'We learn much from our work in India'

Interview with Fawzi Hamad Al Sultan, President, International Fund for Agricultural Development.

The International Fund for Agricultural Development (IFAD) was established as a specialised agency of the United Nations in 1977 through a resolution adopted by the 1974 World Food Conference. The objective was to establish a Fund "to finance agricultura l development projects primarily for food production in developing countries". The IFAD, with its headquarters at Rome, has a specific mandate: to combat poverty and hunger by helping the rural poor in the poorest regions of the world. The Fund has the a mbitious target - one that it shares with other multilateral lending institutions - of reducing the proportion of the extremely poor in the world by half, by 2015.

The IFAD is not a relief agency, nor is it a commerical organisation like the International Monetary Fund (IMF) or the World Bank. Most of its lending is at highly concessional rates for long tenures. The majority of its beneficiaries are countries that belong to the very low income category. The Fund's resources come from voluntary contributions made by member-states and also from loan repayments and income from investments. So far the IFAD has financed 548 projects in 114 countries for a total commitm ent of approximately $6.8 billion.

In 1999, the IFAD launched an in-depth study of rural poverty and came up with a report highlighting the regional variations in the causes and manifestations of rural poverty. The report found that landlessness was the prime cause of poverty in Asia, whe reas in North Africa the poorest were members of farming households with insufficient land or water resources. Increasing rural unemployment was another cause. In Latin America and in the Caribbean, the landless and the near-landless are the fastest grow ing categories of rural poor. The IFAD is currently fashioning strategies that will address the specific needs of each region so as to optimise the utilisation of its resources.

A study on the effectiveness of 38 projects supported by the IFAD revealed that there were substantial improvements in the income and standard of living of the beneficiaries. This was facilitated mainly by improved technologies - that is, access to bette r irrigation and improved seeds - and, more important, access to rural credit. In fact, the IFAD found that credit was critical for an increase in the household incomes of cash-crop growers and micro-entrepreneurs. One important finding that emerged from the study was that mere targeting, however accurate, would not by itself improve the lives of the poorest and that beneficiaries must take an active part in the decision-making. It also found that environmental awareness played a key role in the success of a project.

Since 1979, the IFAD has invested about $400 million in India through 15 loans. The projects aim at increasing public participation in anti-poverty initiatives, strengthening grassroots institutions and increasing the access of the poor to resources, inc luding financial services. Initially, the projects' focus was on the irrigation sector, but since the late 1980s, it has shifted to tribal development, women's development and rural credit.

Fawzi Hamad Al Sultan took over as President of the IFAD in February 1993, after having served the World Bank in several capacities. He was Executive Director of World Bank for nine years, from 1984 to 1993. He is a Kuwaiti national with a Master' s degree in Economics from Yale University, with specialisation in International Finance and Economic Administration. Al Sultan was in New Delhi in November to discuss India's contribution to the Fifth Replenishment of IFAD resources. India is the IFAD's second largest customer. Excerpts from an interview he gave Sudha Mahalingam:

What prompted the setting up of the IFAD?

During the World Food Programme meet in 1974, the need for a specialised agency to meet the needs of the rural poor came into focus. We found that investments in agriculture were not taking place to the desired extent. A dedicated agency that would focus on this key area was necessary because poverty poses a challenge - a moral, social and economic challenge - to society and hence the IFAD was set up to address this need. While organisations like the UNDP (United Nations Development Programme) target de velopment projects of all kinds, we concentrate only on the rural poor.

Do you compete with other multilateral agencies like the World Bank, the UNDP or the Asian Development bank (ADB) in your programmes?

We are essentially complementary. Other agencies like the World Bank and the ADB finance larger infrastructure projects, while ... our role has been to support secondary projects. In Tamil Nadu, we financed a Women's Development Programme, which was late r replicated in six States because of its success. We start a programme and then the other agencies take it up. When we look for technical assistance, we turn to the UNDP, or we coordinate with the World Food Programme. Our advantage has been that we foc us on a very narrow field and remain consistent. Our expertise is focussed. Right now we are reaching out to 12 million people a year. In about 15 years we have reached over 150 million people. That I think is a pretty good share. Resources by themselves don't amount to much. How they are used, what policies are framed by the governments concerned, and so on also matter.

Do you have any control over the policies of these governments?

As a group we do. With a fair degree of coordination, we are able to sit with the governments, talk to them and tell them that these are the policies you need to adopt, this is the evidence, and so on. We have had several rounds of dialogue with many of the governments we have been lending to. There is no government which does not want to see fewer poor people. So, if they find something that works, they get persuaded into putting in place policies that will help them achieve this objective.

Does your funding also come with conditionalities like those of the World Bank, for instance?

We don't have the kind of conditionalities that the large institutions have. While ours is not a relief agency, neither is it a commercial organisation. We are a development organisation and we lend about 70 per cent at less than 1 per cent interest for up to 30 years and there is a huge grant element in the loans. Another 20 per cent is at the middle rate and even the top rate is much lower than the market rates. But like the World Bank, we lend only to governments. Even NGOs (non-governmental organis ations) are funded through the medium of national governments. Occasionally we do support NGOs directly, but that's not the norm.

The World Bank President was in India recently to "stock-take" as to why disbursements are not picking up. In the case of India, the Bank has committed, but undisbursed, funds of over $8 billion. Its net lending to India is also negative. Do you have similar problems?

No, we don't. The funds may be disbursed over a three-, four-, or five-year period for each project, but there are no undisbursed funds. The repayments are also satisfactory. And our net lending is not negative.

During the last 23 years of your operations, have you tracked and monitored systematically the economic status of the beneficiaries of your programmes? What are your findings?

We do have evidence of improvement in the status of the target beneficiaries - some of it hard evidence. But the reason why you do not get more hard evidence is that countries do not keep track of progress. They disburse the funds to NGOs, but there is n o system to monitor constantly the implementation of the projects.

The other reason is that we may fund investments, but certain things have to be done by the governments, and unless they put in place an enabling policy structure you cannot expect significant improvements. What we are trying to develop now is to put in place a monitoring system in the beneficiary countries. It is a long process and people need to be trained. But there are certain indicators that are useful in such an assessment - like increase in production, certain macro indicators, etc. The feedback from these indicators shows that there is a positive impact on the target population.

Macro indicators may not reflect improvement in the individual's economic status. Mere growth without distributive justice may not be a good indicator.

That's right. That's why we look at factors like household prosperity, children's education, and if the people are happy. But I agree that we lack the wherewithal to measure the impact. We are trying to put in place a system for the purpose. There are in dicators like nutrition, which the community will have to measure and give us a feedback on. But then there are other indicators that are readily visible. The bottomline is, if the household is reasonably well looked after, if the children are being educ ated, then you know it has been working.

Could you tell us about your success with micro-credit in Bangladesh?

We were among the very early supporters of the Grameen Bank projects. Since then, we have learnt the concept of micro-credit. These were very poor people who had no regular income, no security - no bank would have ever considered lending to them . But th ese were the people who need credit the most. Some way had to be found to reach out to these people. Grameen Banks did just that. Now about 30 per cent of our lending is in the forms of micro-credit and rural finance. In India we work through rural banks , because there is already a structure, a network reaching out to these people, but there are some countries where you have to adopt a different approach because there are no village banks there. In fact we have had to deal with very varied situations - where settlements are scattered, for instance. We tried to link up a few of them. The concept is the same but it has to be adapted to the situation.

The brochure of the IFAD says that investments are one of its main sources of finance. What kind of investments does it mean?

Our investments are basically in the international markets. But this is more to use the money well while it is waiting to be disbursed. When we commit a loan, it is normally disbursed over a seven-year period. During this time, we keep the money invested . In fact, a third of our revenues come from such investments.

How does India figure in the IFAD's scheme of things?

India is a very important country for us. We are learning so much from the work we do here. So much innovation is going on in the different States. The types of intervention in different States teach us so much about what needs to be done and how it is t o be done. Apart from our existing projects, we are also looking at northeastern India where we believe there is great scope for bettering the lives of the rural poor. India is the second largest beneficiary of our funds. I don't think we shall be able t o reach any kind of development target if we leave India and China out of our programmes.

1. Maharashtra Rural Credit Project: It began in 1993, covering Chandrapur, Nanded, Yavatmal and Pune districts. It involved the participation of commercial banks in self-help groups. Of its 91,250 beneficiaries, 55 per cent are women. The project demonstrated that lending to the rural poor could be "demand-driven".

2. Tamil Nadu Women's Development Project (1990-1998): Recruited 27 NGOs to work with women self-help groups. Provided micro-credit to women to acquire livestock, and also for handicrafts and small-scale trading. Over 1,08,300 women in eight distr icts were covered. As many as 68,800 loans were granted on market terms by 108 branches of the Indian Bank. Women availing themselves of the schemes became more independent and confident and acquired a better say in household decision-making.

3. Andhra Pradesh Tribal Development Project: Started in 1991, co-financed by the Government of the Netherlands and the U.N. Population Fund (UNFPA). Integrated Tribal Development Agencies in Seethampeta, Parvatipuram, Pederu and Rampachodavaram. Project aimed at introducing innovative agricultural practices that would make land more productive while protecting the soil with appropriate soil conservation measures. There are 63,370 households as beneficiaries.