PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: 87726 Project Name Developing Artisanal Livelihoods in Rural ‘RANG’ Project

Public Disclosure Authorized Region SOUTH ASIA Country Pakistan Sector Other Industry (100%) Project ID P145420 Borrower(s) Indus Heritage Trust #13, 4th. Floor, 109 West Sardar Begum Plaza, Blue Area, Islamabad. Implementing Agency Indus Heritage Trust Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared April 21, 2013 Date of Appraisal March 29, 2013 Authorization

Public Disclosure Authorized Date of TF Approval

I. Country and Sector Background

Country Context

1. Pakistan’s population exceeds 180 million with over 60% living in rural areas. The United Nations Human Development Report of 2011 puts Pakistan in “low human development category” ranking 145 out of 187 countries. The current social and political unrest, conflict and economic downturn in Pakistan have had an impact on the development and economic growth initiatives of the country. Men, women and youth have few employment opportunities at the

Public Disclosure Authorized local level, which has led to internal displacement, forced migration, crowding of urban centers, and increased political and social instability.

2. The Government of Pakistan seeks to restore the country’s economic growth rate to between 5 and 7 percent per year by stimulating growth and creating employment opportunities. Looking at the composition of employment within the country, while agriculture dominates the formal sector, crafts and related trades comprise 15 percent of formal sector employment, coming third behind unskilled labor. In the informal sector, crafts and related trades provide 31 percent of the jobs, of which 54 percent are filled by women. Given that the value of world exports of cultural and creative industries (goods and services) was $592 billion in 2008 according to UNCTAD, crafts and related trades is a viable sector of the economy for promoting

Public Disclosure Authorized job growth and economic growth. Some of the major constraints to growth - and bringing informal workers into new formal enterprises - are the quality of goods and the marketability of goods.

3. Rural communities, especially in remote areas, despite being rich in traditional craft, remain the poorest and the most vulnerable. They are constrained by poor infrastructure, lack of market information and linkages with mainstream markets, absence of institutional support from the private sector and, difficulty in obtaining raw materials. Hence, they often have to sell their products to middle men and traders at marginal value or produce products for local markets only.

4. Youth unemployment and lack of livelihood opportunities for those at the Bottom of the Pyramid- the landless and the most vulnerable community members- is emerging as a major issue, especially in disadvantaged and sensitive regions. The pilot project will test a new model for improving the livelihoods of the most vulnerable communities in politically sensitive and lagging regions that depend on the craft sector for their livelihoods.

Sectoral and Institutional Context

5. Traditionally, the arts and crafts of Southern Pakistan ( and ) suited the climate and were intrinsically interwoven with the farming seasons. This used to be an important source of generating income for the artisans locally. The areas, traditionally known as the belt, fed the spinning wheels and the looms of the region to produce the rich soft fabric. In some cases, the fabric found its way into the hands of the nomadic tribes of the Thar Desert region for the most intricate embroideries, viz. Rabari and Megawar. The women in the identified areas were traditional known for the dexterous skill-set in and embroideries. However, competition from the low cost imported mass produced machine made imitations, high cost of informal local finance, lack of access to markets or market information, etc., has resulted in sharp decline in the rural cultural and creative industry.

6. The sector (arts and crafts) has traditionally been the backbone of Pakistan’s economy. These identified areas are traditionally known for specialized products such as Khes from Gambath and Hala silk from Sind and pottery from Punjab. Khes is a rich, hand woven with silk and cotton thread and was worn by the elite of Sind thus fetched good prices. In the 1950s there were over 300 looms for this type of Khes and now barely 5 looms survive. Similarly, Hala silk is also disappearing. The region had 400 looms in 1950s and now only 25 survive.

7. Some of the key reasons cited by the artisan communities for the deterioration of the industry are technological obsolescence, marketing constraints, lack of market demand information pertaining to color story, embroidery motifs and styles, middlemen/money lender stranglehold and lack of skills development are leading to the weakening of the weaving and hand embroidery industry.

II. Objectives

8. The Project Development Objective (PDO) is to improve the livelihood opportunities for rural artisans. It will demonstrate to policy makers the effectiveness of a crafts-based cluster approach to poverty alleviation and to improve living conditions for weavers and embroiderers (especially women and girls) and their families in targeted communities in Punjab and Sindh.

9. The project is to assist an estimated 2,600 vulnerable artisan families, mainly women headed households as is common in project districts, at the bottom of the pyramid to help them rebuild their lives and access sustainable livelihoods through establishing their own artisan institutions. The project is expected to benefit an overall population of about 18,200 individuals. Out of the total number of beneficiaries, 70% of the beneficiaries are expected to be women.

III. Rationale for Bank Involvement

10. So far, the efforts of policy makers and development practitioners have been on supporting either the marketing efforts or providing micro finance support or design and product development. Unfortunately, there have been hardly any specific efforts to support the artisans through the entire process. For example, without design and product developments inputs, the artisans are bringing to market the same products over and over again On the other hand, by providing the artisans just the product development support, but no linkages to the market or to finance, the artisans are forced to sell their products to exploitative middlemen and traders. There have been several government initiatives and projects that have tried to support the industry, but have limited impact since they were only working on either one specific intervention or another but not setting up systems for development and strengthening of the entire craft value chain. This project will be working with the artisans to help them set up their own artisan institutions, support them in product development, provide tailored artisan specific financial products and finally, help them in marketing their products by linking them with mainstream buyers.

11. Also, the proposed project fully conforms to the second pillar of the Country Partnership Strategy (CPS), ‘improving human development and social protection’. The project’s focus is on generating inclusive growth in low-income provinces. It is aimed at achieving rapid, inclusive growth and ensuring that development is sustainable.

IV. Description

12. The project aims to work with weavers and embroiders from poor income households in Punjab and Sindh. The identified project areas in these provinces have among the highest concentration of poverty in the country1, but are known for their exquisite traditional skill. The

1 “Income Poverty at District Level: An application of small area estimation technique”, Haroon Jamal, published by the SPDC in 2007 mentions that People below the poverty line in the identified districts of Sindh Province are as follows: Khairpur (27.4%) project will target women, who have lost or are at a high risk of losing their livelihoods because of their inability, to keep pace with contemporary market requirements. The project will support the communities to build their own artisan institution, create and access tailor made artisan specific products and finally, market their products through a brand that is fully owned by them.

13. The project aims to assist an estimated 2,600 vulnerable artisan families at the bottom of the pyramid to help them rebuild their lives and access sustainable livelihoods through establishing their own artisan institutions. The project is expected to benefit an overall population of about 18,200 individuals.

Component A: Cluster Development and Capacity Building (US$ 0.941 million)

14. A total of 15 new cluster enterprises will be developed in these areas in the two provinces, and at least two complete with Common Facility Centers (CFC) for production operations and auxiliary centers for packing, tailoring, etc. While identifying these centers the financial feasibility will be factored in to ensure that these centers operate viably.

15. Specifically, this component will provide the necessary capacity building assistance, equipment and tools, facilities and focused hand-holding and mentoring support to the poor artisan communities to set up and strengthen their very own organization. It will also focus on working with artisans to develop newer and more marketable products. Product developers and designers, who have substantial experience in working with artisan communities would work with artisans in the cluster. With the help of the artisans, the project will also set up focus on a resource and design center.

Component B: Artisan Cluster Investment Fund (US$ 0.706 million)

16. Since limited access to (or lack of) finance was seen as one of the key constraints in this sector, this component envisages to pilot an innovative mechanism whereby Micro Finance experts will work with the artisans to identify the key financial constraints and services that are critical for ensuring viability and sustainability of their activity. Once the financial needs are properly assessed, the experts would then work with the identified community members to help design a set of tailored financial products for the livelihood activity.

17. Through this Component each artisan cluster supported through the project will be provided with a small fund with an objective to provide an opportunity to the poor to access funds, otherwise inaccessible through formal financial institutions to initiate their businesses. The members of each of the clusters can request for loan. The size, duration and the interest rate

, Sukkur (24.96%), Tharparker (28.9%) , (46%) and Hyderabad 23%; Punjab province- districts of Muzzafargarh (56.29%), (39.46%), Rahimyar Khan (45.87%) and Multan (38.4%). This data is before the floods of 2010 and hence, the percentage of people below as result, is estimated to be substantially higher. will be determined by the cluster members themselves, based on the type of activity the member proposes to undertake. The loan that is paid off along with the interest will be ploughed back in the cluster’s artisan investment fund pool. This way, the fund is intended to be a self- replenishing resource to help maintain continuous production and sales cycles for the cluster. A detailed guideline on management and operation of Cluster Investment funds will be formulated to guide each of the clusters on its usage and terms.

Component C: Marketing, Trade Facilitation and Support Services (US$ 0.659 million)

18. This component aims to provide front-end marketing and trade linkages for the products produced by the clusters and test new mechanisms to efficiently link the cluster organizations developed in the project to local, provincial and national markets.

19. The project will work on developing a robust strategy to market these products, based on consumer feedback (local, provincial and national). The project will focus on developing strong links with existing retail shops, exhibitions; conduct specific buyer-seller meets. The project will reach out to the government as a promoter and a buyer of these new products. Developing on the positive signals, it will work with the governments to institute “Handmade in Pakistan” fairs at the key provincial, national and regional cities and emerging growth centers. These initiatives will support the artisans in marketing their products by linking them with mainstream buyers.

Component D: Monitoring and Evaluation, and Knowledge Dissemination and Project Management and Administration (US$ 0.493 million)

20. This component would support a small administration unit dedicated to implementing the project and will support the incremental administrative and operational costs of the project at Indus Heritage Trust (IHT), the implementing agency for this project. The unit will be responsible for implementing the grant, including hiring and supervising of implementing partners, facilitating contacts with key partners, art institutes, market sector players, organization of training, preparation of TORs for consultants, The project would hire a full time Project Manager, Project Accountant and Cluster representatives from within the community as well as some support staff.

V. Financing

Source: ($m.) BORROWER/RECIPIENT 0.00 International Development Association (IDA) 0.00 JSDF Trust Fund 2.80 Total 2.80 VI. Implementation

21. Funds will be provided directly to the IHT, which will provide all fiduciary oversight for the funds. IHT will enter into an agreement with the identified partner organizations (POs) to manage the design and marketing interface necessary to upgrade the skills of artisan communities. The selection of the POs would take place during project implementation according to the Bank's Guidelines. The project will work in close coordination with the World Bank assisted Pakistan Poverty Alleviation Fund that is a premiere micro-finance institution in Pakistan. This project will leverage the legacy of systems and procedures established by the Pakistan PAF project to ensure long term sustainability of the program.

VII. Safeguard Policies

Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X

VIII. Contact point

Contact: Vinayak Narayan Ghatate Title: Senior Rural Development Specialist Tel: 5785+47661 Email: [email protected] Location: New Delhi, India (IBRD)

IX. For more information contact:

The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: [email protected] Web: http://www.worldbank.org/infoshop