Increasing Creditworthiness of the Poor by Strengthening GAC Mechanisms:

Case of Andhra Pradesh Rural Poverty Reduction Project, India

Parmesh ShahOpen GAC Council Meeting

April 21, 2009

SHGs SHGs

1098 Sub-District Level Federations

22 District Level

Federations

35,525 VillageOrganizations

SHGs

Institutional Structure: CBO Federations

APRPRP: Context

Participation: 10.1 million members; 850,000 SHGs, Investments: WB - $336 Million;

Public & Private: $4.8 Billion Expansion: • South Asia Poverty Alleviation Program (SAPAP): 1995-2000 - 3 districts• APDPIP: 2000-2006 – 6 districts• APRPRP: 2003-2009 - 22 districts (full coverage) 850,671

SHGs

10.1 million members

• Institution Building and Social Capital Development

• Development of Financial Services for the Poor

• Livelihoods Promotion and Expansion through Private Sector Partnerships

• Leveraging Information and Communication Technologies for Enhancing Livelihoods

• Reducing Vulnerability, Promoting Social Action and Improving Local Governance

• Developing Innovative Franchise Model to Provide Insurance Services to the Rural Poor

Key Investments in the Project

Institutional Design: Outcome Based GAC Interventions

Incentivize

Define minimumG&A Standards

Feedback

Investments into Systems and Capacity

Good Governance Improved Outcomes

Improved Quality of Service Delivery

Feedback

Benchmark

Measure & Triangulate

Improved Accountability

Strengthened Institutions Increased Creditworthiness

GAC Risk Mitigation: The APRPRP WayRisks Measures Introduced in Program GAC Area

Elite CaptureLeadership rotation with fixed terms; Decision making through consensus; Performance ratings based on adherence to 5 cardinal principles

Governance

Poor management Performance rating; Community monitoring and auditing; Intensive training and sensitization; Asset photo documentation

Financial Management

Supplier Collusion Procurement committees at CBO level; Audited records by Chartered Accounts

Procurement

Poor Grievance Redress

Monitoring sub-committees at the VO, MS, ZS levels; Call centers

Grievance Redress/

Complaints

Poorly Targeted Funds

Micro-planning; Participatory identification of poor; Funds disbursed publicly

Transparency/Access to

Information

GAC in APRPRP: Lessons LearntGood Governance = Good Outcomes

• Institutionalize transparency, democratize information

• Triangulate through performance, transaction and social audits to change behavior

• Build in standards, benchmarks and incentives

• Improved G&A systems reduce risk perceptions for institutions of the poor attracting other private and public sector investments

• Build a culture of good governance beyond Bank projects– Social auditors audited $500 Million in NREGA expenditure; $0.5 Million

returned by corrupt officials; multiplier deterrent effect

• Accountable and well governed grassroots institutions takes facilitation, investments, time and patience

Catalyzing Investments through a Good Governance Ecosystem

Institutional Architecture Based on Principles of Good Governance(Transparency, Accountability and Participation)

Private SectorWorld Bank

$336 Million

Government of Andhra Pradesh

$398 MillionCommercial Banks

$4.8 Billion

154% Increase in HH Income (2000-2006)

8.1 Million People Insured

Credit Flow from Banks to Communities: $4.8 Billion

Cumulative Savings: $770 Million

Increasing Credit Worthiness of the Poor,Building Identity and Legitimacy of Poor People’s Institutions

98.5% safe deliveries; No low birth weight

among women who attended the nutrition center.

THANK YOU

Five Cardinal PrinciplesFive Cardinal Principles

Weekly Weekly

MeetingsMeetings

Weekly Weekly SavingsSavings

Good Governance

Good Governance

Regular Regular RepaymentRepayment

Regular Regular RepaymentRepayment

Internal Internal LendingLending

Healthy Book Healthy Book Keeping Keeping