Knowledge Showcase Improving Infrastructure for Rural Productivity Through Decentralized Loan Management With 80% of the Philippines

s poor living outside its cities, and many of them living on subsistence farming, improving the value chain for rural agriculture can improve the lives of millions. A sprawling rural infrastructure development pro ect encompassing four geographically!scattered areas in southern Philippines can be better managed on the field. "ranting local government partners latitude and freedom to manage their pro ects ma#es them more efficient..

6mproved rural infrastructure, covering farm!to!mar#et roads, communal irrigation, and potable water supply8 9apacity building for devolved pro ect implementation8 and Pro ect management and coordination.

"PPR&" ! Setting 'p( %he loan too# effect in *00*. 6ts development targets were the increase of annual farm household income, reduction of poverty incidence in pro ect areas, and decline in transportation costs throughout the agricultural value chain. 6nfrastructure targets included the rehabilitation of 800 #ilometers 0#m1 of rural roads 0upgraded to (,:00 #m in *0081, upgrade of 8,000 communal irrigation systems, and installation of 300 potable water systems by *008. 6n the end, the pro ect had (+3 contract pac#ages spread over )* ;"<s in nine geographically!scattered provinces located in four regions. %he pro ect is set up to respond to local demands, where the local government units 0;"<s1 apply for pro ect funds according to their needs, and the decision on whether the funds they get are categori.ed as loans or grants depends on their income status. %he 'epartment of -inance and its subagency, the &unicipal 'evelopment -und =ffice 0&'-=1, released the funds to the ;"<s directly, employing a stratified system of grants. A 9ategory > ;"<, meant it was one of the countrys poorest, and was entitled to receive )0% of the disbursed amount as a grant. A 9ategory ( or * ;"< is among the countrys most affluent and developed8 and a ma ority of their disbursement is considered a loan. ;"<s also have to contribute e?uity financing. Decentralizing Pro)ect Management( &anaging and coordinating such scattered pro ect sites is bound to be a challenge, especially if management is centrali.ed in &anila, the head?uarters of both A'/ and the e@ecuting agency, the 'epartment of Agriculture 0'A1. %he pro ect found itself overwhelmed by administrative issues for the first si@ years. 6t too# more than two years to hire consultants, and these technical resources were concentrated in &anila, not in the ;"<s they are supposed to be helping. %he Philippine government was also rac#ing up commitment

!"LL#$%#S $ural poverty is a serious issue in the Philippines. %he rural poor comprise 80% of people living below the poverty line, and most of them are engaged in subsistence agriculture. While farmers may be persuaded to plant high value commercial commodities such as coconut, cassava, tobacco, sugarcane, rice and corn, their efforts are often severely undercut by the limited sources of water for crops. Water itself also runs the ris# of being infected with water! borne diseases, affecting health and productivity. &any farmers live in communities that have no farm!to!mar#et roads, raising the cost of transporting their produce to mar#ets. &any farmers resort to selling their crops at the farm gate, greatly affecting their profit margin. %hese issues reflect problems in the countrys agricultural value chain, the chain of factors that allow a product to reach a consumer. %he Philippines &edium!%erm 'evelopment Plan for ()))!*00+ and ()), Agriculture and -isheries &oderni.ation Act emphasi.ed the importance of pro!poor mechanisms to reali.e the potential of agricultural production and create employment and income opportunities in rural areas. Pursuing these, the Philippine "overnment secured support from the Asian 'evelopment /an# 0A'/1 through a 2((3 million loan that sought to improve infrastructure for rural productivity in /icol, 4astern 5isayas, &indanao and the island provinces of $egion 65. %he pro ect had three components7

fees, interest, and implementation charges due to the delay. /y pro ect re!appraisal in *008, only *,% of the funds had been disbursed, despite the pro ect being scheduled to end in *00,. Pro ect reorgani.ation was clearly warranted. -irst order of business was to put the technical resources where they are most needed7 the field. 9onsultants were hired directly by 'A and the ;"<s, and deployed directly to the .onal offices of 'A. -rom there, consultants went to the infrastructure sites themselves, directly supervising construction and improvements using local manpower. Promoting Self orrection( A'/ re?uires partner agencies to submit semestral progress reports. Aowever, this delayed action on critical pro ect issues, such as delin?uent contractors. With the reorgani.ation of pro ect management, A'/ and 'A scheduled monthly, and sometimes fortnightly, meetings with 'A to thresh out issues and find out entry points in which A'/ might be of service. %his allowed both agencies to discuss problems affecting the builds, and course!correct and troubleshoot whenever necessary. R#S'LTS 6n the ne@t four years 0*00)!*0(*1, the pro ect achieved )+% of its targets for access infrastructure, and (00% of both potable water supply and communal irrigation system targets. %he average rural household income increased by >)%, still under the appraised target of 80% but the average farm household income in the pro ect areas increased by roughly PhP3,,000, above the targeted PhP*8,000. %he actual reduction in farm transportation cost was ,8%, almost double the appraisal target of +0%. 6mprovements in the lives of pro ect beneficiaries can be gleaned from various waysBpeople started buying more household and farm assets, accessing higher credits, practicing better hygiene, using electricity and li?uid petroleum gas for coo#ing as opposed to charcoal and firewood, and building sturdier houses. Women, too, have started participating more in community affairs. %a#en together, these indicate more direct impacts on the households earnings. %he success of the decentrali.ation approach has also made its presence felt in subse?uent

development pro ects7 ;aos has a rural infrastructure pro ect in progress that in two years has already managed to achieve :0% of its ob ectives. %he design is also set to be implemented in 5ietnam and 9ambodia. M&*I$% +&R,"RD %he lessons of the e@periment have been illuminating. "ranting local government partners latitude and freedom to manage their pro ects ma#es them more efficient. Co does deploying consultants early D the *,!month delay in loan effectiveness also affected the hiring and deploying consultants for the original loan rollout. %his wasted time and money, as well as eliminated the possibility for additional productivity for the ;"<s affected. Pro ect planning should also consider a systematic geographical rollout. A focus on developing one or two regions with potential growth areas manages pro ect and travel costs, consultant deployment, and implementation monitoring. Policies should also be drafted for the creation of specific agribusiness .ones that recogni.e what the farmers of a region are suited for D sugarcane farmers have speciali.ed #nowledge, and forcing them to cultivate rice will inhibit their productivity. Weather and climate conditions should also be factored into pro ect planning. -or instance, in the Philippines, the rainy season generally brings typhoons. 9onstruction must be scheduled for the dry season, while paperwor# and planning are scheduled during wet months. ;"< management is also #ey D creating a system by which low!performing or corrupt ;"<s are penali.ed by deprioriti.ing them from future support could ensure that their focus on development isnt dissipated. %he Philippine infrastructure for rural productivity pro ect, and the subse?uent pro ects modelled after it, prove that there are rewards to giving government partners a chance to claim ownership of their development initiatives.

Related Lin-s Cource lin# for the Philippine Philippine 6nfrastructure for $ural Productivity 4nhancement Cector Pro ect7 http7EEwww.adb.orgEpro ectsE30::*!0(3Emain

Knowledge contri.utor /ui &inh "iap 0buigmFadb.org1 is a natural resources and agricultural economist for A'/s Coutheast Asia 'epartment. Ae is the mission leader for the Philippine 6nfrastructure for $ural Productivity 4nhancement Cector Pro ect, as well as similar demand!driven, decentrali.ed infrastructure pro ects in ;aos, 5ietnam and 9ambodia.