Draft Organisation Strategy for Denmark s engagement with International Fund for Agricultural Development (IFAD)

Transcription

1 Draft Organisation Strategy for Denmark s engagement with International Fund for Agricultural Development (IFAD) Strategic Question The Organisation Strategy for IFAD 10 is a light model, which seeks to narrow Danish engagement with IFAD to a few strategic areas. The present strategy proposes to focus the Danish dialogue with the organisation on institutional effectiveness and efficiency, gender and engagement of the private sector. The selection of priority areas in this Organisational Strategy has been guided by lessons learned from IFAD9, an analysis of challenges and opportunities, and the required need of reducing priority areas to three including the mandatory area of effectiveness and efficiency. With the strong Danish track record in dialogues on gender, with the expressed wish of IFAD to continue having Denmark as a donor focused on gender equality, and with the continued need for ensuring gender mainstreaming and transformation within the IFAD10 operations, It is argued, that Denmark can contribute most efficiently in dialogues on private sector approaches. In seeking effective synergies between IFAD operations and Danish development cooperation this is thought to be feasible in relation to private sector approaches to agricultural development. The programme Committee is invited to confirm this choice. 2. Objective This Strategy for the cooperation between Denmark and International Fund for Agricultural Development (IFAD) forms the basis for the Danish contributions to IFAD, and it is the central platform for Denmark s dialogue and partnership with IFAD. It sets up Danish priorities for IFAD s performance within the overall framework established by IFAD s own strategy. In addition, it outlines specific goals and results vis-à-vis IFAD that Denmark will pursue in its cooperation with the organisation. Denmark will work closely with likeminded countries towards the achievement of results through its efforts to pursue specific goals and priorities. This Strategy is valid for the 10th Replenishment of IFAD s resources covering the period (IFAD10), and it constitutes the fifth strategy for collaboration between IFAD and Denmark. During Denmark will work for IFAD to: Increase its operational and institutional effectiveness and efficiency Further enhance and maintain its performance on gender equality and women s empowerment Systematically engage private sector actors and approaches to ensure increased job creation and economic growth benefitting the rural poor 3. The organisation Mission and Mandate IFAD is a specialized agency of the United Nations and an International Financial Institution (IFI) established in 1977 with a mission to mobilize resources for agriculture and rural development in developing countries. Its goal is to empower poor rural women and men to achieve higher incomes and improved food security and nutrition in consideration of sustainable management of natural resources and adaptation to climate change. In partnership with local governments IFAD provides finance for investment and technical assistance to agriculture and rural development projects with the perspective that smallholder agriculture can act as both a crucial source of rural income and nutrition and a vector for rural economic growth. IFAD takes a marketoriented approach to rural development and its projects seek to incorporate smallholders into inclusive local, regional and global value chain development. IFAD has in the IFAD10 strategy committed to pulling 80 million people out of poverty. IFAD s strategic goals, objectives and principles of engagement are laid out in its Strategic Framework The tenth IFAD Strategic Framework, a ten year outlook from , is still under development, 1

2 and will be based upon the Strategic Vision for IFAD : Enabling inclusive and sustainable rural Transformation, approved together with the IFAD10 commitment matrix and results management framework, during the IFAD10 consultation. IFAD s mandate is underpinned by five strategic objectives: A natural resource and economic asset base for poor rural women and men that is more resilient to climate change, environmental degradation and market transformation; Access for poor rural women and men to services to reduce poverty, improve nutrition, raise incomes and build resilience in a changing environment; Poor rural women and men and their organisations able to manage profitable, sustainable and resilient farm and non-farm enterprises or take advantage of decent work opportunities; Poor rural women and men and their organisations able to influence policies and institutions that affect their livelihoods; and Enabling institutional and policy environments to support agricultural production and the full range of related non-farm activities. Reform agenda for IFAD10 IFAD is continuously developing in order to deliver on it mission and mandate. IFAD is committed to a reform agenda for IFAD In relation to IFAD's strategic vision and role, IFAD commits to further include a systematic focus on innovation, knowledge management and scaling up for improved sustainability of results. This will be done within the overall focus on social and economic empowerment and strengthened resilience and risk management capacity of poor rural people. IFAD s reform commitments for IFAD10 include the following major areas of action: Implement a scaling-up process, based on a series of tools, partnerships including with other IFIs, guidance notes and training events, plus a new operational framework where all projects shall include an approach for innovation and scaling-up. Integration and mainstreaming of climate adaption including climate smart agriculture and sustainable management of natural resources in all operations. Ensuring integration of improved nutritional impact in all country programs and in an increasing number of projects. Develop tools for enhanced integration of nutritional impacts. Expand and strengthen private-sector participation through the public-private-producer partnership mechanism and value chain financing. Establish best practices in private sector collaboration; develop new financial instruments and business practices to leverage increased private sector co-financing. Further implement gender equality mainstreaming and gender transformation in all operations. Enhance country-level policy engagement in all country programs, and enhance international policy engagement through defining cooperate level priorities and increased sharing of IFAD experience. Increase South-South cooperation as part of approach in country programs. Develop and implement more differentiated country approaches taking into account the very different situations in different countries of operation including fragile states, low and middle income countries. Further enhancing the IFAD operations delivery model and tools in order to improve impact of operations, including further building of implementation partnership, further country presence, strengthening of activities for additional co-financing, and improvement of internal efficiency in a range of IFAD operational procedures. Enhancing financial management and risk assessment capacity to ensure better oversight, more effective directing of funds to operations, and increased opportunities for additional resource mobilization. Structure and Governance IFAD headquarters in Rome is responsible for the management and administration of the organisation. Light country presence is increasingly part of IFAD s institutional arrangement through establishment of smaller country offices in selected countries co-housed with other UN and international agencies. IFAD now has offices in 40 countries and expect to have 10 further country offices. IFAD has some 540 employees with 450 in Rome and 90 at country level. IFAD s highest decision-making body is its Governing Council, formed by representatives of IFAD s 176 member states. The Council meets annually to take decisions on such matters as approval of new membership, appointment of the President of IFAD, approval of the administrative budget and adoption of broad policies, criteria and regulations. The Executive Board is the Fund's second main Governing Body, consisting of 18 elected members and 18 alternate members from three categories (A- OECD countries, B- OPEC countries 2

3 and C (1,2,3) developing countries) who are elected for a three-year term. The Board meets three times a year to review IFAD s programme of work; approve its projects, programmes and grants; and make recommendations to the Governing Council concerning policy, budget, membership and staffing within the Fund. The President of IFAD chairs the Executive Board. Under the leadership of its Governing Council and Executive Board IFAD is managed by the Office of the President and Vice-President, with departments covering financial operations, corporate services, strategy and knowledge management, and programme management. The current governance structure i.e. the list system is under review and Denmark participates in the Governance Working Group, which will propose changes especially the balance between membership and voting rights. Denmark is a member of the board until 2018 under list A. Investments and financial resources IFAD s financing is drawn from several sources, incl. investment incomes, loan reflows and contributions from Member States. Contributions come through three-year replenishment contributions (un-earmarked) by its Member States, and through supplementary funds (earmarked) by Member States, as well as co-financing by other partners, including non-member countries, other IFI s, civil society and private sector actors. Most of IFAD s operations involve a significant level of co-financing with an average ratio of 1:1,23 between IFAD and co-financing resources provided in 322 projects since Of 15,9 billion USD invested since 2004, 43 pct. was from IFAD, 33 pct. from domestic co-financing, and 23 pct. from other international co-financing. IFAD has a strong buy in from many member countries with 107 members out of 173 actually contributing financially to the Fund in the current IFAD9 replenishment period. Pledges for IFAD10 from some recipient countries have been substantial. The IFAD budget covers an agreed work programme over a 3-year replenishment period. Currently, IFAD9 ( ) has a total of loans and grants of USD 2.95 billion, with 44 pct. going to Sub-Saharan Africa. About 95 pct. of IFAD s resources are provided as loans on concessional terms or investment grants to developing countries in accordance with a performance based allocation system, which takes into consideration the number of poor people in rural areas in a given country, poverty levels and performance. The remaining 5 pct. are given as targeted regional and global grants for technical assistance, research and innovation, farmer organizations, etc. The new replenishment period for IFAD10 is IFAD works in Sub-Saharan Africa, Asia and Pacific, Latin America and the Caribbean, Near East, North Africa, Central Asia and Eastern Europe region and currently funds 271 approved projects in 120 countries. Accountability and risk management IFAD operates a management for development results approach that includes several systems aimed at contributing to improved results-based management as well as a responsible financial management. These include a results measurement framework tied to the replenishment period, a results and impact management system, the performance based allocation system for a transparent and predictable allocation of IFAD s resources and annual reporting on development effectiveness. IFAD s Independent Office of Evaluation (IOE) constitutes an important part of these systems assessing the impact of IFAD-funded activities. As an independent office, IOE has its own budget and reports directly to the Executive Board, not management of IFAD. IFAD s oversight functions are managed by the Office of Audit and Oversight that includes an Investigation Section handling all investigative matters and a Sanctions Committee. IFAD also has an Ethics Office and an actively implemented anti-corruption policy. IFAD has adopted an enterprise risk management framework, integrating financial risk management into planning and budgeting by means of a corporate planning and performance system. 4. Relevance and Justification of Future Danish Support Relevance to the international development framework Through its hybrid nature (UN agency and IFI) and specialized mandate, IFAD plays a crucial niche role in the international financial and development framework. IFAD, in partnership with implementing national and local partners, works with hard-to-reach rural communities in least developed countries, states in fragile situations and Sub-Saharan Africa. IFAD also directs investments to underserved and marginalised rural areas in many of the very diverse middle-income countries. As IFAD aims to improve food security and income of the rural poor, primarily smallholder farmers, through sustainable agriculture and commercialisation, its core mandate lies centrally within MDG1 and the proposed SDG 1 and 2 related to ending poverty and hunger and 3

4 to achievement of food security, improved nutrition and sustainable agriculture. IFAD s mandate, its focus and its experience within practical agricultural, food production and rural development provide it with a clear comparative advantage in this area. IFAD s focus on women s empowerment is in line with MDG3 and the proposed SDG 5, as rural women constitute around 60% of IFAD s target group. IFAD has a gender policy and works with increasing its focus on securing women s rights and access to critical resources and services, such as land and rural finance. IFAD targets vulnerable groups such as indigenous peoples and IFAD promotes smallholder commercialization and integration in markets and value-chains as well as sustainable and resilient agricultural development adapted to climate change also making it relevant in the achievement of MDG 7 as well as the proposed SDG 13 and 15 related to combatting climate change and sustainable management of ecosystems. IFAD s business model supports national ownership in accordance with the principles of Paris, Accra and Busan. IFAD-financed operations are implemented through national and local authorities, rural and nongovernmental organizations and the private sector. IFAD participates in strengthening the international cooperation on global challenges and international division of labour. In countries where IFAD operates it engages directly with governments and other donors in the agricultural and related sectors. IFAD plays an important advocacy role on food insecurity and rural poverty and has increased its engagement in advocacy and policy dialogues related to smallholder farmers. It collaborates with the other Rome-based UN-agencies working with food security (WFP and FAO) on policy and analytical work, and is a member and host of the UN Secretary-General s Task Force on Global Food Security. Challenges and opportunities IFAD recognises that scaling-up its operations to create more impact and better sustainability is a challenge in need of continuous attention. The sustainability at country-level and increased impact of IFAD s relatively small operations as well as increased and efficient partnerships and additional resource mobilization for smallholder agricultural development constitute challenges that IFAD is facing in the process of scaling-up. Part of these challenges is also to ensure effective innovation, learning and knowledge management. During IFAD10, IFAD will continue its important focus on scaling-up its successful work and approaches. As part of this work, IFAD will continue to improve innovation, learning and knowledge management to ensure that experiences is further used to guide operations and address the challenges of scaling-up. IFAD10 will see added strengthening of the Strategy and Knowledge Management Department. IFAD operates in many different countries where situations are very different. Being applied across these very different contexts challenges IFAD s operational model. IFAD therefore recognises the need for developing increasingly differentiated approaches for countries in fragile situations, low-income countries and middleincome countries, and IFAD10 has committed to developing such differentiated approaches. Effectiveness of IFAD is generally found to be satisfactory, whereas efficiency in IFAD operations has been found to be more of a challenge. This follows partly from having a project portfolio consisting of few projects in many countries, but this is an operational model that makes IFAD able to respond to requests from its many member states. Still, IFAD recognises the need for improving on its efficiency and thereby improving on its impact on rural poverty reduction. IFAD10 commits to address a range of aspects that will improve efficiency including improved partnerships, co-financing, country presence, human resources reform, financial management, and more efficient internal operational procedures. Engagement in policy relevant to agricultural development is also an area where IFAD has seen challenges. This applies to the country-level as well as to the international level. IFAD has, due to its relative limited country-level presence and due to its comparatively small size, not had the impact on policy development that it deserves. With IFAD s strong background in and knowledge of smallholder agriculture, engagement in the associated policy development is important. This is being addressed in IFAD10, where an added focus on engaging in policy dialogues at national and international level related to smallholder agricultural development is being promoted. IFAD is confronted with a range of financial challenges in a context where traditional donors are faced with financial constraints and increasing earmarking of funds is taking place. IFAD needs to examine the options for broadening its strategy for additional resource mobilization and is committed to do so in IFAD10. These options include: Expanding the programme of loans and grants; Sustained mobilization of core and 4

5 unrestricted complementary contributions through replenishment cycles, and; borrowing from sovereign states and state-supported institutions to leverage IFAD's resources. Options also include expanding the programme of work through supplementary funding and a more strategic and targeted approach to co-financing. Agricultural growth is widely recognized to be a precondition for a country s economic structural transformation and a powerful vehicle for poverty reduction. This growth also faces challenges in the form of delivering on global food security and improved nutritional outcomes, expanding the levels of rural employment, sustainably managing the natural resource base and remaining resilient to the effects of climate change. Agricultural growth also offers new opportunities to smallholders through expanding markets for food and environmental services, as well as creating new sources of growth and employment in diversified rural economies. It is critical to ensure that poorer rural households are able to access and benefit from these opportunities and are not further marginalized and that they are able to better manage the growing risks they face. This is the core of the work of IFAD and will be in focus in the implementation of IFAD10. With the projected increasing global demand for food, opportunities for small-scale farmers can increase, but at the same time uncertainty linked to price volatility as well as food insecurity and malnutrition as a global challenge entail risks for both producers and consumers. The needed growth in agricultural production also requires an added focus on sustainable development in the sector, which constitutes a challenge but also an opportunity for small-scale farmers. IFAD recognizes the need for promoting increased productivity based on the premise of smallholder agriculture as a business activity. IFAD s strategy for engagement with the private sector promotes publicprivate-producer partnerships through linkages between its target groups and private sector actors, primarily small and medium sized enterprises. Through a value-chain approach, IFAD aims at facilitating stronger market and processing ties for smallholder producers in order to ensure their access to agriculture-related services and inputs and increased income. Challenges are many in this endeavour, with the most prominent being to ensure that benefits from increased market linkages also reach the poorer farming households. IFAD has made important advances in this area, but IFAD s performance in this area could be further improved by strengthening current instruments and internal capacity, by developing financing opportunities for SME private sector actors in the sector and by risk analysis on value-chains. IFAD10 has a strong focus on improving performance in its private sector approach. IFAD has progressed significantly in addressing gender equality issues in their work. Addressing smallholder agricultural development in an effective way necessitates serious and tangible implementation of gender sensitive approaches. The challenge of ensuring continued focus on gender and gender mainstreaming in all IFAD operations will be addressed in IFAD10. Climate change impacts the sector and IFAD is addressing adaptation among smallholders through a specific adaptation programme. Climate smart agriculture and addressing sustainable natural resource management are directly related to climate adaptation and forms part of IFAD s initiatives to promote adaptation. The challenges of mainstreaming adaptation including climate smart agriculture and natural resource management into all IFAD operations are real, but IFAD10 clearly states the need for further mainstreaming adaptation in the work of the organisation. Addressing improved nutritional impact of IFAD projects have seen an increasing attention in the recent years. Recognising that agricultural development has to go hand in hand with improved nutritional impact if the poorest are to benefit is of central importance. Mainstreaming improved nutritional impact in IFAD operations is a challenge, but it is stressed by a number of donors and it forms part of the IFAD10 commitments. Conflict-affected states and states in fragile situations, of which a majority is placed in Africa, are the furthest away from achieving the MDGs. IFAD takes up the challenges and works in many areas in countries in fragile situations with governments committed to reach out to these areas. IFAD operates in all member states with loan and grant programmes, however, IFAD projects in weak states with high security risks are more challenging, and due to cost of operations generally have a lower efficiency. Meaningful collaboration with government in such situations can be difficult. Still, IFAD, recognising the needs of poor rural communities in such situations, commits in IFAD10 to operate in many of the fragile states and situations. 5

6 Relevance, partnership and synergies with Danish development cooperation There are strong similarities between IFAD s and Denmark s priorities as expressed both in the Right to a Better Life, the Policy on Food Security and the Danish Strategy for Natural Resources, Environment and Climate. IFAD s mandate is clearly in line with the Danish development policy s aim to fight poverty, ensure food security, promote green growth and strengthen key aspects of human rights such as the right to food, land, water and meaningful participation. In line with the Danish Strategy s human rights-based approach- HRBA- IFAD s focuses on empowering rural poor people especially women, youth and indigenous peoples, promoting social progress and inclusive and sustainable growth. IFAD s is in the process of strengthening its application of the Guiding Principles on Human Rights and Business. IFAD works to strengthen the capacity of developing country governments at all levels, supports capacity building and employs a participatory approach vis-á-vis its target groups at country level. By developing the economic and business potential of smallholder farmers, particularly via participation in the production/value chain, IFAD contributes to promoting economic empowerment at country level. IFAD s engagement on climate change adaptation and agricultural sustainability is well in line with the green growth focus on supporting growth based on sustainable management and use of natural resources. IFAD is promoting innovative technological and financial solutions in agriculture and climate as well as poor men and women s increased participation and improved access to water, land, knowledge and finance. IFAD s publicprivate- producer partnerships implemented at country level act as a catalyst for green growth and sustainable food production. IFAD is present in the majority of Danish priority countries and regions and is an important partner for Danish priorities on poverty alleviation and obtaining of MDG and SDG 1 in Sub-Saharan Africa, as currently 44 pct. of IFAD s resources are directed to this sub-region. Funding to IFAD from Denmark was in the period 2001 to 2006 in the range of DKK million a year, in the period from 2006 to 2015 it has been in the range of DKK 20 to 29 million a year with steady increase since This has been provided as unearmarked core funding. Denmark have pledged a core contribution support to IFAD10 of 100 million DKK (DKK 34 or 33 million a year), a 17,6 pct. increase compared to IFAD9. Earmarked co-financing of around DKK 17 million per year in 2016 and 2017 is planned through the Danish Neighbourhood Programme for support in Moldova and Armenia. The channels of strategic influence for Denmark in IFAD are multiple and mutually reinforcing. Denmark is an active participant in the EB, and will continue to be so during IFAD10. As EB member Denmark has been able to promote a number of strategic issues of relevance to Danish priorities. Denmark also participates in relevant working groups including the working group on governance reform. Denmark participates actively in the OECD group (List A) to monitor and discuss IFAD s performance and to formulate, coordinate and deliver joint EB statements. Through List A Denmark s strategic influence is optimized via joint messaging on corporate issues such as organisational efficiency and effectiveness, transparency and accountability. Denmark engages actively with the Nordic group though joint Nordic statements also at IFAD s annual Governing Council. IFAD offers opportunities for secondment at both junior and senior level in areas of particular Danish interest and this line of support will also be pursued strategically during IFAD10. Considering the increased focus in Danish development cooperation on promoting agricultural growth that is benefitting the rural poor especially in Sub-Saharan Africa, there are good options for synergies between the Danish priorities and the work of IFAD, including with the various Danish bilaterally supported green growth programmes, which to a large degree have a focus on many of the same agricultural growth aspects that IFAD is promoting. Lessons learning and exchange of experience is highly relevant. Also synergies clearly exists with the new Danish Agribusiness Fund, the Sustainable Value Chain and Vocational Training Challenge Fund and a range of other initiatives in the agricultural sector, where the approaches of IFAD and the Danish supported initiatives have significant common areas relevant for exchange of experience, and where the different areas supported can be mutually reinforcing. Danish support to other multilateral organisations such a WFP does also offer synergies as WFP and IFAD both have strong impact on food security and have important strategic collaboration expressed in the significant collaboration between the Rome-based organisations of WFP, FAO and IFAD. Recent evaluations IFAD has in the last decade been undergoing an important process of reform and organizational improvements focused on its strategic framework, strategic use of its workforce, improvements of the results framework, strengthening its strategic country presence, ensuring direct programme and project supervision, 6

7 improved coordination and efficiency. Several recent external evaluations underline the overall positive picture of IFAD and of the implementation of its reform process. The most recent Danish Multilateral Development Cooperation Analysis (2013) found that IFAD places itself among the ten most relevant multilateral organisations for Danish multilateral development cooperation and among the five most effective organisations. IFAD was to be found in the upper-section of the effectivenessrelevance matrix and emerges as a strong strategic partner within the Danish multilateral development cooperation. The Analysis also found that IFAD scored a best practise rating in terms of green growth, HRBA, human rights and democracy, and scored a good rating on poverty reduction and social progress. Regarding stability and protection and country level importance, IFAD due to its mandate and comparatively small size, did score relatively low. It also scored high on systems for financial responsibility, including on risk management and anticorruption, as well as in participation in the international development system. IFAD scores midrange on its ability to provide information on results and challenges as well as on including new development actors. The Analysis found that IFAD had performed in a satisfactory manner on the five priority areas in the Danish Organizational Strategy and that IFAD in the relevant Action Plan reporting documented that they delivered fully or satisfactory on all 19 out of 19 indicators. In the most recent MOPAN assessment of IFAD s organisational effectiveness (2014), IFAD is found to be fully committed to a results agenda, to have a strong strategic management in place, and to have a clear and unique mandate that is well reflected in its clear Strategic Framework. IFAD is noted for having increasingly mainstreamed cross-cutting priorities such as gender, environment, and food security and nutrition into its operations. It was further found that IFAD has implemented a number of organisational reforms to improve its effectiveness in the areas of managing for development results, quality of projects, strategic planning, innovation, efficiency and human resources. IFAD has demonstrated strong support for national and partner plans. The transparency of IFAD s performance-based resource allocation system is noted, as is the independence and quality of IFAD s Office of Evaluation. MOPAN found a steadily improved performance of IFAD in the recent years. Areas for improvement of IFAD included further implementation of resultsbased budgeting, further work on decentralising decision making closer to the countries, and improvement of institutional reporting practises to include clear assessments of IFAD contributions to development outcomes and impact. IFAD has, during IFAD9, further acted upon those areas identified for improvement. The 2014 Canadian development effectiveness review of IFAD covering the period found that IFAD had been achieving most of its development objectives and expected results, that sustainability of benefits/results were generally satisfactory, that IFAD programs were aligned and relevant to stakeholder needs, but that IFAD did face challenges in contributing to gender equality and environmental sustainability although major improvements were noted in these areas in the latter years of the period under review. Also, the review noted less positive results in terms of IFAD s efficiency, but again with actions taken by IFAD in recent years. The most recent British Multilateral Aid Review (2013-Update) found that IFAD when compared to the review of 2011 had been making progress in all areas and that IFAD was a strong partner providing good value for money. In 2011 IFAD was assessed to be amongst the best performing third of the multilateral partners. Strengths of IFAD noted by MAR were it s unique mandate being critical to reducing hunger and poverty, a good results framework and a commitment to improving delivery of results, and strong and trusted partnerships with developing countries. IFAD was noted for progress in terms of achieving sustainability of results in development countries, in terms it s use of human resources and in terms of financial management. Efficiency in delivery was an area identified for further improvement. Lessons learned The Organization Strategy for Denmark s collaboration under IFAD9 has five priority areas for focus of the dialogue, namely effectiveness and efficiency, gender, private sector, fragile states and climate change/environment. Denmark has participated actively in dialogues with IFAD on IFAD s performance in effectiveness and efficiency and in gender. Participation in dialogues in the areas of fragile states and in private sector development has also taken place, whereas limited dialogues have been undertaken within the area of environment and climate change. IFAD s recent performance, measured in reports from the Independent Office of Evaluation (Annual Report of Results and Impacts of IFAD operations, 2014) and in reports from IFAD s management (Report on 7

8 IFADs Development Effectiveness, 2014), is giving the general picture of IFAD s performance and provides an updated picture on the performance within the five priority areas for the Danish Organisation Strategy for IFAD9. Overall, in relation to the 14 indicators in the Danish organisation strategy for IFAD9, and one year before its finalisation, there are satisfactory performance on 11 indicators, adequate performance on 2 indicators and for 1 indicator on climate adaptation figures are not yet available. The reports show satisfactory ratings for project effectiveness with impacts on rural poverty scoring high, whereas ratings on efficiency are more mixed and constitute an area where improvements are still needed. Effectiveness is high for IFAD due to its direct focus on investments in projects that target agricultural and rural development for the rural poor. This means that a lot of poorer smallholders are being supported, but it does not mean that all the absolute poorest among the rural population are being reached. This is not any different from other rural transformation programmes. Progress on government ownership and aid effectiveness in its operations are also contributing to IFAD s good scores on effectiveness. Although IFAD has implemented changes and its efficiency is improving, the fact that IFAD has relatively small operations (compared to other IFI) in many countries and addresses under-served and marginalised areas with high technical assistance needs, influences the efficiency ratings of the organisation. Denmark has taken a proactive role in addressing anti-corruption measures and policies in IFAD in the bilateral and multilateral dialogues with IFAD. Ratings on gender equality show a relatively strong performance of IFAD in the latest years. The 2012 Gender Policy of IFAD has proved an important tool to boost IFAD performance in gender. The tools developed by IFAD to address gender equality at household level and in various types of investments have supported the increased performance of IFAD on gender equality. Although progress has been achieved in gender equality work in IFAD, there is need to maintain momentum, apply further mainstreaming of gender in all areas, and ensure that gender equality is further applied in such areas as private sector entrepreneur development and fragile states scenarios. Denmark is clearly recognised as having played an important role in promoting gender equality in IFAD, and this is an area, where continued engagement by Denmark would be useful and welcomed. Ratings on fragile states are more mixed with good ratings on Sub-Saharan states focus and performance of projects in fragile states, but with a more limited progress in terms of reaching the target of disbursement to countries in fragile situations. IFAD has traditionally worked in remote and under-served areas in many countries, a good deal of those areas are in fragile situations. IFAD continues to show good performance in reaching out to areas in fragile situations, but IFAD can only deliver if the respective governments are keen to reach out with services to such areas. During IFAD9, IFAD is having projects in 48 countries characterized as fragile states, and whereas IFAD operations are seen as relevant and effective in many of these countries, there are challenges in some of the fragile states in terms of efficiency and government ability to reach out. IFAD is increasingly not operating with the term fragile states, but rather with fragile situations applied to specific smaller or larger areas in the countries of operation. In this way fragility, rather cuts across all IFAD programmes. Danish dialogue with IFAD on approach and progress in fragile states have not benefitted from having a specific entry point in the organisation. Working in fragile states is generally more demanding and can influence negatively on parameters of efficiency. This is recognised, but addressing fragility is still prioritised as this corresponds with addressing the needs of the poorest of the rural populations. Although fragile states are recognised as important in the operations of IFAD, IFAD management did not see significant opportunities for a Danish dialogues with IFAD on fragile states. This is because fragile states is rather understood as an issue of addressing fragility across operations, which is having geographical implications for the operations, but which does not benefit from having a specific entry point in the organisation for the dialogues with Denmark. IFAD operational managers also expressed concerns about the serious constraints that their operations were faced with in the most difficult operational environments in some of the fragile states. Progress in the area of private sector engagement shows strong performance significantly above set targets. Private sector engagement in IFAD is first and foremost using a business perspective in addressing smallholder development. This is a fundamental aspect of IFAD s operations, and today more than 70 pct. of loan operations have aspects of value chain development in them. Investing in smallholder farming enterprises is an area that needs continued focus in IFAD. Increasingly, IFAD is working with public-private-producer partnerships, where IFAD is playing a crucial role of linking smallholder farmers to larger agricultural investments. This is an area that is likely to grow in the future and where further capacities of IFAD should be developed. Although there is good support to private sector development from a range of donors in IFAD, 8

9 including the Netherlands and the UK, Denmark could contribute importantly by having private sector engagement as a priority area for the dialogue with IFAD. Progress in the area of environment and climate change are relatively poor when it comes to performance in the areas of natural resources and environment and has not yet any ratings on the specific impacts of the major adaptation programme of IFAD. However, programme reports show good progress on adaptation impacts. IFAD has seen significant earmarked support to smallholder adaptation to climate change. IFAD s work on adaption is providing additional grant investments in more than 40 projects supporting additional investments in adaptation work. Climate change work is also focused on mainstreaming climate smart agriculture into all aspects of the organisation. Adaptation work in IFAD seems to be on track partly due to the additional resources allocated. Mainstreaming of sustainable management of environment and natural resources need additional focus in the organisation and this is being addressed in IFAD10. Denmark, having chosen not to be a specific donor to the work on adaption (i.e. the ASAP programme), has played a relatively limited role in dialogues on climate change and environment. Earmarked support to IFAD for operations in Armenia and Moldova through the Danish Neighbourhood Programme was initiated 2009 and was renewed for another five-years period in The operations have been reviewed largely positively and are forming an important part of the IFAD programmes in the respective countries. Especially, the approach to private sector development and employment creation has seen significant positive impact with improvement of performance of agricultural businesses and better opportunities for youth employment in rural area. The choice of priority areas in the Danish Organisational Strategy has been guided by the lessons learned from IFAD9, the analysis of challenges and opportunities, and the required need of reducing priority areas to three including the mandatory area of effectiveness and efficiency. On the background of the importance of increased efficiency in the IFAD10 reform process, efficiency is considered an important theme for the dialogue that needs to be selected as part of the priority area of effectiveness and efficiency. Likewise, the effectiveness in in terms of impact on reducing poverty and the progress on anti-corruption measures are areas where the Danish dialogues can contribute to the IFAD reform process. Although all four remaining priority areas of the Danish Organisation Strategy for IFAD9 (gender, fragile states, private sector, climate and environment) are clearly important for both Denmark and IFAD, only two of these can be selected as priority areas. Given the limited participation in the climate and environment dialogues that has been possible for Denmark and will be likely in the future due to the fact of Denmark not being a specific ASAP donor, as well as given that other donors have a strong input on this, this priority area is not chosen. With the strong Danish track record in dialogues on gender, with the expressed wish of IFAD to continue having Denmark as a donor focused on gender equality, and with the continued need for ensuring gender mainstreaming and transformation within the IFAD10 operations, gender is selected as priority area for dialogues in the coming IFAD10. Fragile states and private sector approaches in agricultural development are both important for Danish development cooperation, however of the two, it is clear that IFAD believes that Denmark will contribute most efficiently in terms of dialogues on private sector approaches. Moreover, it is believed that most effective synergies between IFAD operations and Danish development cooperation can be achieved in relation to private sector approaches to agricultural development. Hence, private sector approaches to agricultural development is chosen as the last priority area for the Danish Organisational Strategy for IFAD Priority Areas and Intended Results of Danish Support Denmark provides core contribution to IFAD and the intended results of the Danish support to IFAD is first and foremost the overall results achieved by the organisation in addressing smallholder agricultural development and poverty reduction. Overall, results of the support to IFAD will be measured in the annual IFAD reports on achievements. The Strategic Vision and associated commitments matrix and results measurement framework for IFAD10 cover the period The strategic framework will only be available in second half of The Organisation Strategy is proposed to include the following 3 priority areas: PRIORITY AREA 1: Effectiveness and Efficiency of IFAD The objectives for the priority area include: An increasing number of people moved out of poverty; Improved effectiveness and efficiency of IFAD in its contribution to poverty reduction, and; Strengthen IFAD s financial management capacity, risk management capacity, and oversight processes. Effectiveness and efficiency of 9

10 IFAD continue to be reform areas where donors are able to ensure relevant input to the process of encouraging improved effectiveness and efficiency. Three areas of performance of IFAD operations are selected to form part of the dialogue: Increased effectiveness measured through the impact of projects on overall reduction of rural poverty; Improved efficiency of IFAD as an organisation measured through the cost ratio between investments and administrative expenses, and; Progress on anti-corruption measured through reports from the Office of Audit and Oversight. PRIORITY AREA 2: Promoting Gender Equality in IFAD operations The objectives for the priority area include: Improved impact on gender equality in IFAD operations, and; Improved design of gender equality approaches in project design. During IFAD10, IFAD is committed to mainstream gender approaches further in all aspects of its operations. Two areas of performance in IFAD operations are selected to form part of the dialogue: Increased impact on gender equality measured through the percentage of IFAD projects, where gender equality is deemed to be effectively implemented, and; How gender equality approaches are applied in project design measured through the quality assurance system and also reflecting IFAD capacities in addressing gender equality. PRIORITY AREA 3: Systematically engage private sector actors and approaches to ensure increased job creation and economic growth benefitting the rural poor The objectives for the priority area include: Reduction of rural poverty by deepening IFAD s engagement with the private sector, and; Create markets, improve access to inputs, services, knowledge and technology, and increase income-generating opportunities or job-creating opportunities for the rural poor. IFAD has developed a Strategy for Deepening IFAD s Engagement with the Private Sector, and IFAD has committed to: Establishment of best practices to guide future collaboration with the private sector; Development of new financial instruments and business practices to leverage and sustain increased co-financing through private investments developed, and; Expanding private-sector participation in projects through the public-privateproducer partnership mechanism and value chain financing. Denmark expects IFAD to continue to engage with the rural poor in ways that promote inclusive growth. Two areas of performance in IFAD operations are selected to form part of the dialogue: Development of best practises for future private sector collaboration, which will be measured through the IFAD10 commitments matrix, and; Expansion of private sector participation in projects through the public-private-producer partnership mechanism and value chain financing to be measured through percentage of projects where private sector is included as partner. Draft Results Matrix to Monitor the Implementation of the Danish Organisation Strategy Priority area 1. Effectiveness and Efficiency Objective: Improved effectiveness of IFAD Indicator in IFAD10 Results Measurement Framework (IFAD10 RMF): Pct. of projects rated moderately satisfactory or better at completion for rural poverty impact Baseline: 88 pct. according to Project Completion Reports (PCR) and 86 pct. according to Independent Office of Evaluation (IOE) reports. Target for IFAD10: 90 pct. (in PCR and IOE) Objective: Improved organisational efficiency of IFAD Indicator in IFAD10 RMF: Loan and grant commitments and project co-financing in USD per USD1 of administrative expenditure Baseline: 14.9 according to corporate databases Target for IFAD10: 15.2 (in PCR and IOE) Objective: Strengthen IFAD s financial management capacity, risk management capacity, and oversight processes Indicator, Baseline, Targets: To be developed (part of IFAD10 commitments) and part of the Annual Reports on Investigation and Anti-Corruption Activities Priority area 2. Promote Gender Equality in IFAD operations 10

11 Objective: Improved impact on gender equality Indicator in IFAD10 RMF: Pct. of projects rated moderately satisfactory or better at completion for gender equality Baseline: 93 pct. according to Project Completion Reports (PCR) and 80% according to Independent Office of Evaluation (IOE) reports. Target for IFAD10: 90 pct. (in PCR and IOE) Objective: Improved design of gender equality approaches in projects Indicator in IFAD10 RMF: Percentage of projects rated 4 or better at entry (design) Baseline: 81 pct. according to quality assurance reporting Target for IFAD10: 90 pct. according to quality assurance reporting Priority area 3. Systematically engage private sector actors and approaches to ensure increased job creation and economic growth benefitting the rural poor Objective: Best practices to guide future collaboration with the private sector established Indicator, Baseline, Target: To be developed (part of IFAD10 commitments) Objective: Private-sector participation in projects through the public-private-producer partnership mechanism and value chain financing expanded Indicator, Baseline, Target: To be developed (part of IFAD10 commitments) 6. Preliminary Budget Overview The planned financial support to IFAD for the duration of the Organisation Strategy, which includes core funding and earmarked funding, is shown below. Allocation in mill DKK/year Un-earmarked contribution to IFAD - core funding Earmarked funding from Neighbourhood Programme in Moldova and Armenia Total Major Risks Risks associated with IFAD project operations vary widely depending on local, country or regional context, and may be of a policy, institutional, technical, environmental, security, political, financial or economic nature. A thorough analysis of risks is undertaken as part of each country programme and project development process. This has in turn been reinforced at the corporate level through a formal enterprise risk management system that supports management of key organizational risks, and strengthens IFAD s ability to achieve its overall objectives. IFAD is assessed as having a strong risk management system. Major corporate risks of IFAD that will be monitored through the Annual Report on Enterprise Risk Management Activities include: Shortage and/or ineffective allocation of human and financial resources to achieve ambitious agenda. Root causes or drivers of the risk are: Member states fiscal constraints that lead to insufficiency of resources to operations; Limited scope to achieve economies of scale in support areas due to IFAD s small size, and; Inadequate focus and prioritization in the project portfolio. Risk mitigation measures that IFAD will apply include: Prioritization and focus of resource use on high priority and value-adding activities; Rebalancing of resources to ensure operation support, and; Continued improvement of staff performance to stretch limited resources. The risk is rated as likely and with major impact. Failure to adapt IFAD s development operations and business model to achieve more ambitious impact targets without growth in regular financial resources. Root causes or drivers of the risk are: Weak or lacking collective analysis and decision-making; Complacency about need to accelerate and expand impact; Insufficient political will to drive review/adapt business model, and; Inadequate capacity for policy dialogue and advocacy for engagement with private sector. IFAD will apply the following risk mitigation measures: Collective engagement and focus of senior management on results and resources management/mobilization, 11

12 and; Implementing action plan to strengthen scaling up performance. The risk is rated as likely and with major impact. Delayed/reduced pledges and payments to IFAD replenishments. The root cause of the risk is the economic constraints experienced by member countries, and the mitigating measure is to do more extensively and more compelling follow up with member states. Risk is rated as likely and with major impact. Failure to mobilize significant additional resources through new financing mechanisms. Root causes or drivers of the risks are: Heavy dependence on replenishment; Weak capacity for developing and exploiting strategic partnerships; Legal and bureaucratic hurdles, and; Resistance among IFAD Member States. Risk mitigation measures to be applied include: Develop proposals for streamlining, rationalizing, and standardizing supplementary and trust funds; Constructively engage governing bodies on expanding partnerships and financing mechanisms, and; Further focus on implementing Partnership Strategy. Risk is rated as likely and with major impact. Risks associated with the implementation related to the priority areas of the Organisation Strategy are: Gender policy and gender mainstreaming meets passive opposition from key staff, and experience human and financial resource constraints. The root causes or driver of the risk are: Resistance to change and ingrained perceptions of gender roles at multiple levels of project operations, and; Politics of established power relations. Risk mitigation measures that IFAD will apply include: Communication campaigns; Ensuring Policy mainstreaming into all aspects of operations, and; Undertaking gender training and experience exchange. Risk is likely and with major impact. To be monitored through Annual Report on IFAD Policy on Gender Equality and Women s Empowerment. Gender equality is not being addressed effectively in value chain and private sector development. The root causes or drivers are: Strong financial incentive for male or elite capture, and; Perceptions and power relations that hinders the participation of women. To mitigate this risk, IFAD will: Support women s activities at each node of the value chains; Keep a persistent focus on gender equality tools, and; Continue sensitization on gender equality in the operations. Risk is likely and with major impact. To be monitored through Annual Report on IFAD Policy on Gender Equality and Women s Empowerment. Private sector engagement including public-private-producer partnerships and value chain development does not benefit the poorest countries and the poorest segment of the rural population. The root causes or drivers are: Limited private sector opportunities in the poorest countries; Limited capacity of the poorest to participate in value chains and partnerships. Risk mitigation measures IFAD will apply include: Risk analysis of value chains; Promoting geographical spread of IFAD engagement; IFAD to be diligent in following its own Principles of Engagement for partnering with the private sector to maintain the pro-poor focus, and; To ensure design of private sector engagement that benefit also the poorest smallholders. Risk is likely and has major impact. To be monitored through implementation of IFAD10 Commitments. Reputational risk for IFAD when engaging with private sector companies and on the other hand risk of limited interest from companies to work with IFAD. The root causes or drivers are: Large scale investments and operations have higher chances of also including activities that cause problems locally; Some of the major agri-business investments have major negative impacts on smallholders, and; IFAD and private companies have different institutional cultures and motivations. Risk mitigation measures to be applied include: IFAD has adopted UN due diligence procedures for private sector partnerships, including formation of an internal due-diligence working group, follows the UN Guidelines on Cooperation with Business Sector, and; IFAD will target its efforts to those companies that show interest and commitment in working with the rural poor. Risk is likely and has major impact. To be monitored through the annual reporting on the implementation of the private sector strategy. 12

13 Annex 1: Results Management Framework (RMF) for IFAD10

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