Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 59393-IN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 635.8 MILLION (US$1,000 MILLION EQUIVALENT)

TO THE

REPUBLIC OF INDIA

FOR THE

NATIONAL RURAL LIVELIHOODS PROJECT

June 3, 2011

Sustainable Development Department Agriculture and Rural Development Sector India Country Management Unit South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective: February 28, 2011)

Currency Unit = Indian Rupees (`)` 45.05 = US$1

US$1.57 = SDR 1

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

CAAA Controller of Aid Accounts & Audit

BMCU Bulk Milk Cooling Units BPL Below Poverty Line CS Country Strategy CBO Community Based Organization CDD Community-Driven

Development CIG Common Interest Group COM Community Operational Manual CRM Customer Relationship

Mechanism CRP Community Resources Persons CSO Civil Society Organization CW Civil Works DC Direct Contracting DPCC District Project Coordination

Committee DPIP District Poverty Initiatives

Project DPMU District Project Management

Unit DPL Development Policy Lending DRDA District Rural Development

Agency EC Executive Committee EFA Economic and Financial

Analysis EMF Environment Management

Framework eNRLMs Electronic National Rural

Livelihoods Management System

ERR Economic Rate of Return FMM Financial Management Manual GAAP Governance and Accountability

Action Plan GAC Governance Anti-corruption GAP Gender Action Plan

GB Governing Body GC Governing Council GDSP Gross State Domestic Product GOI Government of India HH Households HRD Human Resource Development IAP Initial Action Plan IBRD International Bank for

Reconstruction and Development

ICB International Competitive Bidding

ICT Information Communications and Technology

IDA International Development Association

IFAD International Fund for Agricultural Development

IGNOU Indira Gandhi National Open University

IMR Infant Mortality Rate IUFR Interim Un-audited Financial

Reports LIF Livelihood Investment Fund MFI Micro Finance Institution ME&L Monitoring, Evaluation and

Learning MGNREGS Mahatma Gandhi National

Rural Employment Guarantee Scheme

MIS Management Information System

MoRD Ministry of Rural Development MoU Memorandum of Understanding NCB Non Competitive Bidding NFSM National Food Security Mission NGO Non Governmental

Organization

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NMMU National Mission Management Unit

NFSM National Food Security Mission NRHM National Rural Health Mission NRLP National Rural Livelihoods

Project NRLM National Rural Livelihoods

Mission NSDC National Skill Development

Corporation NTFP Non Timber Forest Product NPV Net Present Value PC Producer Collectives PDO Project Development Objective PDS Public Distribution System PHC Primary Health Center PIO Public Information Officers PIP Project Implementation Plan PM Process Monitoring PME Participatory Monitoring and

Evaluation PO Producer Organization PP Procurement Plan PWD Persons with Disability PVSP Participatory Varietal Selection

Program QBS Quality Based Selection QCBS Quality and Cost Based

Selection QER Quality Enhancement Review

RBI Reserve Bank of India RD Rural Development RFP Request for Proposal RKVY Rashtriya Krishi Vikas Yojana RSETI Rural Self Employment

Training Institute RTI Right to Information Act SAWP State Annual Work Plans SC Scheduled Caste SGSY Swaranjayanti Gram Swarojgar

Yojana SHG Self Help Group SHT Spear Head Team SIL Specific Investment Loan SMF Social Management Framework SMS Short Messaging Service SPMU State Project Management Unit SPIP State Perspective and

Implementation Plan SRI System of Rice Intensification SRLM State Rural Livelihoods Mission SSA Sarvya Siksha Abhiyaan ST Scheduled Tribe TDF Tribal Development Framework TOR Terms of Reference TOT Training of Trainers’ UT Union Territory VRP Village Resource Person WCD Woman and Child Development

Department

Regional Vice President: Isabel M. GuerreroCountry Director: N. Roberto Zagha

Sector Director: Sector Manager:

John H. SteinSimeon K. Ehui

Task Team Leader: Parmesh Shah

 

iv

REPUBLIC OF INDIA

NATIONAL RURAL LIVELIHOODS PROJECT

Table of Contents I.  Strategic Context ..................................................................................................................... 1 

A.  Country Context............................................................................................................. 1 

B.  Sectoral and Institutional Context ............................................................................... 2 

C.  Higher level Objectives to which the Project Contributes ......................................... 4 

II.  Project Development Objectives ............................................................................................. 5 A.  PDO ................................................................................................................................. 5 

1.  Project Beneficiaries .................................................................................................. 6 2.  PDO Level Indicators ................................................................................................ 6 

III.  Project Description .................................................................................................................. 6 A.  Project Components ....................................................................................................... 7 

B.  Project Financing ........................................................................................................... 9 

1.  Lending Instrument .................................................................................................... 9 2.  Financing Project Table ........................................................................................... 10 

C.  Lessons Learnt and Reflected in the Project Design ................................................ 11 

IV.  Implementation ...................................................................................................................... 12 A.  Institutional and Implementation Arrangements ..................................................... 12 

B.  Results Monitoring and Evaluation ........................................................................... 12 

C.  Sustainability ................................................................................................................ 13 

V.  Key Risks and Mitigation Measures ..................................................................................... 14 VI.  Appraisal Summary ............................................................................................................... 15 

B.  Technical ....................................................................................................................... 16 

C.  Financial Management ................................................................................................ 16 

D.  Procurement ................................................................................................................. 18 

E.  Social (including safeguards) ........................................................................................ 18 

F.  Environment (including safeguards) ............................................................................ 19 

Annex 1: Results Framework and Monitoring.............................................................................. 21 Annex 2: Detailed Project Description ........................................................................................ 24 Annex 3: Implementation Arrangements ..................................................................................... 41 Annex 4: Operational Risk Assessment Framework (ORAF) ...................................................... 62 Annex 5: Implementation Support Plan ........................................................................................ 66 Annex 6: Team Composition ........................................................................................................ 67 Annex 7: Economic and Financial Analysis ................................................................................. 68 Annex 8: Access to Financial Services ......................................................................................... 74 Annex 9: Service Delivery Convergence for Rural Livelihoods .................................................. 82 Annex 10: Governance and Accountability Framework .............................................................. 87 Annex 11: Statement of Loans and Credits .................................................................................. 93 Annex 12: Country at a Glance ..................................................................................................... 98 

 

v

PAD DATA SHEET Republic of India

National Rural Livelihoods Project

PROJECT APPRAISAL DOCUMENT

South Asia Region Agriculture and Rural Development (ARD)

Date: June 3, 2011 Country Director: N. Roberto Zagha Sector Director: John H. Stein Sector Manager: Simeon K. Ehui Team Leader: Parmesh Shah Project ID: P104164 Lending Instrument: SIL

Sectors: Agricultural marketing and trade (55%); General agriculture, fishing, and forestry (37%); Public administration - Agriculture, fishing, and forestry (8%) Themes: Rural non-farm income generation (45%); Rural policies and institutions (43%); Other rural development (5%); Climate change (4%); Rural services and infrastructure (3%) EA Category: B - Partial Assessment

Project Financing Data: Proposed terms:

[ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other:

Source Total Amount (US$ million) Total Project Cost:

Borrower: Total Bank Financing:

IDA

New Recommitted

1,168.50 168.50 1,000.00 1,000.00

Borrower: Joint Secretary, Department of Economic Affairs, Ministry of Finance, Republic of India, New Delhi, India Tel. (91-11) 2309 5190; Fax: (91-11) 2309 2039; email: venu.rajamony@nic.in Responsible Agency: Joint Secretary, Department of Rural Development, Ministry of Rural Development, Republic of India, New Delhi, India Tel. (91-11) 2338-2313; Fax: (91-11) 2338-7536; email: tvijay.kumar@nic.in Implementing Agency: National Mission Management Unit (NMMU), National Rural Livelihoods Mission (NRLM), New Delhi, India Tel. (91-11) 2338-2313; Fax: (91-11) 2338-7536; email: tvijay.kumar@nic.in

Estimated Disbursements (Bank FY/US$m) FY12 FY13 FY14 FY15 FY16

Annual 100 200 300 200 200

Cumulative 100 300 600 800 1,000

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Project Implementation Period: July 1, 2011 to June 30, 2016 Expected effectiveness date: July 1, 2011 Expected closing date: December 31, 2016

Does the project depart from the CAS in content or other significant respects?

○ Yes No

If yes, please explain:

Does the project require any exceptions from Bank policies? Have these been approved/endorsed (as appropriate by Bank management? Is approval for any policy exception sought from the Board?

○ Yes No ○ Yes ○ No ○ Yes ○ No

If yes, please explain:

Does the project meet the Regional criteria for readiness for implementation?

Yes ○ No

If no, please explain:

Project Development Objective: To establish efficient and effective institutional platforms of the rural poor that enables them to increase household income through sustainable livelihood enhancements and improved access to financial and selected public services.

Project Description Component 1. Institutional and Human Capacity Development: The objective of this component is to transform the role of the Ministry of Rural Development (MoRD) into a provider of high quality technical assistance in the field of rural livelihoods promotion. Component 2. State Livelihood Support: The objective of this component is to support state governments in the establishment of the necessary institutional architecture for the implementation of the National Rural Livelihoods Mission (NRLM) activities from the state to the block level, including support to the formation of institutions of the rural poor. Component 3. Innovation and Partnership Support: The objective of this component is to create an institutional mechanism to identify, nurture and support innovative ideas from across the country to address the livelihood needs of the rural poor.

Component 4. Project Implementation Support: The objective of this component is to establish an effective project management unit at the national level that develops key systems and processes for coordination and management of the proposed project and the NRLM.

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Safeguard policies triggered?

Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

Yes ○ No Yes ○ No Yes ○ No Yes ○ No ○ Yes No Yes ○ No ○ Yes No ○ Yes No ○ Yes No ○ Yes No

 

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I. Strategic Context A. Country Context 1. Rural poverty in India: In spite of a high GDP growth rate over the past decade (7.3 percent on average between 2001 and 2010), over 250 million rural people (45 million households) remain locked in poverty, living on less than US$1 per day. While the number of rural people living on less than US$1 a day decreased by 29 million between 1981 and 2005, the number of rural people in India living on less than US$1.25 a day grew by 35 million in the same period1. The key challenge facing India is to ensure that its economic growth is inclusive and leads to significant rural poverty reduction. 2. Nearly 60 percent of the rural poor households are geographically concentrated in the high poverty states of Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh. As per the latest rural poverty head count for different states,2 Orissa has the highest percentage of rural poverty (60.8%), followed by Bihar (55.7%), Chattisgarh (55.1%), Madhya Pradesh (53.6%), Jharkhand (51.6%) and Maharashtra (47.9%). Consumer expenditure surveys show that poor spend nearly 58 percent of their expenditure towards food purchase and another 15 percent towards health expenses.3 About 78 percent of rural households depend upon private sources for treatment of illnesses, entailing substantial out of pocket expense. Nearly 45 percent of rural households resort to high cost borrowing or sell away their productive assets to meet hospitalization costs.4 3. Marginalization of vulnerable groups: In India, certain social and occupational groups have been bearing a disproportionate burden of rural poverty. The Scheduled Castes (SCs), the Scheduled Tribes (STs), religious minorities, single women and households headed by women, persons with disability, the landless and the migrant labour suffer a disproportionate impact of poverty. Apart from deprivation, isolation and exclusion that these communities and groups are subjected to, their factor endowments are very limited and a significant proportion of them live in fragile ecological zones, experiencing rapid depletion of natural resources. Consequently, these groups have lower human development attainments, lower access to public services and livelihood resources like land, and credit, and lower participation in local governance and workforce, compared to other social groups. 4. Financial exclusion: Access to finance for the poor is a crucial ingredient for poverty reduction, and credit is essential to help the poor smoothen consumption requirements and support investments for acquisition, renewal and/or expansion of productive assets. Thrift based self-help groups (SHGs) are emerging as a major source of credit for the rural poor, particularly small and marginal farmers. Commercial banks disbursed US$2.7 billion of credit to 1.6 million SHGs during 2008-09 which translates into per capita credit access of US$150, which is about 45 percent of the average expenditure of small and marginal farmers (US$335).5 Presently, less

1 National Sample Survey 2004-05 2 Tendulkar Committee Report, GoI, 2010. These states are among the twelve states identified for support under the proposed NRLP. 3 59th round of NSS Survey 4 Health Finance NSSO Report 2007 5 National Sample Survey Organization Report No. 497

2

than 10 percent of the rural poor have access to financial services from formal banking systems in the high poverty states in India.

B. Sectoral and Institutional Context 5. Government’s experience with rural poverty reduction programs: The Government of India (GoI) has been investing substantial resources towards rural poverty alleviation through economic empowerment of the poor for several decades, most systematically since the 1980s. In the 1980s the GoI, through Ministry of Rural Development (MoRD), established the District Rural Development Agency (DRDA) at the district level and introduced special programs for rural development targeted at the poor such as the Integrated Rural Development Program (IRDP) targeted at identified BPL households through accessing credit and grants for household level economic activities. In 1999, the GoI introduced the Swarnjayanti Gram Swarozgar Yojona (SGSY) program which maintained the features of the IRDP, but moved to a group based approach to self employment. These programs, as well as the structure to deliver them through the DRDA structure achieved very mixed results. 6. Evolution of World Bank support to rural livelihoods in India: In the year 2000, the Bank started its initial engagement in select districts of Andhra Pradesh, Madhya Pradesh and Rajasthan and learned systematically from these experiences. This has resulted in social and economic empowerment of the rural poor and enabled them to build linkages with state and market institutions. The ICRs of the three initial Bank supported state projects have shown that these projects have resulted in household savings in excess of US$1,000 million, leveraged nearly US$6 billion in credit from commercial banks, achieved US$1,000 million turnover in collective marketing of farm and non-farm produce.

7. The World Bank has invested more than a US$1,000 million over the last ten years to create this scaled up institutional architecture for rural poverty reduction and mobilized 30 million rural poor into their own institutions that enable them to access livelihood opportunities and build social, financial and economic capital. These programs have achieved significant results in terms of increased savings, access to credit, livelihoods and public services and enabled increased public and private investment to flow into these households, communities and regions. These programs have resulted in social empowerment of most vulnerable groups including the rural women, Scheduled Castes and Scheduled Tribes to enable them to build social and financial capital and increase access to growth opportunities. These programs have also been taken up in areas affected by internal conflict and in the poorest regions. It has also supported State Governments to develop a professional support and service delivery architecture for social and economic mobilization of the poor. Investment has also been done in developing knowledge management, learning across states and GoI to enable reorientation of public expenditure priorities and the strategies for achieving rural poverty reduction. The central lesson learned during the last ten years of state level engagement is that significant investment in building institutional platforms of rural poor households is a critical foundation for sustainable poverty reduction. Other key lessons include investments in:

a) social and economic mobilization through promotion of thrift and savings among the rural poor, particularly women to build up their financial capital and enable them to

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become clients of formal financial institutions including commercial banks, microfinance institutions, and insurance companies to access credit and other financial services;

b) building human capital to enable these households to acquire new skills including bookkeeping, financial management, livelihood enhancement, market information and access to ICT (information communication technology). This not only helps increase the extent of entrepreneurship and self employment among the households but also enables them to access new job opportunities in the services sector in both rural and urban areas leading to higher social mobility among households;

c) enhancing economic capital enables households to produce and earn more from agriculture, dairying and other key livelihoods through access to productivity enhancing technologies and development of more inclusive value chains for higher price realization from the commodities produced by them. This also results in increased food security and livelihood diversification;

d) creating capacity among the poor and particularly women to enable them to exert voice and increase their participation in local governance and create demand side stimulus for improvement in public services, particularly last mile service delivery for health, nutrition and education outcomes; and

e) professionalizing the delivery of rural development programs through a competent and dedicated human resource management strategy and structure enables achievement of development outcomes.

8. Beyond Livelihoods - influencing public services and local governance: The experiences of state supported rural livelihood programs has shown that investments in social and economic mobilization of the rural poor leads to increased voice, participation and representation of the rural poor in local governments and creates a demand side accountability and pressure for improvements in local governance and last mile service delivery. In many states, this has lead to convergence of various public services, entitlements and programs at the household level. These include better targeting of the development programs, increased access to nutrition services and reduction in malnutrition and infant and maternal mortality, increased access to social safety nets including the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), pensions, PDS entitlements and insurance services. These programs have lead to higher accountability from public service providers including reduction in teacher absenteeism and increased availability and responsiveness of health service providers. A number of poor households belonging to excluded groups like scheduled castes, minorities and schedule tribes have started participating in local governments including various levels of Panchayats and are being elected as functionaries thus increasing inclusivity of the decision making process. NRLM will significantly invest in developing institutional arrangements which would ensure that household economic impacts would enhance the access to public services and entitlements for the poor and lead to sustainable improvements in local governance. 9. Origin of NRLM: In 2009, the MoRD proposed a more comprehensive approach to rural poverty reduction in its strategic framework paper entitled ‘Poverty Eradication in India by 2015: Rural Household Centered Strategy’. The framework draws on the lessons from Bank-financed rural livelihood projects6 in several states, Kerala’s Kudumbashree initiative as well as

6 The World Bank-GOI collaboration on rural livelihoods began in 2000 with three District Poverty Initiative Projects in Andhra Pradesh, Madhya Pradesh, and Rajasthan. The approach as evolved through additional financing and subsequent projects in

4

livelihood initiatives by civil society organizations. These projects have shown that investing in the development of a self-managed institutional platform of the poor yields impressive returns in terms of poverty reduction. Furthermore, extensive consultations with various stakeholders including the State Governments, Civil Society Organizations, Bankers and academicians were conducted by MoRD. Based on these learnings, the MoRD decided to restructure one of its key rural development programs, the SGSY, through the establishment of the National Rural Livelihood Mission (NRLM) with a clear objective of rural poverty reduction through the creation and strengthening of institutional platforms of the rural poor. This was approved by the Government of India in 2010. 10. The Mission approach in such a GoI program will provide greater focus and momentum through rapid coverage of rural poor households to address the key sectoral challenges identified in the 2009 Poverty Eradication paper. The NRLM will work in conjunction with the MGNREGS program, also implemented by MoRD, and will primarily focus on creating self employment and job employment opportunities for the rural poor thereby assisting them to graduate from access to safety nets to productive assets and improved incomes. The NRLM will provide a combination of financial resources and technical assistance to States so they can use the comprehensive livelihoods approach encompassing four inter-related tasks:

a) mobilizing all rural, poor households into effective SHGs, SHG federations and producer organizations and creating an effective institutional platform of the rural poor;

b) enhancing access to financial, technical, and marketing services; c) building capacities and skills for gainful and sustainable livelihoods; and d) improving the inclusive delivery of social and economic support services to the poor.

11. Transformation of MoRD: The proposed National Rural Livelihoods Project (NRLP) will enable MoRD to increase effectiveness and results from a US$ 5.1 billion public investment in NRLM over next seven years including expected allocation for Twelfth Five Year Plan. The support to MoRD is for professionalizing the overall program management and moving towards a results-based approach throughout the country. The investment support would enable MoRD to launch the NRLM in the 12 states which account for 85 percent of the rural poor households in India in an intensive manner. The NRLM has been included as a major initiative for public investment by the GoI and in the Twelfth Five Year Plan. The program also enjoys broad political consensus. C. Higher level Objectives to which the Project Contributes 12. The central vision of India’s Eleventh Five Year Plan is to promote inclusive growth so that the benefits are shared by all people. In line with this vision, the key thrust in the World Bank’s CAS for India FY09-12 is to provide support for programs that i) address rising inequality, ii) ensure sustainable development, and iii) enhance access to services by the poor. 13. The proposed project is in line with the strategy adopted under the CAS as it seeks to enhance the involvement of the World Bank in those states of India where the incidence of poverty, both in terms of absolute number of people and percentage of population, is high.

Tamil Nadu (2005), Bihar (2007) and Orissa (2008). Similar projects in Sri Lanka and Bangladesh have also contributed to lessons from rural livelihoods investment.

5

Through the proposed project, it is envisaged that developing sustainable institutions of the rural poor with focus on rural women and providing enhanced alternative and effective channels for provision of diversified livelihood alternatives to the poor, will contribute to overall poverty alleviation in India. More specifically, the proposed project will support the MDGs in the following key areas:

a) improving incomes of the poorest, reducing the proportion of the people living on less than US$1 a day (Goal 1, Target1);

b) promoting gender equality and empowering women (Goal 3, Target 4); and c) development and implementation of strategies for decent and productive work for youth

(Goal 8, Target 45). II. Project Development Objectives A. PDO 14. The project development objective for the proposed NRLP is to establish efficient and effective institutional platforms of the rural poor that enable them to increase household income through sustainable livelihood enhancements and improved access to financial and selected public services. 15. The proposed NRLP intends to support systemic reform and transformation of MoRD from focusing on allocation, disbursement, and monitoring of central government resources, to one of providing quality technical assistance to states implementing the NRLM. The activities to be supported under the proposed NRLP intend to achieve the following key outcomes:

a) Enhance effectiveness of public expenditure on NRLM – the proposed NRLP will help establish rigorous and outcome-based systems and processes at the national and state level to implement the NRLM throughout the country. The MoRD intends to adopt all the operational manuals, financial management and procurement guidelines, and safeguard requirements that were prepared for the proposed NRLP for all the activities to be financed under the NRLM throughout the country.

b) Leverage resources for the poor – substantial leveraging of resources for the poor is expected from the proposed NRLP as evidenced by the initial three WB-financed state livelihood projects, namely: i) group members accumulated their own savings in excess of US$1,000 million; ii) leveraged nearly US$6 billion in credit from commercial banks; iii) leveraged in excess of US$500 million in resources from other public programs; and iv) achieved US$1,000 million turnover in collective marketing of farm and non-farm produce.

c) Increase access to other government programs – the institutions of the poor created under the proposed NRLP will provide greater integration with the formal panchayat system for last mile service delivery (i.e. nutrition, health, education), enhanced access to other critical programs for the poor (i.e. MGNREGS), and ensuring that the Gram Panchayat (locally elected body) is more representative of the poor by giving the poor and women a greater voice to reduce elite capture opportunities.

6

1. Project Beneficiaries 16. The proposed National Rural Livelihoods Project (NRLP) intends to support the overall launch of the activities of the NRLM including specific additional investments for twelve7 states that have the highest number of absolute poor and poverty rates in India (currently six8 states have WB-financed rural livelihood projects). It is important to note that these 12 states account for almost 85%9 of the poor in India. 17. The NRLP will target approximately 24 million rural poor (about 4.8 million households) in approximately 100 districts (roughly 400 blocks) of the 12 states. These programs will focus on rural women members within the household. MoRD will reach all remaining rural poor throughout the country through its own resources using the institutions created and/or supported by the NRLP at the national and state level. The NRLP will not be implemented in the same blocks as the ongoing WB-financed state livelihood projects to ensure that there is no risk in duplication of financing to the same SHGs/federations. 2. PDO Level Indicators 18. The key performance indicators for the proposed project include the following (details of all indicators are shown in the Results Framework in Annex 1):

twelve State Rural Livelihood Missions formed and providing good quality technical assistance to institutions of the rural poor;

seventy percent of the excluded SC, ST, and Minorities households directly access Community Investment Support through SHGs/federations;

at least forty-five percent increase in the number of identified poor households who have accessed services from formal financial institutions10;

identified poor households have saved US$ 200 million through thrift and financial inclusion; and

average income for identified poor households in project villages has increased by fifty percent.

III. Project Description 19. While the WB-financing for the proposed NRLP is estimated at US$1,000 million, the GoI has allocated to the NRLM approximately US$ 5.1 billion, (including Twelfth Five Year Plan allocation). In this regard, the activities detailed in the component description below, will provide the enabling environment for the effective utilization of all the resources allocated by the GoI to the NRLM. With the exception of Component Two that will be implemented in the 12 targeted states, the remaining components will provide support at the national level to enable the smooth rollout of the NRLM throughout the country.

7 Chhattisgarh, Bihar, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal 8 Andhra Pradesh, Bihar, Madhya Pradesh, Orissa, Rajasthan, Tamil Nadu. 9 Percentage of rural poor is based on recommendations from the Tendulkar Committee Report on Poverty Estimation. 10 Only around 9 percent of marginal farmer households (landholding <1 ha, a proxy for poverty) access credit from formal financial institutions, (Report of the Committee on Financial Inclusion using NSS 2003 data).

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20. The proposed NRLP intends to support the implementation of the NRLM through the transformation of MoRD from the traditional focus of expenditure-based allocation, to one of providing quality technical assistance and results-based financing. Furthermore, being a national level project, investments will be made in developing a wider base of implementing partnerships with private sector, civil society, and other development institutions for bringing in new ideas, innovations, services, and delivery mechanisms. A. Project Components 21. Component 1. Institutional and Human Capacity Development (US$61.3 million): The objective of this component is to transform the role of MoRD into a provider of high quality technical assistance in the field of rural livelihoods promotion. This component will finance primarily staff, technical assistance consultancies, and training and related course material. Support under this component will be for all states. To achieve the objective of this component, the proposed project intends to support the following activities:

a) Technical Assistance - establish teams of high quality professionals to provide technical assistance to the states in various thematic areas such as community mobilization, livelihood promotion, financial inclusion, human resource management, monitoring and evaluation, environment management, and fiduciary management, among others. This team will provide continuous support to state governments in the implementation of the NRLM and related activities in the rural development sector.

b) Human Resource Development - support development of partnerships with well established training and research institutions in the field of rural development throughout India that can deliver focused training programs for successful implementation of the NRLM and related activities in the rural development sector. The activities supported will include curriculum development, design and conduct of training programs including e-learning and distance learning. The feasibility of establishing a National Center for Rural Livelihoods will also be explored.

22. Component 2. State Livelihood Support (US$793.7 million): The objective of this component is to support state governments in the establishment of the necessary institutional structures and mechanisms for the implementation of NRLM activities from the state to the block level, including support to the formation of institutions of the rural poor. The extent of financing to each state will depend on state-specific needs as detailed in their respective State Prospective and Implementation Plans (SPIP) which will be jointly reviewed and appraised by the MoRD and the WB prior to the financing of any activities. This component will finance livelihood grants to poor rural households (i.e. SHGs/federations) to undertake productive livelihood activities, set up micro and nano enterprises as detailed in their livelihood plans, support for higher level producer institutions, producer groups, farmers collectives, and/or producer companies (PCs), technical assistance consultancies, training and related material, office equipment, and operational costs at the state level and below. To achieve the objective of this component, the proposed project intends to support the following activities:

a) State Rural Livelihoods Missions (SRLM) – support the formation of an autonomous and professionally managed mission at the state-level for the implementation of the NRLM comprising of a multi-disciplinary team with expertise in themes like social

8

mobilization, institution building, capacity building, microfinance, farm and non-farm livelihoods, and job employment, among others. In addition, the SRLM would establish implementing entities at the district level comprising of multidisciplinary teams to further facilitate implementation of NRLM financed activities.

b) Institution Building and Capacity Building - support the identification, selection, and mobilization of poor rural households into self-managed institutions, such as Self Help Groups (SHGs) and their federations. This would also include providing capacity building and training activities for SHG members and federations in livelihood activities, bookkeeping, financial literacy, and business education, among others. Teams of livelihood professionals trained in participatory methodologies and community facilitation will be set up at the block/sub-block level.

c) Community Investment Support - provide livelihood grants to the institutions of the poor to enable them to undertake productive livelihood enhancing initiatives, set up micro and nano enterprises. In addition, the NRLP would facilitate the establishment of higher level producer institutions, producer groups, collectives, and/or companies.

d) Special Programs - support for pilot activities that have potential for scaling-up and replication such as last mile delivery of public services including health and nutrition, implementing activities in areas affected by internal conflict in partnership with civil society organizations, green opportunities, climate change-related activities, value-chain development, using new technologies for financial inclusion, among others. Activities under special programs will cover all States, including those States that are not directly participating in the NRLP.

23. Component 3. Innovation and Partnership Support (US$45 million): The objective of this component is to create an institutional mechanism to identify, nurture and support innovative ideas from across the country to address the livelihood needs of the rural poor. Support under this component will be for all states. This component will finance pilot initiatives and technical assistance consultancies that support innovative livelihoods activities in agriculture, livestock, youth employment, among others, for rural poor households. Support under this component will be for all states. To achieve the objective of this component, the proposed project intends to support the following activities:

a) Innovation Forums and Action Pilots - support selected innovations identified through development marketplace-type forums that have the potential to be scaled-up in a viable manner in partnership with development foundations.

b) Social Entrepreneurship Development - support the development of a network of grassroots innovators and social entrepreneurs, identified through a competitive process, at state and national level.

c) Public-Private-Community-Partnership - develop and support effective partnerships with the private sector, foundations public corporations, and civil society organizations on livelihoods development for the rural poor throughout India. These could include ICT, agribusiness, commercial banks/MFIs and other financial service providers, and youth employment, among others. Process and procedures for identification, and partnering with NGOs and social entrepreneurs under this component may likely follow an Innovation and Partnership Development Guidelines that is currently under preparation, provided it is found agreeable by both MoRD and the WB.

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24. Component 4. Project Implementation Support (US$100 million): The objective of this component is to strengthen the National Mission Management Unit for effective project management at the national level that develops key systems and processes for coordination and management of the proposed project and the NRLM. Given that the NRLP, and more importantly the NRLM, will be implemented across India, there are substantial managerial requirements which are critical to ensure the satisfactory implementation of both the NRLP and NRLM. In this regard, a dedicated National Mission Management Unit (NMMU) has been established under the MoRD. This component will finance technical assistance consultancies, training and related material, office equipment, MIS development, and operational costs. Support under this component will be for all states. To achieve the objective of this component, the proposed project intends to support the following activities:

a) National Mission Management Unit (NMMU) - strengthen the various functions of the NMMU to be able to manage, deliver and support all aspects of not only the NRLP, but also the NRLM.

b) Monitoring and Evaluation - given the geographic scale and magnitude of the resources and activities to be supported by the NRLP/NRLM, a comprehensive and robust monitoring and evaluation system will be established to not only track implementation progress but also to provide meaningful reports on household level impacts and implementation experiences so as to enable MoRD and state governments to take corrective actions, if necessary.

c) Electronic National Rural Livelihoods Management System (e-NRLMS) and ICT: The objective of this sub-component is to design, develop and roll out electronic National Rural Livelihoods Management System (e-NRLMS) using state of the art IT platform for hosting and delivering variety of project services like management information system (MIS), decision support systems (DSS), financial management system (FMS), etc. This digital grid connecting village to the national level will be Aadhar (UID) compliant and will be leveraged to deliver ICT based services to rural poor households in the last mile.

d) Governance and Accountability Framework - the NRLP would support the development and roll-out of a user friendly and highly responsive governance and accountability mechanism by which to ensure that all aspects of the proposed project are being implemented in accordance with agreed principles and procedures.

e) Knowledge Management and Communication - incorporating lessons from experience and communicating consistent and significant messages at both a policy and operational level, is critical for the overall success of the NRLP/NRLM. In this regard, the project will invest in a variety of products and services to enhance the generation and use of knowledge and communications as a key tool for enhancing the quality of the program.

B. Project Financing 1. Lending Instrument 25. The lending instrument will be a SIL, and the implementation period for the project is five years. A SIL provides the flexibility to build human and institutional capacity, construct infrastructure, and to support the gradual design and implementation of a reform agenda in the agriculture and rural development sector. A SIL also allows for close follow-up of defined

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activities and procedures and making adjustments where necessary, on the part of the government and the World Bank. 26. Special authorization from the Regional Vice President, as provided for under OP6.00/BP 6.00 Annex A, has been received with respect to the expenditure eligibility for financing food requirements. OP 6.00 recognizes that while some expenditure may not, in and of themselves, be productive, they may be deemed productive if they are a necessary part of a larger project that is designed to improve productivity. In this project, such expenditures, likely to be small, are essential to the livelihoods of the poor and help sustain the viability of the SHGs and the project as a whole. The proposed project's fiduciary arrangements are sound, and similar special authorizations were provided previously for the Rajasthan, MP, Orissa, Bihar, and Tamil Nadu rural livelihoods projects, all of which are working well and without undue risk. Hence, the authorization arrangements have been made as provided for under OP 6.00, Annex A.

2. Financing Project Table 27. The GoI has allocated about approximately US$5.1 billion to the NRLM over next seven years (including expected allocation under Twelfth Five Year Plan). With these funds, and the technical assistance grant from DFID, MoRD has already initiated the process of creating professional service delivery architecture for the rural poverty programs at the national level based on the prior results of state level rural livelihood programs. The total project cost for the proposed NRLP has been estimated at US$1.17 billion, out of which the Government share would be US$168.5 million. The remaining US$1,000 million would come in the form of an IDA Credit. The following is a table that summarizes the overall project costs.

Component / Sub component IDA GoI Total(in US$ million)

A. Institutional and Human Capacity Building – nationwide support A.1 Technical Assistance 46.5 - 46.5A.2 Human Resource Development 13.8 - 13.8Subtotal 60.3 - 60.3B. State Livelihoods Support – support to 12 states B.1 State Rural Livelihoods Missions (SRLM) 193.5 - 193.5B.2 Institution Building and Capacity Building 179.3 59.7 239.0B.3 Community Investment Support 326.3 108.8 435.1B.4 Special Programs 98.0 - 98.0Subtotal 797.1 168.5 965.6

C. Innovations and Partnership Support – nationwide support C.1 Innovation Forums and Action Pilots 11.6 - 11.6C.2 Social Enterpreneurship Development 10.5 - 10.5C.3 Public Private Community Partnerships 23.4 - 23.4Subtotal 45.5 - 45.5

D. Project Implementation Support – nationwide support D.1 National Mission Management Unit (NMMU) 21.1 - 21.1D.2 Monitoring and Evaluation 23.2 - 23.2D.3 Electronic National Rural Livelihoods Management System

(e-NRLMS) 28.3 - 28.3

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D.4 Governance and Accountability Framework 7.2 - 7.2D.5 Knowledge Management and Communication 17.3 - 17.3Subtotal 97.1 - 97.1Total PROJECT COSTS 1,000.0 168.5 1,168.5

NRLM Costs (covering geographic areas not under the NRLP) - 4925.0 4925.0

Total NRLP and NRLM - nationwide costs 1,000.0 5093.5 6093.5

C. Lessons Learnt and Reflected in the Project Design 28. The NRLP builds not only on the experience of the first phase livelihoods projects but also on the on-going rich and varied experience from the second phase livelihood projects in Andhra Pradesh, Tamil Nadu, Bihar, Orissa and Madhya Pradesh and other state projects such as Kudumbashree in Kerala, as well as the Bank’s global experiences in community driven development. The NRLP has also learned systematically from the current microfinance crisis in Andhra Pradesh. The systems proposed in the Project have also incorporated lessons from other national level programs of the GoI supported by the Bank, such as the Sarva Shiksha Abhiyan (SSA) in primary education. The following important lessons have been considered and incorporated accordingly in the design of the NRLP:

Investing in effective institutional structures at different levels for identifying and addressing the needs of the rural poor is a necessary precondition for any rural development program as evidenced in the state level livelihood projects.

Poverty targeting through a combination of participatory methods and Gram Panchayat–(local self-government) endorsement is effective and raises transparency. These methodologies have been effectively used to identify the poorest of the poor in WB-supported state poverty alleviation projects in, for example, Andhra Pradesh, Madhya Pradesh, Orissa, and Tamil Nadu.

Technical assistance to States on an ongoing basis is needed to establish effective and sustainable supporting systems. The high poverty states often find it difficult to draw in professional service providers, develop appropriate systems of fiduciary and program management, and recruit professional staff.

In light of the recent microfinance crisis in India, various important lessons have been learned and incorporated in the design of the proposed NRLP to ensure that financial inclusion of the poor is achieved in a sustainable and responsible manner, namely: i) invest in the demand-side of financial inclusion by supporting the formation of responsible client households for both commercial banks and microfinance institutions; and ii) partnering with WB-supported projects such as the “Scaling-up Sustainable and Responsible Microfinance,” among other WBG activities (i.e. IFC), and other related programs, to work on the supply-side of financial inclusion such as linking SHGs to microfinance and other formal financial intermediaries, creation of pro-poor financial products, linkages to licensed credit bureaus, etc. More specifically, the NRLP will focus its efforts on increasing financial inclusion of the poor by undertaking the following concrete activities: i) making financial literacy and financial planning a core aspect of institution building; ii) increasing emphasis on savings and savings mobilization; and iii) dedicated investments to build partnerships to enhance financial inclusion.

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IV. Implementation A. Institutional and Implementation Arrangements 29. The NRLM is embedded within the MoRD. The program strategies formulated by NRLM envisages creation of dedicated support structures for the delivery of program benefits and pulling together all other poverty reduction efforts by the government departments, Panchayat Raj Institutions, CSOs, formal financial institutions, and the private sector under one umbrella. The governance structure of NRLM includes an Advisory Committee chaired by the Minister of MoRD as a policy making body, and a Coordination Committee, chaired by the Secretary of MoRD to oversee implementation. The NRLM Empowered Committee (NRLM-EC) would review and approve the State Perspective and Implementation Plans (SPIPs), and Annual Action Plans (AAP) for release of funds. The Joint Secretary, NRLM, MoRD, as Mission Director, assisted by a Chief Operating Officer, will head the main implementing entity, the National Mission Management Unit (NMMU), comprising a multi-disciplinary team of professionals. 30. The NMMU has been established in New Delhi for the implementation of the NRLM and NRLP. The main focus of the NMMU is to provide technical assistance to the states in their implementation of the NRLM and to ensure understanding and compliance with NRLM guidelines. The strategy is to retain a lean structure at the NMMU with a defined number of core staff and thereafter engage short-term consultants, as required, to provide support to the states.

31. The NMMU will also provide support for the establishment of state rural livelihood missions (i.e. SRLMs) for undertaking the activities supported under the NRLM. Likewise, the SRLMs will have state mission management units (SMMUs) comprising of a multi-disciplinary team for the implementation of both the NRLM and NRLP.

32. In order to leverage on project-to-project and community-to-community learning, there will be systematic exchange initiatives that will be supported by the NRLP. It is envisaged that the NRLP would enter into partnership with on-going livelihoods projects supported by the Bank in the states of Andhra Pradesh, Bihar, Tamil Nadu, Orissa, Madhya Pradesh and Rajasthan. Moreover, the NRLP will also be entering into partnership with experienced community-based learning and training organizations to facilitate the community-to-community learning and/or other training programs. A protocol on the project-to-project and community-to-community learning exchange initiative will developed and operationalized by the NRLP. B. Results Monitoring and Evaluation 33. The objective of the Project’s Monitoring, Evaluation and Learning (ML&E) system will be to re-reinforce the culture of result-based management and provide the basis for evidence-based decision making processes, of both strategic and operational nature, at all levels including community institutions. The ML&E will play the role of a social observatory, using different M&E tools to provide continuous feedback to the project management and other stakeholders on the progress and quality of the project implementation.

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34. Monitoring would include regular reporting of inputs, outputs and outcomes on several levels drawing on a range of information sources, primarily the MIS, but also process monitoring. The NRLP will invest in a fully computerized, web-based MIS system which will capture all data at the source where it is generated (i.e. the SHG level for maximum transparency and accuracy). Process Monitoring and Qualitative Tracking systems by accredited agencies will be promoted at State level to track TA and project implementation (quality, failures, successes and challenges) and key changes taking place in participation, inclusion, and service relationships under the Project. The NMMU M&E unit will assist in coordinating quality control of these and integrating findings at the policy level.

35. Participatory self-monitoring by community institutions would be a key pillar to assess their own organizational capacity development as well as progress towards sustainable livelihoods. Impact evaluations would include both quantitative and qualitative dimensions. The former will be initiated with poverty diagnostics using secondary data to assess challenges and opportunities on the ground (district-wise in all states) and accordingly design activities. Simultaneously, a first ever baseline Rural Livelihoods Survey will be commissioned. C. Sustainability 36. Sustainability of the proposed investment could be measured at two levels: a) the sustainability of the institutional platform, beyond the life of the project; and b) sustainable financing or funding of the National Rural Livelihood Mission. 37. Sustainability of the institutional platform: The central mission of the NRLP is to mobilize the women of the rural poor households into self managed and sustainable institutions that are over time vertically federated to create socially and economically viable organizations. Such institutions can then access their entitlements from the government because they are empowered and create an effective system of demand. They can also access various markets because they are organized into aggregated collectives, and access services through managing the last mile of service delivery in a host of sectors such as agriculture, livestock and dairying on the economic side and nutrition and health on the social side. This requires investments in human social capital, building systems including book-keeping and MIS, putting in place a transparent and accountable governance system, building leadership amongst others. The second measure of institutional sustainability will be the ability of the institutions to be financially sustainable namely able to meet expenses from their own revenues. In a sequenced manner, it is proposed that over the project period the sub block level functions managed by project staff is handed over to community-based organizations and their community resource persons who take on many of the roles of the frontline staff. 38. Sustaining the NRLM: Convergence of different programs of the government for rural development and social entitlements allows the poor to reduce both vulnerability and enhance their capitalization process. Convergence with all such programs will allow for both substantial further leveraging of resources and sustainable financial flows after the project period. Convergence of social protection schemes like MGNREGS, food security, PDS, social insurance, pensions, etc. with livelihood promotion initiatives under NRLP will generate cash flows at the household level which further strengthens savings and credit habits among poor and

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help them accumulate assets. The approach of building peoples’ institutions under NRLM can therefore, create conditions wherein the programs targeting the rural poor can converge in terms of content and capital flows. The experiences from States which have gone through long-term investment in creating an institutional platform shows that the per capita investment is significantly low and is primarily aimed at ensuring that these institutions are able to take-up higher value addition, deal with urbanization and growth opportunities in the economy, and enable poor households to benefit from entitlements and convergence with public services.

39. At the national level, the GoI has shown a strong commitment and has already allocated US$2.2 billion to the NRLM for the balance two years of the Eleventh Five Year Plan period. Rural poverty reduction and inclusive development continues to be a policy priority of the GoI and commitment of resources in the future to the NRLM is assured. The MoRD has also had several state level consultations to ensure full ownership and commitment from the states to the NRLM. V. Key Risks and Mitigation Measures 40. The overall risk to achievement of the PDO is likely to be moderate. The project and its design builds on the proven experience of various state-level livelihood projects in India which have mostly been successful in achieving their development objectives. It builds on the organization and capacity of existing state-level livelihood projects to provide the necessary support to scale-up the activities. The table below summarizes the key risks to the NRLP and possible mitigation strategies for the project.

S.No Risks Risk

Rating Mitigation Measures

1. The ‘legacy’ of earlier programs implemented by MoRD—Integrated Rural Development Program (IRDP), Swarnajayanti Gram Swarozgar Yojana (SGSY), and others limits acceptance of new approaches.

Moderate A new set of guidelines titled ‘Framework for implementation of NRLM” has been prepared that lays out the new principles of NRLM differently from the older programs. This has been accepted by the states through a consultative process.

2. Role transition of MoRD from being just a fund disbursing entity to institution that will provide technical assistance and hand-holding support to state during implementation.

Moderate The NRLP recognizes this as the core challenge and has an in-built strategy to address this through dedicated project component on institutional and human capital development which will invest in strengthening the NMMU for providing technical assistance to states and for professionalizing the training system for rural development.

3. The NRLP will be implemented in multiple states, especially the high poverty states, with low and/or varying implementation, procurement and financial management capacity.

High NRLP will be rolled out in phased manner in different states through an appraisal process jointly conducted by MoRD and the World Bank task team. Moreover, 50% of the target states are where existing WB financed livelihoods projects are being implemented.

4 The current microfinance crisis in AP will lead to some changes in the regulatory system for microfinance institutions by RBI (i.e. central bank of India) thus slowing down the speed of financial inclusion and could lead

High NRLM will focus more on financial literacy, debt counseling services, savings and thrift, micro-insurance/risk mitigation and livelihood support services before credit access. Furthermore, it could also support the supply side solutions including sharing SHG member financial data

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to slow down of credit access for the rural poor. It could also require reducing the scale of the demand side approaches until supply side is regulated and sustainable

with licensed credit information bureaus, branchless banking solutions and use of IT. NRLM will create a foundation for sustainable financing sector, by way of developing responsible clients for the financial sector and improve MIS to ensure that early warning systems are established to identify and mitigate risk.

VI. Appraisal Summary A. Economic and Financial Analysis (EFA) 41. Including all project costs (and contingencies), the analysis resulted in an economic rate of return (ERR) of 26.4% for the project as a whole, with a NPV of $1.04 billion. The financial rate of return (FRR) for the livelihood investments alone is 11.6% and for the project as a whole is 25.3%. The rate of return analysis underlines the significant impact of the investments on the institution building and capacity development to generate optimum returns. 42. Major project benefits will come from (i) productive livelihood investments by poor HHs, (ii) improved access to institutional credit for expanding/diversifying livelihood investments, (iii) improved integration with markets and institutions for scaling up livelihood activities, (iv) participatory targeting of poor beneficiaries, (iii) community management of investment funds, and (iv) enhanced skills linked with gainful employment opportunities for one million rural youth. This was based on the analyses of 735,245 livelihood activities, opted by beneficiaries in five similar projects in South Asia, the likely choice of broad livelihood project categories by the NRLP HHs is projected as follows: livestock related (40%), agriculture related (25%), small trade related (20%) and service related (15%). Weighted average annual benefits from such livelihood investments varied from Rs 5375 (agriculture) to Rs 10,345 (small trade). Across livelihood sectors, average annual benefits from livelihood investments varied from Rs 4.620 (with credit and institutional constraints) to Rs 12,780 (with access to adequate credit, technology and institutions) based on similar projects in this region. With livelihood investments alone, project ERR is estimated at 12.7%, due to limited loan funds, market and technology related constraints and sustainability limitations in the SHG operations. Comprehensive institution building and capacity development in the project villages, blocks and districts is expected to generate the following impacts:

a) Scenario One: providing linkage to markets and access to technologies for at least 50% of

the SHGs will enhance the productivity of loan investment and increase the profit margin of the livelihood activities; this improves the project ERR to 17.3%.

b) Scenario Two, enabling SHG linkages with financial institutions to mobilize additional credit for at least 45% of the SHGs will facilitate optimal funding for livelihood loans to further enhance the income impact; this improves the project ERR to 24.5%.

c) Scenario Three: strong community institutions with human capacity development support

in the project areas will ensure sustainable service delivery to the beneficiaries for a longer period; this improves the project ERR to 27.1%.

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43. Sensitivity and risk analysis considered key risk variables like cost escalation, fall in livelihood benefits due to institutional failures and implementation delays by considering jointly 30% change in costs and benefits. The expected ERR, estimated by the risk model at 17.5%, was considered reasonably stable since the probability of ERR reaching 15% level for the proposed project interventions is about 85%, as predicted by the risk model. B. Technical 44. Between 2000 and 2010, the World Bank has promoted seven state-level livelihood projects throughout India. They have demonstrated that community-driven development approaches that are based on building strong, self managed and sustainable institutions are viable and effective options for catalyzing socio-economic change at the grassroots level, providing pathways to poverty reduction and stimulating the rural economy. Building on the lessons from these experiences, it is proposed to expand the approaches applied in these projects to all the high poverty states and states with acute pockets of poverty through a series of measures that takes into account the weaknesses in these states in implementing rural poverty reduction programs. The three factors which are being addressed in this project are as follows:

a) building the capacity of these states to build support structures of a high quality to implement the project, through provision of technical assistance to the states to plan and implement the project;

b) building a training system to place a large number of professionals in the states right up to the village level; and

c) building institutions of the poor to empower them to draw in various services. This approach will replicate and expand the approach that has been successfully implemented at the state level to the national level.

C. Financial Management 45. The guiding principles for the design of the financial management arrangements for the NRLP are twofold: (i) use the country fiduciary systems, to the extent feasible and considered satisfactory for meeting the essential fiduciary requirements; (ii) build upon the successful models developed and tested in the IDA-financed state livelihood projects. Within this broad framework, the parameters of the financial management arrangements are as described below. 46. National Level (MoRD & NMMU): The project will be budgeted at the national level under an identifiable budget head item of the MoRD; all payments and accounting of expenditures relating to NMMU will be within the existing Government systems using the Pay & Accounts Office (PAO). The NMMU will maintain memorandum registers to track the project expenditures by activity heads to allow for quarterly interim financial reports to be prepared in a manner that will allow easy monitoring of actual expenditures against agreed work plans and for management decision making purposes. 47. A dedicated financial management team, headed by a controller and comprising of suitably qualified finance professionals will be established within NMMU with the overall responsibility of developing, updating and implementing the financial management and

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operation guidelines. The team will also be responsible for managing and monitoring the financial management arrangements both at central & state level.

48. NMMU finance team will compile and prepare consolidated project financial progress reports on a quarterly basis. These reports will aggregate the financial reports for the following: (a) NMMU level expenditures as obtained from PAO reports; (b) fund releases to SRLMs by MoRD, as obtained from PAO reports; (c) SRLM level financial reports, as obtained from their financial management systems.

49. State Level (SRLM): Five states which are presently implementing World Bank Livelihood Projects have established and tested financial management arrangements. It is important to note that no material fiduciary weaknesses have been identified over the last 10 years of implementation of WB-financed state livelihood projects, nor have there been major issues identified with the audit reports. For the remaining states being considered for NRLP, the adequacy of the financial management arrangements will be assessed against benchmarks agreed and documented in the Financial Manual. These readiness filters will be applied both at the Initial Action Plan and State Perspective & Implementation stages jointly by MoRD and the World Bank. 50. Fiduciary Arrangements for the Community Investment Support component have been designed to seek assurance from a combination of the following two processes and will be applicable uniformly, regardless of whether the federation passes the grant funds onwards as loans or grants; (a) robustness of the portfolio at the federation level, monitored through rigorous processes and use of eligibility indicators of profitability, capital and portfolio quality, acceptable levels of loan collections, appropriate capacity for appraisals and supervision etc.; and (b) strength of the community fiduciary oversight arrangements established at the federation level to monitor and verify the use of funds for intended purposes, including verification mechanisms for assets and other uses of funds, as applicable. 51. Disbursement Arrangements: Disbursements from the IDA Credit will be based on consolidated project financial reports and will be made at quarterly intervals. An initial advance with a fixed ceiling (to be determined by appraisal) would be deposited into the segregated designated account maintained in US dollars at Reserve of Bank of India, Mumbai by CAAA, GoI. Withdrawals from the Designated Account will be on receipt of periodic withdrawal applications from MoRD, GoI and to the extent of reported expenditures during the period. As per the standard Centre-State mechanism for Central Sponsored Schemes, GoI funds to the States for Components 2 (b) and (c) will be on a grant basis with 25% counterpart funding by the States (10% in the case of North East and hill States). The fund releases to the States which will be accounted for at MoRD level as ‘Grants in Aid’ will not be considered as eligible expenditures for purposes of disbursement under the project. All fund releases to SHG Federations made in accordance with Federation Grant Agreement will be considered as eligible expenditures for the purposes of the project. 52. Retroactive Financing: Retroactive Finance of up to US$20 million equivalent (i.e. 2 percent of the total credit) will be available for financing eligible project expenditures incurred before credit/financing agreement signing, but on or after February 1, 2011. This will help the

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project in hiring of various services such as setting of the staff recruitment systems, project website, monitoring systems & MIS, field level testing of various manuals and various other similar initial activities. This will help the project save critical time and be ready to start implementation of core project activities immediately after the project is declared effective. D. Procurement 53. Procurement of all goods, works and non-consulting services required for the Project and to be financed out of the proceeds of the Financing shall be procured in accordance with the requirements set forth or referred to in Section I of the Procurement Guidelines (January 2011), and all consultancy services shall be procured in accordance with Consultants Guidelines (January 2011). A Procurement Manual for the NRLM applicable to the whole country is finalized by Government of India in consultation with the Bank. The procurement arrangements and methods detailed for procurement of Goods, Works and Services in NRLM Procurement Manual is reviewed as in accordance with the above referred World Bank guidelines. In the event of any conflict in interpretation of various provisions for procurement in case of items procured using the proceeds of the credit from the IDA, interpretations of provisions of IDA Procurement and Consultancy Guidelines will prevail. 54. NRLM will be building on pre-existing experience of the IDA-supported state livelihood projects wherein the capacity and systems are in place and post procurement assessments have rated the risk as low to moderate. In two of the new target states, regulatory frameworks are in place. However, in a few others the regulatory system is limited to Financial Management Rules without detailing of methods, conditions, systems and service levels for procurement. Based on the assessment, overall Procurement risk for the project is assessed as “Moderate”. A series of mitigation measures are agreed which are detailed in Annex 3.

55. As part of procurement arrangements, a dedicated procurement management team at the National level shall be established. The team shall comprise of sufficient technical staff with overall responsibility of developing, implementing and managing the procurement functions. Similar teams, comprising of sufficient procurement professionals would be set up at the State Mission Management Units. As per the provisions of the Procurement Guidelines prior and post review arrangements are in-built as part of the responsibilities of the implementing entity at state and national level structures for ensuring appropriate quality of procurement and oversight. It is agreed that at national level, NMMU will hire a third party independent post review consultant for conducting annual post review of 10% contracts issued at state and district levels. Bank will depend on this third party post review for its fiduciary supervision, while retaining a right to conduct direct post review as required. E. Social (including safeguards) 56. Social Assessment (SA): The NRLP’s social assessment documents the key social lessons from earlier livelihood projects in India and elsewhere, and field consultations carried out in representative project areas. It has highlighted the problems related to mis-targeting, leading to risks of exclusion of the poor and inclusion of non-poor in development/welfare programs. The poor often rely on middlemen to access government programs due to lack of information and

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high transaction and opportunity costs. The poorest, often SC and ST households, remain excluded as they cannot afford such high costs. Tribals, migrants and other disadvantaged groups, due to geographical isolation of their remote and dispersed rural habitations have limited access to information and benefits. Restrictive social norms for women, scheduled castes, and religious minorities, prevents them from participating in development programs and decision-making processes. The other barriers to participation of the poor are language and illiteracy, lack of sustained outreach efforts, long distances to facilities, indifferent attitudes of agencies and difficult procedures. 57. Social Management Framework (SMF): To address these and other social constraints, an SMF has been prepared (see summary in Annex 3). Use of the SMF would ensure the identification, mobilization, provision of information to, inclusion, and capacity-building of the vulnerable people including tribal people. The SMF calls for preparation of Social Inclusion Plans (SIP) by SMMUs, reflecting the findings of the SA. After meeting the readiness criteria, the states would carry out participatory village assessments and PFTs and CRPs would assist households to prepare their specific livelihood plans. These plans would address the priority needs of tribal and non-tribal groups. The SMF includes the institutional arrangements at the national, state, district and sub-district levels that are necessary to implement the social dimensions of the project. It also provides for capacity-building activities for project staff, community institutions and partners at all levels to address social needs and risks. The SMF includes key indicators on social mobilization and inclusion. The Project’s Results Framework includes two PDO-level indicators related to poverty and social inclusion and the targeted levels: (i) 70% of the identified poor households directly benefitting from the project by Year 5; benefitting means that poor households are not only part of SHGs but have also accessed and utilized the services related to savings, finance, entitlements and livelihoods; and (ii) 70% of the excluded SC, ST and Muslim households directly access Community Investment Support or formal financial institutions through SHGs/Federations. The SMF has been disclosed in-country. 58. Social Safeguards: The key social safeguard policy requirement is to ensure equitable and culturally-compatible benefits to tribal people in the project areas (OP 4.10). The SMF provides for priority targeting of tribal groups to ensure that they are equitable participants and beneficiaries in the project interventions and institutions. Regular and informed consultation would be undertaken with tribal groups to ensure their continuing consent and support of the project. Tribal areas would be closely monitored. In tribal and backward areas, SHGs would be encouraged to adapt their norms to suit tribal conditions and those of other vulnerable people. The World Bank’s OP 4.12 (Involuntary Resettlement) is not triggered as involuntary land acquisition and land purchase are not envisaged and are included in the project’s negative list. Any community project that involves voluntary land donation would follow consultative and transparent procedures that substantiate the voluntariness of the donation and informed consent of the donor. These procedures are specified in the SMF which is in the PIP. They would be enforced by the PFTs and monitored by the District and State level Social Coordinators. F. Environment (including safeguards) 59. An Environmental Assessment (EA) has identified the following key environmental issues concerning activities of SHGs and their federations: (i) land degradation including soil

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erosion (ii) poor water availability and quality, depletion of groundwater (iii) improper use of agro-chemicals (imbalanced use of fertilizers, unsafe use of hazardous pesticides) (iv) decreasing fodder availability (v) degradation of forests (unsustainable extraction of forest produce, shifting agriculture, grazing) (vi) drought and floods. The NRLP triggers the following safeguard policies of the World Bank: Environmental Assessment (OP 4.01), Forests (OP 4.36), Natural Habitats (OP 4.04) and Pest Management (OP 4.09). The NRLP falls in the environmental screening category B as per Bank’s Operational Policy (OP) 4.01. 60. The Environmental Management Framework (EMF) developed as an outcome of the EA study provides a detailed strategy and procedures for all the participating states. An Environmental Action Plan (EAP) will be developed as part of the State Project Implementation Plan (SPIP). The EMF also comprises procedures to assess eligibility of SHG primary federation activities and Producer Collectives through a regulations list and incorporation of good natural resources management practices through environmental guidelines. Environmental Guidelines (EGs) are provided for four major livelihoods – agriculture, livestock, non-timber forest produce and fishery - to identify subproject-level impacts and relevant mitigation measures. The Environment Management Framework (EMF) ensures compliance with applicable laws and regulations of the GoI, the twelve state governments and triggered safeguard policies of the World Bank. The EMF provides a detailed strategy for the promotion of green opportunities that can contribute to environmental resilience and improved incomes. Capacity building, monitoring and institutional arrangements to enable the adoption of the environmental management plans and the promotion of green opportunities is part of the EMF.

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Annex 1: Results Framework and Monitoring INDIA: National Rural Livelihoods Project

Results Framework

Project Development Objective (PDO): to establish efficient and effective institutional platforms of the rural poor that enables them to increase household income through livelihood enhancements11 and improved access to financial and selected public services.

PDO Level Results Indicators*

Cor

e Unit of Measure

Base-line12

Cumulative Target Values** Frequency

Data Source/ Methodology

Responsibility for Data

Collection

Description (indicator

definition etc.) YR 1

YR 2 YR3 YR 4 YR5

Indicator One: Twelve State Rural Livelihood Missions formed and providing good quality technical assistance to institutions of the rural poor

Percent-

age 4 6 11 12

Yearly MIS and

evaluations

NMMU & SMMU M&E

Unit

Based on AP, TN, Orissa and

Bihar experiences

Indicator Two: At least 70% of the excluded SC, ST and Minorities households directly access Community Investment Support or formal financial institutions through SHGs/Federations.

Percent-

age 0% 5 % 20% 40% 60% 70% Yearly

MIS and evaluations

NMMU & SMMU M&E

Unit

Based on AP, TN and Bihar

experiences

Indicator Three: At least 45% increase in the number of identified poor households who have accessed services from formal financial institutions

Percent-

age 9%13 14% 24% 35% 45% 54% Yearly

MIS and evaluations, NABARD

NMMU & SMMU M&E

Unit - as above

Indicator Four: Identified poor households have saved cumulatively US$200 million through thrift and financial inclusion

USD million

5 6 30 75 130 200 Yearly MIS and FMS NMMU &

SMMU M&E Unit

- as above

Indicator Five: Average income for identified poor households in project villages has increased by 40%

Percent- age

0 0% 20% 50%

Baseline, mid-term

and end of project

Evaluations External

evaluation

Based on AP, Sri Lanka livelihoods

Projects ICRs

11 Sustainable livelihood enhancements include investments in agriculture, livestock and non-farm sector through assets, productivity, technology and access to markets. 12 While the Bank has ongoing livelihood projects in several states, their baseline numbers can only be approximated/scaled up for NRLP which will reach 12 states. Further, the context in states with existing livelihood projects such as Andhra Pradesh or Tamil Nadu is entirely different from that of newer states under the Project like Uttar Pradesh. Hence proxy baseline values have been indicated using best possible secondary data. 13 Only around 9 percent of marginal farmer households (landholding <1 ha, a proxy for poverty) access credit from formal financial institutions (Report of the Committee on Financial inclusion using NSS 2003 data).

22

INTERMEDIATE RESULTS

Intermediate Result (Component 1): Delivery of good quality TA to the States for implementation of NRLM.

Intermediate Result indicator One: 70 Percentage of SRLMs have received timely and quality TA as per agreed service standards, on a regular basis.

Percent-age for Service

Standard (no.)

0% 15% (5)

40% (12)

70% (21)

70% (21)

70% (21)

Yearly Service standard

assessment

Joint NMMU and

SMMU

Service Standard will be mutually agreed

Intermediate Result indicator Two: Twelve participating SRLMs have prepared State Perspective Plan and accessed dedicated resources as per agreed service standards.

Number of

States 2 10 12 12 12 12

Half-yearly

MIS and FMS, and Service

Standard Assessment

NMMU and SMMU

Does not include NCR. Some States may not do intense

blocks.

Intermediate Result indicator Three: 80 Percent of NRLM staff are accredited professionals

Percent-

age 0% 40% 60% 80% 80% 80% Yearly HR Data

NMMU and SMMU HR

Units

6000 core staff positions

Intermediate Result (Component 2): Establishment of institutional platforms of the poor for improved access to financial, livelihood and public services for participating households.

Intermediate Result indicator One: All Project SLRMs delivering implementation to service standards and user satisfaction

Number of States

0 4 8 12 12 12 Yearly

Service Standard

Assessment, Satisfaction

survey

SMMUs and NMMU

Service Standard will be agreed with

NRLM and partners

Intermediate Result indicator Two: At least 70 percent of the identified poor mobilized into Self Help Groups (SHGs)

Percent-age of poor

house-holds

8%14 15% 40% 55% 70% 70% Yearly MIS, NSS, NABARD

SMMU M&E units

Based on mobilization among

BPL, Tendulkar. Baseline and targets do not include AP,

TN, Mah. and Karn. Intermediate Result indicator Three: At least 70 percent of SHGs have achieved quality and sustainable parameters as per agreed standards/rating systems.

Percent of SHGs

0% 30% 40% 60% 70% 70% Yearly MIS SMMU

M&E units Applies to new SHGs

under project

Intermediate Result indicator Four: 30% of SHG members using financial services report higher level of satisfaction as a result of new service delivery mechanism.

Percent of members

0% 10% 25% 30% 30% 30% Yearly

Financial services

satisfaction survey

SMMU and NMMU

Microfinance Units

Applies to new SHGs under project

Intermediate Result indicator Five: At least 50% of poor households have made

Percent of Project

0% 0% 10% 20% 35% 50% Yearly MIS SMMU Investments in agric.,

livest. and NFRE

14 Using NSS poverty estimates for 2004-05 and SHG membership data from NABARD for 10 states, only 22.3 percent of rural poor were mobilized into groups in these states. The states included Andhra Pradesh, Bihar, Chattisgarh, Jharkhand, Kerala, Madhya Pradesh, Orissa, Rajasthan, Tamil Nadu and Uttar Pradesh. Since mobilization will not be carried out as intensively in Andhra Pradesh, and Tamil Nadu and Kerala are not among the 12 Project states, the average mobilization among the remaining states is about 8 percent.

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productive investments through SHGs village poor HH

Intermediate Result indicator Six: One Million new jobs for the poor are created

Number of jobs

000 50, 200 500 750 1000 Yearly MIS SMMU Under youth

employment linkage

Intermediate Result (Component 3): Establishment of a platform for PPP and innovations for rural livelihoods and integration into NRLM

Intermediate Result One: 5 pilot innovation replicated, adopted

Number of

pilots scaled up

0 0 0 1 2 5 Yearly Annual Progress Report

NMMU Innovation and Partner

Unit

Adoption at State level at significant

scale

Intermediate Result two: At least 20 PPP financed and launched

Number of

PPPs 0 2 5 10 15 20 Yearly

Annual Progress Report

NMMU Innovation and Partner

Unit

PPP for viability gap funding

Intermediate Result (Component 4): Establishment of effective project management unit at the national level and establishment of key systems for coordination and management

Intermediate Result One: NMMU receives satisfactory management scorecard from at least 70% of participating NRLM States on a regular basis (covers procurement, decision making, FM, M&E / ICT support, grievance handling, etc, but not TA – which is component 2 indicator)

Percentage of

participating States.

n/a 50% 60% 70% 70% 70% Yearly Satisfaction

Survey based on scorecard

SMMUs and SRLMs

Participating States: NRLP States and

States implementing NRLM with NMMU

support

Intermediate Result Two: Policies and procedures developed from NRLP experiences implemented in ten other NRLM States

Number of non-NRLP

States 0 0 1 3 6 10 Yearly

Annual Progress Report

NMMU

Minimum set of policies and

procedures will be defined

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Annex 2: Detailed Project Description INDIA: National Rural Livelihoods Project

Project Design 1. The Government of India has restructured its flagship program for poverty reduction Swarnajayanti Gram Swarozgar Yojana (SGSY), as National Rural Livelihood Mission (NRLM) drawing lessons from large scale poverty reduction initiatives in the country particularly the state level WB supported rural livelihood projects. The lessons include investment in mobilization of the rural poor households forming them into self help groups, producer groups, etc. and creating their aggregate institutions which serve as ‘institutional platforms of the poor’ to systematically pursue goals of social inclusion of vulnerable and marginalized groups, financial inclusion and their access to formal markets. This inclusive approach enabled poor to access public services and entitlements through improved targeting and information, innovative ICT applications, franchise mechanisms and other community enterprise models. Professionally managed dedicated implementation structures together with leaders and resource persons from communities played key role in scaling up program impacts under these initiatives. Transition from SGSY to NRLM Government of India introduced the Swarnjayanti Gram Swarozgar Yojana (SGSY) program in April 1999, with the objective of bringing poor families out of poverty by providing productive assets that generate sustainable income. The basic financial instrument in the program was a government subsidy (grant), linked to bank credit using the institutional mechanism of Self Help Groups. An overview of program implementation showed mixed results. About 25 million poor households have been organized into SHGs but only 22 percent of the groups were able to access bank credit. This also brought into focus important shortcomings like vast regional variations in mobilization of rural poor and quality of the SHGs and insufficient capacity building of beneficiaries resulted in lack of building necessary absorption capacity among rural poor. Furthermore, several states have not been able to fully utilize the funds received under SGSY indicating a lack of appropriate delivery systems. Based on the recommendations of the ‘Committee on credit related issues under SGSY’, Government decided to restructure SGSY and implement the program in mission mode under National Rural Livelihoods Mission largely drawing upon the successes of Bank supported large scale livelihood initiatives in Andhra Pradesh, Tamil Nadu and Madhya Pradesh. Significant transformational changes that were brought in SGSY are discussed below: Program related: The single point focus of the program on income generation activity and one-off assetization in productive assets under SGSY is considerably expanded to address multiple dimensions of poverty including assets, skills, incomes, consumption and risks (including food and health risks). Convergence with other poverty reduction programs, social security schemes and safety nets are particularly encouraged. Secondly, platform of aggregate institutions is brought into the program design in the form of SHG federations and producer collectives that will allow poor accessing higher order support services in the last mile particularly for risk management, productivity enhancement and systematic participation in value chains and formal markets. Implementation related: District Rural Development Agency (DRDAs) were mandated to anchor SGSY implementation with very limited role for state governments. DRDAs are overburdened with implementation of multiplicity of other government schemes with limited staff resources that often lack skills to nurture institutions of the poor. NRLM envisages lead role for the state governments in developing poverty reduction strategies and creating professionally competent State Rural Livelihood Missions (SRLM) as dedicated support organizations with reach up to community level, to nurture and support community institutions in a process intensive manner. Recognizing the need for multi-stakeholder engagement positioning itself as and has built collaborative arrangements with innovators, social entrepreneurs, civil society, public and private sectors in the program design. NRLM will also invest in high quality technical assistance architecture to support SRLMs and partner agencies. Policy related: Moving away centrally determined from entitlement based fund allocations made on year on year basis, NRLM subscribes to program based financing of perspective plans for poverty reduction plans prepared by the states. This is effectively complemented by emphasis on evidence based policy impact analysis rather than expenditure focused scheme management.

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2. The proposed project is therefore designed to create enabling environment and develop institutional capacities of the center and the states that will allow NRLM to produce significantly higher outcomes. This is sought to be achieved by creating ‘professionally competent and dedicated implementation structures’ at all levels and transform MoRD as provider of ‘high quality technical assistance and hand-holding support’ to the States for effective implementation of poverty reduction programs. The proposed project will also help NRLM establish ‘national system for monitoring and learning’ and make ‘targeted livelihood investments’ that will provide “proof of concept” to the states joining the project and support ‘innovation forums’ that will bring together innovators, social entrepreneurs, public and private sectors to engage with institutional platforms of the poor.

Project Area and Scope

3. There are 28 states and 7 union territories in India. The project will be implemented in 12 high poverty states accounting of 85 percent of the poor in the country. Out of these, intensive livelihood investments will be made in 100 districts and 400 blocks. The broad criteria for the selection of districts and blocks for intensive livelihood investment support include (i) high poverty incidence, (ii) representation to different socio-economic regions of the state; (iii) status of social mobilization of vulnerable and marginalized communities; (iv) areas affected by internal conflict; and (iv) availability of social capital generated by successful livelihood programs in the nearby areas. However, the proposed project will not be implemented in the same blocks as the ongoing WB-financed state livelihood projects to ensure that there is no risk in duplication of financing. The distribution of the districts and blocks will be identified by the states in consultation with MoRD and presented in their respective plans.

Particulars Number

National unit 1

States covered 12

Districts covered 100

Blocks covered 400

Number of poor HH mobilized (million) 4.8

Number of poor covered (million) 24

Project Phasing

4. In the first year of the project, the project will strengthen the professional team at NMMU and build its capacities for providing high quality technical support to all States. During this time, it will also institutionalize mechanisms and standard operating procedures for appraisal and approval of state plans and establish nationwide system of monitoring and learning, financial management and procurement management. 5. The phasing of the project at the state level is largely contingent on the readiness of the states viewed in terms of having in place professionally managed implementation structures and formulating high quality state perspective and implementation plan (SPIP). About five of these

26

states have developed this capacity as they are implementing the large scale state level livelihood programs. The project will help them to align with the NRLM and expand their coverage to new areas. In the remaining seven new states, NMMU will extend technical assistance in the first year to help them develop and implement Initial Action Plan (IAP) which will enable them to (i) set up State Rural Livelihood Missions (SRLM) and fully staffed State Mission Management Units (SMMU), (ii) undertake poverty diagnostics and launch field pilots, and (iii) formulate of state perspective and implementation plans (SPIP) for poverty reduction.

6. It is anticipated that all the seven states that have received technical assistance and have launched field pilots in the first year will roll out the project activities from second year onwards. The year-wise phasing and coverage of the districts and blocks is given below:

Particulars Year 1 Year 2 Year 3 Year 4 Year 5 States Covered 7 12 12 12 12 Districts Covered 45 80 100 100 100 Blocks Covered 180 320 400 400 400

Project Approach 7. The NRLM will be pivot of all poverty reduction efforts in the country. The mission will have ‘strong results orientation’ and in a significant departure from conventional program management it has proposed the following:

a) Providing high quality technical assistance to the states to enhance their program implementation capacities to reach mission goals in an effective manner

b) Shifting from entitlement and allocation based strategies to a demand driven strategy that enables the states to determine poverty reduction priorities and formulate own plans

c) Bringing time perspective in program planning with focus on targets, outcomes and time bound results achievement as opposed to the current year on year planning effort driven by expenditure targets

d) Continuous capacity building, imparting requisite skills and creating linkages with livelihoods opportunities for the poor, including those emerging in the organized sector,

Initial TA

•Exposure visits to best practices

•Diagnostics, HR and Basic FM and Procurement

•Outcome: Support structure with strategic staffing and IAP

Piloting

•Pilots in Social mobilization, financial inclusion, livelihoods

•Staffing of SMMU, FM, PM, MIS and ESMF systems in place

•Outcome: Learning from Pilots and SPIP

Roll Out

•Staffing at all levels, training and capacity building architecture

•Livelihoods promotion, partnerships and innovation promotion

•Outcome: Scaling up NRLM in all intensive blocks

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e) Introducing innovations and incubating alternate models for program delivery in the last mile

f) Creating knowledge and learning platforms that bring together good practices and facilitate cross learning

8. In order for the states to access funds under NRLM, they have to comply with the following three conditions:

a) Set up dedicated program implementation structure in the form of SRLM; b) Trained professionals to manage and implement NRLM activities are in place; and c) State has prepared poverty reduction plan reflecting the local context.

9. The NRLP will prime the transformational process of MORD and strengthen the NRLM and SRLMs to suitably adapt best practices for achieving significantly higher outcomes. The project will create institutional structures that will be managed by multi-disciplinary teams of professionals backed by strategic outsourced professional service firms and resource agencies. These agencies will help set up national systems for ICT enabled MIS and service delivery; monitoring and evaluation; financial management and audit; and procurement management. NMMU will also facilitate partnerships with public, private and social enterprise sectors to delivery of program related services in the last mile. This strategic outsourcing and partnership strategies will also help NRLP to deliver high quality TA to states taking advantage of advancements in knowledge, technologies and management practices in the outside environment. Finally the proposed project will also provide TA to partner agencies to create a large pool of service providers, particularly at the community level to ensure continuity and sustainability of service delivery in the last mile. 10. The resources from NRLP to the states will be transferred in a demand driven manner following an agreed protocol described in the PIP. The states carry out a diagnostic study of the poverty situation in the state that include geographical distribution of poverty, special groups of the poor and vulnerable, situation analysis of the poor in terms of social, financial, and economic exclusion, etc. Based on the diagnostics, each state will prepare their own multi-year State Perspective and Implementation Plan (SPIP) detailing the strategies and activities, implementation arrangements, phasing and roll-out plans, sources and uses of the funds for achieving specific poverty reduction goals.

11. The proposed project will also invest intensively in the high priority states to create best practice sites to develop them as local immersion locations and generate critical pool of social capital for catalyzing social mobilization of the poor and building quality institutions of the poor. While the tactics will vary with the location and the community needs, the intensive blocks will follow a certain sequence in which the project activities will be rolled out. The sequence will includes the following:

a) social inclusion through participatory identification of the poor and universal social

mobilization; b) building institutional platforms of the poor in the form of SHG federations, producer

collectives, etc.;

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c) developing social capital in the form of trained community leaders, community resources persons and para-professionals providing livelihood services to the poor;

d) micro-planning and investments for livelihoods enhancement; (v) access to credit from formal financial institutions available in desired amounts and convenient repayment terms;

e) convergence with other entitlements and programs such as MGNREGS, pensions, etc.; and

f) building sustainable livelihoods options for the poor by developing activity/trade clusters supporting farm and non-farm enterprises focused on productivity improvement and market access.

12. Upon submission of IAP/SPIP by the state mission, the NMMU will assess the readiness of the state mission and a joint appraisal mission will be undertaken by a team of experts drawn from NMMU, the World Bank, other donors (if any), CSOs and practitioners from other state missions. The mission will undertake field visits, participatory assessments, discussions with key officials, and state level multi-stakeholder workshops and would use the appraisal criteria described in the PIP.

Plan Readiness Filter Broad Criteria for Appraisal Initial Action Plan (The states without dedicated implementation structures will prepare a one year plan for incubating SRLM, program pilots and preparation of SPIP. The IAP will be backed by TA from NMMU)

1. Action for setting up SLRM initiated 2. Action initiated for appointment of CEO 3. Separate bank account opened in the name of SLRM 4. Rapid poverty diagnostics undertaken

1. Results 2. Program strategies - pilots 3. Timelines 4. Implementation capacity 5. (Strategic staffing) 6. Partnership arrangements 7. Administrative and fiduciary arrangements 8. Cost effectiveness

State Perspective and Implementation Plan (The states that have set up dedicated implementation structures)

1. CEO appointed 2. Fully inducted state team 3. Operational manual 4. HR Policy and manual 5. Administrative & financial rules 6. Partnerships identified 7. The state has an Environmental Management Coordinator and a Social Coordinator as part of the core team. 8. Environmental Action Plan is developed in the SPIP through the process described in the EMF. 9. Social Inclusion Plan is developed in the SPIP through the process described in the SMF.

1. Results 2. Program strategies and implementation cycle 3. Phasing 4. Implementation capacity (Structures, Staff, Systems & Partners) 5. Safeguards compliance 6. Administrative and fiduciary arrangements 7. Cost effectiveness

13. The revised SPIP/IAP would be reviewed by NMMU and place for approval before an Empowered Committee constituted by the MoRD. Upon approval, NMMU would enter into MoU with the state mission for supporting the multi-year SPIP with technical and financial resources and fund one year operation plan. For the subsequent years, the Annual Action Plans will be reviewed in the context of SPIP and the feedback provided by half yearly reviews,

29

supervision/implementation support missions, concurrent evaluation studies, and performance criteria laid down from time to time.

14. In the states which have implemented state wide livelihood programs over long periods and have achieved higher level of social mobilization and financial inclusion, the NRLP will focus on supporting innovative and special programs aiming for higher order impacts in areas such as health, nutrition, education, etc. Project Development Objective 15. The development objective of the proposed project is to establish efficient and effective institutional platforms of the rural poor that enables them to increase household income through livelihood enhancements and improved access to financial and selected public services. Project Components 16. Component 1: Institution and Human Capacity Development ($61.3 million): The objective of this component is to transform the role of MoRD into a provider of high quality technical assistance in the field of livelihoods promotion and to create a national pool of livelihood professionals to support implementation of rural development programs, particularly NRLP. The component consists of the following sub-components. 17. Technical Assistance: The objective of this sub-component is to provide timely and good quality technical assistance to all states in the country for rolling-out and implementing the broader NRLM. This will be achieved by establishing a team of high quality professionals and institutionalizing partnerships with resource agencies, professional service firms, public and private sectors considering their domain expertise, to create specialized architecture for providing technical assistance to the States and partner agencies in various thematic areas such as human resource management, rural livelihoods, environment management, financial inclusion, new product development (ie. health, education, savings, etc.) and fiduciary management. There

Setting up NMMU

Professional staff,  national systems for MIS,  

FM, PM, KM

TA to States

Situational analysis, pilots, setting up SRLM

Setting up SMMU

Professional staff, business processes and 

staff trainings

State Plan

Diagnostics, strategies, results, phasing,  costs and arrangements

Appraisal

Readiness filters, desk review, joint missions, 

agreed results

MoU with States

Plan approval, commitment to 

resources and results

Implementation

PIP, social mobilization, trainings, micro 

planning, livelihood investments

Partnerships 

CSOs, innovators, social enterprises, public, private sectors

Supervision

Monitoring, reviews of results, joint supervision, inputs to annual plans

30

will be Resident Representative in each of the project supported states. Task and theme based teams called Spear Head Teams (SHTs) will be created to meet specific TA need of the state. These mobile teams will be made out of a pool of resource persons drawn from NMMU, SMMU, CSOs, resource agencies, consultants, etc. hired on retainer basis and made available to a state or a group of states. These arrangements will provide continuous and year-round support to the states in effective implementation of NRLM and other related activities. 18. In the initial phase of implementation, dedicated technical assistance to states will be provided to facilitate their compliance with NRLM framework. This will include support for setting-up SRLM with multi-stakeholder governance mechanism, staffing with good quality livelihood and program management professionals and developing efficient institutional systems like HR, MIS, financial management, procurement, environment, etc. TA will also be provided to the states to undertake comprehensive situational analysis to capture various dimensions of human and economic poverty and identify forms of social, financial and economic exclusion of the poor. This will help states to prioritize interventions and resources while formulating the SPIPs. Specific TA products in each of programmatic themes will offered to provide implementation support to the states for achieving NRLP outcomes.

19. Human Resource Development: The objective of this sub-component is to create a large pool of good quality professionals that is available for implementation of NRLM in all states in the country. It will support development of partnerships with well established training and research institutions in the field of rural development and livelihoods promotion throughout India that can deliver focused training programs for successful implementation of the NRLM. National level partnerships will be made with reputed universities, rural management institutes and specialized training institutions for offering professional courses for aspiring and serving livelihood managers, including through technology mediated (e-learning) and distance education options.

20. This sub-component will support systematic building of capacities and managerial skills of the NRLM staff through accredited training programs developed and rolled-out in partnership with national and regional institutes. For this a repertoire of case studies and innovation briefs will be developed covering various livelihood initiatives across the country. This would include a customized Management Development Program (MDP) and Training of Trainers (ToT) in specific thematic areas for NRLM staff at all level. NRLM will undertake regular immersion and exposure programs at best practice locations across India for staff of SRLMs.

21. A consortium of training institutions and resource agencies will be engaged for developing high quality training materials and practitioner tool kits for social inclusion, institution building, financial inclusion, and livelihoods that are made available to states after suitable customization. National level centers of excellence and resource centers will be developed as knowledge and training hubs on specific themes like social mobilization, financial inclusion, farm based livelihoods, etc. The feasibility of establishment of a National Center for Rural Livelihoods will also be explored.

22. The key outcome of this component will be delivery of good quality TA to the states for implementation of NRLM that leads to improved planning and implementation of NRLP in the

31

participating States and establishment of the pool of professionals for implementation of NRLP across the country. 23. Component 2: State Livelihood Support ($793.7 million): The objective of this component is to support state governments in the establishment of the necessary institutional architecture for the implementation of NRLM activities from the state to the block level, including support to the formation of institutions of the poor. To achieve the objective of this component, the proposed project intends to support the following activities:

24. State Rural Livelihood Missions: This objective of this sub-component is to assist identified states to set-up autonomous and professionally managed missions for implementation of the NRLM comprising multi-disciplinary team of trained livelihood professionals with expertise in diverse themes like social mobilization, institution building, capacity building, microfinance, banking, farm and non-farm livelihoods, market-linked jobs, food security, health and nutrition, etc. will be created at the State and the district levels. In addition, the SRLM would establish implementing entities at the district levels to facilitate field implementation of NRLM financed activities. It will also facilitate promotion of state and regional/district level (within the state) resource centers as training hubs for NRLP with community learning academies as spokes for capacity building of project staff, community leaders and community professionals. This sub-component will also develop cadre of professional trainers, master trainers and community resource persons. The project will strengthen the institutional capacities of State Institutes of Rural Development for supporting the training needs of government staff, bankers and Panchayat Raj functionaries. 25. Institution and Capacity Building: The objective of this sub-component will be implemented in identified districts/blocks and make ‘targeted livelihood investments’ that will provide “proof of concept” for the states joining the project and develop them as “demonstration sites” and “immersion locations” by creating good quality community institutions and social capital for expansion of NRLM in other blocks/areas. This sub-component will support identification, selection, and mobilization of poor rural households into self-managed institutions, such as Self Help Groups (SHGs) and their federations. This would also include providing capacity building and training activities for SHG members and federations in group management, e-bookkeeping, financial literacy, livelihood activities, and business education, among others. Community managed service provisioning in the last mile like credit counselors, case managers at Primary Health Centers (PHCs), etc. will also be supported. Teams of livelihood professionals trained in participatory methodologies and community facilitation will be set up at the block/sub-block level. Description of activities under this component and the sequence in which they will be undertaken are elaborated in the PIP. 26. Community Investment Support: The objective of this sub-component is to provide livelihood grants to the institutions of the poor to enable them to undertake productive livelihood enhancing initiatives including setting up of nano and micro enterprises. The SHGs will receive livelihood investment support when they reach a certain level of maturity, as measured by pre-defined milestones in the SPIP. The livelihood grants to SHGs will only be provided in the initial formation phase that goes to strengthen their institutional capacity and financial management systems. Thereafter they will utilize these funds alongside their savings and other sources of

32

financing, including from formal financial institutions, to scale-up their livelihood activities. It is estimated that approximately 480,000 SHGs would be supported under the proposed NRLP with each SHG receiving a total livelihood grant of approximately Rs. 36,000 (roughly US$600 per SHG or US$60 per SHG member household over the 5 year project period). The livelihood grants will also be provided to farmers’ collective/producer groups/producer companies to improve market access and link to mainstream agri-business companies.

27. The livelihood grants are envisaged to be a further incentive and investment to the SHGs/federations for the purposes of them undertaking productive livelihood activities (as specified in their livelihood plans), coupled with the funds they collect from their own saving and proceeds from the inter-loaning within the group using market-based interest rates. The specific use (ie. agriculture, dairy production, sewing machine, etc) of this livelihood grant, and the group’s savings, will be demand driven by its members. The institutional building and resource transfer arrangements to SHGs/federations require that they have governance norms on rotational leadership, performance-based grading, social audits, and require formal audits (further details in the Governance and Accountability Framework in Annex 10).

28. For the purposes of institutional sustainability, the experience gained by the SHGs, and documented in their bookkeeping records of livelihood activities and inter-loaning, SHGs and their federations will be better positioned to access credit from financial institutions given the proof of their capacity to manage funds and implement productive livelihood activities. The livelihood grants and their savings will enable SHGs to leverage funds from the banking system and/or other government sources to scale-up the different livelihood activities that each member is undertaking.

33

29. The project will support linkages with service providers and market institutions in key pro-poor value chains. Once the “proof-of-concept” is established, the community institutions will leverage mainstream funds from formal financial institutions and schemes like Rashtriya Krishi Vikas Yojana (RKVY), National Food Security Mission (NFSM), National Skill Development Corporation (NSDC), etc.

30. The project will also invest in community managed food security and health risk funds for mitigating food and health shocks of the poorest households. The SHGs/federations will be facilitated access to entitlement programs like Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), old age and disability pensions, social insurance, health insurance, etc. Small grants will also be provided, on limited basis, to destitute, old, infirm and disabled for emergency food and health purchase to help them graduate out of extreme poverty.

31. Special Programs: The objective of this sub-component is to support pilot activities that have potential for scaling-up and replication such as last mile delivery of public services, implementing activities in areas affected by internal conflict in partnership with civil society organizations, value-chain development, using new technologies for financial inclusion, among others. The project will explore opportunities to work with MFIs to develop partnerships and products which enable MFIs to work more with SHG Federations and expand their outreach. This could be taken up in selected high poverty states such as Bihar where new ways by which MFIs could work with SHG Federations will be demonstrated. The livelihood grants will be used to address higher order livelihood and human development issues like MDGs related to food security, health, malnutrition and education. The project will also finance the cost of pilots including capacity building expenditures, setting up health and nutrition centers and early child education centers by institutions of the poor. This component will also incubate institutional innovations by helping states set up special purpose vehicles like foundation, societies, etc to consolidate scaled-up livelihood programs like sustainable agriculture; community managed dairy; market-linked jobs and placement; etc. These institutional forms will have flexibility to

34

develop range of partnerships and leverage resources from public and private sources. Activities under special programs will cover all States, including those States that are not directly participating in the NRLP. 32. The key outcome of this component is demonstrating project benefits at significant scale that will have significant bearing on full scale implementation of the NRLM using Government’s own resources. This component, when implemented in a sequenced strategy, will ensure that the all key outcome indicators of the project related to the identified poor households like improved and diversified livelihoods opportunities for participating households and improved food and nutrition security are achieved.

33. Component 3: Innovation and Partnership ($45 million): The objective of this component is to create an institutional mechanism to identify, nurture and support innovative ideas from across the country to address the livelihood needs of the rural poor; promote social entrepreneurs and social enterprises which have potential for replication and scaling up; and implement scaled up access to services and markets in key livelihood sectors such as financial services, agriculture, dairying, fisheries, and the nonfarm sector through public- private –people partnerships benefitting the rural poor.

34. Innovation Forums and Action Pilots: This subcomponent will support selected innovations identified through development marketplace-type forums that have the potential to be scaled-up in a viable manner in partnership with development foundations. The Innovation Forums organized under the project will also create a platform for bringing together the innovators, civil society organizations, the business sector, the government, development agencies and academia for improving livelihood opportunities to the poor. Action pilots to test innovative ideas identified at the forum will be financed through a transparent award system. 35. Social Entrepreneurship Development: This subcomponent will support the following activities a) invest in developing a network of grassroots innovators and social entrepreneurs identified through a competitive process15 including developing a dedicated website; b) provide

15 Along the lines developed by Foundations like the Ashoka, Schwab and Jubilant Bhartia

35

start-up funds for Social Entrepreneurs/Social Enterprises with scalable & replicable models in pre-identified areas, primarily those that addresses service delivery challenges and livelihood needs of the rural poor. The funding will be limited to scaling up business models that, which has already been tried in other locations, in the chosen NRLM districts and states; c) mentoring social entrepreneurs by linking them to their role models/ mentors; d) Capacity building of social entrepreneurs on setting up systems & processes for better governance, transparency and accounting/ book-keeping.

36. Public, Private and Community Partnership: This subcomponent will develop a framework for scaled up Partnership Development with private sector, public corporations, and civil society institutions in the areas of scaling up financial inclusion including new product development, value chain and technology extension in areas such as agribusiness, dairying, fisheries and other sectors where the poor are employed. The sub-component will finance the following activities – a) develop PPCP Guidelines to assist National and State level units to implement PPCP; and b) provide financial assistance to partners identified through a competitive process.

37. The outcome of this component will result in continuous integration of innovations from different fields into the NRLM for the benefit of the poor in large numbers. It will focus on co-opting private sector by providing incentives and encouraging it to invest in the poor and also leverage their strengths in developing viable business models at scaled up levels. 38. Process and procedures for identification, and partnering with NGOs and Social Entrepreneurs under this component will follow the Innovation and Partnership Development Guidelines agreed with the Project. 39. Component 4: Project Implementation Support ($100 million): The objective of component is to establish an effective project management unit at the national level that develops key systems and processes for coordination and management of the proposed project and the NRLM. Given that the NRLP, and more importantly the NRLM, will be implemented across India, there are substantial managerial requirements which are critical to ensure the satisfactory implementation of both the NRLP and NRLM. In this regard, a dedicated National Mission Management Unit (NMMU) has been established under the MoRD. To achieve the objective of this component, the proposed project intends to support the following activities:

40. National Mission Management Unit (NMMU): A National Mission Management Unit (NMMU) established at the national level within the MoRD will be strengthened. The NMMU will provide leadership to the whole program implementation and creating a facilitating environment for the performance of state level rural livelihoods mission. An appropriate governance and coordination structure to supervise and support this unit has been established as part of an integrated governance structure. This will include an Advisory Committee with a multi-stakeholder group as a policy making body, and a Coordination Committee to oversee implementation. The main role NMMU will be to establish and oversee structures and processes for: (i) Policy Formulation, (ii) Project/Operations and Financial Management, (iii) Planning and Appraisal, (iv) Knowledge Management and Communication, (v) Capacity Building and Training, (vi) Monitoring, Learning, Evaluation and Information Management, and most

36

important (vii) Technical Assistance (TA) to States in rolling out the program. Annex 3 on implementation arrangements describes these roles and support structures to be established in detail. 41. Monitoring and Evaluation System: Given the geographic scale and magnitude of the resources and activities to be supported by the NRLP/NRLM, the objective of the subcomponent is to set up a very comprehensive and robust monitoring and evaluation system to not only track implementation progress but also to provide meaningful reports on household level impacts and implementation experiences so as to enable MoRD and state governments to take corrective actions, if necessary.

42. Social Observatory - The Monitoring, Learning and Evaluation System under NRLM will serve more as a social observatory, incorporating various monitoring and evaluation tools to measure change (both economic and non economic), assess the effectiveness of the project, and pinpoint design and implementation challenges concurrently. This will re-enforce the culture of result-based management and evidence based decision-making, of both strategic and operational nature, at all levels including community institutions. In such a system, there will be more emphasis on intermediate outputs along with learning rather than limiting the focus on input level tasks and activities. A two-way flow of M&E information will be facilitated between the program’s MIS and web-based systems for knowledge management (sub-component 4.5). This would further facilitate the project management in taking appropriate and timely decisions, and to assess the output, outcome and impact of the project as mentioned in the result framework of the project (Annex 1). The Social Observatory takes ethics, and in particular the principles of "informed consent" and "do no harm," very seriously. Any participation by respondents in surveys, field experiments, and qualitative interviews will be conditional on them being given full information on the nature and purpose of the interview or experiment, followed by obtaining their consent to participate in the interview or experiment. Moreover, survey instruments and experimental design will be reviewed by an advisory committee of scholars and activists who will be able to flag any ethical (and substantive) concerns that may arise, before they are implemented. Additionally, the open-data architecture of the Social Observatory will facilitate complete transparency which should create an effective enabling environment for ethical practice. 43. Monitoring - This would include regular reporting on inputs and outputs on several levels drawing on a range of information sources, primarily the MIS (see subcomponent on e-NRLMS), but also process monitoring and financial management systems. The web and computer based MIS will track members of different community institutions and their outcomes on a monthly basis, covering such data as membership, saving and credit history; number of meetings held; sources of income etc, but also key project data related to staff and partners capacity building, inputs and outputs, for example.

44. Process Monitoring and Qualitative Tracking systems by accredited agencies will be promoted at State level to track TA and project implementation (quality, failures, successes and challenges) and key changes taking place in participation, inclusion, and service relationships under the Project. The NMMU Social Observatory unit will assist in coordinating quality control

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of these and integrating findings at the policy level. For the first year, process monitoring will be done semi-annually to assess progress of TA and Project.

45. The central objective of a self-monitoring system is to bring the primary stakeholders at the forefront. Participatory self-monitoring by community institutions themselves would therefore be a key pillar of the monitoring framework. Under this, community institutions will use pictorial tools to assess their own organizational capacity development as well as progress towards sustainable livelihoods. The findings of these collective assessments will feed into the capacity building program of these institutions. In addition other participatory methods like users satisfaction rating, citizen report card, community scorecards etc. would be carried out on an annual basis (for the first year) and then on a semi-annual basis thereafter to incorporate the community’s perspective in the whole project management decision making. 46. Finally, at each level of the implementation structure, regular monthly meetings will be held to review the project progress, deal with any emerging operational bottlenecks and any other strategic issues. Learning forums will also be organized on an annual basis followed by preparation of detailed annual plan and budgets, and accordingly progress will be tracked on a quarterly basis. 47. Impact evaluation - The NRLP evaluation will be initiated with poverty diagnostics using secondary data which will help the Project assess the situation on the ground (district-wise in all states) and accordingly design activities. Simultaneously, a first ever baseline Rural Livelihoods Survey will be commissioned. Subsequent evaluations (mid-term and end-term) will be based on randomized rollouts, at least in the initial five years of the project when it will be more likely to locate valid control groups. Once the project expands to cover all feasible controls, then the evaluation design will be revisited keeping the need for valid controls in mind. In addition, the Project will examine the possibility of adding some modules of the core questionnaire to national level surveys such as the NSS so that the impact of the project is tracked in secondary data sources as well. 48. Besides periodic evaluations (baseline, mid-term and end-term), the core questionnaire will be administered to a sub-sample of households that will be tracked at least every two years. Such a household progress tracking system would help create a panel to assess, longitudinally, how beneficiary households and individuals interact with project interventions and how they benefit and progress economically and socially from the project over time. The project will also undertake randomized trials to assess (on a pilot basis) the impact of specific innovations and interventions beyond the core SHG intervention (i.e. intensive cultivation, health insurance, nutrition programs, etc). Artefactual experiments will be used to test specific ideas for interventions on a scientific basis, albeit on a small scale and using inexpensive methods. 49. Finally, small subsamples of communities will be tracked for in-depth qualitative data collection and analysis with high-frequency visits by trained qualitative field investigators. Tools such as open ended FGDs will be used to assess the integrated impact that the project has had overall on jobs in the village, the average rate of interest charged and softer indicators such as women’s empowerment as measured by their physical mobility. Such qualitative exploration will be done in particular to understand changes in marginal, excluded and vulnerable

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communities that may have particularly acute differences from the average (e.g. tribal pockets, coastal communities etc). 50. Electronic National Rural Livelihoods Management System and ICT: The objective of this sub-component is to design, develop and roll out e Governance platform for NRLM, viz electronic National Rural Livelihoods Management System (e-NRLMS) using state of the art IT platform for hosting and delivering variety of project services like management information system (MIS), decision support systems (DSS), financial management system (FMS), etc. This system connecting village to the national level will be Aadhar (UID) compliant and will be leveraged to deliver ICT based services to rural poor households in the last mile. 51. The NRLM will invest in a fully computerized MIS system coupled with large scale deployment of hand held (including tablets,, mobiles, etc.) devices and applications for ensuring transaction based data capture at the source where it is generated for maximum transparency and accuracy. This is expected to reduce the time and resources needed for data collection transportation and feeding directly into informed decision making processes at different levels, thus leading to greater organizational effectiveness. The core software applications will be developed at the national level. Technical assistance in the form of technology advisory, trainings and capacity building, off-site and on-site support services through call centers will be provided to the states for implementing and rolling out of e-NRLMS. Hardware investments will be made to ensure that this system functions effectively at various levels, including through mobile technology for simpler, faster and more reliable recording of transactions at the community level. The whole IT architecture will be developed following a modular approach and will have the flexibility to be adapted and added on to serve the specific requirements of different states. The plug and play functionality built into the architecture will allow the use of a range of front-end devices and technologies. 52. The project will also tie-up with public and private sector firms to facilitate delivery of different services, particularly mobile based services, at the community level. For example PDS, access to health, education, insurance, remittances, pensions and other entitlements, access to agricultural inputs, and price and market information. The strategies and approaches to ICT initiatives and the detailed roll out plan of e-NRLMS are elaborated in the PIP. 53. Governance and Accountability Framework: Looking at the size and scale of the NRLP, a comprehensive, though simple, result oriented and standardized, governance and accountability (GAC) system is extremely critical for program success. The NRLP’s GAC system is meant to be risk informed and results oriented so that it can serve as a management tool, rather than seen as a ‘compliance’ or ‘checklist’ type activity. 54. Given the federated implementation structure of the NRLP, the GAC system has involved development of an overall ‘GAC framework’ and then separate GAC Action Plans (GAAPs) have been established at the national level and participating states are in the process of developing state plans as part of their project implementation plans.16 GAAP for national level

16 This is similar to the approach used in safeguards where an environmental and social management framework (ESMF) is prepared when actual investments are unknown. Environmental/social action plans for specific investments are developed based on the ESMF. Similarly, the GAC framework would provide the overall ‘menu’ and approach to identify risks and GAC mechanisms to deploy in different states, while the

39

has been included in the Project Implementation plan and has been reviewed. The GAC Framework is set up to respond to the key GAC risks and vulnerabilities faced at the three levels of implementation structure i.e. national, state and community institution level. The different GAC mechanisms would focus on three aspects; (a) prevention (e.g. business processes, disclosure mechanisms, HR systems, and capacity building/participatory processes), (b) detection (e.g. monitoring, grievance redress), and (c) response (e.g. sanctions policies and performance based incentives). Four distinct set of actors – NRLM national team, SRLM teams, community organizations, and civil society actors will be engaged in different types of GAC instruments. While the overall responsibility for governance and accountability lies with the senior management and governance committees of the institutions, a GAC focal person would be appointed at each level of implementation structure to look after the GAC mechanism. 55. The capacity building of project staff and community professionals around GAC mechanisms would be an integral part of the project roll out. Training modules on GAC will be included in the core curriculum for staff orientation and their induction program. GAC indicators and information will also be included in the M&E and MIS systems. 56. A range of GAC innovations have also been included in the NRLP design and GAAP. This include – setting up of a “Sevottam” charter of service standards (including for grievance handling, disclosure and monitoring); an annual user report card on project governance and performance; an institutionalized social audit system linked to the MIS; a GAC window in the Innovations Fair; annual GAC awards; and pilot programs for e-bookkeeping and e-procurement as well as use of media tools (e.g. talk back shows) for complaints handling. The GAC measures in the project will be reviewed annually and the GAAPs will be updated accordingly. 57. Knowledge Management and Communication: Incorporating lessons from experience and communicating consistent and significant messages at both a policy and operational level, is critical for the overall success of the NRLP/NRLM. In this regard, the project will invest in a variety of products and services to enhance the generation and use of knowledge and communications as a key tool for enhancing the quality of the program. 58. The project will invest in a variety of products and services to enhance the generation and use of knowledge and communications tools for enhancing the quality of the program. This will include a state of art website and user targeted program briefing and guidance material as the basic hub for program information. Community radio programs, TV programs in vernacular channels, films and other material will be used for engaging community audiences. Further, there will be an investment in proactive dissemination and feedback mechanisms on information and knowledge products internally. This will be to assist the professionals and community members working in the program to build a proactive community of practice. For this practitioners will be supported by a web-based solution exchange program, regular forums for exchange of learning, and participatory development of learning material, drawing often on a broad range of M&E findings (see above), but also external experiences. This support will be mutually supportive to the NRLP’s capacity building activities. For strategic communication to external audiences, policy notes and policy fora will be conducted, again drawing on a range of project evaluation

individual state GAAPs would lay out the actual GAC measures being deployed and the actions, timelines, and responsibilities for their implementation.

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and other M&E findings. For creating supportive awareness in broader audiences a regular awareness survey will be conducted, films on NRLM will be prepared and aired in TV channels, backed up by a clear program branding. A knowledge management and communication unit at the national level will assist States in linking and setting up similar units.

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Annex 3: Implementation Arrangements INDIA: National Rural Livelihoods Project

Institutional Arrangements 1. Transforming role of MoRD. The primary focus of the institutional arrangement for the NRLP will be to prime the transformational process of MoRD and strengthen the NRLM governance and management structure to suitably adapt best practices for achieving significantly higher outcomes. There is a radical role transformation of the Ministry of Rural Development, GoI from just an allocation, disbursement, and monitoring of GoI resources body to one providing quality technical assistance to the states for implementing NRLM. The role transformation of the MoRD is shown in the Table below.

Role of MoRD under SGSY Role of MoRD under NRLM Expenditure focused scheme management reduced the role of MoRD to that of fund allocation agency and monitoring of disbursements

Results focused mission management with particular emphasis on enhancing institutional capacities of delivery system and building institutional platforms of the poor at the grassroots to ensure reach of all program benefits to all their members

Direct interface with district level entities on implementation strategies driven with little role for the state Governments

States will play lead role in developing poverty reduction strategies and creating a dedicated support structure upto the community levels. MoRD providing high quality technical assistance to States and other partner agencies.

Entitlement-based fund allocation made on year on year basis to the districts determined by the poverty ratio of the states

Program based financing with commitment beyond one year by subscribing to the mutually agreed results in perspective plans prepared by the States.

Program planning restricted to financial allocations under SGSY distributed thinly across the districts/blocks. Credit mobilization plans restricted to subsidy allotments for year.

Leverage model of NRLM places emphasis on convergence with other Government programs for the poor and formal financial institutions as primary source of investment.

Implementing SGSY as a scheme run only through the state system

NRLM envisages multi-stakeholder engagement particularly positioning itself as promoter and incubator for innovators, social entrepreneurs and private enterprise.

Input monitoring against physical and financial targets Evidence based monitoring and policy impact analysis 2. Mission Governance Structure: NRLM is embedded within MoRD. The program strategies formulated by NRLM envisages creation of dedicated support structure serving as backbone for delivering program benefits and pulling together all other poverty reduction efforts by Government departments, Panchayat Raj Institutions, CSOs, formal financial institutions, public and private sectors under one umbrella. This calls for autonomous and dynamic learning organizations with qualified personnel and multi-stakeholder governance structure comprising representatives from Government, banking, training and academic institutions, civil society, rural development and poverty experts and practitioners, particularly from community institutions. Accordingly MoRD has set up dedicated governance and coordination structures to supervise the mission activities and separate National Mission Management Unit with multi-disciplinary team of professionals.

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3. The governance structure of NRLM includes Advisory Committee as a policy making body, and a Coordination Committee to oversee implementation. The NRLM Empowered Committee (NRLM-EC), established at the MoRD, would review and approve the State Perspective and Implementation Plans, and Annual Action Plans for release of funds to the SRLMs. The Joint Secretary, NRLM, MoRD, as Mission Director, assisted by a Chief Operating Officer will head the main implementing entity, the NMMU, comprising a multidisciplinary team of professionals. The NMMU and other committees constituted would also be responsible for the oversight and implementation of the NRLP. Level Committees and Membership Roles and Responsibilities

NA

TIO

NA

L

NRLM Advisory Committee (NRLM-AC) Minister, Rural Development, GoI, Chairperson Ministers Secretaries Representatives of RBI, NABARD Director Generals - NIRD, CAPART etc. Representatives from State Governments Representatives from Training/Academic

Institutions Representative Corporate Sector/Industry

Associations Three Experts (RD)/NGOs Member Representative of SHGs/federations Secretary, Rural Development, Government of

India - Convener Mission Director, NRLM - Co-convener

Providing overall vision for NRLM Providing direction and setting priorities for

NRLM Policy guidance on poverty reduction and

livelihoods enhancement of the poor Review progress of activities and provide

strategic support for program implementation Advocacy

NRLM Empowered Committee (NRLM-EC) Secretary, Rural Development, GoI, Chairperson Additional Secretary & FA, MoRD Principal Secretaries, RD from States Poverty and RD Experts/Bankers Mission Director, NRLM - Convener

Approve the State Perspective and Implementation Plans

Approve the Annual Action Plans prepared by the States and review the progress of their implementation

Approve release of funds to SRLMs 4. National Mission Management Unit: The NMMU has been established in New Delhi as an effective project management unit with key systems for coordination and management. The NMMU will provide leadership to the whole program implementation and creating a facilitating environment for the performance of state level rural livelihoods mission. The main role NMMU will be to establish and oversee structures and processes for: (i) Policy Formulation, (ii) Project/Operations and Financial Management, (iii) Planning and Appraisal, (iv) Knowledge Management and Communication, (v) Capacity Building and Training, (vi) Monitoring, Learning, Evaluation and Information Management, and most important (vii) Technical Assistance (TA) to States in rolling out the program. 5. The focus of the NMMU is to provide technical assistance to the states to ensure their understanding and compliance with the NRLM and NRLP guidelines. The NMMU is comprised of a combination of staff and consultants to perform different functions such as project management, various technical specialists, M&E, planning, appraisal and monitoring of the project in participating states. The strategy is to retain a lean structure at NMMU with a defined

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number of core and support staff and engage short-term consultants on as required to provide support to states or to undertake certain specialized functions.

National Mission Management Unit (NMMU) – Implementation Structure

6. The structure at the NMMU is divided into three functional units: (i) Thematic Support Unit, (ii) Technical Assistance Unit and (iii) Program Management Unit. The organization structure and staffing of the NMMU is shown above. The Project Management Unit will look after the operational dimensions of the NRLM such as fiduciary functions of finance and procurement, administration, state funding appraisal process, monitoring and evaluation and human resource development. A key innovation in the structure is the establishment of a Technical Assistance unit that will have state level resident representatives and spearhead teams which will support states from the establishment of State level Livelihood Mission structures to program implementation at the ground level. This will reduce the risk of uneven implementation of the NRLP in weaker states. 7. Technical Assistance to States: One of the key role transformations envisaged through support under NRLP to NRLM is to provide high quality technical assistance to the States. Technical assistance will be provided by establishing a team of high quality professionals and institutionalizing partnerships with resource agencies, professional service firms, public and private sectors considering their domain expertise, to create specialized architecture for providing technical assistance to the States in various thematic areas such as human resource management, rural livelihoods, environment management, financial inclusion, and fiduciary management. There will be Resident Representative in each of the project supported states. Task and theme based teams called Spear Head Teams (SHTs) will be created to meet specific TA need of the state. These mobile teams will be made out of a pool of resource persons drawn from NMMU, SMMU, CSOs, resource agencies, consultants, etc. hired on retainer basis and made available to a state or a group of states. These arrangements will provide continuous and year-round support to the states in effective implementation of NRLM and other related activities.

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8. The project will create institutional structures managed multi-disciplinary team of professionals backed by strategic outsource to professional service firms and resource agencies. These agencies will help set up national systems for ICT enabled MIS and service delivery; monitoring and evaluation; financial management and audit; and procurement management. NMMU will also facilitate partnerships with public, private and social enterprise sectors to delivery of program related services in the last mile. This strategic outsourcing and partnership strategies will also help NRLP to deliver high quality TA to states taking advantage of advancements in knowledge, technologies and management practices in the outside environment. Finally the proposed project will also provide TA to partner agencies to create a large pool of service providers, particularly at the community level to ensure continuity and sustainability of service delivery in the last mile. 9. State Level: NRLM realizes its success is critically linked to the quality and professional competence of dedicated sensitive support structures at various levels and their staff. States will be required to create separate autonomous implementation structures as State Rural Livelihood Missions (SRLMs) with multi-stakeholder governance mechanisms. Level Committees and Membership Roles and Responsibilities

ST

AT

E

Governing Body Chief Minister or Chief Secretary –Chairperson Ministers/Secretaries of Agriculture, Panchayat

Raj, AHD, SC/ST, Industry, Labor, Education, Health, WCD, SW, Institutional Finance

Representative from MoRD, GoI Representative from Training institutes, Corporate

Sector, Academic institutions State level Representative(s) of RBI, NABARD,

Convener SLBC Three Experts (RD)/NGOs Representative of SHGs/federations Principal Secretary (RD) - Convener State Mission Director - Co-Convener

Providing overall vision for SRLM Providing direction and setting priorities for

SRLM Policy guidance on poverty reduction and

livelihoods enhancement of the poor Review progress of activities and provide

strategic support for program implementation Advocacy role to ensure pro-poor policies are

issued by the Government

Executive Committee

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Chief Secretary or Development Commissioner – Chairperson

Principal Secretary (Rural Development) - Vice-chairperson

Commissioner/Directors - Agriculture, Rural Development, Panchayat Raj, Animal Husbandry, Industry, Labor, Education, Health, Women and Child Development, Social Welfare, Tribal Welfare etc.

State level Representative(s) of NABARD/RBI/SLBC convener

Industries Associations Representative of SHGs/Federation State Mission Director (SRLM) Convener

Providing overall policy guidance and direction to the project

Approving all annual plans Approving overall Human Resource policies Providing strategic support and guidance to

program implementation Monitoring program implementation and

achievement of performance Redefining and reformulating project strategies

based on emergent experience from project implementation

Coordinating with different Government departments and agencies

Representing the project at the state government level

10. As part of learning and adapting from experiences in rural livelihoods projects currently undergoing in various states, NRLP would enter into partnership agreements and MoUs with on-going livelihoods projects supported by the Bank in the states of Andhra Pradesh, Bihar, Tamil Nadu, Orissa, Madhya Pradesh and Rajasthan. A detailed process for seeking support from any of the State projects would require approval from the national level. 11. State Mission Management Unit: The State Mission Management Unit (SMMU) of the State Rural Livelihoods Missions (SRLM), has or will be constituted by state governments for the implementation of NRLP activities. SRLM would implement the NRLM activities in the state through an SMMU, at the state level, headed by a full-time State Mission Director (SMD). The major responsibilities of the SMMU include:

a) leading all NRLM activities in the state; b) drafting policies and implementation guidelines of the mission at the state level; c) handholding support to district and sub-district implementation/support structures; d) ensuring quality implementation of different components/thematic interventions; and e) managing convergence and partnerships.

12. Apart from the SMD, multidisciplinary SMMU team would comprise of experts in Social Inclusion, Financial Inclusion, Livelihoods, Program Management (including M&E/MIS), Program Support, among others. These experts, with adequate experience in the relevant thematic area, would be drawn either from the market on contractual basis or from the government organizations on deputation basis, with specific terms of reference. 13. The exact staffing pattern(s) at various levels would be based on geography, number of blocks, population spread, implementation strategy and phasing. Each state would make plans/adjustments accordingly and would have its own HR Policy and Manual, to be revised periodically. The key elements in the HR Policy prepared for NRLM include staffing, job profiles/competencies, recruitment and selection, transparency, immersion and induction, remunerations, performance management, appraisals and incentives, grievance redressal, staff learning and capacity building, space for HR in various formats and tenures – full-time, part-time, home-based, short-term/long-term, internship, sabbatical, etc., and deployment flexibility etc.

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14. District and Block Level: Based on the above principles SRLM will set-up District Mission Management Unit (DMMU) and Block Mission Management Unit (BMMU) for meeting NRLM objectives and implementing NRLM activities in the district and sub-districts. Suitable linkages with DRDAs would be explored during implementation after undertaking a capacity assessment. The DMMU and BMMU will be a facilitating and support unit for field structures. It will interface and forge convergence with District/Block Administration and line departments, banks, NGOs and corporate agencies. 15. Community Level: The whole project is designed in such a manner that the participating rural households and members of the self help groups play a lead role over time in implementing and expanding the reach of the program. Several strategies have been visualized for achieving this. The core model of building SHGs and their federations at the village and higher levels will gradually take over the functions of implementing the program at the village level such as managing last mile service delivery, linking up with formal financial institutions and taking up different livelihood activities. 16. To expand the establishment of such community institutional structures and take up specific activities, cadres of community resource persons will be created from within the households identified and participating in the different dimensions of the program. They will be trained in specialized functions such as institution building, agriculture animal husbandry, microfinance management and will support members of community institutions being established in other villages. To make this strategy effective, community academies will be established that will act as hubs and centers for spreading the programs reach to other locations. Procurement 17. General: Procurement of all goods, works and non-consulting services required for the Project and to be financed out of the proceeds of the Financing shall be procured in accordance with the requirements set forth or referred to in Section I of the Procurement Guidelines (January 2011), and all consultancy services shall be procured in accordance with Consultants Guidelines (January 2011). A Procurement Manual for the NRLM applicable to the whole country is finalized by Government of India in consultation with the Bank. The procurement arrangements and methods detailed for procurement of Goods, Works and Services in NRLM Procurement Manual is reviewed as in accordance with the above referred World Bank guidelines. In the event of any conflict in interpretation of various provisions for procurement in case of items procured using the proceeds of the credit from the IDA, interpretations of provisions of IDA Procurement and Consultancy Guidelines will prevail. 18. The procurement framework designed for the project has taken into consideration various aspects of the project such as (i) relatively low value procurement in a livelihood operation that remains within the upper thresholds of methods used within country like shopping and NCB; the wide geographical and regional spread of the proposed program of Govt., which poses its own challenges of developing capacity and carrying out supervision of procurement across national, state, district and sub district levels; the resulted challenges and problems of introducing multiple procurement systems at already capacity constrained state, district &sub district levels;

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lack of uniformity of comparable processes and procedures or satisfactory contract data (MIS) across the country to have considered reliance on state procedures as it is, etc. In addition, the fact that each of the implementing unit at state and district/sub district level would be receiving funding for similar activities under the Bank supported NRLP, GoI’s own NRLM resources as well as stand along projects funded by Bank and other development partners like DFID, IFAD etc. lead to the procurement strategy of developing a new NRLM Procurement Guidelines which will be mandated for use for NRLP and all other funds for similar activities under NRLM. These efforts were supported through a Bank executed trust fund for the Govt. 19. The outcome has been the development of NRLM Procurement manual, that while retaining the terminology & nomenclature of Procurement Methods that is commonly understood and practiced in the field, was reviewed and found to have met comparability with methods Bank uses in similar projects in the country with special conditions for shopping and national competitive bidding incorporated as part of the formal procedures. For developing the Manual, in addition to Bank Procurement and Consultancy Guidelines, other relevant sources like is Financial Management Rules, GoI (2005); FM and Procurement Manual of a similar centrally sponsored scheme, SSA, MHRD, GoI; Stores Purchase Rules methods in various states and World Bank “Guidance Note For Management Of Procurement Responsibilities In Community-Driven Development Projects, December 2009 were also consulted. Model Bidding Documents are also developed and agreed with the Government. 20. Procurement of Goods and Works: The NRLM procurement manual provides for different delegated financial limits for various levels of implementing entities at community level (SHGs/CBOs/POs), block level (PFT), district level, state level and national level for goods works and services. Different Methods, conversant with the country systems, are also defined for procurement of Goods, Works and Services with its applicability based on value thresholds for various levels of implementing entities. Prior and post review arrangements are also built in at state and national level for ensuring appropriate quality and oversight over the procurement process. The highest levels of value thresholds for various methods applicable to the national level, and its comparable procedures within Bank methods is detailed in the below Table.

Procurement Thresholds for Goods and Works

Method as per NRLM Procurement manual

Comparable Bank Method

Goods Works

Petty Purchase Shopping < US$ 100 NA Local Shopping Shopping < US$ 10,000 NA Limited Tendering Shopping < US$ 50,000 < US$ 200,000 Open Tendering NCB < US$ 500,000 < US$5,000,000 Force Account Force Account NA < US$ 10,000 Direct Purchase Direct Purchase As per conditions NA DGS &D Rate Contract Shopping

Equivalent < US$ 50,000 NA

21. As high value contracts that requires International Competitive Bidding is not anticipated at this stage by the project, a maximum threshold of a single contract under NRLP reimbursement is set as the highest value of the NCB. In the event, the Project requires procurement valued above $500,000, using the proceeds from the Bank support, the same shall be discussed with the Bank and the applicability of ICB methods will be decided. Model Bidding

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Documents, acceptable to the Bank are agreed with NRLM for various methods mentioned above. Special NCB conditions in India are applicable to Open Tenders. 22. Selection of Consultants: For selection of institutional and individual Consultants for providing services, the project will use QCBS, Selection based on Consultants’ Qualification, Fixed Budget Selection, Least Cost Selection, Single Source Selection, and Selection of Individual Consultants as appropriate. For service contracts, Model Bidding Documents, acceptable to Bank are agreed NRLM for various methods mentioned above.

Procurement Thresholds for Services Method Limits in Value

Individuals SSS Subject to acceptable justifications Individuals Competitive <US$ 50,000 Institutions selected through CQS, FBS, LCS

<US$ 100,000

Institutions selected through QCBS

> US S 100,000 All selection >US$ 200,000 from NRLP shall be prior reviewed by Bank and advertised in UNDB. Short list of consultants from within the country are acceptable for value up to US$500,000

23. In NRLM, federated structures of Self Help Groups (SHGs) will be formed at different levels (village, block, district) for undertaking value chain linked economic and livelihoods activities in dairy, agri-business and similar enterprises for better production, storage, marketing, etc. of the produce of the members of the SHGs. These groups would undertake procurement of goods, works and services in line with the selected value added activity. The methods of procurement used will be Community Force Account, Local Shopping, and Petty Purchase as detailed in the NRLM Procurement Manual

Thresholds for Community Procurement of Goods and Works Method Goods Works Petty Purchase < US$100 NA Local Shopping < US $ 1,000 NA Limited Tendering < US $ 15,000 < US $ 20,000 Open Tendering < US $ 50,000 <US $ 200,000 Force Account NA < US $ 50,000

Thresholds for Community Procurement of Services

Method Limits in Value Individuals < US $ 2,000 Institutions selected through CQS, FBS, LCS < US $ 20,000

24. The Innovation and Partnership Support component of the NRLP is allocated to create an institutional mechanism to identify, nurture and support innovative ideas from across the country to address the livelihood needs of the rural poor. NGOs and Social Entrepreneurs will be partnered for various innovative activities and for scaling up successful initiatives, under this component. As implementation of this component is not envisaged to begin in the early stage of the Project, the process and procedures for identification, and partnering with NGOs and Social Entrepreneurs will be further discussed for prior agreement by all concerned parties. For

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undertaking procurement of goods works and services from the proceeds by the selected partner agencies, established commercial practices will be followed. 25. Prior and Post Review Arrangements: As per the provisions of the Procurement Guidelines Appendix 1 para 5, prior and post review arrangements are defined and in-built at state and national level structures for ensuring appropriate quality of procurement and oversight. It is agreed that at national level, NMMU will hire a third party independent post review consultant for conducting annual post review of 10% contracts issued at state and district levels. Bank will depend on this third party post review for its fiduciary supervision. Bank will, however, continue to retain a right to carry out direct post review of the states where proceeds from the credit for NRLP will be used. Bank will carry out annual supervision of procurement carried out at NMMU level from the proceeds of the credit of NRLP. 26. Assessment of the Agency’s Capacity to Implement Procurement: An assessment of the procurement risk based on PRAMS application was carried out in 9 states, districts and sub district levels in the project. NRLM will be building on pre-existing Bank supported livelihood projects in 7 of the selected States wherein the capacity and systems are in place and post procurement assessments have rated the risk as low to moderate. In 2 of the new intensive States of Jharkhand and Karnataka, regulatory frameworks are in place. However, in UP, and Maharashtra the regulatory system is limited to Financial Management Rules without detailing of methods, conditions, systems and service levels for procurement. Based on the assessment, overall Procurement risk for the project is assessed as “Moderate”. Some of the residual risks identified are:

a) lack of dedicated procurement staff and/or appropriate training and capacity building for other technical and administration staff on procurement requirements;

b) varied and inconsistent levels of procurement administration, openness, clear and transparent evaluation, selection and award process;

c) poor or limited participation in competition by bidding community; d) non-availability of procurement data in an organized, comprehensive and uniform format;

and e) non-availability of dispute resolution mechanism or similar accountability measures.

27. Based on experience and discussions with varied stakeholders, the mitigation measures agreed with NRLM are the following:

a) hiring and training of required procurement staff as a criteria for fund release; b) an intensive training program, and accreditation as a pre-mandate for implementation

(being developed as a Diploma Program in Public Procurement with special reference to NRLM Procurement through IGNOU- Indira Gandhi National Open University for accreditation of about 1000 staff across the country);

c) an NRLM procurement manual to be developed with community procurement guidelines and formats to guide procurement at the community and project implementation level. The manual also suggests upper threshold based methods for goods, works and services. The manual details the proposed systems, delegated authorities along with capacity development needs and SBDs, various protocols and formats to be used. The Manual requires all entities about document and record keeping formats for all procurement

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undertaken. The Manual is reviewed and ensured that Bank’s concerns for transparency, fairness, economy and efficiency and all in country conditions for NCB are met;

d) prior and post review arrangements will be put in place with enhanced monitoring arrangements including establishment of a Procurement MIS; and

e) a Complaints and Dispute Resolution Mechanism will be developed and put in place. 28. One of the key strategies that will be undertaken under the Capacity Building component is establishing good governance systems at the community level. These systems include establishing horizontal fiduciary assurance mechanisms like social audit, procurement committees, score cards that will ensure effective and transparent procurement at the Community level through community participation in procurement implementation and monitoring. At each CBO level, a Procurement committee will be established to monitor all procurement undertaken at aggregated community level. Display of contracting process, progress of work and payments made will be made in public notices and a system of certification by community will be ensured for contract completion. 29. Staffing: As part of procurement arrangements a dedicated procurement management team at the National level shall be established. The team shall comprise of 6 core staff- Head of procurement (1), Procurement Consultants (2), Procurement Associate Consultants for State focus (2) and Procurement Associate Consultant (1) for NMMU focus. Overall responsibility of developing, implementing and managing the procurement administrative functions will rest with this core team. Similar teams, comprising of a Head of Procurement (1), Procurement Consultant (1) would be set up at the State Mission Management Units, adequately supported by atleast 1 support staff. 30. Procurement Plan: The NRLM Procurement Manual requires all implementing entities at district, state and national level to prepare and publish their procurement plans as part of the annual work plan generation activity, and to publish the same on the NRLM web site. Procurement Plan for the TA component (i.e. component 1, 3 and 4) of the project is prepared by the NMMU, reviewed and agreed by the Bank. This plan will be updated annually to reflect the latest circumstances. As the project rolls out on a framework basis where the initial period of one year is used for building institutional capacities at state and district level and for developing a Perspective Plan for each state, there are no state wise Procurement Plan available at this stage. It has been made mandatory conditions to include a Procurement Plan as part of the Implementation Action plan and State Perspective Plans. A Summary Procurement plan is available in files. 31. Frequency of Procurement Supervision: In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended 2 supervision missions to visit the field to carry out review of procurement actions. Financial Management 32. The financial management arrangements of the proposed project has been designed around two essential guiding principles: (i) use of country fiduciary systems, to the extent

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feasible and considered satisfactory and meeting the essential fiduciary requirements; (ii) build upon successful models developed and tested in the IDA funded rural livelihood projects implemented across various states in India. These arrangements are documented in the Financial Management Manual and assessed as adequate to account for and report on sources and uses of project resources and meet Bank’s fiduciary requirements. 33. The National Mission Management Unit (NMMU) of the Ministry of Rural Development responsible for implementing the National Rural Livelihoods Mission will be responsible for the establishing and maintaining satisfactory financial management arrangements for the project, both at the national level and across 12 selected states of India. At the State level, newly established or existing State Rural Livelihood Mission (SRLMs) anchored to the State Rural Development Departments will be the key implementing agencies. These institutions are typically set up as registered autonomous societies and have pre-existing financial management systems which vary by quality and content. 34. On the overall, the financial management framework is based on established GoI procedures for Central Sponsored Schemes (CSS) and General Financial Rules 2005 at national level. The five states17 which are presently implementing World Bank supported livelihood projects have established and tested financial management arrangements. It is important to note that no material fiduciary weaknesses have been identified over the last 10 years of implementation of WB-supported livelihood projects nor have there been major issues identified with the audit reports. For the remaining states being considered for NRLP, the adequacy of the financial management arrangements will be assessed against benchmarks agreed and documented in the Financial Manual. These readiness filters will be applied both at the Initial Action Plan and State Perspective & Implementation stages jointly by MoRD and the World Bank. 35. Planning and Budgeting: Each state will prepare a 5-year State Perspective and Implementation Plan (SPIP) and Initial Annual Action Plan for NRLM. These plans will be appraised and approved by MoRD and MoUs will be signed between MoRD and each state. The approved plan and budget for the state for NRLM will separately identify activities/line items which are to be funded by the World Bank under NRLP. 36. National Mission Management Unit (NMMU) of MoRD will prepare annual estimates of the project by consolidating state level and NMMU level estimates. The project will be budgeted at the Union level, under an identifiable budget head item of the MoRD. Partly on account of the inflexibility in processing in-year budget reallocations, that this imposes, the project components and sub components have not been set up at the detailed budget head level. As a result, the consolidated `Monthly Accounts’ prepared by the Pay & Accounts Office (PAO)18 will provide information on the project expenditures in summary form only. NMMU will maintain memorandum registers to track the project expenditures by activity heads to allow for quarterly interim financial reports to be prepared in a manner that will allow easy monitoring of actual expenditures against agreed work plans and for management decision making purposes. As for

17 Bihar, Madhya Pradesh, Orissa, Rajasthan, and Tamil Nadu. 18 The accounting for expenditures at the central level is done by the Pay and Accounts Office (PAO) headed by the Chief Controller of Accounts within MoRD.

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all special schemes of MoRD, the Empowered Committee, chaired by the Secretary, will be responsible for approving the work plans and proposal for activities under the project. 37. Fund Flow Arrangements: The NMMU will remain within the existing financial management systems of MoRD, which operates through the centralized Pay and Accounts Office. No separate bank accounts will be established for the project and the authorization to honor project related payments will be derived from the appropriated budget. 38. MoRD will release funds to states against agreed annual work plans and as per FM provisions of MoU which will be signed between MoRD and each participating state. Funds will be released in two tranches each year through direct transfers into SRLM bank accounts. For all fund releases following the first tranche, the states will be required to submit audit reports and utilization certificates, as per established GoI procedures. 39. To the extent feasible, funds flow from SRLMs to districts/sub-districts will not entail physical transfer of funds, and instead an Electronic Fund Transfer system will be established. Under this system annual budgetary allocations will be approved by state office for each cost center against specific budget lines. The cost center will generate sanctions and draw down from a centralized state level bank account using the online banking systems up to the budgetary limits and within the agreed delegation of financial powers. 40. Fund releases from the State to SHG Federation/s and other institutions (producer companies, NGOs etc.) will be made through electronic transfer systems, to the extent feasible and be based on the terms and conditions for fund releases as documented in the MoU or financing agreements, as the case may be.

41. Accounting Policies, Procedures and Systems: Project expenditure at national level and will be as per standard government systems of Pay and Accounts Office (PAO) and subject to controls as per General Financial Rules of Government of India. All fund releases (Grant-in-Aid) to SRLMs to finance approved state Annual Work Plans will be recorded as expenditure in accordance with existing GoI rules. For the purpose of the program, however, NMMU will maintain `off-line’ memorandum registers to keep track of actual expenditures reported against

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the grants by the States, as these are essentially in the nature of advances, and incorporate them in six monthly interim consolidated financial reports of the project. 42. While the accounting policies, procedures and systems may vary across the states, the following general principles will apply:

SRLM and its constituent district and block units and SHG Federations will maintain its books of account on a cash basis following the double entry principle of accounting.

A common set of ‘back office’ rules on financial management, including accounting and financial rules at the State, SHG Federation and SHG level will apply uniformly across all activities and all sources of funds, including NRLP.

In order to ensure that there is no risk in duplication of financing to the same SHGs/federations, it has been agreed that NRLP will not be implemented in the same blocks as the ongoing WB-supported state livelihood projects. However, the SRLMs will establish up-front, appropriate criteria to apportion common costs (state and district levels) across the various projects and document the same in the SPIP.

SRLMs will put in place acceptable internal audit arrangements, commensurate with the size of the operation.

All funds released by the state to the district and block level units will be treated as inter unit transfers until expenditures are incurred at these levels.

Financial controls including delegation of financial powers and financial rules will be documented in the Financial Management Manual/ Administrative rules of the state societies.

All fund releases to SHG Federations made in accordance with Federation Grant Agreement will be considered as eligible expenditures for the purposes of the project and accounted for as grants (expenditures) in the books of accounts of the SRLM. Such fund releases will be based on achievement of certain defined milestones/ triggers as defined in the description of Component 2 in Annex 2 of this PAD.

SHG Federation will maintain books of accounts for the receipts and loans provided to SHGs and will prepare regular financial statements. SHGs will in turn, provide loans to their constituent members to fund economic activities to enhance livelihoods or other consumption needs as described in the SPIP, but excluding the items listed in the negative list.

The project will obtain fiduciary assurance for the use of Community Investment Support provided to the SHG Federations from a combination of the following two processes: (a) periodic assessment of robustness of the loan portfolio at the Federation level and monitored through rigorous processes and use of eligibility indicators of profitability, capital and portfolio quality, acceptable levels of loan collections, appropriate capacity for appraisals and supervision etc.; and (b) assessment of the fiduciary oversight arrangements established at the Federation level to monitor and verify the use of funds for intended purposes, including verification mechanisms for assets and other uses of funds, as applicable.

The project will invest in (a) developing detailed assessment criteria for grading of SHGs and Federations; and (b) providing handholding accounting technical assistance (book keepers, accounting hubs etc) to the Federations to help maintain accounting records and prepare monthly/annual financial statements for the Loan portfolio.

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The accounting for fund releases (grants) to other institutions, including Producer Companies, livelihood federations, NGOs Partnerships and other service providers under the component of Special Programs (Component 2(d) and Innovations and Partnerships (Component 3) will be guided by the terms and conditions of respective the contractual arrangements or financing agreements/MOUs.

Over the medium and long term, a separate platform will be developed for accounting and financial reporting for SHG Federations (and SHGs). This will ensure standardization and consistency in the quality of accounting. This will also provide online access to financial information for community level at the aggregate as well as standalone basis. The accounting system at the SHG/federation level will be automated through e-bookkeeping using different front-end devices, including net books and handheld devices like tablets, mobile phones, etc.

43. Financial Reporting: NMMU will be responsible for compiling and preparing consolidated project financial progress reports on a six monthly basis. These Interim Unaudited Financial Reports (IUFRs) will aggregate the financial reports for the following: (a) NMMU level expenditures as obtained from Pay & Accounts Officer (PAO) reports; (b) fund releases to SRLMs by MORD, as obtained from PAO reports; (c) SRLM level financial reports, as obtained from their financial management systems. The SRLM financial reports will reflect all sources (GoI and State) and uses of funds (NRLM, NRLP and ongoing Bank financed State Livelihood Project, where applicable) with detailed statement of NRLP related expenditures. The quarterly consolidated project IUFRs will be submitted to the Bank within 45 days of the end of each quarter. The reporting formats (IUFRs) will be agreed upon and included in the NRLP Financial Manual. 44. Staffing of Finance Function: A dedicated financial management team will be established within NMMU. The team will be headed by a Controller, a senior serving or retired officer from Central Accounts Service with commensurate experience and suitably qualified finance professionals engaged on term contracts. Each of the spearhead teams of states will include a financial management specialist who will be the nodal point both for assessing state FM readiness and for the state for coordinating FM technical assistance to state, fund releases to states, monitoring of financial management performance etc. The job responsibilities and detailed descriptions have been documented in the Financial Management Manual. The SRLMs will have qualified finance staff. The composition of FM team at SRLMs for state/district/block level and ToRs of FM positions will be included in state FM Manual. 45. FM Manual: A Financial Management Manual has been developed for the project and documents the key financial management arrangements for the project. The manual provides an overview of the financial management arrangements for NRLP and includes a toolkit for the assessment of the adequacy of the financial management arrangements at the state level. Each State will in turn, have a separate Financial Management Manual and the SPIP detailing the financial management arrangement for the State and community level institutions, including audit requirements for SHGs/federations. 46. Disbursement Arrangements/ Disbursement Conditions: An initial advance with a fixed ceiling (to be determined by negotiation) would be deposited into the segregated designated

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account maintained in US dollars at Reserve of Bank of India, Mumbai by CAA&A, GOI. Withdrawals from the Designated Account will be on receipt of periodic withdrawal applications from MoRD, GoI and to the extent of reported expenditures during the period. As per the standard Centre-State mechanism for Central Sponsored Schemes, GoI funds to the States for Components 2 (b) and (c) will be on a grant basis with 25% counterpart funding by the States (10% in the case of North East and hill States). The fund releases to the States which will be accounted for at MoRD level as ‘Grants in Aid,’ will not be considered as eligible expenditures for purposes of disbursement under the project. Disbursements from the IDA Credit will be based on consolidated project financial reports (Consolidated IUFRs) and will be made in six monthly intervals. 47. External Audit: The annual statutory audit of NMMU (MoRD) will be conducted by the Comptroller and Auditor General (C&AG) of India as per standard terms of reference agreed with the World Bank. Audit of SRLMs will be conducted by Chartered Accountant firms acceptable to the Bank, as per terms of reference agreed with the World Bank. A ‘draw down’ list of CA firms, based on agreed criteria, will be made available for the states for procuring their services. The audit reports of NMMU and each of the SRLMs will submit annual project financial statements to the Bank by 30th of September every year for previous financial year. The annual audit report will consist of (i) audit opinion, (ii) annual financial statements and (iii) management letter highlighting significant issues to be reported to the management. NMMU will implement a regular system of review of audit process, including quality of audit at state level, audit observations and monitoring compliance of the observations by implementing units. Bank remedies for delays or non submission of acceptable audit reports will be applied on MoRD and each defaulting state separately. The following audit reports will be tracked through Audit Reports Compliance System (ARCS):

Implementing Agency Audit Auditors Due Date Ministry of Rural Development,

Government of India Annual Project Financial

Statements C&AG 30 September

State Rural Livelihood Missions (by whatever name called)

Annual Project Financial Statements

CA firms 30 September

DEA/GOI Designated Account C&AG 30 September

48. The SHG Federation/s annual accounts will be subject to statutory audits as required by state laws. The SRLMs will enter into draw down contracts with select CA firms at State and district levels and agree on fixed price budgets as well as the audit ToRs and templates for the annual financial statements. SHG Federation audit reports will be monitored at the state level and will not be considered a part of NRLP’s audit requirements. 49. Public Disclosure: In compliance with the Bank’s new Access to Information Policy, the following information will be disclosed on the MoRD and State websites:

National Level State Level Financial Management Manual (FMM) Project Implementation Plan (PIP) Circulars issued by NMMU regarding FM issues Any amendments to FMM

Financial Management Manual (FMM) of the State Circulars issued by SRLM regarding FM issues Any amendments to FMM of State FM Guidelines

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Minutes of FM Meetings with States FM Training Material Other Information related to FM Training Annual Budget for Project Release of Funds to: SMMUs, Other Implementing Agencies Consolidated IUFR for the project Consolidated Annual Audit Report of project Individual Audit reports of NMMU And SMMUs Status of Compliance of Audit Observations by NMMU and SMMUs FM Indicators: Summary for Project, Summary for NMMU

FM Training Material and Other Information about FM Training Annual Approved Estimates for project in the state: ◦ Original Estimates ◦ Revised estimates Releases to SLRM by MORD ◦ Releases of funds by State to SHG Federations and other partner institutions Consolidated IUFR for the State Annual Statutory Audit Report for the State FM Indicators Summary for State

Environment (including safeguards) 50. An Environmental Assessment (EA) has identified the following key environmental issues concerning activities of SHGs and their federations: (i) land degradation including soil erosion (ii) poor water availability and quality, depletion of groundwater (iii) improper use of agro-chemicals (imbalanced use of fertilizers, unsafe use of hazardous pesticides) (iv) decreasing fodder availability (v) degradation of forests (unsustainable extraction of forest produce, shifting agriculture, grazing) (vi) drought, floods and cyclones. 51. The NRLP triggers the following safeguard policies of the World Bank: Environmental Assessment (OP 4.01), Forests (OP 4.36), Natural Habitats (OP 4.04) and Pest Management (OP 4.09). The NRLP falls in the environmental screening category B as per Bank’s Operational Policy (OP) 4.01. Natural resource management has been identified as one of the strategies of the project. Self Help Groups (SHG), SHG federations (Village Organizations) and Producer Collective (PCs) in each of the participating states will be supported for undertaking a variety of economic activities, including those related to the development of natural resources (agriculture, livestock, forestry-related, fisheries etc.). 52. The Environmental Management Framework (EMF) developed as an outcome of the EA study addresses the identified issues through a detailed strategy and procedures for incorporating environmental sustainability in the planning process in the state and village levels. An Environmental Action Plan (EAP) will be developed by each State Mission Management Unit (SMMU) as part of the State Perspective and Implementation Plan (SPIP). The National Mission Management Unit (NMMU) will screen the SPIP through a desk-appraisal for state readiness and compliance on the basis of an appraisal readiness filter in the EMF. 53. The EMF will be applied to investment plans taken up by SHG primary federations making use of loans provided under the State Livelihood Support Component of the Project. The EMF comprises development of a SHG federation Environment Management Plan (EMP) to incorporate good environmental guidelines and assess eligibility of SHG federation activities and Producer Collectives through a regulations list. The EMP will be prepared by the VO with facilitation by the PFTs. It will be prepared prior to the micro-credit/livelihood plan preparation process in the affiliate SHGs and will be updated periodically. Environmental Guidelines (EGs) are provided for four major livelihoods – agriculture, livestock, non-timber forest produce and fishery - to identify subproject-level impacts and relevant mitigation measures. The

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Environment Management Framework (EMF) has been developed for the NRLP to ensure compliance with applicable laws and regulations of the Government of India, the 12 state Governments and triggered safeguard policies of the World Bank. 54. The EMF provides a methodology and capacity building materials for the promotion of green opportunities including climate change adaptation activities that can provide environment and income generation co-benefits. Overall, the strategy would be to use the first 12 months to raise awareness of the NMMU and the SMMU to collaborate with proponents of Green Opportunities and integrate strategic ones into the SPIPs or the national program. During this period when the states are preparing their SPIPs, they would be supported and guided to look for potential for Green Opportunities not only from an existing repository, but also from other sources as well. Capacity building to enable the promotion and adoption of green opportunities is a part of the EMF. 55. Furthermore, the EMF contains institutional arrangements, detailed training and capacity building plans (intensive during first year) and monitoring mechanisms/indicators to enable effective implementation of environmental management measures. Monitoring of the EMF will take place at three levels: community monitoring by green community resource professionals; internal monitoring by the state and district project personnel; and annual third-party external environmental audits after the first year of implementation. The environmental specialists at the national, state and district levels will conduct internal monitoring of the implementation of the EMF on a sample basis. The nationally-commissioned external environment audit will assess cumulative impacts and identify ways of strengthening implementation of the EMF. The roles and responsibilities of the key staff at the national, state, district and sub-district levels are specified in the EMF. A national consultation in which key stakeholders from the center and states participated was part of the development of the EMF. The final EMF is also planned to be disclosed through the websites of the Ministry of Rural Development and all the State Departments of Rural Development and on the Bank Infoshop. Social (including safeguards) 56. Social Safeguards. The key social safeguard policy issue is ensuring informed consultations with, and broad community consent and support of, the Scheduled Tribes, along with equitable and culturally compatible delivery of benefits to tribal people in the project areas (O.P. 4.10). Many NRLP states have significant tribal populations, particularly Madhya Pradesh, Orissa, Jharkhand and Chhattisgarh. As scheduled tribes (STs) are among the poorest groups, and tribal states and districts among the poorest regions in the country, both tribal areas and people would be targeted for special efforts within the SMF summarized below. The SMF applies to all NRLP interventions and also covers BPL households, scheduled castes, people with disability, migrant and agriculture labor and other vulnerable groups. NRLP would support preparation of Social Inclusion Plans (SIPs) that will include specific measures for tribal groups. These measures include: (i) regular consultations with tribal groups and their community institutions, related government departments and research agencies, and NGOs during state assessments and the village-level community mobilization processes; (ii) identification and prioritized targeting of the tribal people and areas; (iii) tribal representation and participation in community institutions, executive positions and committees; (iv) informed and locally-adapted

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project norms and mechanisms for project processes and livelihood assistance; (v) support to traditional grievance redress mechanisms; and (vi) periodic community feedback. The social development staff in SMMUs, DMMUs, and BMMU/PFTs will be trained in socially- and culturally-sensitive ways of working with tribal people. 57. O.P. 4.12 (Involuntary Resettlement) is not triggered as involuntary land acquisition and land purchase are not envisaged and are included in the project’s negative list. Any community project that involves voluntary land donation would follow consultative and transparent procedures that substantiate the voluntariness of the donation and informed consent of the donor. These procedures are specified in the SMF which is in the PIP. They would be enforced by the PFTs and monitored by the District and State level Social Coordinators. All large pilots on rural enterprises and value chains would be subject to screening by the BMMUs/PFTs for any adverse social/safeguard impacts. The criteria for screening are in the SMF. They would be enforced by the DMMUs and monitored by the State level Social Coordinator. 58. Non-safeguard Social Risks. NRLP may face other social risks including; (i) exclusion of the poorest areas (especially remote rural/tribal habitations) and groups; (ii) elite capture of project processes and benefits; (iii) social and political conflicts and violence; and (iv) caste- or religion-based discrimination. 59. The SMF addresses these risks through a range of interventions. Universal social mobilization and saturation coverage of the poor are core strategies of NRLP. The state poverty diagnostic exercise will help in identification and mapping of the pockets of highest poverty and vulnerability in the NRLP states. At the village level, NRLP will facilitate participatory processes for identifying all ‘poor’ and ‘vulnerable’ households. Sensitization of project staff to such social risks, rapport building with PRI and community leaders from all social groups, and promotion of social capital formation and cohesion by the Community Resource Persons will mitigate such risks. Community and staff capacity would be built for conflict resolution. NMMU will partner relevant research and training institutions working on social inclusion strategies to reduce caste-based exclusion; and pilots to reduce social discrimination in NRLP villages, and build legal and rights-based literacy will be undertaken. 60. Stakeholders. The most important stakeholders are the directly targeted 24 million rural poor households and their organizations, including SHGs, federations, producer organizations, and government/non-governmental organizations working on rural poverty reduction and livelihoods advancement. The poorest are Scheduled Castes, Scheduled Tribes, other backward castes, minorities and vulnerable groups such as people with disabilities, single women, women heads of households, the landless and migrant labor. The MoRD has consulted with a wide range of primary and secondary stakeholders in order to inform the design and implementation of the project and address the limitations of existing rural development programs. The NRLP explicitly recognizes the potential to leverage, partner and adopt the expertise and innovative models of NGOs, the private sector, specialized agencies (e.g. SERP), and leading experts and champions of the rural livelihoods sector. These key stakeholders will be active in facilitating the implementation and monitoring of NRLP.

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61. Consultation and Participation. During implementation, primary stakeholders, community institutions, project staff, other government departments, partner agencies and NGOs will be consulted as follows:

a) community level consultations with tribal and non-tribal groups during: the state poverty diagnostic exercises, village entry and participatory assessment processes, social mobilization and institution-building processes, preparation of plans for microcredit, livelihoods and rural enterprises, and innovation/piloting proposals;

b) District/Block level consultations with DMMUs, government departments, DRDAs, partner NGOs, PRIs, training and resource agencies, and community institutions during project implementation;

c) State level consultations with district administrations, government departments, partner NGOs, training and resource agencies, some community institutions during the state poverty diagnostic exercise, perspective/annual planning, project review meetings and learning events;

d) National level engagement with NRLM committee members, NMMU thematic and functional units, SMMUs, Social Development experts, NGO representatives during project reviews and national workshop/learning events.

62. Capacity Development. Development of SD capacity to implement the SMF the national, state and sub-state level units, and the institutions of the rural poor (SHG/federation), is an integral part of NRLP. The TA to states would support conduct of the state poverty assessments. The SMF would support design, development and delivery of training modules, guidelines and practical resource books to build the SD capacity among mission units, and the CRPs. These would be on social assessment (to be carried out with the state poverty diagnostic process), participatory learning methodologies, social inclusion and community mobilization strategies, preparation of social inclusion plans (SIPs), working with vulnerable groups and in areas affected by internal conflict, and other related themes. A capacity building module for community institutions on social action, accountability and legal empowerment would be developed. The knowledge management and communication unit at NMMU will be provided SD inputs on information, education and communication (IEC) strategies and materials. Other areas would be covered on the basis of consultations with state units. Within States, establishment of resource centers, community learning academies, and capacities of SIRDs on social inclusion and community mobilization will be facilitated to support project staff, community professionals and trainers. NMMU and the state units will implement most of these activities through national and state level partners with suitably experienced training/technical resource agencies within the first two years of implementation. 63. Community Mobilization and Institution Building. The state social inclusion plans (SIPs) will include specific, and suitably adapted, strategies for building SD capacity of SHGs/federations. The community institutions will be supported on identification of the poor, targeted mobilization of women, youth and other vulnerable groups from SC/ST households pro-poor functioning through thematic committees (ST, social audit, and social action), participatory assessments, mobilizing and assisting the vulnerable groups/areas, and targeting of livelihood investments for the poorest groups.

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64. Community Investment Support. Poverty, food insecurity and other vulnerability criteria will be applied in selection of villages/groups for (i) community food, health and nutrition centers; (ii) community-managed food credit and distribution system; (iii) health risk mitigation fund; and (iv) support for destitute, old, infirm and disabled household for emergency food and health purchase; and establishment of these mechanisms. Consultations with key stakeholders and social screening of plans involving rural enterprises and value chains for potential land donation or other adverse impacts will be undertaken. Social accountability mechanisms (e.g., social audits, performance reports/scorecards, community notice displays, grievance hotlines, call centers) will be designed and implemented at community level. Large scale pilot programs on livelihoods and public services, CSO interventions in areas affected by internal conflict, and innovations and partnerships will be based on consultations with the targeted beneficiaries, particularly women and youth from tribal areas. The inclusion of the identified poor households in the institutions, interventions and partnerships will be monitored by the SMMUs. 65. Innovation and Partnership. The Innovation Pilots, Social enterprises, and the Community Partnerships supported under this component will evaluated and selected on the basis of i) directly targeting and addressing the livelihood and social service needs of large numbers of tribal and non-tribal households, women, people with disability, landless, migrant labor and other vulnerable groups in disadvantaged areas; ii) consultations with the targeted beneficiaries during design and implementation; iii) promotion of community capacity on negotiating with markets and service delivery agencies. The project implementation structures at national, state and sub-state levels will have representation of leading social inclusion experts, and representatives from civil society organizations and community institutions with demonstrable engagement in social, economic and financial inclusion of the rural poor. 66. Social Monitoring. A social observatory model of concurrent monitoring will be adopted to guide the social performance and impact of the project, with inputs from community institutions. The monitoring and evaluation system will include socially disaggregated monitoring and reporting of beneficiary participation, capacity building, livelihood assistance, partnerships and other interventions, with a particular focus on tribal and other disadvantaged social groups and areas. Community institutions will be trained on use of Participatory monitoring methods like user satisfaction rating, citizen report card, community scorecards etc. Qualitative and household surveys will be undertaken to assess social, economic and financial changes among the project beneficiaries. Social learning forums would also be organized on an annual basis. 67. Grievance Redressal Mechanism. The Governance and Accountability Framework (GAF) of the Project includes grievance redress mechanisms at the national, state and community levels. At the community level the grievance redress system would consist of: (i) information provision on the grievance redress system; (ii) recording of grievances raised by Federations and support received from BMMU/PFTs (or higher levels when required) to resolve the grievances; (iii) periodic discussion on the subjects of grievances between the BMMU/PFT and the Federations/SHGs to improve the system and prevent further grievances. SD staff in the management units will monitor grievances through CRPs, project staff and NGOs. Training modules on grievance handling will be part of the core curriculum for project staff.

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68. Disclosure and Amendment of SMF. The SMF has been disclosed on the websites of the NRLM and the state Departments of Rural Development and Panchayati Raj. A translation of the SMF in the local language would be distributed to all the project areas of the NRLP states. Community disclosure of the SMF would be a key entry level activity. Given the scale and multi-sectoral interventions under NRLP, the SMF has been designed as a framework and guidance tool for implementation, monitoring and supervision of social issues and safeguard risks. It would be reviewed for its responsiveness and effectiveness as part of the annual audit, and revised on the basis of the audit recommendations and re-disclosed.

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Annex 4: Operational Risk Assessment Framework (ORAF) INDIA: National Rural Livelihoods Project

Project Development Objective

The development objective of the proposed project is to establish efficient and effective institutional platforms of the rural poor that enable them to increase household income through sustainable livelihood enhancements and improved access to financial and selected public services.

PDO Level Results Indicators:

1. Twelve State Rural Livelihood Missions formed and providing high quality technical assistance to institutions of the rural poor 2. Seventy percent of identified poor households directly benefiting from Project. 3. At least forty-five percent increase in the number of identified poor households who have accessed services from formal financial institutions. 4. Identified poor households have saved US$2 billion through thrift and financial inclusion. 5. Average income for identified poor households in project villages has increased incrementally by fifty percent.

Risk Category Risk Rating Risk Description Proposed Mitigation Measures

Project Stakeholder Risks

Low Some of the state governments, Financial Institutions, donors and NGOs may not appreciate and value the design of the project which may cause resistance during implementation and lead to delays.

Multiple rounds of stakeholder consultations are been held prior to conceptualizing and during on-going preparation of the project.

Implementing Agency Risks

High Low capacity within states, especially new states, limits ability to implement. Substantial investments are required to establish accounting and financial systems at the newly created institutions. Overall low levels of procurement management capacity among participating entities and the general risks attached to fraud and corruption apply to procurement at all levels in such a highly dispersed project.

NRLM will be rolled in Phased manner taking into account the institutional capacity and government buy-in. NRLM proposes to offer dedicated TA support and towards this end the proposed project has provided for substantial TA funds to help States with building the institutions and capacity within these institutions. At the State level, an assessment of existing financial management systems will be undertaken to determine the feasibility of using the same to meet the project requirements. NRLM will develop a Procurement Management manual, based on GoI FMRs, but meeting the Bank procurement principles. The use of this manual for all procurement will be mandatorily conditional for all participating states. The manual will emphasize participation of beneficiary communities in procurement implementation and monitoring.

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Overall low levels of procurement management capacity among participating entities and the general risks attached to fraud and corruption apply to procurement at all levels in such a highly dispersed project. In CSS states receive grants from the central ministry and do not have sufficient incentive for timely reporting, ensure auditor’s quality and taking adequate steps to address control weaknesses.

As part of the preparations, NRLM at national level has developed a Procurement Management manual, broadly based on GoI GFRs, but meeting the Bank procurement principles. The use of this manual for all procurement will be mandatorily conditional for all participating states. Horizontal assurance through community participation will be enhanced. NRLM will establish dedicated units for procurement management and will also commission sample based procurement post review. NRLP has developed a FM Framework and fund releases to states are linked to state readiness to receive grants which includes FM readiness; NRLP envisages a central technical short-listing of audit firms with states having a call down option. Regular audits of finance and procurement activities will further strengthen the activity and cost centers.

Project Risks Design

Medium - I Certain states in the process of fast tracking implementation may not follow processes as inscribed in the project implementation framework. It is envisaged that the project would be supporting MoRD to provide good quality technical assistance at all stages of NRLM implementation. The risk that this program might not benefit from the best practices of previous successfully implemented livelihoods projects

NRLM would be entering into an MoU with States and certain NRLM compliant measures to ensure that they follow the project implementation framework. In the Project Implementation Plan a well articulated strategy is in place for technical assistance with resource allocation and a structure to provide such assistance in an efficient and effective manner. The Bank Team is constantly in discussion with GoI on the design and roll-out strategy of the NRLM, with the intent that through this mission, the Bank’s support to livelihoods operations in India would be on an intensive basis in twelve states including the states where state specific livelihoods projects are currently under implementation

Social and Environmental

Medium - I Weak institutional capacity to implement and supervise the social strategies (included in the SMF) could adversely affect the social outreach and livelihood impact of the project.

The Technical Assistance and Capacity Building component would significantly upgrade the capacity of the States to implement and supervise the SMF. TA and spearhead teams would focus on the new, as well

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The exclusion risk could undermine the poverty reach of the project and affect benefit streams to the extremely poor. The risk of Naxal-linked violence could compromise security and restrict mobility of project staff and partners. Some of the SHG federation and/or Producer Collective activities carried out at cumulative or aggregate levels may accentuate depletion of natural resources with adverse impact on sustainability of rural livelihoods.

as existing, project states. The overall design of NRLP, and the SMF, accord highest priority to identifying and mobilizing the poorest and most excluded SC and ST households. This is the core strategy and a PDO for NRLP. Focus on social and economic inclusion of the SC and ST households would cut across the project interventions on informed consultations, participatory assessments, social mobilization, institution and capacity building, and access to livelihood and employment assistance and social entitlements. NRLP would build and mobilize social capital and cohesion at a large scale. Facilitation of social capital within groups (SHGs) and across groups (Federations) is expected to ease caste relations, as seen in existing livelihood projects. Consultations, consensus building, partnerships across social groups, community leaderships and NGOs, would reduce the risk of conflict and local opposition. Design and implementation of Environmental Management Framework that includes: participatory development of environmental management plans in the livelihood plans and value chain investment plans; a regulations requirements list and environmental guidelines that inform good practice measures and ensure compliance with the triggered safeguard policies and with relevant laws and regulations. The Framework gives emphasis on project-level and community monitoring (including monitorable indicators) along with annual external audits for Years 2-5. The audits will include an assessment of cumulative impacts. Finally, demonstration of green practices in livelihood activities that provide income co-benefits will be proactively supported in the project.

Program and Donor NA NA NA

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Delivery Quality

Medium – L The project location will be highly dispersed, there is a possibility that aggregating sustainability indicators may be difficult and also, in generalizing the results at the national level.

The project plans to set-up a system to gauge sustainability aspects, which will be in-built into institutional maturity index. Likewise concurrent monitoring and evaluation studies will be taken up to measure outcomes and results.

Overall Risk Rating at

Preparation Overall Risk Rating During

Implementation Comments

Medium – I Medium – I

The GoI’s strategy for addressing rural poverty is well articulated and NRLM is one of the pillars of this strategy. The process is underway to internalize the proposed NRLM model and architecture within various State Governments and also create the appropriate institutional structure to implement the project at State level. Hence, given the size and scope of the proposed project, this is the agreed rating at both preparation and implementation stages.

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Annex 5: Implementation Support Plan INDIA: National Rural Livelihoods Project

Strategy and Approach 1. The primary focus of the implementation support is to support MoRD to become a good quality technical assistance support provider to states and develop a program management and monitoring unit. The World Bank has been working with MoRD over the last one year to develop a strategy of joint implementation support missions and has provided mentoring and technical support to MoRD staff to take up the role. The focus in the first year will be in terms of creating capacity within MoRD to provide implementation support teams for each state, which will follow a regular frequency of implementation support. World Bank teams will carry out a number of joint missions with MoRD teams and hand hold them to enable them to carry out this role intensively in the states. As far as procurement, fiduciary, accountability and other safeguards is concerned, a significant amount of third party monitoring will be undertaken to develop independent assessment of how the processes and systems are working. Program monitoring will also be carried out by incorporating web and real time MIS so that analytical and decision support reports are generated. Bank team will focus on areas which are identified thorough client supervision, third party monitoring, analysis of MIS and M&E data, risk assessment and grievance redressal systems incorporated in the GAP. Bank will also partner with independent institutions for concurrent monitoring and analysis and impact assessment. In terms of contracts and various other procurement activities, details are given in the procurement section. World Bank will also ensure that a multi sector and disciplinary team is available for implementation support. 2. State level implementation support systems and processes will draw on the rich experience of rural livelihood and community driven projects in India and the region. These include a combination of community level mechanisms like social audit, community auditors and formal financial auditing. They will also develop state level supervision plans and strategies and these will become an important input to Bank’s implementation support strategy. Various lessons from post DIR work in India for rural livelihood programs based on previous independent reviews will be incorporated in the approach. Implementation Support Plan 3. The key risks initially relate to development of an institutional architecture at MoRD level. Bank is supporting MoRD through a Bank executed non lending TA which offers specialized technical support on HR and organizational aspects. Since the NRLP covers many states including some WB-financed state projects, the Bank will develop cluster teams of specialists who will work across states on programmatic, fiduciary, safeguard and procurement aspects. Bank will also develop partnerships with specialist reputed institutions so that some of this support is provided through these institutions. Bank would do two strategic joint implementation support missions with MoRD and follow this up with periodic thematic missions and support. The focus would be on developing capacity within MoRD to do good quality implementation support teams. Since this is a large operation, initial resources required will be larger than a single state project but with development of capacity in the first two years, the requirement would come down.

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Annex 6: Team Composition INDIA: National Rural Livelihoods Project

Name UPI Title Unit Parmesh Shah 166198 TTL, Lead Rural Development Specialist SASDA Biswajit Sen 153683 Co-TTL, Senior Rural Development

Specialist SASDA

Nathan Belete 208109 Co-TTL,Senior Rural Development Economist

SASDA

Samik Sundar Das 262941 Co-TTL, Senior Rural Development Specialist

SASDA

Juan Carlos Alvarez 203490 Senior Counsel LEGES Junxue Chu 153387 Senior Finance Officer CTRFC Sitaramachandra Machiraju

312741 Rural Livelihoods Specialist SASDA

Vijaysekar Kalavakonda 183209 Senior Insurance Specialist GCMNB Meera Chatterjee 55275 Senior Social Development Specialist SASDS Priya Chopra 159796 Program Assistant SASDS Mohan Gopalakrishnan 246401 Senior Financial Management Specialist SARFM Rasmus Heltberg 23386 Senior Technical Specialist SDV Jacqueline Julian 22308 Senior Program Assistant SASDO Gayatari Kalia 338064 MIS and Systems – ETC SASDA Soumya Kapoor 259890 Consultant – Monitoring and Evaluation FAO-CP Narendra Kande 247390 Consultant – Institution Building SASDA Kalesh Kumar 327316 Senior Procurement Specialist SARPS Priti Kumar 210231 Senior Environment Specialist SASDI Manvinder Mamak 213176 Senior Financial Management Specialist SARFM Meena Munshi 51438 Senior Economist AFTAR Shilpa Phadke 294097 Economist SASDA Giovanna Prennushi 77972 Economic Advisor SASEP Sarita Rana 164731 Senior Program Assistant SASDO Vijayendra Rao 83072 Lead Economist DECPI Deborah Ricks 15870 Program Assistant SASDO S. Selvarajan 93387 Consultant – Economic Analysis FAO-CP Rohan G. Selvaratnam 19087 Operations Analyst SASDA Janmejay Singh 217275 Senior Social Dev Specialist SDV Varun Singh 350127 Social Development Specialist SASDS Sandra Sousa 246692 Program Assistant SASDO Nalini Srinivasan 375443 Consultant – ICT TWICT M. S. Sriram 266306 Consultant SASDA Animesh Srivastava 83448 Senior Agriculture Economist SASDA Vinay Kumar Vutukuru 360217 Consultant – Project Management SASDA Melissa Williams 95332 Operations Officer SASDA

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Annex 7: Economic and Financial Analysis INDIA: National Rural Livelihoods Project

1. The project will support and strengthen the institutions at all levels for efficient delivery of enhanced sustainable livelihood income opportunities with improved access to financial and public services for 4.8 M rural poor HHs. Total project cost at 2011 prices is US$1.16 billion, including the contingencies. Project benefits are quantified for the project interventions accounting for about 79% of the project costs, shared between institution building and capacity development (58%) and community investments (42%). 2. Project Benefits: Major quantifiable benefits for the EFA will come from (i) productive livelihood investments by poor HHs, (ii) improved access to multiple sources of credit for expanding/diversifying livelihood investments, (iii) improved integration with markets and institutions for scaling up livelihood activities, (iv) community-led participatory targeting of the poor beneficiaries, (iii) community-led management of investment funds, and (iv) enhanced skills linked with gainful employment opportunities for one million rural youth. In addition, strong community led 480,000 rural SHG institutions, backed with a network of 40,000 village organizations, 1200 block level federations, and implementing institutions at various levels will sustain the delivery of livelihood services to the project beneficiaries beyond project period, which will have long term project specific as well as system wide impacts. Indirect economic (or multiplier) benefits are likely to be substantial and hence, quantifying the direct project benefits only understates the full economic impact of the project. 3. Due to the demand driven and market-led nature of the rural livelihood investment strategies (T-1), the assumptions and approach for assessing the multiple impacts like income, employment and efficiency, are drawn from multiple sources. They include the experiences from similar livelihood projects in India and other South Asian countries like Sri Lanka and Bangladesh, as documented in PADs, MTRs, ICRRs, Impact Assessments, and Evaluation surveys. 4. Livelihood investment benefits: Major source of quantifiable benefits will come from the livelihood investment initiatives. Participating households will be self selected based on the pre-defined criteria. Choice of investment activity will be demand driven. Both are unknown for ex-ante economic analysis. Based on the analyses of 735,245 livelihood activities, opted by project beneficiaries in five similar projects in South Asia (T-1), the likely choice of broad livelihood project categories by the estimated 3.36 million project beneficiaries is projected for NRLP (Fig.1).

5. Project benefits for livelihood investments are quantified for three categories of SHGs, in tune with the proposed project design. (i) At least 70% of SHGs will operate with the basic livelihood project investment support (Scenario-1), (ii) 50% of them (SHGs) will also have additional access to multiple sources of funding

T-1 Choice of livelihood investment portfolio

Sub-projects Unit Livelihood Loans#

Livestock Sector % 44 Agriculture Sector % 24 Trading activities % 18 Service sector % 13 Total Number 735245

# Aggregated based on the WB funded five livelihood project experiences in India, Sri Lanka and Bangla Desh.

Fig.1 NRLP: Projected choice of livelihood activities 

0%

10%

20%

30%

40%

50%

Livestock Agriculture Trading Service

Liv

elih

ood

loan

s av

aile

d

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(Scenario-2); and (iii) 45% of them (SHGs) will also have linkages with producer organizations like milk cooperatives, producer companies, markets and technology institutions (Scenario-3). Since there will be some overlapping in SHG scenarios, they are detailed in T-3. The assumptions underlying the EFA analysis are as follows:

At least 70% of the targeted project beneficiary HHs (4.8 million) will be mobilized into SHGs to provide quality services to the members

At least 70% of the targeted project beneficiary HHs (4.8 million) will be directly benefited from the project interventions.

Without comprehensive institutional and capacity development at all levels, SHG operations will be sub-optimal, constrained by inadequate credit and weak institutional linkages for accessing credit, market and technology and over and above this, at least 25% of the SHGs will not be able to sustain their operations through the project life (15 years)

With effective institutional and capacity building, all SHGs (100%) will be sustained in their operations and their services will get expanded and diversified for longer project life (20 years) with established access to additional credit, markets and technology.

All SHGs (336,000) will have project livelihood investment funds @ Rs 36500 per SHG to support the livelihood activities. Out of this, by the end of project, 20% will be linked with multiple credit sources to augment their funds, 25% will be linked with markets, producer associations and technology support, 25% will be linked with credit as well as market and other production support and the rest 30% will operate only with the project assisted livelihood funds. Three scenarios to represent these diverse SHG situations used for quantifying the livelihood investment benefits are detailed in T-3.

Incremental benefits for the livelihood sub-projects are estimated based on similar project experiences in India, covering 5570 sample HHs from 140 villages in the project villages in Rajasthan; and 250 sample beneficiaries from individual/group/ federation based livelihoods from 40 project villages in Tamil Nadu. Both these project experiences represent two broad groups of the 12 states participating in NRLP in almost 50:50 basis. The database was supplemented with other secondary published data/documents of GOI, NABARD, RBI, and other state government project documents.

Potential project beneficiaries of NRLP will opt for the following broad livelihood categories; Livestock related (40%), Agriculture related (25%), Trade related (20%) and Service related (15%). Expected incremental benefits for these livelihood investments estimated from the ongoing project experiences in India is given in T-2.

6. Economic Analysis: The NRLP’s cost-benefit analysis is conducted for major livelihood sub-projects (livestock, agriculture, trade and services) and then aggregated for the project as a whole using the investment as the weights. Project costs and benefits are estimated at 2010 prices over a period of 15 years, using 12% as the opportunity cost of capital. Financial prices are

T-2 NRLP: Livelihood activity investments and benefits

Livelihood Sector

Livelihood Loans

Loan Size (Rs)

Benefits (Rs/year)

Livestock 40% 14610 8130 Agriculture 25% 17010 5375 Trade 20% 20275 10345 Service 15% 19760 7965 Overall Maximum 25225 12780 Minimum 11405 4620 Average 17115 7860

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adjusted to economic prices by using standard parity prices and conversion factors. For the analysis of the project as a whole, total project costs (including contingencies) were included. 7. When livelihood investments alone considered, ERR is estimated at 12.7% due to limited loan funds, market and technology related constraints and sustainability limitations in the SHG

operations. Comprehensive institution building and capacity development in the project villages, blocks and districts will generate following multiple impacts (T-3). 8. Institutional and Capacity Development Benefits: One, providing linkage to markets and access to technologies to at least 50% of the SHGs by end-project will enhance the productivity of loan investment and increase the profit margin of the livelihood activities. This will improve the ERR to 17.3%, but still limited by credit constraint to cover more beneficiaries and/or to provide adequate loan funds for optimal investment. Two, enabling SHG linkages with financial institutions to mobilize additional credit for at least 45% of the SHGs by end-project will get at least US$ 5 billion. Average investment funds with SHG will go up by Rs 475660 by end-project which will facilitate optimal funding for livelihood loans to generate maximum income impact. For instance, providing adequate credit and institutional linkages to SHGs improved the livelihood activity returns by Rs 8160 per annum as compared to SHGs facing credit and institutional constraints (T-2). Capturing such benefits improved the ERR further to 24.5%. Three, strong community institutions with need based human capacity development in the project areas will ensure sustainable service delivery to the beneficiaries by

T-3: NRLP: Project Investment Analysis Summary (2010 prices)

Sources of project benefits

ERR NPV (Rs Billion)

FRR NPV (Rs Billion)

Explanation

Livelihood Investments 12.7% 0.9 11.6% (0.5) All 336,000 SHGs operate only with the project livelihood funds; only 75% of them sustain their operations through the project life of 15 years (Scenario-1)

Institutional Impacts

Plus market, technology linkages

17.3% 9.4 16.3% 8.3 Same as Scenario-1 but with 168,000 SHGs (50%) operating with the project livelihood funds and also linked with markets and institutions (Scenario-2)

Plus financial institution linkages

24.5% 30.2 23.2% 30.1 Same as Scenario-1 but with 67,200 SHGs (20%) operating with multiple credit sources, 84,000 SHGs (25%) operating with access to markets and technology, and 84,000 SHGs (25%) have access to credit, markets and technology (Scenario-3)

Plus sustainability enhancement

27.1% 47.9 26.0% 48.8 Same as Scenario-3 Plus CDD led management with institutional and human capacity building results in; 25% increase in the number of SHGs sustaining their activities, and also extended performance life for all 336,000 SHGs by one-third.

Overall Project 26.4% 46.7 25.3% 47.4 Same as above with the inclusion of all project costs

T-4: NRLP: Summary of Sensitivity analysis

Scenarios for the project ERR NPV, Rs Billion

Base Level 26.4% 46.7 Escalation in costs Costs at 125% of the base level 21.2% 34.9 Risks in livelihood investment returns Benefits at 75% of the base level 19.8% 23.2 Sustainability of production cycles Limited to 50% beyond project period

15.8% 8.6

Cost escalation and risks in livelihood benefits combined Costs and benefits by 25% each 15.3% 11.4 Delayed implementation Benefit lagged by two years 18.1% 23.3

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Fig.2  NRLP Risk Model: Cumulative distribution of ERR 

0%

20%

40%

60%

80%

100%

10% 12% 14% 16% 18% 20% 22% 24%

prob

abili

ty

more SHGs and for longer period. This has improved ERR up to 27.1%. Including all project costs (including the contingencies) in the analysis finally resulted in the ERR of 26.4%, with a NPV of Rs 46.7 billion. FRR for the livelihood investments alone is 11.6% and for the project as a whole is 25.3%. The rate of return analysis underlines the significant impact of the investments on the institution building and capacity development, which is critical to ensure optimum utilization of credit linked with markets and institutions to generate sustainable income impact in the beneficiary HHs. Strengthening SHGs in availing other public funded social safety net services will generate multiplier effects through efficiency gains and similar such positive impacts of strengthened and empowered village institutions have not been quantified and to this extent the analysis understates the expected returns to the community led livelihood development investments. 9. Sensitivity Analysis: Sensitivity tests are carried out for changes in costs and livelihood benefits, sustainability risks in continuing investment activity cycles due to institutional failures, and implementation delays (T-4). On the cost side, increased project costs at 125% of the base costs brought down the ERR to 21.2%. Implementation delays had brought down the ERR to

18.1% and reduced the NPV by half. With 25% fall in the projected livelihood benefits, project ERR came down to 19.8%. Limiting the sustainability of livelihood activity cycles beyond project period to only 50% has brought down the ERR to just 15.8% and NPV came down by 82%. Timely implementation of the project interventions, strong community led village level institutions, integration with markets and linkage with credit sources are critical to maximize the returns to scarce project resources invested.

10. Risk Analysis considered key risk variables like cost escalation, fall in livelihood benefits due to institutional failures and implementation delays by considering jointly 30% increase in costs and 30% decrease in benefits on the ERR. The simulated ERRs ranged from 11.2 to 23.7% with a coefficient of variation of 11% (T-5). Hence, the expected ERR, estimated by the risk model at 17.5% is considered reasonably stable, since the probability of ERR reaching 15% level for the proposed project interventions is about 85%, as predicted by the risk model (Fig.2). 11. Community led management benefits: Inclusive and Participatory management of livelihood investment funds will have following positive impacts- efficiency gains due to better targeting of poor HHs and enhanced sustainability of livelihood loan cycles resulting in reduced delivery cost for the financial and other services. Aggregated for three WB funded CDD-led rural livelihood projects in India and Sri Lanka, cost of delivering community funds (1 US$) by

T-5 NRLP Summary of Risk analysis

NPV, Rs Billion IRR

Expected value 18.75 17.5% Standard deviation 6.84 2.0% Minimum (2.67) 11.2% Maximum 38.23 23.7% Coefficient of variation 0.37 0.11 Probability of negative outcome 0.3% 0.0%

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the end of the project (2010) is estimated at US$ 0.23, which was expected to come down to US $ 0.15, with the projected recycling of revolving fund, based on the experiences during the project implementation (T-6) in India and Sri Lanka. In NRLP, cost of delivering community funds (1 US$) is projected at US$ 0.11. Continuous recycling of livelihood funds coupled with the bundling of other social safety net programs with CDD-led service delivery will further maximize the efficiency gains from the project-led community institutions. 12. Youth employment benefits: Need based skill development in the project villages will find job placements for one million rural unemployed youth. Developing viable linkages for job and self employment through community led institutions are both cost efficient and cost effective and generate more jobs annually than any other public funded employment generation programmes as documented in the rural livelihood projects in Tamil Nadu, Bangla Desh and Sri Lanka (T-7). 13. Aggregated over three WB funded projects in this region, average cost of training linked with job placement is US$ 89 per job, which is about one-third of the amount spent by other public funded schemes. Overall, during the project period, about 26% of the unemployed rural youth in the project villages are provided with suitable jobs matching with their upgraded skills. Average annual growth in jobs for rural youth is 6.6% in the project villages as compared to only 1.8% in the non-project areas. 14. Poverty alleviation impacts: Average earnings for the employed youth range from US$ 56 to 122 per month. Aggregated for 12 participating states, GOI estimated weighted poverty

T-6 Cost efficiency in community funds delivery, actual and projected

Project activities Similar Projects # NRLP

Project management US$m 23.3 US$b 0.12 Institutional/Capacity development/mobilization US$m 69.0 US$b 0.66 Community Investment funds US$m 197.4 US$b 0.38 Credit mobilized through multiple sources US$m 189.6 US$b 5.00 Compulsory savings mobilized US$b 2.00 Cost of Delivering Community Funds (1 US$)

With recycling of Revolving Fund by EOP US$ 0.23 US$ 0.11$

With projected recycling of Revolving Fund US$ 0.15@ # Aggregated based on the WB funded livelihood project experiences in Tamil Nadu, Rajasthan and Sri Lanka. $ Projected for end of the project @ Revolving fund recycling ratio is projected at 1.6, based on pilot and earlier batch experiences

T-7 Skill development and employment impacts #

Rural Youth Employment Impacts Unit Project Villages

Status of Youth Unemployed youth identified Number 182141 Trained for skill development Number 61133

Youth employed 47844 Paid wage employment Number 27032 Self-employment Number 20812

Average cost of Job creation US$ 89 Average monthly earnings US$ 93

Paid wage employment US$ 122 Self-employment US$ 56

Annual growth in jobs for youth In Project villages Per cent 6.6% In Non-project villages Per cent (1.8%)

# Aggregated based on the WB funded livelihood project experiences in India, Sri Lanka and Bangla Desh (2010).

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line monthly per capita income cut-off level, adjusted for 2010 prices, is Rs 630 for rural areas. Based on this, all families with employed youth will go above poverty line, by the end of the project. For the project population as a whole the poverty incidence will come down by about 20% by the end of project. 15. Weighted average incremental benefit from livelihood investment activity for the project beneficiaries is estimated as Rs 7860 by the end of the project. And this will be realized by an estimated beneficiary HH of 3.36 million, who will be availing the loan funds through their SHGs. Incremental benefits due to the project will be sufficient to lift at least one member of the project benefited family to go above poverty line. The project interventions on rural youth job skill development and livelihood enhancement for 4.8 million poor HHs in the 40000 project villages will result in an estimated reduction in poverty by an average of about 6% annually during the project period, as compared to 2% realized at country level in the rural areas during 1994-2005. More importantly, poverty alleviation impact in the beneficiary families is both cost effective as well as permanently sustainable.

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Annex 8: Access to Financial Services INDIA: National Rural Livelihoods Project

Background 1. Access to finance, especially by the poor and vulnerable groups is a prerequisite for employment, economic growth, poverty reduction and social cohesion. This has to become an integral part of any efforts to promote inclusive growth. Further, access to finance will empower the vulnerable groups by giving them an opportunity to have a bank account, to save and invest, to insure their assets (e.g. livestock) or to partake of credit, thereby facilitating them to break the chain of poverty. Financial inclusion denotes delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. 2. Extent of Exclusion19: NSSO (2003) data reveal that 45.9 million farmer households in the country (51.4%), out of a total of 89.3 million households do not access credit, either from institutional or non-institutional sources. Amongst those who access credit, less than one-fourth (or 23%) do so from formal financial institutions including Coops and Commercial Banks. Farm households’ not accessing credit from formal sources as a proportion to total farm households is especially high at 95.91%, 81.26% and 77.59% in the North Eastern, Eastern and Central Regions respectively. Thus, apart from the fact that exclusion in general is large, it also varies widely across regions, social groups and asset holdings. The poorer the group, the greater is the exclusion.

Figure 1: Sources of Credit by Farmer Households

19 Report of the Committee on Financial Inclusion, January 2008

3%

20%

36%

26%

5%

9%

1%Co‐op. society 

Bank 

Agri./ professional money lender 

Trader 

Relatives & friends 

Doctor, lawyer etc. 

Others 

Less than one-fourth access credit from

formal financial institutions, incl. coops, MFIs &

banks.

Source: NSS (59th Round)-Report on Indebtedness of Farmer Households

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3. On average, more than 61% of population in the high poverty states20 do not have access to microfinance services neither from the Microfinance Institutions (MFIs) nor the SHGs (Bank linkage). Penetration of microfinance, measured in terms of MPI and MPPI21, both in terms of overall State population and more specifically amongst the poor within the State is very low. The penetration of microfinance ranges from less than 20 – 30 percent in States like Bihar, Madhya Pradesh and Uttar Pradesh which incidentally also have the highest malnutrition and poverty rates. In the absence of access to formal financial services the poor resort to borrowing from informal sources which subsequently leads to indebtedness as the major cause of rural poverty. Fig - 2a Microfinance Penetration Index (MPI)22 Fig – 2b Microfinance Poverty Penetration Index (MPPI)23

Source: Microfinance India- State of the Sector Report 2010 4. SHGs and MFIs are emerging as primary sources of credit for the rural poor, particularly small and marginal farmers. Per capita credit accessed by SHG and MFI clients is Rs.9652 and Rs 6928 respectively, equivalent to about 67 percent and 48 percent of the average expenditure of small and marginal farmers (Rs.14300).24 To bridge the gap, the rural poor depend on informal sources—particularly money lenders who charge usury rates (e.g., in excess of 5 percent per month)—to meet both unforeseen consumption expenses and to invest in income generation. This pushes them into indebtedness and abject poverty. There is a need to invest in institutional systems and processes which would enable the organized poor to emerge as the clients of the banking system and the microfinance sector. Again there are huge regional disparities both in the case of SHG Bank linkage (refer Fig 3) as well as MFI operations (Fig 4a and 4b), southern states like Andhra Pradesh, Kerala and Tamil Nadu outperform every other state which have made significant investment in the institutional architecture of creating creditworthy clients and have shown remarkable progress in reducing the credit deficit. 20 Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Rajasthan, Uttar Pradesh, Northeastern State (Assam). 21 MPI – ratio of the state population to the share of microfinance clients (clients of MFIs and SHG members with outstanding loans to Banks). MPPI – ratio of the state population of the poor to the share of microfinance clients in the State. 22 MPI – Penetration of microfinance measured in terms of share of the state in microfinance clients with the share of population. Share of microfinance clients include number of credit clients of MFIs and SHG members with outstanding loans to Banks. 23 MPPI – ratio of the share of the state in microfinance clients by share of the state in population of the poor. 24 National Sample Survey Organization Report No. 497 (1999).

0.00

0.50

1.00

1.50

2.00

2.50

3.00

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4.00

Bihar

Rajasthan

Madhya Pradesh

Uttar Pradesh

Assam

Jharkhand

Chhattisgarh

Maharashtra

Kerala

West Ben

gal

Karnataka

Orissa

Tamil Nadu

Andhra Pradesh

00.51

1.52

2.53

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6.57

Bihar

Rajasthan

Madhya Pradesh

Uttar Pradesh

Assam

Jharkhand

Chhattisgarh

Maharashtra

Kerala

West Ben

gal

Karnataka

Orissa

Tamil Nadu

Andhra Pradesh

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Figure 3: SHGs are not accessing credit at the rate they need

5. Savings. Demand for savings is very high. It is estimated that more than 72% of the rural families and over 90% of urban families do some form of savings. The poor save money as cash in pocket/house, SHGs and with chit funds/committees. Savings in the form of recurring deposits in banks or post office and buying insurance is very meager to non-existent. The savings of SHGs as deposits in the banks is estimated to be about US$1.35 billion, as on March 201025,26.

25 State of Microfinance in India (2009), Frances Sinha 26 Microfinance India, State of the Sector Report 2010

1.09 1.15 1.29 1.57 2.16 2.86 4.328.02

24.97

35.5

83.24

0

10

20

30

40

50

60

70

80

90

Percentage of credit needs met through formal financial sources

2%2%

21%

10%

14%

51%

Northern

Northeastern

Eastern

Central

Western

Southern

4% 2%

22%

10%

7%

55%

Northern

Northeastern

Eastern

Central

Western

Southern

NOTE: In the Eastern Region, West Bengal accounts for more than55% of outreach and loan portfolio.

Fig-4a: MFI Client Outreach Region wise Fig-4b: MFI Loan Portfolio Region wise

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The average savings per head, in SHGs, works out to less than Rs 990 (or US$21) which is about 3-4% of BPL household income level. 6. Livelihoods as a means to increasing access to financial services for the rural poor: Rural livelihood projects have created new clients for the financial markets (incl. commercial banks and MFIs) as evidenced from ongoing projects. SHGs members are major clients of MFIs in a large number of states incl. Andhra Pradesh, Rajasthan, and Tamil Nadu. Livelihood projects have encouraged various financial institutions to work with SHG and SHG Federations to deepen and expand financial outreach including insurance and pensions. In Andhra Pradesh: cumulative savings of SHG members is in excess of US$ (of which more than 27% are with Commercial Banks). Annual credit from commercial banks to self help groups (SHGs) increased from $12.2 million in 1999 to $ 1.39 billion in 2009 (about 114 times increase), and cumulatively >US$5.1,000 million, since 1999. During the commensurate period, the amount of credit from the five largest MFIs in Andhra Pradesh (ASMITHA, BASIX, SHARE, SPANDANA and SKS) increased from US$5 million in 1999 to US$2.78 billion in 2009 (more than 555.54 times increase). Similarly, in Bihar, cumulative saving of the SHG households has reached US$2.61 million which enabled their SHGs to leverage US$7.85 million from commercial banks during FY10. NRLP will also work on supporting development of products by which MFIs can work directly with SHG Federations. The market for MFIs can develop faster if they work with SHG federations. 7. Remittances and insurance. Remittances are predominantly done through informal channels (i.e. friends and relatives). Formal channels such as post-offices and banks are very small or non-existent. Similarly, access to formal insurances products is weak (an estimated 1-2% of the poor have some form of insurance protection). The proposed project will invest in building last-mile service delivery architecture, wherein the Federation of SHGs will act as a bridge/facilitator between the financial institutions and the SHG clients. Experience from other rural livelihood projects clearly demonstrates the value proposition of such partnerships between community institutions and commercial financial institutions. Experience and Learning from AP Microfinance Crisis 8. Genesis of the crisis: As can be seen in Figure 3 above, access to formal credit in Andhra Pradesh is well advanced compared to other states in India. As a result of the development of the microfinance industry, a crisis unfolded that was largely due to: i) rapid growth in microcredit for both SHGs and MFIs between 2007-08 and 2009-10; ii) large-scale client overlap among different MFIs and SHGs; and iii) over concentration of loan portfolios of MFIs in a few districts like East Godavari, West Godavari, Nalgonda, Warangal, Medak, etc. which already had ‘near saturation’ microfinance penetration rates under both SHG and MFI models. The ensuing easy availability of credit enabled some poor households (an estimated 30% of the total borrowers) to borrow from several MFIs and banks under the SHG bank linkage program. Multiple loans to same households without proper due-diligence and credit checks by lenders lead to unsustainable debt burden and financial distress for these households. With multiple loans there is always the potential for borrowers to be unable to service credit obligations and there have been a few alleged instances of some MFIs/branches engaging in unethical and non-transparent business practices in recovering the outstanding loans.

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9. Learnings from the crisis: While numerous important lessons have been highlighted through this crisis, the following are some key issues identified: i) obsession with micro “credit” rather than a more holistic approach to financial planning; ii) lack of (credit) information on borrowers lead to poor households borrowing from multiple institutions; iii) lack of supervision and enforcement of regulations, particularly on MFIs; and iv) the need for transparency as well as consumer protection. In addition, the one-size fits all financial products offered by MFIs as well as commercial banks leads to mismatch between cash-flows and commitments (incl. loan repayment). 10. Government response to crisis: The Board of Directors of the Reserve Bank of India formed a Sub-Committee of the Central Board of Directors of the Reserve Bank of India to study issues and concerns in the microfinance sector following the recent crisis. In so far as SHGs and SHG federations are concerned, the following are some of the key findings/recommendations of the Sub-Committee:

a) Key findings: i) when communities set up their own institutions, such as SHG federations and co-operatives the transaction costs are lower; ii) MFIs often use existing SHGs as the target to obtain new borrowers, this not only increases profit but also reduces their transaction costs; and iii) formation of SHGs (and JLGs) cannot be merely to share the liability rather the group is to be seen as the vehicle through which skill development and training are imparted to the members of the group.

b) Key recommendations: i) a borrower cannot be a member of more than one SHG/JLG; ii) not more than two MFIs should lend to the same borrower; iii) credit information bureaus should be established and be operational as soon as possible and all MFIs be required to become members of such bureau. All SHG member information should also be posted in the credit bureau; iv) there should be transparency in interest charges; and v) Bank lending to the Microfinance sector both through the SHG-Bank Linkage program and directly should be significantly increased and this should result in a reduction in the lending interest rates.

11. While a final decision has yet to be made on the above, it is not envisaged that neither findings nor recommendations made by the Sub-Committee would impede the ability of the NRLP to achieve its development objective. Financial Inclusion Strategy for the NRLP 12. In light of the microfinance crisis in India, various important lessons have been learned and incorporated in the design of the proposed NRLP to ensure that financial inclusion of the poor is achieved in a sustainable and responsible manner, namely: i) invest in the demand-side of financial inclusion by supporting the formation of responsible client households; and ii) partnering with WB-supported projects such as the “Scaling-up Sustainable and Responsible Microfinance,” among other WBG activities (i.e. IFC), and other related programs, to work on the supply-side of financial inclusion such as linking SHGs to microfinance and other formal financial intermediaries, creation of pro-poor financial products, linkages to licensed credit bureaus, etc. More specifically, the NRLP will focus its efforts on increasing financial inclusion of the poor by undertaking the following concrete activities: i) making financial literacy and financial planning a core aspect of institution building; ii) increasing emphasis on savings and

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savings mobilization; and iii) dedicated investments to build partnerships to enhance financial inclusion.

Demand-Side Mechanisms 13. Financial literacy and debt counseling services: The project will support financial literacy and business education programs for all clients. A cadre of trainers and community based wealth management professionals will be developed to provide face-to-face counseling services for helping the poor households choose appropriate financial products, decide investment priorities and educate them on responsible borrowing. 14. Developing robust financial management and accounting system at the SHG/federation: The NRLP will invest in strong and automated financial management and accounting system at SHG/federations through e-booking using different front-end devices, including net books and handhelds like mobile phones. Currently, e-booking with netbooks is being used by 5,000 village level federations of SHGs in Andhra Pradesh and is simultaneously being pilot tested in Bihar, Orissa and Madhya Pradesh. 15. Promoting strong savings focus in SHGs: One of the key learning from the recent microfinance crisis has been the emphasis on credit. In line with the NRLP’s approach to focus more on demand side interventions and build strong community institutions, the focus will be more in terms of promoting savings as against credit. The SHGs promoted under NRLP will be encouraged to have strong savings focus including special purpose savings for meeting specific life cycle needs and mitigate food and health shocks. Savings base of the SHGs will ensure balanced leverage of commercial bank credit which will be based on their track record on savings and internal loans systematically measured through regular rating mechanism. 16. Intensive livelihood support and value-chain development: Factoring the role of SHG/federations in the overall poverty reduction strategic framework, they will engage in range of livelihood support activities and last mile service delivery of public service for poor households. The federations will provide technical assistance to members for dairy, agriculture, food distribution and marketing of various commodities, thus enabling them to earn more from their core livelihoods. This will help link small farmers to value chains and receive better prices for their produce. Supply-Side Mechanism 12. Engaging SHG Federations as intermediaries: NRLP will seek support from SIDBI’s “Scaling-up Sustainable and Responsible Microfinance”, a WB-financed project and IFC, to a) identify products or approaches to increase access to financial products for the poor including possibly through linking SHGs formed under NRLP to responsible microfinance institutions supported under the SIDBI Project; and b) to facilitate linking up with the mainstream, licensed credit bureau. 17. Develop alternate delivery models for reaching financial services to the poor: In conjunction with the ongoing efforts by the Ministry of Finance’s Department of Financial Services and others, support where possible, branchless banking initiatives wherein the community organizations could act as Banking Correspondents/ Banking Facilitators/ Customer Service Providers for financial institutions. In addition, NRLP will partner with technology

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providers to scale-up cell-phone banking among others to increase access to financial services for the poor. 18. New financial product development: The project will invest in piloting financial products in partnership with mainstream financial institutions, which could be an alternate to the livelihood grants provided to SHGs. The new financial products could take the shape of partial risk guarantee for lending by commercial banks to SHGs and higher level institutions like Producer Groups/collectives/companies (PC). 19. Geo-mapping systems and client feedback mechanisms: The NRLP will invest in GIS overlay on SMS based client feedback mechanisms along-side effective and transparent third party verification process which could then be used as Customer Relationship Mechanism (CRM) by SHG/federations, commercial banks and MFIs, feedback mechanism by industry association and regulators, to enforce responsible microfinance practices. This will help in objectively dealing with client grievances particularly in the areas of service deficiencies, pricing disclosure, and noncompliance with the responsible microfinance code. Summary Description of Project Investments 20. The NRLP will support the formation of institutions of the poor in the poorest states of India. Key investments to be supported by the project include:

a) investing in building people’s institution and human social capital27 (i.e., SHGs28 and Federation of SHGs at village, cluster, block and district levels);

b) promoting thrift-based groups and promoting financial discipline29; c) investing in financial literacy & business planning as a core activity of SHG formation;

and d) providing grants to SHGs30 to address the livelihood needs including for consumption

purposes (such as health emergency, child education) and income generating activities such as purchase of livestock, seeds, etc.

21. Once SHGs and federations of SHGs pass certain predefined milestone/criteria, the project funds in support of livelihoods/income generating activities will flow to them as a grant for financing productive livelihood activities which will thereafter be reimbursed for further inter-loaning among the membership. While inter-loaning to members, NRLP will ensure that SHGs and federations of SHGs will charge an interest rate not less than the prevailing market rates31. NRLP will also ensure that no project funds will be used for providing any interest subsidy for any income generating or livelihood activity to the ultimate beneficiary i.e., individual SHG members. The objective of encouraging such an approach is two-fold: a) to ensure sustainability post project as SHGs and Federation of SHGs would have learned how to manage their combined savings and livelihood grants from the project to meet recurrent and

27 Human social capital includes a cadre of bookkeepers and para-professionals at the village-level, and professional staff as part of the project facilitation team which operate at the cluster level. 28 Self help groups (SHGs) consist of a group of 10 – 15 members, whereby every member of the group saves regularly and the savings is subsequently loaned out to each member on a rotating basis. 29 Financial discipline is promoted by way of promoting regular savings by members of the SHG, inter-loaning amongst the members of the group, ensuring on-time repayment, and maintaining good records or book-keeping of the financial transactions. 30 Will be routed through the SHG Federation at the village level for efficiency and effectiveness purpose 31 Prevailing interest rate is defined as interest rate charged by commercial banks on the SHG Bank linkage loans. Currently, the rate of interest varies between 10.5% to 12% depending on a) the type of institution i.e., Regional Rural Banks or Commercial Banks; and b) the Prime Lending or Base Rate of the respective commercial banks.

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emergency financing needs of members; and b) to be able to raise additional money from financial institutions by demonstrating their credit worthiness and financial and business management skills. 22. The NRLP will be investing in robust MIS platform which will help both the National and State-level Rural Livelihood Mission Management Unit (i.e., NMMU and SMMU) to monitor the overall livelihood and financial performance of the SHGs and federations.

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Annex 9: Service Delivery Convergence for Rural Livelihoods INDIA: National Rural Livelihoods Project

1. Making markets work for the poor and making public services work for the poor are two integral elements of the rural livelihood projects in India. The business model for both these elements are centered on leveraging investments made in – a) institutions of the poor namely SHGs and Federation of SHGs at the Village, Mandal/Block and District level for aggregating demand; b) human social capital i.e., cadre of grassroots workers and resource persons such as health activist, community nutrition specialist, quality controllers, insurance agents and claims management specialists among others; and c) IT infrastructure including call centers. All these combine to provide effective last mile service delivery architecture for the rural poor. Over the last 10-years:

more than 1.5 million SHG and about 4-5 million individual bank accounts have been opened which are still active accounts, and in excess of US$6 billion of credit accessed from commercial banks

more than 11million SHG members and their family have life & disability and health insurance coverage and in excess of US$100 million in terms of claims have been settled

about 4.5 million SHG members have individual co-contributory pension account, and more than 400,000 SHG members are receiving pensions

on the health front in excess of 1000,000 million SHG members have a separate health savings account and more than 2500 – 3000 villages have dedicated health risk fund to mitigate health emergency funding needs

similarly more than 3000 villages have dedicated nutrition centers to deal with malnutrition amongst pregnant & lactating mothers and children under 5-years of age

a dedicated food security intervention, which bundles the entitlements from PDS and Grain Banks apart from sourcing food grains from open market in bulk, is operated by CBOs benefiting more than 2.5 – 3 million SHG households

the CBOs also operate “bridge-schools” and have ensured high levels of enrollment of girls in the school

A. Access to Financial Services 2. The livelihood projects work on multiple fronts in terms of improving access to financial services for the poor. To start with livelihood projects build thrift and credit culture within the SHGs and in the process develops bankable/creditworthy clients for financial institutions. The project invests in building systems and processes such as bookkeeping/recordkeeping, micro credit plans or appraisal plans and community-based recovery (loan) mechanisms (CBRM) to ensure 100% repayment of loan taken from financial institutions. In addition, they invest in building cadre of paraprofessionals, who facilitate the last mile service delivery; such as book-keepers, and bank mithras32. The livelihood projects are working on crowding-in financial services by way of exploring new business models and leveraging technology such as the Banking Corrrespondent (or BC) model and using Cell-phone based technology for conducting banking and remittances services. In the BC model the Federation of SHGs at the district level is appointed as a BC/Distributor and the Village Organization acts as a Customer Service Provider

32 Bank Mithras (or “Friends of Banking): are resource person identified from within the community who are positioned in the Bank Branches. There primary role is to facilitate/assist SHGs and SHG members in carrying out bank transactions at the branch level and in the process reduce the workload of the bank staff in dealing with SHGs and SHG members who are predominantly low value and high volume clients.

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(CSP)/Agent of a Commercial Bank. Similarly, the livelihood projects are entering into new frontiers such as cell-phone based banking in partnership with technology providers like Eko, FINO and ZERO Mass. 3. On the insurance front livelihood projects have invested in building a cadre of resource persons who are trained on various aspects of insurance products and services including member enrollment, claims documentation and claims processing. In addition, livelihood projects have invested in putting in place insurance call centers and developed web-portal for all insurance transaction processing. This has ensured providing a better last mile service delivery model and in ensuring seamless claims processing wherein the turn-around-time in insurance claims settlement has been brought down from an average of 4-6 months to 3-4 weeks.

Higher Order Service Delivery: Micro-Insurance Service in AP

B. Livelihood and Access to Markets 4. Two major support provided by the livelihood projects are: a) training and capacity building and extension services: the project invests in identifying and training para-professionals/agriculture extension workers; para-veterinarians, and setting-up “farmer field schools (FFS)” managed by the CBOs. This bridges huge knowledge management gap at the village level. The FFS is the vehicle through which new agriculture technology and farm management practices are introduced such as community-managed sustainable agriculture, zero budget cropping, system of rice intensification, and seed production among others; and b) investments in creating market infrastructure to link small and marginal farmers/ producers with agri markets: key investments as part of market infrastructure include:

hardware: physical infrastructure including small rented or own building (storage facility), weighing instruments, moisture meters, sieving equipment, and drying platforms

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(for agriculture produces); and milk collection centers, and bulk milk coolers and milko testers for measuring fat & SNF content in milk.

software: trained quality controllers and book-keepers C. Health and Nutrition 5. The livelihood programs support community led efforts on the overall health and nutrition value chain. Some of the major activities that livelihood programs support are:

a) Developing a cadre of community resource persons (CRPs) and health activists (HA) (or ASHAs): the CRPs/HAs work on multiple fronts including in promoting changes in health seeking behavior; propagating preventive health issues including hygiene and sanitation issues at the community level; ensuring 100% vaccination for all pregnant & lactating mothers and children (incl. infants); and act as bridge with the formal health service delivery institutions such as ANMs, and PHCs

Health and Nutrition Value Chain

b) Nutrition Centers: given the prevalence of high levels of malnutrition amongst pregnant

& lactating mothers and children under 5-years of age, the livelihood programs are supporting community managed nutrition interventions. The nutrition intervention has the following key elements: Village-level nutrition center, which acts as a one-stop shop for delivery of RCH

services including vaccination and health routine checks and for promoting behavioral changes such as colostrums and breast feeding and caring for new borns & neo natals

Community resource person, para-nutritionist and cook to manage and operate the nutrition center

A micro-credit product offered by SHG Federation to pregnant & lactating mothers, in case they need financing to pay for the meals at the Nutrition Center

Providing access to “soft” livelihood activities to pregnant & lactating mothers

Nutrition Day Care Centre (NDCC) - An Enterprise Model in Addressing Nutrition

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The program is currently working with ICDS, whereby supplementary nutrition aspect of ICDS will be managed by the NDCCs and the early-child education and other elements of ICDS will be managed in the current form and structure.

c) Health Savings, Health Risk Fund and Health Insurance: Health expenditures have

been identified as one of the major causes of indebtedness particularly amongst the rural poor. The poor are very vulnerable to health shocks when they resort to borrowing from informal sources at usury interest rates. This leaves the poor household into virtuous cycle of debt and poverty. In order to prevent the poor resorting to borrowings from informal source the rural livelihood projects started a dedicated health savings account and health risk fund (HRF) model. The health savings account encourages the poor to save on a regular basis during good times and incentivizes health savings by linking borrowing for health needs (incl. emergencies) from the health risk fund at nominal interest rate and easy installments. The HRF is capitalized by the project and acts as a revolving fund for health. Both the health savings and health risk fund are maintained at the Village and are exclusively for the health purposes. There is community oversight and village-level health sub-committee which manages and administers these fund.

6. Similarly, the project also looks at facilitating access to government sponsored & funded health insurance schemes like the Aarogyasri in Andhra Pradesh and Rashtriya Swasthya Bima Yojana (RSBY) by the GoI. In order to better utilize the health insurance services and access the health facilities the livelihood projects have invested in developing a cadre of “Case Managers” who are positioned at the networked hospitals were the insured patients go for treatment. D. Accessing Social Safety Nets and Entitlements 7. There are various social safety net products offered by GoI targeted towards the poor such as:

a) the Aam Aadmi Bima Yojana (AABY), a life and accidental disability insurance cover, for landless agricultural laborers. This also includes scholarship for school going kids, within the insured household, in grades 9th – 12th.

b) Old age pension, pension for widow and destitute and disabled c) Public distribution system (PDS): access to food grains, fuel oil (i.e., kerosene) and

edible oil

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d) the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) 8. In addition to leveraging the institutional architecture the rural livelihood projects have made the following investments including developing new business models:

a) investments in building last mile service delivery: developing cadre of para-professionals and community resource persons and ICT/IT architecture to facilitate access and distribute payments (i.e., social payouts)

b) CBOs acting as “franchisees”, whereby the SHG Federations operate the PDS shops, act

as franchisees of insurance companies, agents of government departments/gram panchayats to identify and enroll beneficiaries among others

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Annex 10: Governance and Accountability Framework33 INDIA: National Rural Livelihoods Project

Level/

Cluster Key GAC

Vulnerabilities/Risks GAC Mechanisms and Tools Actors

Responsible Use of

Information Prevention Detection Response

National

Problems with overall quality control, coordination, and knowledge sharing

• (BP) Sevottam standards • (BP) GAC/Social Accountability Booklets (e.g. in TN)

• (BP) Agreed governance principles for project (e.g. Pancha Sutra, etc….)

• (BP) Guidelines in COM, PIM, FMM, Procurement Manual

• (HR) Code of conduct for staff • (HR) Transparent, merit-based recruitment of staff

• (TD) Disclosure guidelines

• (PM) Annual user citizen report card/ GAC barometer survey

• (PM) Annual GAC review

• (PM) Solid MIS system which tracks performance and governance

• (PM) Disclosure policy monitoring – e.g. Orissa

• (HR) Annual staff survey/focus groups

• (PB) Annual GAC Awards

• (PB) GAC innovations window

• (SP) Sanction policies • (CH) Response and follow-up procedures and timelines for grievances

• (HR) Meritocratic staff performance appraisal system

‐ National Mission Management Unit (NMMU) GAC team ‐ State GAC teams ‐ CSO partner for annual report card ‐ GAC TA provider

Annual GAC review will be basis

for updating and improving existing

GAC systems.

Challenge of managing multiple TA agencies

• (HR) Clear roles and responsibilities for staff to manage TA agencies

• (PM) Regular performance monitoring of TA providers

• (HR) Annual staff survey/focus groups

• (PB) Performance /output based contract disbursement

• (PB) Knowledge and exchange on GAC across States

‐ NMMU program managers ‐ SRLM Project Directors

TA provider performance

reviews will form the basis of whether contract extensions

will be provided

Overall monitoring and fiduciary challenge

• (CB) Training on procedures, systems, good governance for all project staff

• (BP) Service standards for key processes (incl. FM/disb.)

• (FM) Standardized guidelines in FMM and Proc. Manual

• (FM) Standard bidding criteria

• (PM) Institutionalized social audit process

• (PM) Asset verification and utilization certificate monitoring

• (CH) complaints hotline and online system

• (FM) Regular financial

• (PB) Milestone based disbursement system to SHGs and federations

• (SP) Sanction policy for fraud and corruption issues

‐ NMMU FM Manager ‐ NMMU FM team ‐ SRLM FM teams ‐ GAC TA provider

FM information will be regularly

used for assessing progress and

resolving fiduciary issues on an

ongoing basis

33 This GAC framework maps out the entire menu of GAC mechanisms (including prevention, detection, and response measures) to be used to address different GAC vulnerabilities, at different levels in the NRLP. It also specifies the actors to be involved in these and describes how the information and feedback received from these mechanisms will be compiled and used. The GAC framework will be used by both the national NRLP team and the state societies to develop their individual Governance and Accountability Action Plans (GAAPs) that will provide specific actions, actors responsible, and timelines/deadlines for GAC measures in a particular year. The national and state GAAPs will be regularly monitored and updated annually.

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Level/ Cluster

Key GAC Vulnerabilities/Risks

GAC Mechanisms and Tools Actors Responsible

Use of Information Prevention Detection Response

and technical specifications • (FM) Pilot e-procurement and e-bookkeeping program

• (TD) Disclosure Policy (following RTI guidelines)

• (TD) Project Website, notice boards

reporting • (FM) Regular VCs and exchanges for FM staff

• (FM) Random checks of books of FM records

• (FM) Federation level portfolio monitoring

• (FM) Statutory audits • (TD) Photo documentation of procured assets

‐ Social audit committees

State Project Machinery

Financial management and procurement irregularities

• (CB) Training on procedures, systems, good governance for all project staff

• (BP) Service standards for key processes (incl. FM/disb.)

• (FM) Standardized guidelines in FMM and Proc. Manual

• (FM) Standard bidding criteria and technical specifications

• (FM) Funds flow direct to communities

• (FM) Pilot e-procurement and e-bookkeeping program

• (TD) Disclosure Policy (following RTI guidelines)

• (TD) Community and project information centers with FM and procurement records

• (TD) Notice boards and websites with FM/proc info

• (PM) Institutionalized social audit process

• (PM) Asset verification and utilization certificate monitoring

• (CH) complaints hotline and online system

• (FM) Regular financial reporting

• (FM) Regular VCs and exchanges for FM staff

• (FM) Random checks of books of FM records

• (TD) Photo documentation of procured assets

• (PB) Encouragement of output based contracts

• (SP) Sanction policy for fraud and corruption issues

‐ SRLM FM units ‐ Community social audit committee ‐ GAC TA provider

FM information will be regularly

used for assessing progress and

resolving fiduciary issues on an

ongoing basis

Lack of capacity and problems of implementation in areas affected by internal conflict

• (CB) Specialized training program for areas affected by internal conflict

• (TD) Regular IEC campaigns • (TD) Community and project

• (PM) Regular meetings and VCs with FM and other staff

• (CH) Regular de-briefing of community resource

• (PB) Special consideration during performance appraisal for staff in these areas

‐ NMMU ‐ SRLM units ‐ GAC TA provider

Special needs of conflict/fragile areas will be

reviewed to devise special programs

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Level/ Cluster

Key GAC Vulnerabilities/Risks

GAC Mechanisms and Tools Actors Responsible

Use of Information Prevention Detection Response

information centers persons Challenges in staff recruitment, retention, and capacity

• (HR) Transparent and merit-based recruitment process

• (HR) Established/ known codes of conduct

• (HR) Career development and capacity building strategy for staff

• (HR) Recruitment audit and HR review

• ( HR) Annual staff survey/focus groups

• (PB) Staff performance based compensation bonuses

• (PB) Annual GAC Awards

• (HR) Performance appraisal systems

‐ NMMU ‐ SRLM ‐ HR Agency

The annual staff survey will form

the basis for addressing any

concerns of staff

Corruption and financial leakages in state project set-up

• (CB) Training on procedures, systems, good governance for all project staff

• (BP) Service standards for key processes (incl. FM/disb.)

• (FM) Standardized guidelines in FMM and Proc. Manual

• (FM) Standard bidding criteria and technical specifications

• (FM) Pilot e-procurement and e-bookkeeping program

• (TD) Disclosure Policy (following RTI guidelines)

• (TD) Project Website, notice boards with fiduciary records

• (PM) Annual GAC Barometer/User report card survey

• (PM) Institutionalized social audit process

• (PM) Asset verification and utilization certificate monitoring

• (CH) complaints hotline and online system

• (FM) Regular financial reporting

• (FM) Regular VCs and exchanges for FM staff

• (FM) Random checks of books of FM records

• (FM) Federation level portfolio monitoring

• (FM) Statutory audits • (TD) Photo documentation of procured assets

• (PB) Milestone based disbursement system to SHGs and federations

• (SP) Sanction policy for fraud and corruption issues

‐ NMMU FM team ‐ SRLM FM teams ‐ CSO partner for report card ‐ Social audit committees ‐ Grievance committees

Annual user report card survey and

social audit results will be basis for

assessing level of fiduciary risks

across states and districts.

Complaints receipt will also be analyzed by

geography and type. State teams

will use information to target random

checks and additional capacity

building.

Community Institutions

Elite capture of community institutions (SHGs, federations, etc.)

• (BP) Participatory identification of the poor process for social mobilization

• (CB) Participatory governance norms for SHGs and Federations (e.g. quotas for EPVGs); leadership rotation guidance

• (PM) MIS will record leadership details

• (PM) Institutionalized social audit

• (CH) Pilot media tools • (CH) Telephone hotline • (CH) Web/online complaints mechanism

• (PB) Annual GAC Awards

• (PB) Disbursement based on grading/rating of SHGs and federations

‐ SRLM Block teams ‐ Grievance sub- committees

Issues of elite capture will be

addressed through enhanced

facilitation for groups and

federations and greater targeting.

90

Level/ Cluster

Key GAC Vulnerabilities/Risks

GAC Mechanisms and Tools Actors Responsible

Use of Information Prevention Detection Response

• (CB) Encouraging consensus based decision-making

• (CH) Establishment of grievance sub-committees at village and federation level

• (CH) Regular de-briefing of community resource persons

GAC awardees will be used for peer to peer training and

study tours.

Exclusion/Mis-targeting of poor and vulnerable households

• (BP) Participatory identification of the poor process for social mobilization

• (CB) Participatory governance norms for SHGs and Federations

• (TD) Annual communication (IEC) campaigns

• (CH) Establishment of grievance sub-committees at village and federation level

• (PM) MIS will pick up beneficiary information

• (PM) Institutionalized social audits

• (CH) Pilot media tools • (CH) Telephone hotline • (CH) Web/online complaints mechanism

• (CH) Regular de-briefing of community resource persons

• (PB) Disbursement based on grading/rating of SHGs and federations

‐ SRLM Block teams ‐ Grievance sub- committees

Regular reviews of targeting of poor and vulnerable

groups in MIS will form basis for

future targeting efforts. Monitoring data will be used to

guide social mobilization

strategy. Political interference in management of community institutions

• (CB) Participatory governance norms for SHGs and Federations

• (TD) Regular IEC campaigns • (CH) Establishment of grievance sub-committees at village and federation level

• (PM) Annual user report card

• (PM) Institutionalized social audits

• (CH) Pilot media tools • (CH) Telephone hotline • (CH) Web/online complaints mechanism

• (CH) Regular de-briefing of community resource persons

• (PB) Disbursement based on standard grading/rating of SHGs and federations

‐ SRLM Block teams ‐ CSO partner for report card ‐ Grievance sub- committees

SRLMs will monitor grievance information and

reports of CRPs to monitor if there is

evidence of political

interference.

Corruption/poor financial management in SHGs and federations

• (BP) Micro-planning at HH and group levels

• (CB) Financial literacy program for SHGs and federations

• (TD) Notice boards and awareness materials

• (TD) Community information centers with key documents

• (BP) Micro planning systems

• (PM) Annual user report card

• (PM) SHG, Federation, and Village grading systems

• (PM) Portfolio monitoring of federations

• (PM) Institutionalized social audits

• (PB) Performance indexed disbursement to all groups

• (PB) Annual GAC Awards

‐ SRLM Block teams ‐ CSO partner for report card ‐ Social audit committees

Regular monitoring of SHGs and

federations will be a core part of the

project management and

supervision and the basis for testing

degree of institutional

91

Level/ Cluster

Key GAC Vulnerabilities/Risks

GAC Mechanisms and Tools Actors Responsible

Use of Information Prevention Detection Response

for HH and group levels • (FM) Pilot e-bookkeeping program

• (PM) Asset verification and utilization certificate monitoring

• (PM) Random checks

strengthening. All disbursements and

support will be indexed on this.

Coordination/approach towards existing/failed SHGs

• (BP) Saturation strategy and participatory identification of the poor in social mobilization

• (CB) Participatory governance norms for SHGs and Federations

• (CB) Training on procedures, systems, good governance

• (CB) Financial literacy program for SHGs and federations

• (TD) Regular IEC campaigns (CH) Establishment of grievance sub-committees at village and federation level

• (PM) SHG, Federation, and Village grading systems

• (PM) Portfolio monitoring of federations

• (PM) Institutionalized social audits

• (PM) Asset verification and utilization certificate monitoring

• (PM) Random checks • (CH) Regular debriefing with community resource persons

• (PB) Performance indexed disbursement to all groups

• (PB) Annual GAC Awards

• (CB) Study tours and exchange visits

‐ SRLM Block teams ‐ Social audit committees

The project will adopt a phased

approach towards reaching out to existing SHGs, working on the

power of demonstration

effects. MIS data on group

performance will guide social

mobilization and targeting strategies.

Safeguards issues • (BP) Clear safeguards frameworks included in PIP and OM

• (CB) Training on required safeguards guidelines and procedures

• (TD) IEC campaign to include safeguard guidelines

• (PM) Safeguards Audit • (CH) Regular debriefing with community resource persons

• (CB) Specialized safeguards follow-up training as needed

‐ SRLM Safeguards focal points

Routine environmental and social safeguards monitoring will

determine whether enhanced outreach and supervision is

required. Guidelines may also be adjusted based on needs.

Sustainability of community institutions

• (CB) Regular training and institution strengthening

• (CB) Participatory governance norms for SHGs and Federations

• (CB) Financial literacy program for community institutions

• (PM) MIS to track financial and commercial linkage achieved

• (PM) Portfolio monitoring of federations

• (CH) Regular de-briefs of community resource

• (PB) Performance based disbursement

• (PB) Annual Innovations Fairs

‐ NNMU ‐ SRLM

MIS data on financial and commercial

linkages as well as portfolio

monitoring will be used to adjust sustainability

92

Level/ Cluster

Key GAC Vulnerabilities/Risks

GAC Mechanisms and Tools Actors Responsible

Use of Information Prevention Detection Response

persons

strategy.

Codes for GAC mechanism clusters: BP = Business Processes, Guidelines, and Project Principles FM = Financial Management and Procurement (Fiduciary) Controls TD = Transparency and Disclosure mechanisms SP = Sanction Policy HR = Human Resource Policy and Codes of Conduct PB = Performance (GAC) Based Incentives CB = Capacity Building and Participatory Processes CH = Complaints Handling and Grievance Redress Mechanism PM = Project Monitoring Mechanisms

93

Annex 11: Statement of Loans and Credits INDIA: National Rural Livelihoods Project

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project ID

FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P102624 2011 IN:Kerala Local Govt. & Service Delivery

0.00 200.00 0.00 0.00 0.00 202.36 0.00 0.00

P102329 2011 IN: Rajasthan Rural Livelihoods Project

0.00 162.70 0.00 0.00 0.00 169.00 0.00 0.00

P107649 2011 IN:Karnataka State Highway Improv Pro II

350.00 0.00 0.00 0.00 0.00 350.00 0.00 0.00

P114338 2011 IN: Eastern Dedicated Freight Corridor-I

975.00 0.00 0.00 0.00 0.00 975.00 0.00 0.00

P088520 2011 IN: Biodiver Cons & Rural Livelihood 0.00 15.36 0.00 0.00 0.00 15.58 0.00 0.00

P119085 2011 IN: National Ganga River Basin Project

801.00 199.00 0.00 0.00 0.00 997.93 0.00 0.00

P108258 2011 IN: E-Delivery of Public Services 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0.00

P120836 2011 IN: Maharashtra Agric. Competitiveness

0.00 100.00 0.00 0.00 0.00 99.16 -4.66 0.00

P121515 2011 IN: NHAI Technical Assistance Project

45.00 0.00 0.00 0.00 0.00 40.39 -4.50 0.00

P122096 2011 IN: Bihar Kosi Flood Recovery Project

0.00 220.00 0.00 0.00 0.00 216.15 1.33 0.00

P124639 2011 IN: PMGSY Rural Roads Project 500.00 1,000.00 0.00 0.00 0.00 1,360.61 -150.00 0.00

P110051 2010 IN: Haryana Power System Improv Project

330.00 0.00 0.00 0.00 0.00 233.71 105.55 -95.47

P110371 2010 IN: Sustainable Urban Transport Project

105.23 0.00 0.00 0.00 0.00 97.44 34.56 0.00

P089985 2010 IN: Dam Rehabilitation & Improvement

175.00 175.00 0.00 0.00 0.00 345.97 8.00 0.00

P091031 2010 IN: CBldg for Indus Poll Mgt 25.21 38.94 0.00 0.00 0.00 60.63 -3.62 0.00

P092217 2010 IN:National Cyclone Risk Mitigation Proj

0.00 255.00 0.00 0.00 0.00 262.20 -0.31 0.00

P105990 2010 IN: West Bengal PRI 0.00 200.00 0.00 0.00 0.00 186.83 -15.85 0.00

P101650 2010 IN: A. P. RWSS 0.00 150.00 0.00 0.00 0.00 132.09 10.00 0.00

P096021 2010 IN: AP Road Sector Project 320.00 0.00 0.00 0.00 0.00 296.00 36.13 0.00

P097985 2010 IN: Integrated Coastal Zone Mgmt Project

0.00 221.97 0.00 0.00 0.00 222.35 11.01 -6.58

P100954 2010 IN: AP Water Sector Improvement Proj

450.60 0.00 0.00 0.00 0.00 407.26 -25.54 0.00

P119043 2010 IN: Microf-Scaling Up Sustnble & Resp

200.00 100.00 0.00 0.00 0.00 205.44 -40.29 0.00

P071250 2010 IN: Andhra Pradesh Municipal Development

300.00 0.00 0.00 0.00 0.00 277.90 -2.02 0.00

P102771 2010 IN: IIFCL - India Infras Finance Co Ltd

1,195.00 0.00 0.00 0.00 0.00 1,175.44 -16.57 0.00

P115566 2010 IN: POWERGRID V 1,000.00 0.00 0.00 0.00 0.00 934.13 79.47 0.00

P113028 2010 IN: Mumbai Urban Transport Project-2A

430.00 0.00 0.00 0.00 0.00 428.49 -0.43 0.00

P102549 2010 IN: Tech Engr Educ Qual Improvement II

0.00 300.00 0.00 0.00 0.00 280.04 2.20 0.00

P100101 2009 IN: Coal-Fired Generation 180.00 0.00 0.00 0.00 0.00 179.55 45.50 0.00

94

Rehabilitation

P096023 2009 IN: Orissa State Roads 250.00 0.00 0.00 0.00 0.00 229.93 56.39 0.00

P112033 2009 IN: UP Sodic III 0.00 197.00 0.00 0.00 0.00 180.67 -7.84 0.00

P102331 2009 IN: MPDPIP-II 0.00 100.00 0.00 0.00 0.00 86.29 27.07 0.00

P093478 2009 IN: Orissa Rural Livelihoods Project 0.00 82.40 0.00 0.00 0.00 75.16 17.39 0.00

P100735 2009 IN:Orissa Community Tank Management Proj

56.00 56.00 0.00 0.00 35.06 70.04 15.03 0.00

P094360 2009 IN: Ntnl VBD Control&Polio Eradication

0.00 521.00 0.00 0.00 0.00 407.24 197.68 0.00

P102547 2008 IN: Elementary Education (SSA II) 0.00 1,350.00 0.00 0.00 0.00 504.56 -243.64 152.14

P101653 2008 IN: Power System Development Project IV

1,000.00 0.00 0.00 0.00 0.00 237.35 -196.57 125.60

P095114 2008 IN: Rampur Hydropower Project 400.00 0.00 0.00 0.00 0.00 223.79 87.29 0.00

P102768 2007 IN: Stren India's Rural Credit Coops 300.00 300.00 0.00 0.00 0.00 220.18 183.04 0.00

P100789 2007 IN: AP Community Tank Management Proj

94.50 94.50 0.00 0.00 0.00 144.95 88.99 0.00

P071160 2007 IN: Karnataka Health Systems 0.00 141.83 0.00 0.00 0.00 41.23 5.46 0.00

P075060 2007 IN: RCH II 0.00 360.00 0.00 0.00 0.00 180.54 158.02 0.00

P078538 2007 IN: Third National HIV/AIDS Control Proj

0.00 250.00 0.00 0.00 0.07 122.21 107.77 0.00

P078539 2007 IN: TB II 0.00 170.00 0.00 0.00 0.00 53.68 0.06 0.00

P083187 2007 IN: Uttaranchal RWSS 0.00 120.00 0.00 0.00 0.00 70.58 53.82 41.82

P090585 2007 IN: Punjab State Roads Project 250.00 0.00 0.00 0.00 0.00 115.62 63.80 0.00

P090592 2007 IN: Punjab Rural Water Supply&Sanitation

0.00 154.00 0.00 0.00 0.23 117.47 98.53 -3.47

P090764 2007 IN: Bihar Rural Livelihoods Project 0.00 63.00 0.00 0.00 0.00 25.48 -31.51 4.51

P090768 2007 IN: TN IAM WARM 335.00 150.00 0.00 0.00 0.00 312.84 179.54 0.00

P096019 2007 IN: HP State Roads Project 220.00 0.00 0.00 0.00 0.00 145.57 75.12 0.00

P099047 2007 IN: Vocational Training 0.00 280.00 0.00 0.00 0.00 145.68 27.84 0.00

P078832 2006 IN: Karnataka Panchayats Strengthening

0.00 120.00 0.00 0.00 0.00 35.93 -43.07 0.00

P079675 2006 IN: Karn Municipal Reform 216.00 0.00 0.00 0.00 0.00 145.25 141.59 0.00

P079708 2006 IN: TN Empwr & Pov Reduction 0.00 274.00 0.00 0.00 0.00 163.96 -4.22 0.00

P083780 2006 IN: TN Urban III 300.00 0.00 0.00 0.00 0.64 110.60 111.24 33.98

P086414 2006 IN: Power System Development Project III

400.00 0.00 0.00 0.00 0.00 1.40 1.40 0.00

P093720 2006 IN: Mid-Himalayan (HP) Watersheds 0.00 60.00 0.00 0.00 0.00 14.83 6.21 0.00

P092735 2006 IN: NAIP 0.00 200.00 0.00 0.00 0.00 97.56 40.58 7.54

P084632 2005 IN: Hydrology II 104.98 0.00 0.00 0.00 0.00 64.47 64.47 54.92

P084790 2005 IN: MAHAR WSIP 325.00 0.00 0.00 0.00 0.00 115.47 107.14 0.00

P084792 2005 IN: Assam Agric Competitiveness 0.00 154.00 0.00 0.00 0.00 38.51 29.63 16.35

P094513 2005 IN: Tsunami ERC 0.00 465.00 0.00 0.00 68.99 264.88 316.41 127.77

P086518 2005 IN: SME Financing & Development 520.00 0.00 0.00 0.00 0.00 128.39 -270.61 109.39

P073370 2005 IN: Madhya Pradesh Water Sector Restruct

394.02 0.00 0.00 0.00 6.62 221.32 227.94 0.00

P073651 2005 IN: Disease Surveillance 0.00 68.00 0.00 0.00 8.31 39.22 42.01 7.88

P077977 2005 IN: Rural Roads Project 99.50 300.00 0.00 0.00 0.00 9.17 0.62 0.00

P077856 2005 IN: Lucknow-Muzaffarpur National Highway

620.00 0.00 0.00 0.00 0.00 18.37 18.37 0.00

P075058 2005 IN: TN Health Systems 0.00 228.53 0.00 0.00 20.06 103.93 -3.04 -9.48

P050655 2004 IN: Rajasthan Health Systems Dev 0.00 89.00 0.00 0.00 0.00 22.07 16.55 6.73

P078550 2004 IN: Uttar Wtrshed 0.00 77.60 0.00 0.00 0.00 14.29 -3.41 0.00

95

P050649 2003 IN: TN ROADS 398.70 0.00 0.00 0.00 0.00 29.11 -21.47 0.00

P071272 2003 AP RURAL POV REDUCTION 0.00 315.03 0.00 0.00 0.00 48.78 -136.28 33.35

P071033 2002 IN: KARN Tank Mgmt 32.00 130.90 0.00 0.00 25.07 95.42 32.96 22.08

P040610 2002 IN: RAJ WSRP 0.00 159.00 0.00 0.00 25.84 49.37 16.37 -15.03

P050668 2002 IN: MUMBAI URBAN TRANSPORT PROJECT

463.00 79.00 0.00 0.00 9.88 107.06 103.69 116.69

P050653 2002 IN: KARNATAKA RWSS II 0.00 301.60 0.00 0.00 16.40 149.64 -18.90 1.00

P050647 2002 IN: UP WSRP 0.00 149.20 0.00 0.00 40.11 22.31 33.30 -11.96

Total: 14,310.74 10,898.56 0.00 0.00 257.28 16,124.02 1,842.72 719.76

INDIA STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2005 ADPCL 39.50 7.00 0.00 0.00 0.00 0.00 0.00 0.00

2006 AHEL 0.00 5.08 0.00 0.00 0.00 5.08 0.00 0.00

2005 AP Paper Mills 35.00 5.00 0.00 0.00 25.00 5.00 0.00 0.00

2005 APIDC Biotech 0.00 4.00 0.00 0.00 0.00 2.01 0.00 0.00

2002 ATL 13.81 0.00 0.00 9.36 13.81 0.00 0.00 9.36

2003 ATL 1.00 0.00 0.00 0.00 0.68 0.00 0.00 0.00

2005 ATL 9.39 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2006 Atul Ltd 16.77 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2003 BHF 10.30 0.00 10.30 0.00 10.30 0.00 10.30 0.00

2004 BILT 0.00 0.00 15.00 0.00 0.00 0.00 15.00 0.00

2001 BTVL 0.43 3.98 0.00 0.00 0.43 3.98 0.00 0.00

2003 Balrampur 10.52 0.00 0.00 0.00 10.52 0.00 0.00 0.00

2001 Basix Ltd. 0.00 0.98 0.00 0.00 0.00 0.98 0.00 0.00

2005 Bharat Biotech 0.00 0.00 4.50 0.00 0.00 0.00 3.30 0.00

1984 Bihar Sponge 5.70 0.00 0.00 0.00 5.70 0.00 0.00 0.00

2003 CCIL 1.50 0.00 0.00 0.00 0.59 0.00 0.00 0.00

2006 CCIL 7.00 2.00 0.00 12.40 7.00 2.00 0.00 12.40

1990 CESC 4.61 0.00 0.00 0.00 4.61 0.00 0.00 0.00

1992 CESC 6.55 0.00 0.00 14.59 6.55 0.00 0.00 14.59

2004 CGL 14.38 0.00 0.00 0.00 7.38 0.00 0.00 0.00

2004 CMScomputers 0.00 10.00 2.50 0.00 0.00 0.00 0.00 0.00

2002 COSMO 2.50 0.00 0.00 0.00 2.50 0.00 0.00 0.00

2005 COSMO 0.00 3.73 0.00 0.00 0.00 3.73 0.00 0.00

2006 Chennai Water 24.78 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2003 DQEL 0.00 1.50 1.50 0.00 0.00 1.50 1.50 0.00

2005 DSCL 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00

2006 DSCL 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2005 Dabur 0.00 14.09 0.00 0.00 0.00 14.09 0.00 0.00

96

2003 Dewan 8.68 0.00 0.00 0.00 8.68 0.00 0.00 0.00

2006 Federal Bank 0.00 28.06 0.00 0.00 0.00 23.99 0.00 0.00

2001 GTF Fact 0.00 1.20 0.00 0.00 0.00 1.20 0.00 0.00

2006 GTF Fact 0.00 0.00 0.99 0.00 0.00 0.00 0.99 0.00

1994 GVK 0.00 4.83 0.00 0.00 0.00 4.83 0.00 0.00

2003 HDFC 100.00 0.00 0.00 100.00 100.00 0.00 0.00 100.00

1998 IAAF 0.00 0.47 0.00 0.00 0.00 0.30 0.00 0.00

2006 IAL 0.00 9.79 0.00 0.00 0.00 7.70 0.00 0.00

1998 IDFC 0.00 10.82 0.00 0.00 0.00 10.82 0.00 0.00

2005 IDFC 50.00 0.00 0.00 100.00 50.00 0.00 0.00 100.00

IHDC 6.94 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2006 IHDC 7.90 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2006 Indecomm 0.00 2.57 0.00 0.00 0.00 2.57 0.00 0.00

1996 India Direct Fnd 0.00 1.10 0.00 0.00 0.00 0.66 0.00 0.00

2001 Indian Seamless 6.00 0.00 0.00 0.00 6.00 0.00 0.00 0.00

2006 JK Paper 15.00 7.62 0.00 0.00 0.00 7.38 0.00 0.00

2005 K Mahindra INDIA 22.00 0.00 0.00 0.00 22.00 0.00 0.00 0.00

2005 KPIT 11.00 2.50 0.00 0.00 8.00 2.50 0.00 0.00

2003 L&T 50.00 0.00 0.00 0.00 50.00 0.00 0.00 0.00

2006 LGB 14.21 4.82 0.00 0.00 0.00 4.82 0.00 0.00

2006 Lok Fund 0.00 2.00 0.00 0.00 0.00 0.00 0.00 0.00

2002 MMFSL 7.89 0.00 7.51 0.00 7.89 0.00 7.51 0.00

2003 MSSL 0.00 2.29 0.00 0.00 0.00 2.20 0.00 0.00

2001 MahInfra 0.00 10.00 0.00 0.00 0.00 0.79 0.00 0.00

Montalvo 0.00 3.00 0.00 0.00 0.00 1.08 0.00 0.00

1996 Moser Baer 0.00 0.82 0.00 0.00 0.00 0.82 0.00 0.00

1999 Moser Baer 0.00 8.74 0.00 0.00 0.00 8.74 0.00 0.00

2000 Moser Baer 12.75 10.54 0.00 0.00 12.75 10.54 0.00 0.00

Nevis 0.00 4.00 0.00 0.00 0.00 4.00 0.00 0.00

2003 NewPath 0.00 9.31 0.00 0.00 0.00 8.31 0.00 0.00

2004 NewPath 0.00 2.79 0.00 0.00 0.00 2.49 0.00 0.00

2003 Niko Resources 24.44 0.00 0.00 0.00 24.44 0.00 0.00 0.00

2001 Orchid 0.00 0.73 0.00 0.00 0.00 0.73 0.00 0.00

1997 Owens Corning 5.92 0.00 0.00 0.00 5.92 0.00 0.00 0.00

2006 PSL Limited 15.00 4.74 0.00 0.00 0.00 4.54 0.00 0.00

2004 Powerlinks 72.98 0.00 0.00 0.00 64.16 0.00 0.00 0.00

2004 RAK India 20.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00

1995 Rain Calcining 0.00 2.29 0.00 0.00 0.00 2.29 0.00 0.00

2004 Rain Calcining 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00

2005 Ramky 3.74 10.28 0.00 0.00 0.00 0.00 0.00 0.00

2005 Ruchi Soya 0.00 9.27 0.00 0.00 0.00 6.77 0.00 0.00

2001 SBI 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1997 SREI 3.21 0.00 0.00 0.00 3.21 0.00 0.00 0.00

2000 SREI 6.50 0.00 0.00 0.00 6.50 0.00 0.00 0.00

1995 Sara Fund 0.00 3.43 0.00 0.00 0.00 3.43 0.00 0.00

2004 SeaLion 4.40 0.00 0.00 0.00 4.40 0.00 0.00 0.00

2001 Spryance 0.00 1.86 0.00 0.00 0.00 1.86 0.00 0.00

2003 Spryance 0.00 0.93 0.00 0.00 0.00 0.93 0.00 0.00

2004 Sundaram Finance 42.93 0.00 0.00 0.00 42.93 0.00 0.00 0.00

97

2000 Sundaram Home 0.00 2.18 0.00 0.00 0.00 2.18 0.00 0.00

2002 Sundaram Home 6.71 0.00 0.00 0.00 6.71 0.00 0.00 0.00

1998 TCW/ICICI 0.00 0.80 0.00 0.00 0.00 0.80 0.00 0.00

2005 TISCO 100.00 0.00 0.00 300.00 0.00 0.00 0.00 0.00

2004 UPL 15.45 0.00 0.00 0.00 15.45 0.00 0.00 0.00

1996 United Riceland 5.63 0.00 0.00 0.00 5.63 0.00 0.00 0.00

2005 United Riceland 8.50 0.00 0.00 0.00 5.00 0.00 0.00 0.00

2002 Usha Martin 0.00 0.72 0.00 0.00 0.00 0.72 0.00 0.00

2001 Vysya Bank 0.00 3.66 0.00 0.00 0.00 3.66 0.00 0.00

2005 Vysya Bank 0.00 3.51 0.00 0.00 0.00 3.51 0.00 0.00

1997 WIV 0.00 0.37 0.00 0.00 0.00 0.37 0.00 0.00

1997 Walden-Mgt India 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00

2006 iLabs Fund II 0.00 20.00 0.00 0.00 0.00 0.00 0.00 0.00

Total portfolio: 956.52 249.41 42.30 536.35 604.74 175.91 38.60 236.35

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2004 CGL 0.01 0.00 0.00 0.00

2000 APCL 0.01 0.00 0.00 0.00

2006 Atul Ltd 0.00 0.01 0.00 0.00

2001 Vysya Bank 0.00 0.00 0.00 0.00

2006 Federal Bank 0.01 0.00 0.00 0.00

2001 GI Wind Farms 0.01 0.00 0.00 0.00

2004 Ocean Sparkle 0.00 0.00 0.00 0.00

2005 Allain Duhangan 0.00 0.00 0.00 0.00

Total pending commitment: 0.04 0.01 0.00 0.00

98

Annex 12: Country at a Glance INDIA: National Rural Livelihoods Project

India at a glance 2/25/11

Lo wer-P OVER T Y and SOC IA L So uth middle-

India A sia inco me2009Population, mid-year (millions) 1,155.3 1,568 3,811GNI per capita (Atlas method, US$) 1,220 1,082 2,316GNI (Atlas method, US$ billions) 1,405.7 1,697 8,825

A verage annual gro wth, 2003-09

Population (%) 1.4 1.5 1.2Labor fo rce (%) 2.0 2.2 1.5

M o st recent est imate ( latest year available, 2003-09)

Poverty (% of population below national poverty line) .. .. ..Urban population (% of to tal population) 30 30 41Life expectancy at birth (years) 64 64 68Infant mortality (per 1,000 live births) 50 55 43Child malnutrition (% of children under 5) 44 41 25Access to an improved water source (% o f population) 88 87 87Literacy (% o f population age 15+) 63 61 80Gross primary enro llment (% of school-age population) 113 108 107 M ale 115 110 109 Female 111 105 105

KEY EC ON OM IC R A T IOS and LON G-T ER M T R EN D S

1989 1999 2008 2009

GDP (US$ billions) 292.9 450.5 1,216.0 1,377.3

Gross capital formation/GDP 23.7 26.1 34.5 36.5Exports of goods and services/GDP 7.1 11.7 23.5 19.6Gross domestic savings/GDP 22.6 24.2 29.1 32.0Gross national savings/GDP 22.2 26.1 32.1 34.9

Current account balance/GDP -2.5 -1.1 -2.4 -2.8Interest payments/GDP 1.4 0.8 0.6 0.4Total debt/GDP 25.9 22.0 18.5 17.3Total debt service/exports 29.4 15.2 8.9 4.2Present value of debt/GDP .. .. .. 15.4Present value of debt/exports .. .. .. 54.9

1989-99 1999-09 2008 2009 2009-13(average annual growth)GDP 5.7 7.5 4.9 9.1 8.7GDP per capita 3.8 6.0 3.5 7.7 ..Exports of goods and services 11.8 15.9 19.3 -6.7 9.5

ST R UC T UR E o f the EC ON OM Y

1989 1999 2008 2009(% o f GDP)Agriculture 29.2 25.0 17.6 17.8Industry 26.9 25.3 28.2 27.0 M anufacturing 17.0 14.8 15.5 14.8Services 43.8 49.7 54.2 55.3

Household final consumption expenditure 65.5 62.9 59.9 56.0General gov't final consumption expenditure 11.9 12.9 11.0 12.0Imports of goods and services 8.2 13.6 28.9 24.0

1989-99 1999-09 2008 2009(average annual growth)Agriculture 3.3 2.7 -0.1 0.4Industry 6.0 8.2 4.4 8.0 M anufacturing 6.5 8.3 4.2 8.8Services 7.4 9.2 10.1 10.1

Household final consumption expenditure 5.7 6.0 12.4 1.7General gov't final consumption expenditure 5.9 5.1 10.7 16.4Gross capital formation 7.0 12.2 -3.1 16.0Imports of goods and services 14.5 15.3 23.0 -7.3

Note: 2009 data are preliminary estimates.

This table was produced from the Development Economics LDB database.

* The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

-505

10152025

04 05 06 07 08 09

GCF GDP

Growth of capital and GDP (%)

-10

0

10

20

30

40

04 05 06 07 08 09

Exports Imports

Growth of exports and imports (%)

India

Lower-middle-income group

Development diamond*

Life expectancy

Access to improved water source

GNIpercapita

Grossprimary

enrollment

India

Lower-middle-income group

Economic ratios*

Trade

Indebtedness

Domesticsavings

Capital formation

99

India

P R IC ES and GOVER N M EN T F IN A N C E1989 1999 2008 2009

D o mest ic prices(% change)Consumer prices 4.7 3.4 9.1 12.5Implicit GDP deflator 8.4 3.8 6.7 7.5

Go vernment f inance(% o f GDP, includes current grants)Current revenue 19.2 17.3 19.9 17.4Current budget balance -3.6 -6.0 -7.4 -7.3Overall surplus/deficit .. -9.8 -8.8 -9.0

T R A D E1989 1999 2008 2009

(US$ millions)Total exports (fob) 16,955 36,822 190,000 177,452 Tea 413 1,183 .. .. Iron 1,031 916 .. .. M anufactures 11,972 29,714 108,281 103,256Total imports (cif) 24,411 55,383 296,614 303,113 Food 556 2,417 .. .. Fuel and energy 3,768 12,611 .. .. Capital goods 5,288 8,966 71,237 79,420

Export price index (2000=100) .. 81 161 165Import price index (2000=100) .. 100 182 166Terms of trade (2000=100) .. 81 89 99

B A LA N C E o f P A YM EN T S1989 1999 2008 2009

(US$ millions)Exports o f goods and services 21,201 53,251 290,679 275,955Imports o f goods and services 27,934 67,028 359,698 359,077Resource balance -6,733 -13,777 -69,019 -83,122

Net income -2,928 -3,559 -4,507 -7,403Net current transfers 2,820 12,638 44,799 52,114

Current account balance -7,380 -5,080 -28,959 -38,469

Financing items (net) 6,640 11,222 8,880 51,910Changes in net reserves 740 -6,142 20,079 -13,441

M emo :Reserves including gold (US$ millions) 3,962 38,036 351,259 375,970Conversion rate (DEC, local/US$) 16.6 43.3 45.9 47.6

EXT ER N A L D EB T and R ESOUR C E F LOWS1989 1999 2008 2009

(US$ millions)Total debt outstanding and disbursed 75,941 99,128 224,713 237,692 IBRD 6,615 7,815 7,429 8,048 IDA 12,568 18,930 25,365 25,980

Total debt service 6,961 10,098 30,936 16,150 IBRD 881 1,389 703 656 IDA 188 469 965 982

Composition of net resource flows Official grants 698 475 1,169 1,118 Official credito rs 2,497 1,048 2,683 1,886 Private creditors 2,890 -1,499 11,217 10,165 Foreign direct investment (net inflows) 252 2,169 41,169 34,577 Portfo lio equity (net inflows) 0 2,317 -15,030 21,111

World Bank program Commitments 2,987 999 1,200 6,866 Disbursements 2,011 1,460 2,083 2,378 Principal repayments 449 1,228 1,154 1,251 Net flows 1,562 232 928 1,127 Interest payments 619 630 513 386 Net transfers 942 -398 415 740

Note: This table was produced from the Development Economics LDB database. 2/25/11

-4

-3

-2

-1

0

1

2

3

03 04 05 06 07 08 09

Current account balance to GDP (%)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

03 04 05 06 07 08 09

Exports Imports

Export and import levels (US$ mill.)

02468

101214

04 05 06 07 08 09

GDP deflator CPI

Inflation (%)

A: 8,048 B: 25,980

D: 7,458

E: 22,780

F: 130,476

G: 42,950

A - IBRDB - IDA C - IMF

D - Other multilateralE - BilateralF - PrivateG - Short-term

Composition of 2009 debt (US$ mill.)