: water leakage; shortage or bad quality of cement; not abiding by standards; and the well not being dug deep enough. For rural road projects, they included: road still narrow; delay in implementation by the contractor; and not meeting the standards.

Table 4.h - Perceived quality of SFD work among ex-post household members (household survey)

Perceived quality of work Education Health Water RoadsExcellent 61.6 56.3 42.7 53.6

Average 7.1 15.0 15.7 20.6 Bad 3.0 4.7 13.1 9.2 No opinion / no response 28.3 24.0 28.5 16.6Number of households 594 387 344 306

Another approach to assessing ownership of the project and the likelihood of community participation in its running and maintenance is asking about the perceived value of the finished product as compared to the resources (both their resources and the project’s) invested in its development.

Table 4.i - Perceived value for money of the SFD works among main respondents (project survey)

Value for money Education Health Water RoadsGood 75.0 85.7 84.2 78.6Medium 21.9 4.8 5.3 0.0Low 3.1 9.5 10.5 21.4

In the case of education projects, perceived low value was linked to a still insufficient number of classrooms and the lack of fences. For water projects, respondents felt that in some cases, the consultants and contractors changed the standards, or that the community did not really benefit from the project. Reasons for low value perception of the road projects included the fact that the work was sometimes not completed or not up to standards.

Finally, one can simply ask households in the area of influence of the subprojects if they do actually feel that they are beneficiaries of this project. Table 4.j shows that the proportion of ex-post households feeling that they actually do benefit from the subproject implemented is highest for road projects and lowest for water projects (where one would like to see water more available and more directly available in one’s house), with an overall proportion of 60.6 percent. When comparing with similar figures for the baseline

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group (where subprojects are planned or under way, the proportion of households feeling as beneficiaries is obviously lower, and will rise with implementation.

However, one should also notice that the perception of definitely not being a beneficiary tends to increase from the baseline group to the ex-post group, that is after effectively seeing the project being implemented in one’s community. This is probably due to it being much clearer after a project is finished, who are really the beneficiaries; ex-ante, some people may expect to benefit who turn out later not to benefit. This could lead to some discontent with the SFD project among the households who do not benefit, for whatever reason. SFD should attempt to provide clear information as early as possible about the scope of coverage and the character of services to be provided, in order to avoid such confusions.

Table 4.j – Households’ perception of their beneficiary status in relation to SFD projects

Ex-post Baseline Educat ion Health Water Roads Education Health Water Roads Benef iciary now 56.1 69.3 41.0 80.2 9.2 12.0 0.8 16.4 Beneficiary in the future

13.3 17.6 20.6 13.0 78.1 80.7 72.9 72.9

Not beneficiary 30.6 13.2 38.4 6.8 12.7 7.4 26.4 10.7

Source - 2003 IES

4.5 Social Capital

The study has no data on social capital for the ex-ante situation of the communities in the ex-post sample, and so was only able to compare here the ex-post social capital situation with the ex-ante situation in the new baseline sample. It is important to stress that the comparison of these two groups is not necessarily a good indicator of SFD’s impact on social capital, as the social capital status of the new “Baseline” group might have been different from that of the pre-intervention status of the “ex-post group”. Also, the preparatory phase of the SFD intervention (which had already happened in these communities, in order for the project to be firmly approved for implementation by SFD) would be expected to affect their social capital status. Nevertheless, we report here the findings for the two groups; and the fact that the levels of structural social capital appear to be generally rather low in both datasets is some indication that the SFD is not having a major impact in this area.

Only 4.0 percent of the households in the ex-post group (and 2.3 percent in the baseline group) mentioned that they had members affiliated with any association, with an average of 1.6 members affiliated per family with affiliation. Another measure of structural social capital is respondents’ knowledge of organizations that work for the benefit of the community. But once again there is little sign that there is more organization presence in the communities in the ex-post than in the ex-ante (new baseline) group. A similar proportion of households (13.9 and 14.1 percent) seemed to know about such organizations, the list of which is provided in Table 4.l.

Local charitable or cooperative societies are mentioned most often (by 56 and 38 percent of the respondents respectively), followed by public services (communications, water and electricity), local councils and health facilities. The Social Fund for Development was only mentioned by six percent of the respondents in each group, a potential source of worry in terms of communications strategies for the Fund. In general, local

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charitable or cooperative societies seem to be the prevalent form of structural social capital present in the surveyed communities.

Table 4.k - Service-providing organizations in the community

(multiple answers) Ex-post Baseline Local societ ies (cooperatives/charitable) 56.4 38.2 Office of Post & Communications Services 10.0 32.4 Water/Electricity Corporations 23.6 30.1 Local Councils 24.3 19.1 Hospitals/health facilities 5.8 18.8 Social Security Fund 17.8 8.5 Education/illiteracy offices 14.7 11.8 Other government agencies 5.8 11.4 Schools 0.4 11.0 Private Sector Corporations 5.8 11.0 Foreign donors 2.7 9.6 Security/Civil Affaires 0.8 9.6 Social Fund for Development 5.8 5.5 Number of households 259 272

Table 4.l - Ranking of local organizations by their perceived importance for community development (multiple answers) Ex-post Baseline % Rank % Rank Local societies 79.4 1 52.2 1 SFD 14.7 2 9.0 6 Local Councils 13.2 3 9.0 6 Educat ion (schools) 7.4 4 29.9 2 Health facilities 7.4 4 25.4 4 Water/electricity corporations 4.4 6 26.9 3 International organizations 2.9 7 20.9 5 Number of households 68 67

5. Service production and sustainability of SFD Projects.

This section presents findings on the production of services and sustainability indicators taken from the 2003 IES project survey component. Data are presented for the ex-post group and for the new baseline sample.

The same caveats already expressed should be borne in mind regarding the comparability of these data, since it is possible that there are systematic differences between present service production and sustainability conditions in the new baseline group and the pre-intervention status of the projects that SFD has already completed.

Therefore, the data for the ex-post set should be interpreted independently, as indicating the sustainability level of projects where SFD has already finished its work, but not normally allowing us to reach inferences

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about whether SFD’s intervention has been associated with an improvement in that sustainability. However, in some cases, recall data were collected that do allow us to reach conclusions on this point.

5.1 Education Projects(32 schools in ex-post group, 31 in baseline group)

Table 5.a shows the number of schools, number of classrooms and number of students by type of class (boys only, girls only or mixed classes) in the ex-post survey sample for 2002/3 and for 1997/8. The number of students increased by 29 percent in the ex-post group; the increase was highest for girl-only classes (38 percent). The increase in number of classrooms was 12 percent (29 percent for girl-only classrooms). The average class-size rose by 38 percent in (but only 8 percent in girl-only classes). Overall, the proportion of girls enrolled rose from 48 percent to 50 percent. It can be concluded that the SFD investments in these schools were associated with an increase in enrollment, which is particularly strong for girl students, whose teaching conditions were favored by the building of new classrooms, so class sizes for girls remained stable.

Table 5.a - Enrolment by type of class and school/class/students ratios

Yemen SFD - Enrollment by type of classes - Project Survey (ex post sample) Boys

classes Girls

classes Mixed classes

Total

1997/8 Number of schools 6 7 15 28 Number of classes 50 84 126 260 Number of students Male 1,596 2,254 3,850 Female 2,849 723 3,572 Both 1,596 2,849 2,977 7,422 # students/class 32 34 24 29 # classes/school 8 12 8 9 # students/school 266 407 198 265 2001/2 Number of schools 6 7 18 31 Number of classes 52 108 163 323 Number of students Male 1,887 3,404 5,291 Female 3,946 1,341 5,287 Both 1,887 3,946 4,745 10,578 # students/class 36 37 29 33 # classes/school 9 15 9 10 # students/school 315 564 264 341 % change # students/class 13.7 7.7 23.2 14.7 # classes/school 4.0 28.6 7.8 12.2 # students/school 18.2 38.5 32.8 28.7

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Figure 5.a, shows that schools in the ex-post group tended to be more frequently opened over the week before the survey than those from the baseline group, although the main reason invoked was similar in both cases, that is the middle-of-the-year vacations.

Figure 5-a - Opening of schools in the six days previous to the survey

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 1 2 3 4 5 6

Al l open Som e closed All closed

Ex-Post Baseline

Staffing patterns also influence the availability and quality of services: the following table shows the data for the two surveyed groups in this respect. In each case, there is a relatively high proportion of qualified and permanent teachers, suggesting that the availability of staff (and funding for their employment) is not a serious limiting constraint to the effectiveness of investments in the expansion of education coverage in the communities where SFD has invested and plans to invest in the future.

Table 5.b - Staffing patterns for SFD schools

Ex-Post Baseline Number of staff (total) 16.7 31.9 % qualified/all teachers 83.6% 77.6% % permanent/all teachers 95.0% 97.1% % qualified & permanent 80.0% 75.8% % teachers/ all staf f 83.8% 86.8% % female teachers 17.9% 39.4% % administrative staff 13.8% 9.1%

Absenteeism of staff is very low, with attendance rates of 94-96 percent in the ex-post schools and 96-97 percent in the baseline schools for which records were available for the day of the survey and the previous five days.

Nor does textbook supply appear to be a problem. The availability of textbooks was assessed by grade for 5 subjects: Arabic, Mathematics, Sciences, Arts, and Islamic Studies. Ex-post schools had an average of 1.0 book per student per subject (except 0.7 for Arts) while baseline schools had an average of 1.3-1.4 book per student per subject (except 1.1 for Arts). The ex-post schools have 0.87 seats per student (the figure is1.12 in baseline schools). But this appears to be due to multiple shift use of the facilities, rather

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than indicating a need for more investment in this area. Evening shifts increase the number of students by 57 percent in the baseline schools, but only by 23 percent in the ex-post schools. Taking this into account, ex-post schools may now have approximately the right amount of space, provided they continue with the two shift system, while baseline schools may be able to welcome even more students. .

There is also evidence of a reasonably high level of parental involvement in the schools SFD is supporting. A parents maintenance committee exists in 63 percent of the ex-post schools and 60 percent of the baseline schools. In the last twelve months this committee has met on average three and 3.5 times, respectively. The following are the issues most commonly mentioned as problematic in the schools, issues that the committees should address:

Table 5.c - Operating problems identified in schools

Problem identified (% mentioned) Ex-post Baseline Crowded classes 56.3 46.4 Insufficient number of teachers 40.6 25.0 No fence 31.3 Scarcity of w ater 21.9 No administrative building 15.6 No school/office furniture 15.6 53.6 No teacher residence 12.5 No library 12.5 14.3 No support for school activities/laboratories

12.5 17.9

No concern for maintenance 14.3

5.2 Health Projects(21 in ex-post group, 24 in baseline group) Health centers in the baseline survey tend to serve a wider population (13,497 people on average) than facilities in the ex-post group (10,155 persons), and more communities (51.7 vs 18.6). Four health facilities surveyed in the baseline group were reported as serving between 100 and 400 villages or sub-villages and may correspond to large urban settlements. This suggests that SFD is now intervening in somewhat larger facilities than it did in the early years of its operation, but that they remain concentrated in dispersed rural populations.

Water supply remains an important problem, and it has not been resolved in all the SFD-supported facilities. Only 50 percent of the ex-post clinics had water supply within the building or the compound and for those without water, the next source was 2.3km away (a 47 minutes walk on average). A similar proportion of clinics had electricity from a main line, but 62 percent of the ex-post facilities could benefit from a generator located in the clinic (only 4 percent of the baseline clinics could do that), suggesting that SFD has helped in this regard.

Table 5.d shows the average staff composition of the health facilities surveyed:

Table 5.d - Staffing patterns of health facilities

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Category of staff Ex-post Baseline Physicians 0.9 1.9 Professional nurses 0.3 0.9 Midw ives 1.8 1.3 Auxiliary nurses 0.3 0.8 Medical Assistants 1.0 1.0 Others (health guides, cleaners, escorts, others)

4.6 4.5

Total 8.9 10.4 Number of facilities 21 14

Once again, the pattern is similar between the two surveyed groups and generally suggests that staffing has not been an undermining constraint. Roughly half (48 percent) of the facilities in the ex- post group have a doctor (57 percent in the baseline group) and 57 percent have a midwife in each group. Two-thirds of the doctors are male. Medical assistants (all male) are present in 71 percent of the ex-post facilities and 57 percent of baseline clinics. Professional and auxiliary nurses (all female) are only present in between 19 and 29 percent of facilities, in proportion similar in both groups. Overall, the average ex-post facility has 4.3 professional health staff, while this number is 5.9 for the baseline facilities (again the difference is consistent with the projects’ location).

However, there is some evidence of a greater use of temporary and volunteer staff in the ex-post than the new baseline sample, suggesting the need for a further effort to provision the necessary budget for the hiring of permanent staff. In the Ex-post facilities, 16 percent of staff is temporary and 10 percent are volunteers. The corresponding figures for the baseline facilities are 4 and 7 percent. The proportion of permanent staff is lowest for physicians and professional nurses in both groups.

As in the education sector, staff absenteeism (for the persons assigned to the facilities) does not appear to be a major problem. Over the five previous days (including the day of the survey), the proportion of staff presence by category, calculated over a maximum number of potential days of presence, was as follows:- physicians: 98 and 77%- professional nurses: 100 and 98%- midwives: 91 and 94%- medical assistants: 100 and 97%- auxiliary nurses: 100 and 100%in the ex-post and the baseline group, respectively.

The presence of selected categories of staff apparently enhances the capacity of facilities to provide a wider range of services Unless, what is equally probable, physicians and midwives are located preferentially in larger centres that, per se, provide more services.. Table 5.e shows the proportion of each type of service being provided by all facilities, then by facilities with physicians and facilities with midwives (10 and 8 respectively). As can be seen in the table, the presence of physicians and/or midwives is associated with a 10-30 percentage point increase in the availability of specific services.

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Table 5.e - Variation in service mix by presence of selected staff

Variation in service mix by presence of selected staffEx-post Baseline

Type of Service All With Physician With Midwife All With Physician With Midwife

Morbidity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Prenatal care 57.1% 80.0% 80.0% 64.3% 87.5% 87.5%Delivery (at facility) 61.9% 100.0% 70.0% 50.0% 62.5% 75.0%Delivery at home 66.7% 80.0% 70.0% 64.3% 75.0% 75.0%Family planning 57.1% 70.0% 80.0% 50.0% 75.0% 62.5%Growth Monitoring 47.6% 60.0% 60.0% 35.7% 62.5% 50.0%MCH 47.6% 70.0% 70.0% 50.0% 87.5% 75.0%TT Immunization 76.2% 80.0% 90.0% 100.0% 100.0% 100.0%Child Vaccinations 76.2% 80.0% 90.0% 92.9% 87.5% 87.5%Hepatitis Vaccination 61.9% 80.0% 80.0% 78.6% 87.5% 87.5%Lab service 57.1% 80.0% 70.0% 42.9% 62.5% 75.0%X ray service 14.3% 30.0% 30.0% 14.3% 25.0% 25.0%other service 38.1% 40.0% 30.0% 35.7% 50.0% 62.5%

Health facilities start their morning shift between 7.30 and 8.30 am (80 and 85 percent start at 8.00 am respectively); the evening shift is more variable, with about 50 percent of the facilities starting between 3.00 and 4.00 pm. In the week before the survey, where data were available, there did not seem to be a major problem related to closing of facilities: one out of 21 ex-post clinics was closed during three days for an immunization campaign, while 2 of the 14 reporting baseline facilities had a one-day closing linked to staff vacations.

However, not all services are provided every day. In the 35 clinics where data were available (105 days for 21 ex-post and 70 days for 14 baseline facilities), the following table shows the proportion of days when services were offered during the day of the survey and the four previous working days:

Table 5.f - Frequency of health services provided

Service provided Ex-post Baseline Morbidity consultation (OPD) 97 91 Prenatal care 28 31 Child Development Clinic 18 16 Family Planning 37 19 Vaccinations 48 31 Deliveries 35 26 Average number of pat ients/day

10.9 28.3

As can be seen from the table above, the daily, integrated, delivery of services, especially of preventative services, is far from being ensured, implying that people/families with the need for those services may have to come on several occasions to the facility in order to satisfy those needs. The production figures, partially as a consequence of this lack of availability of integrated services, is still low, especially in the ex-post clinics (again, the difference may be linked to the preferentially rural location of SFD projects): assuming that the surveyed facility is the only source for the provision of health services, that the flux of patients observed at the time of survey is representative of the overall utilization, that services are delivered

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260 days per year, and using the average number of population served, the resulting utilization rate is 0.28 consultations per year per person for the ex-post facilities and 0.55 for the baseline facilities, a very low rate by all standards.

Information related to equipment and drug supplies in the health centers was also available for 21 ex-post facilities and 13 baseline facilities. From a list of 18 basic pieces of equipment, an average of 15.6 (86.5 percent) was found in the ex-post facilities and 11.3 (62.8 percent) in the baseline facilities. Of the equipment available in the facilities, 83 percent was deemed in good condition, 15.2 percent in medium condition and 1.9 percent in poor condition for the ex-post group. Corresponding figures for the baseline group were 61.5, 32.4 and 6.1 percent, respectively. Items most often in a state of disrepair included infant scales, sphyngmomanometers and sthetoscopes in the ex-post group and refrigerators, thermometers and scissors in the baseline group.

As the main project respondents had observed that they knew the project had supplied medical equipment in 20 out of 21 ex-post facilities, it seems that this provision has been effective in improving the situation of beneficiary facilities to this respect.

Availability of drug supplies constitutes an essential element of the perceived quality of health services and a powerful motivator for increased use of services. The evaluation process surveyed the availability of a sample of 42 essential drugs, vaccines and medical supplies. Ex-post facilities had on average 55 percent of the products available, while baseline facilities had 51.8 percent. Most often stocked-out drugs and supplies included dermatological products (calamine lotion, benzoic salicylate), contraceptives (combined pills and condoms), folic acid, oral penicillin tablets. Items such as aspirin and paracetamol tablets, cotrimoxazol, chloroquine, ferrous sulphate, metronidazole, ORS and tetracycline ointment were found more consistently. However, none of the facilities had a perfect score (zero stock out), nor was any specific drug available in all visited facilities. Each type of vaccine was out of stock in one-quarter to one-third of the sampled facilities. Curiously, the lack of medicines does not appear as one of the main concerns of the respondents, as manifested below.

There were health committees in 67 percent of the ex-post clinics and 46 percent of the baseline clinics. Those committees had met on average 4.9 and 5.4 times over the previous twelve months. The problem issues mentioned by the informants are tabulated in Table 5.g.

Table 5.g - Operating problems identified in health facilities project survey ( percent that mentioned each problem)

Problem Ex-post Baseline Non availability/shortage of staff 66.7 47.6 No w ater/w ater far from facility 28.6 9.5 Low level of health aw areness 9.5 28.6 Non availability/shortage of medical equipment 23.8 14.3 No laboratory/operations theater 23.8 9.5 Financial problems (no incentives, no budget, etc) 23.8 19.0 Non availability/shortage of furniture/equipment 4.8 19.0 Delay in completing project 4.8 19.0 Non availability/shortage of medicines 14.3 0.0 No guard 14.3 0.0 Building not completed 4.8 14.3

Clearly, shortage of staff is the main concern. Water supply is the second-ranked problem in the ex-post

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group, while baseline facilities are worried about the lack of awareness with regards to health matters, which probably accounts for not having yet an ongoing health project, and several complained about delays in the start of the project. Ex-post facilities are more concerned about operational issues for their new/renovated buildings. Lack of drugs is not perceived as a major problem in either group.

5.3 Water projects(19 projects in ex-post group and 27 projects in baseline group)

Water projects in the ex-post group are of two types: piped water systems (42 percent) and water harvesting systems (58 percent). However, projects in the pipeline, that is in the baseline group, are almost exclusively water harvesting projects (92 percent), which correspond more to the emphasis on the need of the poorest communities. Most of the projects do not treat water (three out of 19 in the ex-post group, using either sand filter, chlorine or fish pond).

Electro-mechanical equipment is used in nine (47 percent) of the ex-post sites, with 72 percent of the pumps reported in good shape. Only four baseline sites currently use pumps, which were in good conditions.

Payment for water is a feature of the newly completed projects, with eight projects charging for water (42 percent): payments were found to be timely in 61 percent of the cases or with a 2-4 month delay in 29 percent of the cases. Only one project in the baseline group was charging for water.

Water systems, after intervention, had a staff of 6.4 persons on average, of whom 2.4 were professionally qualified.

The SFD projects have had a very positive impact on coverage of the water systems. The water benefits on average 9.8 communities in the ex-post group and 7.7 in the baseline group. Reports from 18 of the 19 ex-post projects showed that the number of persons covered increased on average from 1,251 to 3,251 per project (a 160 percent increase) while the number of covered households increased from 109 to 328 (201 percent). The proportion of households with tap water in their dwelling was reported (from 15 projects) to increase from 6.3 to 35.1 percent, while the proportion of those with a tap available less than 100m from their dwelling increased to 19.5 percent. The SFD intervention also led to a clear increase in per-capita consumption of water and frequency of supply, according to recall data for the situation prior to intervention gathered in the project survey (Table 5.h).

Table 5.h - Changes in water production and service outputs

Ex-post Baseline Before After # projects Before Daily per capita consumption last year 26.6 63.1 18 36.8 Daily per capita consumption last mth 26.4 35.1 18 67.8 # operating hrs/day in rainy season 2.6 6.8 9 2.0 # operating days/mth in rainy season 8.2 21.0 9 20.0 # operating hrs/day in dry season 2.7 7.9 9 1.0 # operating days/mth in dry season 10.7 21.9 9 12.3 # operating hrs/day last month 0.9 14.8 9 1.7

The findings of the study on sustainability are also positive. As one would expect, the upgrading of the systems led to an increase in their running costs, by 200 percent on average, due to the use of

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electromechanical pumps and the need to buy spare parts for those pumps. However, average revenue generation rose by a much greater factor, of 500 percent. There is still a shortfall of revenue: on average, revenue is 65 percent of the total cost. However, before the SFD intervention, on average, revenues were only 34 percent of estimated costs (table 5.i). These findings suggest that the electromechanical network systems that were supported by SFD in the early period of its work were relatively sustainable. This runs counter to perceived wisdom in the SFD at present. Based on concerns about sustainability, the SFD has decided to concentrate almost exclusively on non-mechanized water harvesting schemes.

Table 5.i– Operating costs and revenues for water systems

Before After # Projects Operating & Maintenance costs Staff 33,666 40,100 6 / 10 Electricity 0 44 6 / 10 Diesel/gasoline 37,733 47,422 6 / 10 Chemicals 0 0 6 / 10 Spare parts 0 185,906 6 / 10 Other 34,667 24,940 6 / 10 Total 106,666 298,412 6 / 10 Revenues # beneficiaries 183 1,219 9 Charge/beneficiary/month 133.1 328.1 9 Charge per cubic meter 117.2 170.7 9 Total bill value for last month 57,902 102,841 9 Total revenues for last month 36,337 191,937 9

There is also positive evidence regarding the creation of community water committees. In the ex post sample, 84 percent and in the new baseline sample, 74 percent of the projects are managed by a Community Water committee. Table 5.j summarizes the operating problems encountered with the water systems, according to the project survey informant.

Table 5.j - Operating problems identified in water subprojects

Problem identified (% mentioned) Ex-post Baseline Project location far from beneficiaries 0.0 23.1 Water leakage 21.1 11.5 Defects in finishing of cistern w alls/bottom 21.1 0.0 Cistern/w ell w ithout cover 21.1 0.0 Non availability of other equipment 21.1 0.0 Delay in implementation 0.0 19.2 Low capacity due to low depth/low # of w ells 15.8 11.5 Community unable to contribute/different opinion 10.5 15.4 Cistern above water level 10.5 3.8 Pipe network deteriorated 10.5 3.8 Pipe network insufficient to cover all households 10.5 3.8 Insufficient/misuse of financial resources 10.5 7.7

5.4 Rural road projects(14 projects in ex-post group, 19 projects in baseline).

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SFD support mainly consisted of building or upgrading rural access roads (13 out of the 14 ex-post projects and 13 out of the 19 intended projects in the baseline group). Other interventions included drainage work and road widening. The average length of the roads being supported was 16.8km in the ex-post group and 8.5km for the pipeline projects. Road projects served on average 19.5 communities The average number of communities served is given after eliminating one outlier project allegedly serving 2,000 communities in the ex-post group and two projects serving 250 communities in the baseline group, and 16,771 people in the ex-post groups, and 29.2 communities and 40,261 persons in the baseline group.

Notwithstanding the persistence of problems, the survey results suggest that these projects have had a very positive impact on journey times (reducing them on average by 40 percent). It should be borne in mind that these findings are based on the recall of the interviewee in the completed projects, which might be thought less reliable than baseline data collected prior to the project’s implementation. (Table 5.k). Household level data from dwellers living in subproject confirm that travel times have been greatly reduced. According to their responses, the time needed to get to the nearest town market has decreased due to the SFD intervention from 289 to 193 minutes, a 33 percent reduction (based on observations from 304 households). The key informant interview data suggest that there was little change in the nominal cost of journeys, but Household level responses suggest a significant reduction in the cost of travel, from YR488 to 290 (a 40 percent reduction). There is no evidence of sharp reductions in the cost of basic commodities imported to the villages.

Table 5.k - Outputs of rural roads subprojects

Ex-post Baseline Before After Before Cost of transport to nearest city/suq 200.0 244.3 233.2 Time spent (in minutes) 201.5 121.8 112.1 Vehicles using the road/day 15.9 45.6 30.5 Cost of one bottle of LPG gas 367.9 357.1 388.4 Cost of one sack of w heat 2,110.7 2496.1 2,534.2

The reduction in travel time and cost has led to a sharp increase in the number of trips per day, which is up, on average, by 180 percent. Household level data were collected for the weekly number of trips to the nearest market/town undertaken by each family member before and after the intervention, classifying those trips according to their motive, for better recall. These data show an increase of 120 percent in the number of trips (Table 5.l). It is particularly heartening that much of the increase in trips is due to visits to market local production to town, which should contribute to poverty reduction.

Table 5.l - Number of weekly trips to main town by category of trip

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Average # of w eekly trips for: Now Before Dif ference Shopping 0.8 0.5 0.3 Marketing 1.9 0.2 1.8 Working 0.7 0.6 0.2 Learning 0.3 0.2 0.1 Visiting friends/relatives 0.2 0.1 0.2 Health 0.2 0.2 0.1 Religion 0.0 0.0 0.0 Other 0.1 0.1 0.1 Total 4.2 1.9 2.8

The findings on sustainability are also positive. There is an agreement with the community for road maintenance in 86 percent of the ex-post projects and 58 percent of the baseline group. A maintenance follow-up committee has been formed in 8 ex-post projects, but training has only occurred in one. Community leaders (shaikhs) and more rarely local councils or a charitable organization can also be responsible for maintenance. Three projects mention that beneficiaries contribute YR100 per month for the maintenance costs. Maintenance of the road is performed most often in a periodic fashion (75 percent of projects in the ex-post group).

5.5 Micro Finance Projects(11 projects in the ex-post group)

Eight out of the 11 micro finance projects were run by an NGO and two by a cooperative. The SFD financed grants for technical assistance and training in four of these projects, and provided grants for seed capital and loans for on - lending in all 11 (Table 5.m).

Table 5.m - Type and amount of support received by SFD # of projects Average amount

received (YR) Grant for TA and training 4 160,945 Grant for seed/capital 11 3,484,725 Loans for lending 11 13,747,216 Other support 10 1,853,993 Total 11 19,246,879

The governance of the supported microfinance organizations is generally adequate, although the frequency of board meetings is rather low in some cases. Board members are normally nominated by the General Assembly of the sponsoring agency/cooperative. Information obtained from ten of the projects shows that project boards have an average of 7.4 members, with a mean age of 42 years and a majority of female members (4 versus 3.4 men). The boards meet annually (check this is not monthly) in 7 projects and quarterly in 3 projects. Board members do not receive salary or attendance fees; in two cases, they receive transportation allowance or reimbursement of expenses; in one case, they get an incentive on the fund’s production. The average project has 369 borrowers and 29 savers (table 5.n).

Table 5.n – Average number of beneficiaries by type of operations

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Loans Savings Training #

benef. # proj. #

benef . # proj. #

benef . # proj.

Male 226 7 59 3 Female 116 10 258 6 23 1 Total 369 11 29 6 23 1

Note: # beneficiaries is averaged over 11 project; # proj. is the number of projects reporting the beneficiaries in each type of

activity.

The record of the MF institutions in saving mobilization was not strong: only 1.5 percent of the loan portfolio was funded by members’ savings. SFD loans and grants and 96 percent was funded by SFD loans or grants (Table 5.o).

Table 5.o - Source of funds for micro finance projects # projects Average amount

(YR) Benef iciary savings 4 294,400 Grant from sponsoring agency

2 107,265

SFD loan 11 13,646,366 SFD grant 11 4,565,759 Other 3 395,259 Total 19,005,049

The current value of the loan portfolio is estimated at YR 11,257,736. The average number of loans is 383 (range 120 - 1,385), and the average value of the loans is YR 29,394. Six of the 11 projects work with the “murabaha” type loan, while one is using the “musharaka” modality; five projects use ordinary interest mechanisms. The maximum amount of the first loan ranges from YR 20-100,000, while subsequent loans may reach YR 250,000. The minimum term for the loans is 6 months (190 days on average), while the maximum is just over a year (374 days on average), with a mean loan duration of 279 days (9 months). Loans are used for trade (11 projects), manufacturing (9), animal raising (5), agriculture (4), family and personal consumption (1) and other activities including services and maintenance.

All projects have credit regulations available and all but one also have program statutes. The six projects that have a saving component also have savings regulations. Accounting documents include cash book, loan and saving books, as well as shareholder register (in 4 projects). Four of the projects use accounting software, mostly an Excel-based package. All but one of the projects had up-to-day accounts at the time of the survey.

Sanctions are applied to loan defaulters including fines (7 projects), exclusion from future loans (all projects) and execution of the guarantee (8 projects; all projects require a guarantee before they provide a loan). Only one project allows refinancing of loans that have run in arrears and has a total of 51 such loans, for a total amount of YR364,018. Seventy five percent of loans made by these projects have been fully repaid; of those that are still outstanding, half are being repaid on time and half are in arrears (Table 5.p).

Table 5.p - Status of project loans

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Status of loans Number of loans

Percent Total Amount Percent

Fully repaid 708 67 29,279,61975Being paid on time 172 16 4,854,75912.5In arrears 172 16 4,869,45512.5Total 1,052 100 39,003,833100

None of the projects surveyed had an ongoing training program. Six of the projects have a saving component; saving is a prerequisite for getting a loan and savers get priority in obtaining the loan. There is on average 501.8 saving accounts per project for a total amount of YR958,614, that is an average saving account of YR1,910. The interest rate of the saving accounts varies between 6 and 10 percent. Savings are used for financing program loans (3 projects) or deposited in a bank (5 projects).

Micro finance projects had an average staff of nine. Staff salaries ranged from YR15,070 to 74,938 for men and from YR5,573 to 38,416 for women, with a variation factor of 1.3 to 2.4 for the same staff category.

Table 5.q - Number of borrowers and savers per project (based on reporting projects)

2001 2002 Number Reporting

projects Number Reporting

projects Male 490.4 5 299.9 8 Female 93.3 5 126.6 11 Borrow ers Total 583.8 5 339.3 11 Male 44.0 1 39.7 6 Female 152.0 1 331.5 6 Savers Total 196.0 1 322.7 6

The consolidated balance sheet and financial statements for the SFD’s MF projects (Table 5.r) shows a sharp contraction in total assets between 2001 and 2002 (by 32 percent), linked above all to a reduction of the loan portfolio (by over 60 percent). This is reflected partly in a reduction of other liabilities, but mainly in a reduction in the capital account for other capital contributions, of some 8 million YR.

This adjustment is not, however, reflected in the profit and loss account for 2002, which shows an improved performance, registering a deficit of only YR720,000, following a significant deficit in 2001 (1.5 million YR). These incongruencies seem to show that there are still weaknesses in the accounting procedures (above all for capital accounts) being used by the MF institutions, but that their profit and loss performance has improved through cost reductions in 2002.

Table 5.r - Micro finance projects – Consolidated financial statements (CHECK)

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YR End of 2001 End of 2002 Balance sheet

Assets Cash and banks 4,835,120 6,079,137 Loan portfolio 23,377,056 8,831,270 Fixed assets 3,364,426 1,952,502 Other 6,016,917 8,671,608 Total 37,593,519 25,534,517 Liabilities Members savings 102,916 512,263 Loans from financial institutions 642,809 Other liabilities 8,210,847 3,913,853 Total 8,313,043 5,068,925 Capital Start -up capital 6,502,987 3,359,355 Other capital contributions 20,959,904 12,782,800 Donations and grants 2,866,495 2,390,973 Total 30,329,386 18,533,128

Profit and loss statement Operating income From interest on loan and loan portfolio 3,031,264 1,758,095 Other charges to clients 117,459 66,417 Investment outside loan portfolio 194,130 338,824 Total 3,420,976 2,021,760 Operating expenses Operating expenses 80,775 364,655 Interest paid to savers 3,405 Administrative costs – staff 3,082,618 1,983,933 Other administrative costs 1,660,493 1,070,036 Total 4,951,1129 2,742,345 Non-operational income and expenditure Income 198,874 58,803 Expenses 315,016 109,400

6 SFD Impact on Household-level Development Indicators

6.1 Methodology

The analysis covers a total of 86 projects for which suitable information was available in the household survey dataset. In addition, new baseline data were collected on a set of 101 projects in the SFD pipeline at January 2003. 6.2 Education

Yemen has a low gross enrollment rate for primary education, especially in rural areas and especially among girls, as shown in the following table, obtained form the Yemen Demographic and Health Survey (DHS) of 1997.

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Table 6.a - Yemen gross enrollment rates ( percent) Urban Rural Total Age Boys Girls Boys Girls Boys Girls 6-10 80.2 75.9 63.4 31.5 67.1 41.2 11-15 90.2 74.6 81.4 25.7 83.6 38.4 Total 85.1 75.3 71.5 29.0 74.8 39.9

In this context, the SFD’s school building investments aim to increase enrollment rates in the beneficiary communities. The study hypothesis is that the SFD intervention would result in an increase of the gross enrollment rate for children between the ages of 6 to 14.

Table 6.b reports the enrollment rate for children aged 6 to 14 found in the 1999 NPS and the 2003 IES surveys in the beneficiary communities of the SFD’s education projects. The comparison between the ex-post and baseline enrollment rates in the 1999 dataset has already been reported in the previous Impact Evaluation study presented in December 2002, which showed that there was a much higher female enrollment rate in beneficiary communities than in those still waiting for the SFD investment and this led to an increase of about 5 percent in the overall enrollment rate. Multivariate analysis suggested that this difference was attributable to the SFD intervention and not to sampling differences.

The 2003 IES allows us to compare the enrollment rate before and after the SFD intervention in the group of communities that was in the 1999 baseline sample. This comparison once again indicates a very clear increase in the enrollment rate for girls where the SFD investments were made, from 42.1 percent in 1999 to 56.0 percent in 2003. There is also a small increase in male enrollment (from 76.4 percent to 78.0 percent and the overall rate rises from 60.1 percent to 67.8 percent. This is a very positive finding, reconfirming that the SFD is making an important difference to one of the most critical development indicators in Yemen.

Table 6.b - Comparison of enrollment statistics between 1999 and 2003

Ex-post Baseline M F T M F T

1999 NPS analysis

78.2 49.3 64.7 76.4 42.1 60.1 Ex-post Baseline M F T M F T

2003 IES

78.0 56.0 67.8 77.3 58.3 68.0

Of particular note is the increase in female enrollment rates observed between the 1999 baseline and the 2003 ex-post during the first years of basic schooling, corresponding to the time frame of the project implementation. The motivation for keeping girl children in school starts with the initial years of schooling and the observed pattern will create a dynamics of its own that will contribute to better achievements up to the end of the basic schooling and beyond.

6.3 Health

Factors believed to contribute to low levels of utilization of health services in rural areas of Yemen include: the inexistence of facilities in many areas, the difficulty of access to the facilities that do exist, the poor

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quality of the services on offer and the lack of awareness among the population of the importance of primary health care.

The variable chosen for analysis was the overall probability that a person will receive curative medical attention when facing a health problem (rather than the probability that they will use the particular health post supported by SFD). This assures that SFD is not credited for “crowding out” demand from other centers, but only for increasing the total take-up of primary health care services.

The IES survey recorded the health problems of each household member during the past month, identifying the type of problem and whether it was severe enough to cause the person affected to stop their normal activities. In the sample of households from the ex-post group, 492 problems were identified and in the baseline group, 644 problems were reported. Table 6.c reports the number and type of problems encountered.

Table 6.c - Incidence of health problems in the IES sample

Ex-post Baseline

% of total Number of persons 3,110 3,453

% with a health problem in last month

15.8% 18.7%

Number of problems 492 644 Type of problem:

Malaria 134 246 Diarrhea 69 72 E.N.T condition 94 115 Rheumatism 29 36 Skin condition 19 15 Diabetes, blood pressure 13 13 Accident/injury 9 16 Eye condition 12 17 Other conditions 113 114

Source: IES 2003.

The proportion of people who suffered an illness or accident in the month previous to the survey is slightly higher in the baseline group (18.7 percent versus 15.8 percent, CIdiff 0.7 percent - 5.1 percent). The proportions were similar for both genders, and were higher among rural than among urban people in each group (19.8 versus 11.3 percent in the baseline group and 17.1 percent against 8.3 percent in the ex-post group).

Table 6.d shows the reported effective access to medical attention for those in the ex-post communities compared with the 1999 NPS data. The proportion of sick individuals who managed to receive health care for their illness rose from 55.6 percent to 70.3 percent in the current ex-post group (which was the baseline group in the 1999 survey). In this case similar increases were recorded for both men and women. This is a clear and positive conclusion regarding the SFD’s impact on access to primary health care.

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Table 6.d - Evolution of care-seeking practices between 1999 and 2003

Ex-post Baseline M F T M F T

1999 NPS analysis

56.7 58.1 56.0 53.6 54.7 55.6 Ex-post Baseline M F T M F T

2003 IES

73.1 68.1 70.3 73.9 69.6 71.7

As in the case of the data on education access reported above, the observed access rate in the new 2003 baseline dataset is much higher than that observed in the 1999 baseline group and not dissimilar from the ex-post conditions in the communities that received investments between 1999 and 2003. This may reflect a change in the sort of place SFD invests in: it may be moving towards places where it is easier to deal with the sustainability problems that dogged its early efforts in primary health, and such places may have better ex-ante access conditions.

6.4 Water projects

The IES 2003 collected data at household level on the type of water system used, the perceptions on quantity and quality of water available to the households before and after interventions, the cost of water, the distance and time needed to fetch water for people without a household connection, and the incidence of diarrhea.

Table 6.e shows the distribution of sampled households from water project areas, according to the type of water system they use for their residence before and after intervention (actually without intervention for the baseline group). Although we already mentioned the emphasis of the SFD subprojects in improving water harvesting systems, we can observe in the ex-post group an increase in the proportion of households getting water from a tap located in their own dwelling, associated with a decrease in the use of cisterns or tanks without pump and/or well or dam water outside of the compound. The SFD intervention increased access to household taps (+23 percent), replacing cisterns without handpumps (-8 percent) or with handpumps (-4 percent) and wells/dams off the premises (-11 percent).

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Table 6.e - Distribution of households by main source of water, before and after SFD interventions for rural areas

Drinking w ater Water for domestic use Ex-post Baseline Ex-post Baseline

Before After Before After Before After Before After Piped water w ith household tap

3.4 26.0 5.3 3.4 24.7 4.5

Piped service w ith public tap

11.6 12.7 2.6 7.5 15.8 1.8

Cistern/spring/tank w ith hand pump

6.2 2.1 8.1 7.2 3.1 7.5

Cistern/spring/tank w /o hand pump

27.7 19.5 46.4 33.2 19.2 48.3

Well on the premises 2.7 2.7 3.2 2.4 2.4 3.2 Well/dam of f the premises

29.5 18.5 29.2 30.8 18.8 32.1

Tanker 17.1 15.4 4.9 15.4 16.1 2.6 Number of households 292 507 292 507

37.7 percent of the 345 households in the ex-post group said that the quantity of water available is much more than before; 48.3 percent found no significant change, while 9.0 percent thought that it was less abundant. The quality of available water was deemed better in 25.5 percent of the households, unchanged in 47.8 percent and worse in 16.9 percent.

For those households which indicated that they had to go outside to fetch water, the average consumption was estimated at 12.9 containers of an average size of 17.6 liters, which would yield a total daily amount of 227 liters, that is an average of 30 liters per person per day (using an average of 7.5 persons per household. For those households, there were clear gains in the reduction of the average distance needed to fetch water outside of the dwelling (from 1,166 meters on average to 871 meters, for the 177 reporting households) and in the corresponding time needed to fetch the water (from 61.8 to 43.7mn for the 225 reporting households).

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Annex 9. Stakeholder Workshop Results

Republic of YemenCabinet of Presidency CouncilSocial Fund for Development

Consultative Workshop on the Partners and -Target Group Experiences

During the SFDs’ First Phase

Analytical Matrix of The Target Groups/Partners Experiences

Sana’a, September 20, 2003

This Analytical Matrix was conducted by the participants of the Consultative Workshop, which was held in Sana’a on Sep. 20, 2003.

Objective of the workshop: To document the experiences and experimentations of the target groups and partners during the first and second phases of the SFD.

Expected outcomes of the workshop:1. Recoding and documenting experience of SFD (1st phase) from viewpoint of the target groups and partners;2. Arriving at a clear analysis of the SFD experience from viewpoint of the target groups; and 3. Elaboration of an accurate matrix showing various elements of the SFD experience with the target groups.

Method used for the workshop: The method used in the workshop is based mainly on encouraging the participants to express their opinions and to actively participate in discussion. The use of Metaplan tools and visualization steps was very successful and it greatly assisted in organizing and orienting a discussion toward the desired objectives. The Metaplan method relies on using visual tools such as cards, boards, etc. The Objectives-Oriented Project Planning GOPP (Ziel Orientierte Project Planning ZOPP) method was used within adaptation of the need of such workshop style and expected results.

This method:§Depends on visualization§Facilitates concentrating on discussion points§Facilitates memorization of the discussion points§Facilitates avoiding repetition§Puts outcomes of discussion in a simple clear timetable§Increases participation in discussion§Facilitates documentation and raising discussion towards goals§Role of the moderator assists organizing discussion within the groups and time management.

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Analytical Matrix of the Target Groups/ Partners ExperienceFirst Group: Policy and Tools of Selection of Projects and Group Formation

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Topics of Successes Weaknesses Suggestions (Proposed

Solutions) Possible Risks (Assumptions)

Accurate and detailed sub-projects

Obligatorily contribution of beneficiaries led to hindering implementation of the project; due to poor financial condition of citizens

Review specification of contribution rate as a policy of the SFD according to various areas conditions

Donors may reconsider support to the SFD

Consider sustainability factor in projects planning and implementation

Inadequate awareness of community

Working with governmental agencies as partners for the SFD activities

Sometimes the beneficiaries didn’t pay their contribution which was paid by others

Study proposal and recommendation of the parliament council regarding the community contribution

Lower feeling of project ownership when beneficiaries exempted from contribution

There is concentration on education sector

Future expansions were not considered when implementing rural roads

Implement road projects according to criteria of the ministry of construction

Observe sustainability with regard to training

SFD criteria for selection of road projects are not flexible with regard to population

Covering of remote deprived areas by the SFD activities

Independency of the projects is limited and the SFD interferes during the implementation phase

Consider capacities and transparency of some directions and minimize degree of interference of the SFD

Possibility that some directions may misuse the authorizations

Accuracy in implementation of projects and simple procedures

Some contractors delay implementation of the project from date specified in the contract

Apply conditions of contracts on all contractors to ensure immediate implementation of the projects without delays

Contacts with directions concerned with implementation of SFD activities for setting clear coordination mechanism

Transparency and following of advanced working mechanism

Lack of coordination between some directions concerned with implementation of the projects Technical support for local

authority to raise its planning capacity

Donors and loan providers might disapprove this direction

Water and water harvesting projects were given no great importance

Increase budget for water and environment

Inadequate raising of awareness regarding importance of developmental and service project in rural areas

Intensify raising of awareness of the local authority and NGOs to raise awareness of the local community regarding policy of the SFD

Intensive monitoring regarding loan projects in particular monitoring minor details

Involve the surety direction in monitoring

Local councils are not informed when selecting members of beneficiaries committees to involve all

Stipulate employing local laborer in implementation of the project as much as possible

Delay in implementation plus low quality

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Beneficiaries experiences are not made use of during the project planning

Local councils shall supervise selection of beneficiaries of the projects. Election of the beneficiaries committees shall be carried out according to criteria set by the SFD. Committees training and exchange of experience.

Weak role of women in beneficiaries committees

The SFD continues application of project selection criteria

Coordinate with local councils to have access to their information on different regions

Add women to beneficiaries committees

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Second Group: Community, institution and women participation

Successes Weaknesses Suggestions (Proposed Solutions)

Possible Risks (Assumptions)

Pre-studies that led to success of the project

A precondition is participation of women in beneficiaries committees Raise community awareness regarding women incorporation in development

Considering community participation in the projects resulted in continuous concern about the project (participation and ownership)

Lack of seriousness regarding women participation

Increase number of women consultants in the SFD and provide them with good training

Priorities are set by the beneficiaries

Observe community traditions to facilitate women in participation in field visits Form diverse consultative teams (women/ men) during field screening Diversity in productive

projects. And accurate technical work regarding projects

Insufficient women cadre (as SFD consultants, participants in community work) Accept and support that

some women consultants being accompanied by their relatives; in some cases

- Community rejects participation of women in social work - Community rejection due to some social customs and traditions

Availability of an administrative and financial work mechanism between the SFD and the target groups

Select consultants specialized in social field. Give adequate time for consultants during field visits

SFD policy of integrated development intervention

Consultants missions are inflexible regarding (period and geographical area) during the field sorting

Give the consultants enough time in setting the priorities and formation of committees through application of a field work guide

- High cost of projects led to delays in production - Increase in cost and time

Training in administration and accounting for the administrative cadre of projects (committees)

Limited time for preparation of community work during period of committees formation

Give raising of community awareness regarding importance of the project enough time

Lack of community interaction with the awareness efforts and high cost

Concentration on human capacity building as a result of the SFD cooperative relation (training, qualifying)

Activation of women role in projects management after being implemented (accepting men and women in project management)

Weak institutional structure of NGOs.

Capacity building: training on institutional structure for cadre implementing joint projects with the SFD

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Encouraging active NGOs to assist in projects implementation

Certain directions monopolize the SFD projects

Coordinate with the local councils to avoid influential figures

- Hindering implementation of projects for some time - Non acceptance and marginalizing role of project executives and hindering implementation

Creating new social attitude towards community participation

Make available requirements for field team (transportation … etc.)

Developing human resources and services in the community

Review consultants tasks in terms of time, remuneration and area of work

Giving women target groups the chance to improve their living conditions through participation and support received from donor institution

Local communities don’t accept with new ideas

Activate role of local community through participation in planning, implementation and monitoring

Study and analyze community

Compensating shortage of governmental services

Continuous raising of community awareness during implementation of projects

Continuous presenting technical support by SFD when implementing projects

Community organizations lack clear administrative and accounting regulations

Develop simple transparent administrative and accounting systems to organize committees work. Train members of committees on these systems

Starting policy of participation of target groups in projects implementation

Define specific ratios as operating costs according to region geographical and social conditions

The SFD has qualified cadre

Priorities presented by the local community were not studied thoroughly

Thorough study of priorities

Consultants are unqualified in field of integrated analysis for problems of the target regions

Adopting pogroms that facilitate participation of women in community work

Consultants shall take into consideration factors that would made the implemented project a part of a successful integrated development

Creating work opportunities for people in target areas

Beneficiaries can not make proper priorities for projects needed for their communities

Pre-coordination with local councils and concerned parties

Training committees on social work

Flexibility in approval of institutional projects based on priorities of surety directions

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SFD projects expanded to remote areas didn’t reached by other institutions in comparatively a short period of time

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Third Group: Operation, Repair, Monitoring and Evaluation (Sustainability and Quality)

Successes Weaknesses Suggestions (Proposed Solutions)

Possible Risks (Assumptions)

Depending on beneficiaries committees in operation and repair is one of the successes of the SFD 1. Period span between resenting request and start of implementation didn’t exceed four months

Active technical capacity building program for members of beneficiaries committees

2. Fourteen classes with accessories were built in one year only. This indicates simple procedure

Increase participation of beneficiaries as well as bearing more responsibilities in coordination with the local authority

3. Implementation of the project minimizes class crowd and consequently good education

4. Some suggestions were presented during implementation. These suggestions were took into consideration

Ease in communication with the SFD at project initiation and during implementation

After completion of implementation by the SFD a contract must be signed with the concerned party

Force directions participating in the project to fulfill their commitments

1. Taking into consideration view of a large number of beneficiaries

2. Community contribution

In case implementation is not done according to the specifications by contractors it is not enough deduct the difference but to cancel the work and restart according to the specifications

Force implementing directions and contractors to abide by the technical studies. Periodic monitoring during implementation by the SFD consultants

Additional cost on the SFD

Formation, training and capacity building of repair committees and community committees

Expanding to remote areas. Delivering health services, education, water and poverty reduction services through small and micro-finance to people in remote mountains and valleys.

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- Taking into consideration environmental and health education. This is reflected in cleanness of people. - Recruiting 70% of unemployed in the project areas during implementation period. - Participation of women in committees in repair and cleaning of water ponds - Use of manual skill

Absolute transparency with regard to finance management makes the SFD a pioneer in ensuring quality and sustainability

Accuracy in selecting projects for example establishing a database for associations and NGOs at the ministry. This is taking place for the first time in history of the Republic of Yemen. Successes are many for instance training, qualifying, conducting surveys on the community and institutions of the civil community

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Evaluation of the Workshop

Particulars Excellent Good Weak Subjects discussed in the workshop

27 6

Degree of participation in the workshop

19 7 1

Outcomes of the workshop

16 9

Performance of moderators of the workshop

13 9 1

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Additional Annex 10. Trust Fund Assessment

The project benefited greatly from trust funds. They were instrumental in a number of areas during the establishment of the SFD, as well as throughout operation. The following is a summary of these TFs and the activities that were carried out under them.

Dutch TF21807Effective: March 31, 1997Closing Date: December 31, 2001Original Amount: EUR 367,630.26Disbursed: $350,109

This TF was instrumental in starting the first two pilot Micro Finance and income-generating programs in Hodayda and Dhamar respectively. The TF financed two resident MF consultants to the SFD; an international Dutch consultant, who worked with the SFD for about 18 months and a regional Egyptian consultant who worked with the SFD for over two years and continued support afterward by short-term missions. The two consultants supported the SMEDU in various ways. They supported the drafting of the MF operational manual of the SFD, the identification of intermediaries of the two programs in Hodayda and Dhamar, and the design of the two programs. The consultants also provided training activities at two levels, the SMEDU and selected intermediaries. At the former, trainings were conducted in program identification, financial calculations for break even points, reporting requirements, etc. At the latter, different trainings were provided to loan officers and MF program accountants in areas like group formation, sub-project identification, appraisals of clients, and collection methodologies. Japanese PHRD (26373)Effective: December 12, 2002Closing Date: June 30, 2003Original Amount: $209,400Disbursed: $199,253.94 (95.2%)Undisbursed: $10,146.06

This PHRD complemented the activities that were initiated under the above TF (TF21807). It supported SMED to learn more about the techniques of evaluation and project design. A consultant from NABARD (India) assisted the unit in this regard. Under the TF, an MIS for the unit was developed as well as a website. The unit recruited ASA (a Bangladeshi NGO that has been implementing a MF program for several years) to provide technical support to a new MF initiative. ASA helped SFD to establish a program that today has five branches in Ibb, Taiz, Dhamar, Yarim, and Al-Qaeda. The total number of members is over 3,600 and the number of borrowers is 1,035. A consultant also was recruited to help the unit identify problems with existing programs and, subsequently helped in training some of the programs’ staffs.

The TF also helped the SMEDU organize a MF workshop to help different stakeholders in Yemen to know more about MF best practices and to learn from similar experiences elsewhere. Finally, under the TF, a consultant was recruited who helped evaluate the Hodayda Micro Credit Program and develop a business plan for it.

Dutch TF (20451) - Bank executed. Effective: September 8, 1998Closing Date: December 31, 2002

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Original Amount: EUR 1,361,340.65Disbursed: US$773,398.13

This TF was initially used to hire consultants to provide TA to help select and appraise commercial banks that would work with the SFD to provide credit to small enterprises. IPC of Germany was hired and worked with the SFD on initiating dialogues with a number of commercial banks in Yemen and, eventually, two banks were selected. After a preliminary design of the program was developed, the two banks were reluctant to continue on the program for several reasons, including doubts about the demand for small enterprise finance in Yemen.

The TF was then used to conduct a baseline survey for small and micro enterprises in Yemen. The Bank helped the SFD recruit a reputable international consulting firm (the Netherlands Economic Institute) that designed and implemented the survey. The survey provides a wealth of information that is now being used not only by the SFD but by several government and donor agencies. Based on the results survey, the SFD decided to drop the small enterprise development sub-component, to focus on the MF, and to try to capture the lower end of small enterprises under the MF programs.

Dutch TF (20452)Effective: September 8, 1998Closing Date: December 31, 2002Original Amount: $5,950,000Disbursed: $5,777,477.60 (95.9%)

This TF, which was executed by the SFD, financed SFD operational activities. It mainly financed subprojects in the education of girls in rural areas through the provision of infrastructure and school equipment.

The annual audits for the SFD included auditing all the TF attached to the project.

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Additional Annex 11. Microcredit Program

In the early years of operation, the SFD focused on the development of two microfinance intermediaries: a savings and credit program in Aden and a credit-only program in Hodeidah. The Aden program was doomed to fail from the start due to basic design flaws and complicated procedures, partially because of non-effective foreign technical assistance. The Hodeidah program, a credit-only program, was potentially sustainable, and the likelihood of this program becoming financially sustainable was high. The program was among the Dutch and EU-funded pilot programs set up before the start of the SFD. In 1997, staff was trained, systems were set up, and the program started making its first loans in early-1998. It grew rapidly in its first two years; it had almost 2,000 active clients by the end of 1999 and had made over 4,000 loans by the end of 2000. Due to its rapid growth, which was not sufficiently accompanied by appropriate development of back-office systems, MIS, and internal audit, the program was affected by serious fraud in 2001. Since then, a massive clean-up operation took place, and many procedures were changed. The program withdrew from the fraud-affected districts and opened a branch in another district. It is now well positioned for future growth. It has been selected by UNCDF “Micro Start” as a “break-through” organization with good prospects of becoming financially sustainable within the next three years. The inclusion of the Hodeidah program in the Micro Start program makes it also eligible for intensive technical assistance from regional practitioners.

The Hodeidah fraud, which affected over 50 percent of the loan portfolio, and the poor experience with IGPs, acted as a “wake-up call” for the SFD. The key lesson learned was that the team had to invest much more time and effort in the training of implementing partners’ staff, system, procedure and MIS development before starting to make loans. As a result, in 2001 and 2002, the total number of active clients of all programs together did not grow (and in effect declined). During this period however, the framework was laid for the development of more sustainable microfinance programs. The Sana’a microfinance program, which started in 2002, is a good example of the implementation of these key lessons learned. Another key lesson learned in this period was that in order to increase the number of female clients, savings services were essential: many women only want to save.

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