Proposed Loan and Grant to the Republic of Indonesia for the Youth Entrepreneurship and Employment Support Services Programme

Transcription

1 Document: EB 2018/124/R.26 Agenda: 7(d)(ii)(b) Date: 14 August 2018 Distribution: Public Original: English E President s report Proposed Loan and Grant to the Republic of Indonesia for the Youth Entrepreneurship and Employment Support Services Programme Note to Executive Board representatives Focal points: Technical questions: Ron Hartman Country Director Asia and the Pacific Division Tel: r.hartman@ifad.org Dispatch of documentation: Deirdre McGrenra Chief Governing Bodies Tel.: gb@ifad.org Sarah Hessel Programme Officer Tel.: s.hessel@ifad.org Executive Board 124 th Session Rome, September 2018 For: Approval

2 Contents Abbreviations and acronyms Map of the programme area Financing summary Recommendation for approval 1 I. Strategic context and rationale 1 A. Country and rural development and poverty context 1 B. Rationale and alignment with government priorities and RB-COSOP 1 II. Programme description 2 A. Programme area and target group 2 B. Programme development objective 3 C. Components/outcomes 3 III. Programme implementation 5 A. Approach 5 B. Organizational framework 5 C. Planning, monitoring and evaluation, and learning and knowledge management 5 D. Financial management, procurement and governance 6 E. Supervision 6 IV. Programme costs, financing, and benefits 7 A. Programme costs 7 B. Programme financing 7 C. Summary benefit and economic analysis 8 D. Sustainability 8 E. Risk identification and mitigation 9 V. Corporate considerations 9 A. Compliance with IFAD policies 9 B. Alignment and harmonization 9 C. Innovations and scaling up 10 D. Policy engagement 10 VI. Legal instruments and authority 10 VII. Recommendation 11 ii iii iv Appendices I. Negotiated financing agreement (to be tabled at the session) II. Logical framework i

3 Abbreviations and acronyms BDS FFR M&E NPMU OJK PLUTs SME TVET YESS business development services Financing Facility for Remittances monitoring and evaluation national programme management unit Financial Services Authority (Otoritas Jasa Keuangan) Centres for Integrated Business Services (Pusat Layanan Usaha Terpadu) small and medium-sized enterprises technical and vocational education and training Youth Entrepreneurship and Employment Support Services Programme ii

4 Map of the programme area iii

5 Republic of Indonesia Youth Entrepreneurship and Employment Support Services Programme (YESS) Financing summary Initiating institution: Borrower: Executing agency: Total programme cost: Amount of IFAD loan: Amount of IFAD grant: Terms of IFAD loan: Cofinancier(s): Amount of cofinancing: Terms of cofinancing: Contribution of borrower: Contribution of beneficiaries: Appraising institution: Cooperating institution: Ministry of Agriculture Republic of Indonesia Ministry of Agriculture US$68.59 million US$55.3 million US$2 million Ordinary Financing Facility for Remittances through European Union supplementary funds US$105,000 Grant US$7.98 million US$3.21 million IFAD IFAD iv

6 Recommendation for approval The Executive Board is invited to approve the recommendation for the proposed financing to the Republic of Indonesia for the Youth Entrepreneurship and Employment Support Services Programme (YESS), as contained in paragraph 47. Proposed loan and grant to the Republic of Indonesia for the Youth Entrepreneurship and Employment Support Services Programme I. Strategic context and rationale A. Country and rural development and poverty context 1. Indonesia is a fast-growing middle-income country with a population of 261 million. This population is one of the youngest in the world, with a median age of 28 years, and is increasingly urbanized, due to the combined effects of demographic growth and rural-urban migration, which is particularly strong among rural youth. More than half of those under 30 move to urban areas in pursuit of education and employment opportunities. 2. Steady economic growth has contributed to significant poverty reduction. Since 2012, however, poverty reduction has slowed down and since 2014 has remained more or less steady at around 11 per cent. Furthermore, another 29 per cent of the population remain vulnerable to falling into poverty, leaving more than 100 million Indonesians in poverty or at risk of it. Farming households are 3.5 times more likely to be poor than non-farming households. 3. Agriculture is the main source of income for one third of the population. However, the low proportion of formal employment, low earnings and limited career opportunities contribute to the agriculture sector having the lowest rate of youth participation. According to the Ministry of Agriculture, in 2011 almost 80 per cent of the nation s farmers were aged 45 or older, compared to an average age of 40 just three years earlier. Young women and men who want to engage in agriculture face challenges of limited access to land, technical and financial services, vulnerability to environmental risks and price volatility, lack of market information and limited engagement with value chains. Overall, youth unemployment in Indonesia is higher than the regional average. B. Rationale and alignment with government priorities and RB-COSOP 4. The Government envisions an equitable and sustainable transformation of rural areas, with food security and access to nutritious food for 100 per cent of the population, to support long-term economic growth and social welfare. Yet today, rural youth in particular are struggling to build their livelihoods through agriculture and within the broader rural economy. Growing cities and the rising urban middle class call for a transformation of the rural sector into a modern, youth-led and growth-oriented economy, not only to meet the increased and diversified food needs through a new generation of farmers, but also to secure the provision of other services and products for urban markets. 5. Further trends in social development create new economic opportunities for rural youth: (i) transformation of food systems and increased demand for diversified food; (ii) increasing connectivity through information and communication technologies, even in the remote areas of the archipelago; (iii) enhanced engagement by the private sector in agriculture; and (iv) increased migrant 1

7 remittances, offering untapped potential for investment in the rural economy. Rural youth in Indonesia have not yet succeeded in leveraging these opportunities. 6. In Indonesia, IFAD has a proven track record in empowering disadvantaged groups, strengthening rural enterprises and developing inclusive value chains. To date IFAD interventions have benefited 13 million people throughout the country. Since first investing in Indonesia in 1980, the Fund has developed 17 loan projects with a total investment of US$1,692 million, of which US$550 million financed by IFAD. As highlighted in the RB-COSOP , IFAD in Indonesia focuses on piloting innovative approaches in agricultural and rural development that can be scaled up through national systems and can inform policy and strengthen national capacities in order to respond to the needs of a growing lower-middle-income country. 7. Theory of change. The Youth Entrepreneurship and Employment Support Services Programme (YESS) is based on the theory that the creation of opportunities for rural youth to build their economic livelihood through entrepreneurship or employment will increase their engagement in the rural sector, contribute to sustainable rural transformation, and develop a new generation of farmers, agripreneurs and rural supply chain drivers. It considers that in order to attract young people to participate effectively in the programme, there is a need for innovation leveraging technology, modernizing agricultural practices and creating incentives for young people. The design also recognizes that not all young people can be successful entrepreneurs, and that the agricultural sector does not have the absorptive capacity to provide meaningful opportunities for all young people, particularly when modernizing. The design therefore envisages providing alternative pathways for creating both on-farm and off-farm entrepreneurship and employment opportunities within the broader rural economy. II. Programme description A. Programme area and target group 8. Programme area. The YESS will focus most of its activities on four target provinces: West Java, East Java, South Kalimantan and South Sulawesi. These were selected by the Government of Indonesia in consultation with IFAD, based on the following: population density; poverty and near-poverty indicators; agricultural and market growth potential; youth outmigration and immigration; and the presence of relevant institutions. Within these provinces, YESS activities will focus on 15 selected districts. In addition to these local-level activities, a smaller set of YESS interventions will benefit rural youth nationwide to improve the image and social recognition of agriculture, including through web-based information services. 9. Target group. The main target group will include poor and vulnerable youth (young people below the national poverty line), as well as young people who remain vulnerable to poverty. The YESS will leverage entrepreneurs from agri-based small and medium-sized enterprises (SMEs) and larger enterprises to broaden the range of options available to youth to make a living in rural areas. 10. While poverty defines the main types within the target group, the latter is diverse. Different age groups, social factors and current occupations will have an important influence on how target subgroups are best supported. Different development pathways have been identified, taking these factors into consideration. A Gender Equality and Social Inclusion Strategy will be prepared at the programme s outset, with a view to ensuring that the main target group as well as women, the disabled and indigenous people access the programme s benefits. 2

8 B. Programme development objective 11. The programme s goal is that young men and women contribute to rural transformation and inclusive rural growth. The development objective is that rural young men and women are engaged in the agri-based sector through employment and entrepreneurship. C. Components/outcomes 12. YESS activities are clustered within four components: 13. Component 1: Rural youth transition to work. The expected outcome is that young people acquire work readiness skills that enable them to take advantage of employment and business opportunities, by: (i) assisting institutions of technical and vocational education and training (TVET) for agriculture to better prepare students and trainees to enter the labour market or to develop a business in the rural sector; 1 and (ii) complementing TVET institutions by developing certified apprenticeship programmes in the agriculture-based sector, targeting young people coming out of the education system. Subcomponent 1.1: Linking education and training to jobs. Activities include; (i) capacity-building for agricultural TVET institutions; (ii) career orientation; (iii) agricultural job fairs; and (iv) enhancing the Agriculture Entrepreneurs Programme of the Ministry of Agriculture. Subcomponent 1.2: Apprenticeship. Activities will expand the national apprenticeship system to cover selected occupations in the agriculture-based sector, in partnership with the Ministry of Manpower. Once piloted successfully in the programme districts, the schemes will be rolled out through this ministry s regular systems and budget, and will become available to young people throughout Indonesia. 14. Component 2: Rural youth entrepreneurship. The expected outcome is that young small farmers, rural entrepreneurs and SMEs access markets and services in the target value chains and subsectors, through facilitation of access by rural youth to business development and intermediation services suited to their specific needs, by partnering with district-based business development service (BDS) providers such as the Centres for Integrated Business Services (Pusat Layanan Usaha Terpadu [PLUTs]) established by the Ministry of Cooperatives and SMEs. Subcomponent 2.1: Capacity-building for PLUTs and BDS providers: Activities include: (i) preparation of business models adapted to local potential and to varying socio-economic profiles; (ii) strengthening the capacities of PLUTs/BDS providers to better accommodate the needs of young agricultural entrepreneurs and mainstream youth into the activities of the PLUTs; (iii) setting up a district multi-stakeholder forum; and (iv) facilitating the increased outreach of PLUTs through a gender-balanced outreach and mobilization network in every district, to ensure inclusive access to business development services for young people with different profiles and interests, including those who are poorer and less skilled, as well as the households of migrants and returnees. Subcomponent 2.2: Services to young farmers and entrepreneurs. Activities include: (i) delivering start-up training packages; (ii) developing a network of mentors to accompany entrepreneurs; and (iii) promoting business linkages and partnerships between young farmers/entrepreneurs and other value chain stakeholders. 1 Rural sector/economy and/or agriculture-based sector are intended to cover the range of activities described in Section I.B, i.e. crop and livestock production, agribusiness, the environmental sector and rural services, and activities that can make rural life more appealing to young people. 3

9 15. Component 3: Investing for rural youth. The expected outcome is that young small farmers, rural entrepreneurs, and migrants and their families have access to sustainable and adequate financial products and services to finance their businesses, by: providing financial education to the target group; extending capacity-building to financial institutions; and setting up a financial mechanism, called bridge financing, in partnership with financial institutions. Subcomponent 3.1: Capacity-building for financial inclusion. Activities will focus on: (i) enhancing the financial literacy of rural youth; and (ii) building the capacities of partnering banks to provide adapted services to young people. Subcomponent 3.2: Access to finance - bridge financing. Activities will facilitate access to finance through the establishment and implementation of a bridge financing mechanism to finance the businesses of project participants. This will also enable them to build a positive credit history with their bank and after reimbursing their bridge financing to further finance the growth of their businesses by accessing finance extended by financial institutions, as regular bankable clients. 16. Component 4: Enabling environment for rural youth. The expected outcome is that an enabling policy and institutional/media environment facilitate youth engagement in the rural sector, by: (i) bringing together relevant stakeholders in the target provinces to collectively promote youth employment and entrepreneurship; (ii) improving the image and social recognition of agriculture among young people; and (iii) promoting a favourable policy and institutional environment to facilitate inclusive youth engagement in the rural sector. Subcomponent 4.1: Partnership-building. Activities will build coalitions of private and public stakeholders at the provincial level to collectively promote youth employment and entrepreneurship, so as to: (i) sensitize participants to the diversity of youth profiles and challenges in the province, including poorer youth; (ii) facilitate the mainstreaming of a rural youth agenda within the regular programmes of activities of platform participants; (iii) create new opportunities for youth employment and entrepreneurship, in line with the provincial potential and the diversity of youth challenges; and (iv) facilitate YESS implementation. Subcomponent 4.2: Rural youth mobilization. Activities under this subcomponent will be implemented at the national level, working towards: (i) improving the image and social recognition of agriculture among young people; (ii) providing information and knowledge supporting rural youth engagement; (iii) connecting young farmers/entrepreneurs with the community and helpful partners; and (iv) disseminating good practices and successful models, including those developed under YESS auspices. This will be achieved through a Youth Ambassadors programme and the Digital Rural Youth Online Platform. Subcomponent 4.3: Policies for rural youth. Activities will aim at promoting a favourable policy and institutional environment to facilitate inclusive youth engagement in the rural sector. They will include: (i) policy studies; (ii) a programme for youth participation in policy dialogue; and (iii) knowledge-sharing, mainstreaming and scaling up. 4

10 III. A. Programme implementation Approach 17. Considering the many barriers to rural youth employment and business development, the programme adopts a multidimensional and integrated approach to addressing key supply and demand constraints. This is in close alignment with the emerging recommendations of IFAD s youth action plan (to be presented to IFAD s Executive Board in September 2018) and the G20 working paper on Rural Youth Employment. 18. The implementation framework reflects the programme s multi-sector nature and ensures that activities will build on existing organizations and initiatives in order to consolidate them, rather than creating new, project-based structures. This is aimed at supporting sustainability and ensuring that project innovations can be mainstreamed into the country s institutional framework, replicated and scaled up. B. Organizational framework 19. The Ministry of Agriculture will assume overall leadership for the programme. Partnerships with relevant government institutions will be established to support the Ministry in addressing areas that are directly related to YESS objectives but that do not fall under its primary mandate. 20. The organizational structure will be as follows: A national steering committee will provide overall guidance and oversight, complemented by a youth advisory committee; The Ministry of Agriculture is the executing agency, and its Agency for Agricultural Extension and Human Resource Development will have overall responsibility for programme implementation; A national programme management unit (NPMU) within the Agency for Agricultural Extension and Human Resource Development will lead on programme implementation, supported by provincial and district programme implementation units; Multi-stakeholder platforms at the provincial and district levels will provide a venue for relevant partners to agree on objectives, review progress and seek measures for addressing challenges. 21. The implementing partners are: the Ministry of Cooperatives and SMEs, for business development services at district level; the Indonesia Financial Services Authority (Otoritas Jasa Keuangan [OJK]) for implementing activities related to financial inclusion; the Ministry of Manpower, for the apprenticeship scheme; and TVET institutions. C. Planning, monitoring and evaluation, and learning and knowledge management 22. Planning. Planning processes and schedules within YESS will be harmonized with the mainstream planning process of the Government of Indonesia at central, district and village level. The NPMU, in consultation with the districts, will prepare the annual workplan and budget and submit it to IFAD for review and no objection, in close consultation with the programme steering committee. 23. Monitoring and evaluation (M&E), knowledge management and learning. The YESS will have an integrated M&E and knowledge management system, aimed at achieving three main objectives: (i) guiding programme implementation; (ii) sharing knowledge and scaling up good practices; and (iii) supporting economic decisions and policymaking. 5

11 24. A web-based management information system will track and regularly update gender-disaggregated financial and technical data on programme outputs and outcomes, lessons learned and good practices, and will generate weekly dashboards showing progress on key outputs and objectives, profiling DPIU and the provincial project implementation unit performance and showing progress towards meeting key programme indicators. The management information system will be utilized to support an evidence-based knowledge-sharing and policy dialogue. D. Financial management, procurement and governance 25. Financial management. The programme will be aligned to national systems for accounting and reporting, standards, fund flows, asset management, audit and procurement. The NPMU will be responsible for financial management and will be staffed adequately. NPMU responsibilities will include: (i) preparing the annual workplan and budget; (ii) treasury forecasting and annual disbursement projections; (iii) collecting and consolidating expenditure reports from districts and provinces; (iv) timely preparation and submission of withdrawal applications to IFAD; (v) interim financial reporting; (vi) preparation of annual financial statements in line with international accounting standards; (vii) coordination of audit processes; and (viii) procurement. 26. A financial management assessment of the programme, prepared in accordance with IFAD s guidelines, found overall a financial management risk rated as medium. This risk will be mitigated by a range of measures that include: hiring of external financial management expertise at the NPMU level; development of manuals; interim financial reporting; strengthened internal audit arrangements; and regular training, in addition to intensive support and training at start-up to promote good governance. 27. Flow of funds. The loan will be on-budget and on-treasury. IFAD funds will flow through Indonesia s treasury single account to designated accounts denominated in United States dollars. Disbursements for programme expenditures will be made via the treasury system through local treasury offices (Kantor Pelayanan Perbendaharaan Negara) and reported from that level through the Government s financial management information system for public finances (Sistem Perbendaharaan dan Anggaran Negara). 28. Procurement will be undertaken in accordance with national procurement rules and regulations, to the extent that these are consistent with the IFAD s Project Procurement Guidelines. The NPMU will prepare an integrated framework for good governance. 29. Audit. The programme s accounts will be audited annually by the supreme audit authority. The settlement of audit observations will be monitored by the executing agency, the auditors and IFAD, through supervisory processes. In addition, the YESS programme will be included within the workplan of the Ministry of Agriculture s internal audit unit, with reporting made available to IFAD supervision missions. 30. Governance. Anti-corruption measures will include: (i) creating and sustaining a corruption-free environment for programme activities; (ii) complying with internal procedures and controls in following international best practice standards; (iii) complying with the requirements of IFAD s Policy on Preventing Fraud and Corruption in its Activities and Operations (2005, as amended to date); (iv) ensuring that a good governance framework is implemented promptly; and (v) establishing a complaints mechanism for programme beneficiaries and other stakeholders. 31. Other measures reflected in project design to ensure transparency include the following: (i) an internal code of conduct to be signed by all NPMU, the provincial project implementation unit and DPIU staff and consultants, and a code of business 6

12 ethics to be signed by all partners and beneficiaries of YESS activities; (ii) IFAD s direct supervision process will specifically address fiduciary compliance and implementation of the project framework for transparency and publicity; (iii) project stakeholders will be directly involved in the programming, implementation and M&E of YESS activities; (iv) and multi-stakeholder platforms will provide a forum for raising issues affecting value chain development, including transparency. E. Supervision 32. The programme will be directly supervised by IFAD. Joint supervision missions will be conducted by IFAD and the Government of Indonesia, complemented by regular implementation support missions. Continuous supervision, follow-up and implementation support will be provided by the IFAD subregional office. IV. Programme costs, financing and benefits A. Programme costs 33. Total programme costs, including physical and price contingencies, duties and taxes, are estimated at US$68.59 million over a six-year implementation period. Programme investments are organized into four components: (i) rural youth transition to work (9.1 per cent of costs); (ii) rural youth entrepreneurship (41.6 per cent); (iii) investing for rural youth (33.4 per cent); and (iv) enabling environments for rural youth (15.8 per cent of costs). Table 1 Programme costs by component and financier (Thousands of United States dollars) IFAD Loan IFAD grant FFR Beneficiaries Government Total Components Amount % Amount % Amount % Amount % Amount % Amount % 1. Rural youth transition to work Rural youth entrepreneurship Investing for rural youth Enabling environments for rural youth Total B. Programme financing 34. Total IFAD financing comes to US$57.3 million, 83.5 per cent of total programme costs. Of this amount, US$55.3 million will be financed through a loan to the Government of Indonesia, and US$2 million through a grant to the Government of Indonesia for policy dialogue, South-South collaboration and implementation of specific activities targeted at SME development and innovative finance, expected to be subcontracted to the United Nations Development Programme (UNDP). In addition, US$105,000 will be provided through IFAD s Financing Facility for Remittances (FFR) for international technical assistance, funded by European Union supplementary funds. 35. The Government of Indonesia will contribute US$7.98 million (11.6 per cent), consisting of in-kind contribution of staff and tax exemptions. Beneficiaries will contribute an estimated US$3.21 million (4.7 per cent). 7

13 Table 2 Programme costs by expenditure category and financier (Thousands of United States dollars) IFAD Loan IFAD grant FFR Beneficiaries Government Total Amount % Amount % Amount % Amount % Amount % Amount % A. Technical assistance and consultancies B. Grants and subsidies C. Goods and services D. Training, workshops and meetings E. Credit F. Salaries and allowances G. Operating costs Total C. Summary benefit and economic analysis 36. The Programme will directly benefit a total of 320,000 households. Benefits will directly accrue to farmers, women and youth through activities aimed at: (i) diversifying productive activities and sources of income, (ii) boosting agriculture through an increase in production and productivity; (iii) improved access to markets; (iv) increased access to finance for on-farm and off-farm productivity; (v) promoting entrepreneurship and adding value to agricultural produce; (vi) increasing formal employment in on-farm and off-farm activities; (vii) increasing access to land and production inputs; and (viii) augmented tax revenues as a result of an increased volume of taxable production. 37. Economic analysis. The programme is expected to be a financially and economically viable investment for the economy as a whole. The economic net present value of the programme s net benefit stream, discounted at 9 per cent, is Indonesian Rupiah 2,483 billion (approximately US$183.8 million), producing an economic internal rate of return of 32.7 per cent for the base-case scenario. D. Sustainability 38. All activities have been designed to establish sustainable mechanisms for continued access and benefits for rural youth following programme completion. The main features of the programme approach that will contribute to this include: (i) implementation set-up building on existing organizations and initiatives; (ii) financial sustainability through the development of sound business plans, with incentives to support start-up, the capacity-building of key players, linkages to performing financial service providers and the promotion of district-based business mentors; (iii) outreach and mobilization networks ensuring youth representation and participation; (iv) capacity-building; (v) partnerships with and integration of the private sector to support youth access to employment, youth entrepreneurship and the financing of agribusinesses; and (vi) generation of a knowledge basis for sustaining programme achievements, as well as for promoting further public and private sector engagement in scaling up the most promising and commercially viable mechanisms. 8

14 E. Risk identification and mitigation Risks Variable Government of Indonesia implementation capacity Management challenge deriving from an extended geographical area Limited interest of private-sector partners and financial institutions in engaging in rural areas or the agriculturebased sector, because of the risks Drop-out and failure of entrepreneurs Elite capture of programme benefits Limited access to land Limited coordination between ministries involved Limited effectiveness of PLUTs Limited coordination within MSPs Weak financial management performance, impacting on project execution and disbursement V. Corporate considerations A. Mitigation measures Complementing implementation teams with qualified and experienced consultants; bringing in relevant partners for specific activities; performance-based allocation of project resources at district level; continuous supervision and implementation support by the IFAD country office. Adopting phased project implementation; use of ICT tools to facilitate communication and project monitoring; close monitoring of performance with performance dashboards; regular capacity-building. Provide incentives for agribusiness and financial providers to de-risk support to youth Entrepreneurs will: be directed to types of businesses suited to their assets and skill profiles; get support for developing sustainable business plans; access adapted BDS services, including support for developing business linkages; access financial services along the graduation path; and have access to mentorship services. Self-targeting, social mobilization teams Provincial land tenure reviews; development of tenure models and relevant business opportunities Clear incentives to enhance coordination (including budgetary coordination) integrated into memoranda of understanding; high-level backing for the programme Phasing of project activities will allow for capacity-building; close performance monitoring Clear alignment with partners strategies and establishment of an incentive and commitment matrix will support effective functioning of the MSPs. Strengthened financial management staff capacity at NPMU level; quarterly financial reporting; intensive implementation support at start-up Compliance with IFAD policies 39. The YESS is fully aligned with the goals and objectives of IFAD s Strategic Framework , the RB-COSOP and relevant IFAD policies and strategies including with regard to: targeting and gender mainstreaming; public-private-producer partnerships; inclusive rural finance; the private sector; and indigenous people. In particular, the programme takes into account the issues to be mainstreamed within the Eleventh Replenishment of IFAD's Resources (IFAD11): youth, gender, nutrition and climate change. B. Alignment and harmonization 40. The YESS will work towards the objectives of key national policies, and in addition will integrate into the global development framework, the Sustainable Development Goals and key IFAD priorities in Indonesia, including: (i) the Medium-Term Development Plan ; (ii) the national youth action plan; (iii) the Sustainable Development Goals; (iv) the United Nations Partnership for Development Framework in Indonesia, and the newly formed Inter-Agency 9

15 Network on Youth Development; (v) the Leaders Declaration at the G20 Initiative for Rural Youth Employment; and (vi) IFAD11 commitments, particularly those related to the empowerment of rural youth. 41. There is a strong potential to develop linkages with ongoing IFAD-supported initiatives and also programmes by in-country development partners (including the German Corporation for International Cooperation, the UNDP, the Asian Development Bank, the International Labour Organization and the Netherlands). As much as possible, the programme will be linking to national, provincial and village-level initiatives to facilitate sustainability and scaling up. C. Innovations and scaling up 42. Innovation and scaling up are central to the YESS approach. The programme will adopt an innovation agenda to attract young people into agriculture and related spheres of business. Given the high priority and need for youth engagement in the rural sector, the programme is expected to encounter conducive political and institutional spaces and supportive drivers, ranging from the government to the private sector to most importantly young people themselves. Key elements to facilitate scaling up will include: (i) a solid M&E and knowledge management system allowing the tracking of achievements, documenting approaches and outcomes, and disseminating them to relevant stakeholders; (ii) implementation through existing organizations that will mainstream successful instruments into their regular systems and operations; (iii) involvement of key policymakers at national and provincial levels in implementation and through evidence-based policy dialogue; (iv) multi-stakeholder partnerships; (v) strengthening national and provincial capacities; and (vi) empowering youth as champions for scaling up. D. Policy engagement 43. The YESS will contribute to enhancing the policy and regulatory environment in key priority areas required to promote inclusive youth engagement in the agriculture-based sector, building on policy gaps identified through the provincial mapping studies, YESS project operations and recommendations made by district forums, provincial platforms and the Youth Advisory Board. The YESS will finance policy studies and multi-stakeholder policy workshops to support the preparation of policy studies or to present and discuss the results of such studies. The YESS will also contribute to the Policy Lab for Inclusive Food and Agriculture Policies, recently established in the Ministry of National Development Planning with IFAD support. VI. Legal instruments and authority 44. A programme financing agreement between the Republic of Indonesia and IFAD will constitute the legal instrument for extending the proposed financing to the borrower/recipient. A copy of the negotiated financing agreement will be tabled at the session. 45. The Republic of Indonesia is empowered under its laws to receive financing from IFAD. 46. I am satisfied that the proposed financing will comply with the Agreement Establishing IFAD and the Policies and Criteria for IFAD Financing. 10

16 VII. Recommendation 47. I recommend that the Executive Board approve the proposed financing in terms of the following resolution: RESOLVED: that the Fund shall provide a loan on ordinary terms to the Republic of Indonesia in an amount equivalent to fifty-five million three hundred thousand United States dollars (US$55,300,000), and upon such terms and conditions as shall be substantially in accordance with the terms and conditions presented herein. RESOLVED FURTHER: that the Fund shall provide a grant to the Republic of Indonesia in an amount equivalent to two million United States dollars (US$2,000,000), and upon such terms and conditions as shall be substantially in accordance with the terms and conditions presented herein. Gilbert F. Houngbo President 11

17 Appendix I EB 2018/124/R.26 Negotiated financing agreement (To be tabled at the session.) 1

18 Logical framework 2 Results Hierarchy Outreach 3 Goal Young men and women contribute to rural transformation and inclusive rural growth Outcome 1 Young people take advantage of employment and business opportunities Outcome 2 Young small farmers, rural entrepreneurs and SMEs access markets and services in the target value chains and sub-sectors Indicators 2 Name Number of persons receiving services promoted or supported by the programme (CI1) Corresponding number of households reached (CI1a) Number of beneficiaries (corresponding number of HH/HH members) receiving services promoted by YESS that report an increase in HH asset ownership index 2 Number of young women and men finding employment in the agribased sector Percentage of supported young farmers/entrepreneurs reporting increase in earnings (CI2.2.2) Number of enterprises operating profitably 3 years after establishment Base line Mid-Term (early PY3) 127, ,672 End Target 320, , ,508 (287,262) Means of Verification Source Frequency Responsibility Programme reports Programme survey 0 8,000 32,500 School reports Graduate tracer studies MoM reports 0 0 3,100 5,800 33,800 50,600 PLUT reports Annual Mid-term review and programme end Semi-annual reports Semi-annual reports NPMU with MoA, MoCSME, OJK and service providers NPMU with MoA and MoCSME NPMU with MoA, partner schools and MoM NPMU with MoA, MoCSME and PLUTs Assumptions (A) / Risks (R) Continued GoI commitment to promote youth employment and youth entrepreneurship (National Youth Action Plan) Young people enrol in agriculture schools Farms/enterprises interested in receiving apprentices Agribusiness interested in partnering with young people 2 Indicators will be disaggregated by gender and age where relevant. 3 Following the recommendation of the external reviewers and considering that this programme aims at reaching young people who likely have not yet started their own household, the outreach indicator 3 on estimated total number of people reached has not been included. 4 Will be established based on the baseline study to be carried out at project start. Appendix II EB 2018/124/R.26

19 3 Results Hierarchy Outcome 3 Young women and men have increased access to inclusive financial services Outcome 4 Supportive policy, institutional and media environment for youth engagement in the rural economy Outputs for Outcome 1 Outputs for Outcome 2 Outputs for Outcome 3 Outputs for Outcome 4 Indicators 2 Name Number of rural youth accessing financial services (CI1.2.5) Number of policy/regulatory instruments proposed to policy makers for approval, ratification or amendment (CI Policy 3) Number of TVET institutions running programmes facilitating youth transition to work Number of rural enterprises accessing BDS (CI 2.1.1) Number of persons trained in business management (CI 2.1.2) Number of persons accessing financial services (CI 1.1.5) Number of persons trained in financial literacy (CI 1.17) Number of functioning multistakeholder platforms supported (CI Policy 2) Number of visitors of Rural Youth Online Platform Base line 2 Means of Verification Mid-Term End (early PY3) Target Source Frequency Responsibility +4, ,250 Reports Semiannual NPMU with OJK from and service financial reports provider institutions Reports from program me partners ,800 4, ,000 50, ,000/ month 62,500 62, , , ,000/ month PMU reports and policy document s Annual NPMU with programme partners Assumptions (A) / Risks (R) Partner banks willing to adapt their products and services to the agriculture-based sector Continued GoI commitment to promote youth employment and youth entrepreneurship Appendix II EB 2018/124/R.26