Document of The World Bank

Report No: 20195-SE Public Disclosure Authorized

PROJECT APPRAISAL DOCUMENT Public Disclosure Authorized ONA

PROPOSED CREDIT

IN THE AMOUNT OF SDR 23.6 MILLION

(US$30 MILLION EQUIVALENT)

TO THE REPUBLIC OF SENEGAL Public Disclosure Authorized FOR A SOCLkL DEVELOPMENT FUND PROJECT

IN SUPPORT OF THE FIRST PHASE OF A

SOCIAL DEVELOPMENT FUND PROGRAM

December 1, 2000

Human Development II Country Department 14 Public Disclosure Authorized Africa Region CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30, 2000)

Currency Unit = FCFA FCFA 1 = US$0.00 14 US$1 = FCFA 697

FISCAL YEAR January 1 December 31

ABBREVIATIONS AND ACRONYMS

ADM Agence de D&veloppementMunicipal MEF Ministere de l'Economie et des Finance AfDB African Development Bank MFSN Ministere de la Famille el de la Solidarite Nationale AGETIP Agence d'Execution des Travaux dI'ntereitPublic MFSU Micro-Finance Support Unit contre le Sous-Emploi MIS Management Information System APL Adaptable Program Lending NGO Non-Governmental Organization CAS Country Assistance Strategy NPPA National Program for Poverty Alleviation CBOs Community-Based Organizations NRIP National Rural Infrastructure Program CDSU Community Development Support Unit OCC Orientation and Coordination Committee CIDA Canadian International Development Agency PA Project Account CMTS Coordination and Monitoring Technical Secretariat PAGD Management Development Project CNLP Coordination Nationale de Lutte contre la Pauvrete PANC Poverty Alleviation National Coordination CSFU Central Social Fund Unit PDEF Plan Decennal de l'Education ei de la Formation DDI Direction de la Dette et de l'Investissement PDRHI Projet de Developpement des Ressources Humaines I DPS Direction de la Prevision et de la Statistique PDIS Plan de Developpemnt Integre de la Sante DP Department of Planning PFI Participating Financial Institution ECD Early Childhood Development PLP Programme de Lutte contre la Pauvrete ESAM Enquetes Sdnigalaises aupres des Manages PPA Participatory Poverty Assessment FAU Financial and Administrative Unit RFMU Regional Fund Management Unit FCFA Franc de la Communaute Financiere de l'Afrique SA Special Account GMT Grassroot Management Training SCAs Saving and Credit Associations HBS Household Budget Survey SDF Social Development Fund IDA Intemational Development Association SDFP Social Development Fund Program IEC Information Education and Communication SDC Social Development Credit IGA Income-Generating Activities SDG Social Development Grant IMEU Information Monitoring and Evaluation Unit SFMA Social Fund Management Association IRCD International Research Center for Development SFMU Social Fund Management Unit LACI Loan Administration Change Initiative UNDP United Nations Development Programme MB Managing Board WB World Bank

Vice President: Callisto E. Madavo Country Director: John McIntire Sector Manager: Nicholas R. Bumett Task Team Leader: Alassane Diawara SENEGAL SOCIALDEVELOPMENT FUND PROGRAM

CONTENTS

A. Program Purpose and Project DevelopmentObjective Page

1. Program purpose and program phasing 3 2. Project development objective 3 3. Key performance indicators 3

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 4 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 5 4. Program description and performance triggers for subsequent loans 7

C. Program and Project Description Summary

1. Project components 10 2. Key policy and institutional reforms supported by the project 10 3. Benefits and target population 11 .4. Institutionaland implementationarrangements 12 D. Project Rationale

1. Project alternatives considered and reasons for rejection 17 2. Major related projects financed by the Bank and other development agencies 19 3. Lessons learned and reflected in proposed project design 19 4. Indications of borrower commitment and ownership 21 5. Value added of Bank support in this project 21 E. Summary Project Analysis

1. Economic 21 2. Financial 23 3. Technical 24 4. Institutional 24 5. Environmental 28 6. Social 30 7. Safeguard Policies 34 F. Sustainabilityand Risks

1. Sustainability 34 2. Critical risks 34 3. Possible controversial aspects 35 G. Main Conditions

1. Effectiveness Condition 35 2. Other 36

H. Readiness for Implementation 36

I. Compliance with Bank Policies 37

Annexes

Annex 1: Project Design Summary 38 Annex 2: Detailed Project Description 44 Annex 3: Estimated Project Costs 58 Annex 4: Cost-Effectiveness Analysis Summary 59 Annex 5: Financial Summary 64 Annex 6: Procurement and Disbursement Arrangements 65 Annex 7: Project Processing Schedule 76 Annex 8: Documents in the Project File 77 Annex 9: Statement of Loans and Credits 79 Annex 10: Country at a Glance 81 Annex I 1: Summary Findings of Social Assessment 83 Annex 12: Mainstreaming Gender into the Social Development Fund 91 Annex 13: Note on Strategy for Poverty Targeting in the Social Development Fund Project 102 Annex 14: Institutional Arrangements 111 Annex 15: Financial Management Arrangements 116 Annex 16: Improving Access to Micro-Finance 123 Annex 17: Grassroot Management Training (GMT) for CBO's Capacity Building 130

MAP(S) IBRD 31219 SENEGAL Social DevelopmentFund Program Project Appraisal Document

Africa Regional Office AFC14 Date: December 1, 2000 Team Leader: Alassane Diawara Country Manager/Director: John McIntire Sector Manager/Director: Nicholas R. Bumett Project ID: P041566 Sector(s): SY - Other Social Protection Lending Instrument: Adaptable Program Loan (APL) Theme(s): Poverty Reduction Poverty Targeted Intervention: Y ProgramFinancing Data Estimated APL IndicativeFinancing Plan ImplementationPeriod Borrower i______.______- __ ._ _;;(Bank FY) IDA Others Total Commitment Closing US$m % US$m USSm Date Date APL 1 30.00 64.5 16.52 46.52 03/31/2001 12/31/2004 Ministry of Economy and Loan/ Finance, Senegal Credit APL 2 30.00 50.0 30.00 60.00 12/31/2004 12/31/2007 Ministry of Economy and Loan/ Finance, Senegal

Credit______APL 3 25.00 45.5 30.00 55.00 12/31/2007 12/31/2011 Ministry of Economy and Loan/ Finance, Senegal Credit API-4 Loan!

Credit______iTotal 85.00 1 76.52 161.52 ProjectFinancing Data [ I Loan [XI Credit [I Grant [I Guarantee [ Other: For LoanstCreditslOthers: Amount (US$m): 30.00 ProposedTerms: Standard Credit Graceperiod (years): 10 Years to maturity:40 Commitmentfee: Servicecharge: 0.75% FinancingPlan: Source Local Foreign Total BORROWER 2.17 1.45 3.62 IDA 17.80 12.20 30.00 OTHER SOURCES 7.74 5.16 12.90

Total: 27.71 18.81 46.52 Borrower:GOVERNMENT OF SENEGAL Responsibleagency: MINISTRY OF FAMILY AFFAIRS AND NATIONAL SOLIDARITY Address: BuildingAdministratif, 6eme etage Contact Person: Aminata Tall Tel: 221 822 36 94 Fax: 221 823 66 73 Email: Other Agency(ies): Associationpour le Fonds de DeveloppementSocial (AFDS) Address: BuildingAdministratif 6eme etage, Dakar, Senegal Contact Person: Aminata Tall Tel: 221 822 36 94 Fax: 221 823 66 73 Email: Estimated disbursements( Bank FY/US$M): FY 2001 2002 2003 2004 Annual 2.22 11.04 10.78 5.96 Cumulative 2.22 13.26 24.04 30.00 Project implementation period: 3 years Expectedeffectiveness date: 03/31/2001 Expected closing date: 12/31/2004 OCS AM. PADF-l. R"l M . 2W

-2 - A. Program Purpose and Project DevelopmentObjective 1. Programpurpose and program phasing: The program will support, as part of the core Country Assistance Strategy (CAS), the capacity of poor communities to effectivelymanage their own developmentresources and economic and social services with equal participationof vulnerable groups, which will be gender inclusive. The program will support four main strategic objectivesof the Govemment of Senegal: (i) increasing access to basic social services through direct and indirect poverty reduction interventions;(ii) increasing access of poorer groups of the population to micro-financeproducts and services via existing participating financial institutions (PFIs) and savings and credit associations (SCAs); (iii) capacity building of community-basedorganizations (CBOs), PFIs and SCAs, and (iv) capacity building of Government for poverty strategy management, monitoring and evaluation.

The proposed program will cover a total of 10 years. It will be carried out in three phases. The aim of this approach is to start activities on a small scale and progressivelyexpand them by fine-tuningmechanisms and tools of intervention. The first phase of 3 years specifically aims at setting up and operationalizing the structures needed for the project to take off, sensitizingthe beneficiaries about the project, testing the service delivery strategy at the central and local levels through small-scale operations designed to ease out the leaming process and, based on lessons leamed, start the second phase.

Phase 2 is planned for 3 years and aims at scaling up implementationof the project componentsin order to reach all targeted communities within the program, as well as harmonizing objectives and procedures of all donor-financedsocial funds operating in the country.

Based on the successes of the second phase, the third phase (4 years) will be implementedwith the view to fine-tuningthe operationalmechanism and mainstreamingthe strategy nationwide to include other operations,while ensuring long-term sustainabilityof the mechanism.

2. Project developmentobjective: (see Annex 1) The project developmentobjective is to achieve the effective use of social funds in priority development areas by the poorest test communities in the poorest regions of Senegal with participationof vulnerable groups and women. The Government of Senegalhas developed a framework for poverty reduction in the form of the Programme de Lutte Contre la Pauvrete (PLP). The Social Development Fund (SDF) Program has been formulated within this frameworkto ensure that its efforts to reduce poverty in Senegal are part of the country's long-term poverty strategy and will complement several other WB and donor-assistedprojects aimed at poverty alleviation,with a view to preventing duplicationand risks of contradiction. The project will build upon the positive experiences gained through: (i) long-term past e.xperienceof CBOs' development through Non-GovernmentalOrganization (NGO) support; and (ii) extensive experience of PFIs and SCAs in providing finances and services to weaker socio-economic groups of the Senegalese society.

3. Key performanceindicators: (see Annex I) Outcome Indicators

* 75 % of the 300 test communities making development decisions based on participatorydevelopment plans responsiveto the needs of the poorest * at least, 50 % of vulnerable groups and families within the test commnunitiesare aware of the basic

- 3 - processes of sub-projects'implementation and are satisfied with the outcomes

Output Indicators

* 300 test communitiesrequesting funds for sub-projectscomplying with Social Fund criteria * 50 % of vulnerablegroups receiving TA under the project meet the micro-financeinstitutions' credit criteria * 75 % of projects formulatedand implementedby the CBOs (trained under the project) reflect criteria of sound design and are implementedaccording to the strategy of the Social Fund * 90 % of the test communities are satisfied with the services of the SDF and feel it is equitable and transparent * 90 % of vulnerablemembers of eligible test communitiesare aware of and understand the procedures of the projects financed by the Social Fund * Communitiesare targeted by the Social Fund based on data provided by Poverty Monitoring

B. StrategicContext 1. Sector-relatedCountry Assistance Strategy (CAS) goal supportedby the project: (see Annex 1) Documentnumber: IDAJR98-2 Date of latestCAS discussion: 0 1/29/98 The over-archingobjective of the Senegal CAS is to reduce the incidenceof poverty and create gainful employment,especially for youth and women. This is to be addressedthrough a two-prongedstrategy: (i) supportingpolicies and programs aimed at more rapid and sustained growth; and (ii) ensuring the social sustainabilityof the program. The proposedoperation is meant to provide direct support for poverty alleviationactivities, especially focusedon the social and economicdevelopment of women and youth. The project will specificallycontribute to the CAS objectiveby: (i) reinforcingCBOs and civil societygroups in terns of managerial and operational capacity with equal participation of vulnerable groups, and specificallyhelp women and youth to access basic social services and infrastructure,(ii) reinforcing PFIs and SCAs in terms of managementcapacity and their ability to offer financialproducts and services attractiveand accessible to poorer borrowers,particularly women of the poorest groups, and (iii) improving the govemment'smonitoring and analysis of poverty trends in order to increasethe efficiency of decision-makingin this sector.

2. Main sector issues and Governmentstrategy: Accordingto the 1991-92Priority Survey, about 33% of Senegalesehouseholds live below the poverty line. In most countries,including Senegal,poverty is a rural phenomenon with over 80% of poor householdsfound in rural areas. Dakar, however, houses 21% of the total Senegalese population. Thus, the capital city has a significantproportion of poor households (12%), most of them living in peri-urban areas (See Senegal: An Assessment ofLiving Conditions, 1995 World Bank). Results from the 1994-95 poverty survey indicatea rise in the overall poverty rate. Despite some recent improvement in macroeconomicperformance, poverty indicators(level of household expenditure)remain high, and there is no clear indicationof a trickle-downeffect of recent growth to benefit the poor.

Overall, progress remains fragile and social and economic indicators are still poor by the standards of countries with similar levels of income (Senegal'sestimated GNP per capita for 1998 was US$550). Despite the implementationof Governmentprograms to improve the conditionof women since the early 1960s, women remain a particularly vulnerable group. The illiteracyrate is 66% for women (comparedto 47% for men), and the female drop-out rate is high due to women's householdtask requirements,early

- 4 - marriage, and pregnancies(median marriageage for women is 16.6years and median age at birth of first child is 19.4 years). The nutrition of women is poor, and 42% of women between ages 15-49years are consideredanemic. Women do not have easy access to land and agricultural services,and their accessto credit is predominantlylimited to credit clubs (tontines) which permit them only very small loans.

A second highly vulnerablegroup is the untrained or insufficientlytrained youth. The estimated unemploymentrate among people 20-34 in urban centers has reached 40%, compared to 29% for the total population. Primary school enrollmentis only 68% and the dropoutrate is 75%. About 23% of children under five suffer from malnutrition. Adolescentsand young adults are particularly vulnerableto HIV-AIDS and other sexuallytransmitted diseases. Finally, the increasein urban youth criminalityand child mendacity are rising concems for Senegaleseauthorities.

The Govermment'soverall developmentstrategy is articulatedin the Ninth Socio-EconomicDevelopment Plan (1998-2001), adopted by the National Assembly in February 1997 after extensive consultations. The Plan's objective is highly focusedon poverty reduction and human development(out of its 10 strategic axes, at least 7 involve human developmentactivities). In addition, the Government formulateda Five-year Action Plan for Women and Development. The Action Plan highlightedfour areas to improve the status of women in Senegal: (i) access to financing,income generation,and poverty alleviation; (ii) capacity building of women's organizations; (iii) reproductivehealth and family planning; and (iv) women'srights and empowerment. In December 1997, the Governmentof Senegaldeveloped a comprehensivePoverty ReductionProgram with the inputs of several donors, (includingUNDP, Canada, and Germany). The objectivesof the Program are to: (1) improve the resource base of poor categories through economicand communitydevelopment activities; (2) improvethe quality and quantityof social infrastructureand social services in poverty areas and groups; (3) build monitoring capacity of institutions in charge of poverty reductionpolicy as well as the capacity of organizationsof the poor themselves. The basis of the strategy to be implementedwill be a participatoryapproach and partnership. Thus, the proposed project will seek to contributeto the implementationof the three main axes of this poverty reduction strategy.

3. Sector issues to be addressedby the project and strategicchoices: Low level of income and lack of access to economic opportunities,particularly among women and youth: The lack of access to developmentresources and services,including financial servicesand inputs for productionpurposes, contribute to the low economic status of poor communities.They also have distorted informationon economicopportunities and are disconnectedfrom the local and national economy. The project will contribute to raising income of poor communitiesand vulnerablegroups (womenand youth) through the following activities: (a) small matching grants for time-savingequipment (grinding rnills) for women's tasks, thereby improving their health status; (b) provision of financial services through existing PFIs; (c) linking existing traditionalsaving and credit associations(SCAs) to micro-finance institutions (caisses mutalistes and other finance institutions); (d) supportingSCAs through financing of fixed costs, start-up and managementtraining; and (e) training to improve the operationsand maintenanceof productiveequipment and to improve technical skills for productiveactivities. The project will provide economic informationand sources of fundingto beneficiary communitiesand develop their institutionalcapacity for networkingand partnershipthrough integrated income-generatingactivities (IGAs).

A sub-projectsmenu will be developedthrough participatory discussions with the targeted populations. Linkswill be establishedwith existingprojects financedby other donors, and the communitieswill be encouragedto consider small projects which will better allow them to benefit from the larger formal sector

-5 - projects. The vulnerable group participantswill choose a project, develop a plan and proposal, submit the plan to the SFMU and, if approved,receive grant money to implementthe project. The list of projects could include proposalscovering a wide range of activities in many sectors, such as those below:

Health status of women and children: The poor nutritional status of women and of childrenunder five contributes significantlyto the high maternal mortality (510 deathsper 100,000)and infant deaths (60 per 1,000 live births) rates. Malnutritionand anemia remain a serious problem among children, pregnant women and lactatingmothers.

Two Bank-financedprojects support the Govemment's efforts in the area of Early Childhood Development (ECD): the ongoingCommunity Nutrition Project and the proposed Education Quality for All Project- Where these projects have interventionsin the Social Fund selectedregions, complementaryactivities, such as construction/rehabilitationand equipmentof communitykindergartens in test communitiesand pre-school centers, communitymanagement training, and software sub-projectslinked to the health and nutrition of lactating mothers and their children, will be included in the SDF activities "menu."

Two other Bank-assistedprojects support the Government'sefforts towards better health and nutrition: the IntegratedHealth Sector DevelopmentProgram and the School-Health/NutritionComponent of the proposed Quality Education for All Project. Where these projects have interventionsin selected regions coveredby the Social Fund, SDF promoters and facilitatorswill be encouragedto remind communities systematicallyof HIV/AIDS activities as it is a sensitive,but vital issue.

Women's and Girls' Participationin Economicand Social Developmentis Low: Strategies suggested to communitiesfor improvingwomen's/girls' status will include: (1) interventionsthat reduce demandson women'stime (closer sources of water and fuel-savingtechnology); (2) providing school-basedchild care centers; (3) organizingIEC campaignsto encouragegirls' education,the IEC campaignswill take into accountwomen's time constraint; often, informnationis available,but women do not obtain it. This is partly because the timing of the informationflow conflictswith women's work: they are either out in the field working,or completelyunaware of the informationbeing provided. Measures will be taken to address these problems; (4) a gender-sensitiveschool environment(e.g. separatelatrines, gender-sensitiveteachers, reductionof domesticchores for girls in schools and equal participationfor boys and girls in classrooms); and providing trainingto women for literacy and income generation.

Low access to basic infrastructureand services: Basic infrastructureand services are usually not accessibleto poor communities. Nevertheless,when they exist they do not function well or are ill-maintainedbecause of lack of ownershipby the community.The project will include two types of infrastructurein its "menu,"depending on the zone. In areas where the National Rural Infrastructure Project (NRIP) is active, the project menu will includeECD infrastructure(pre-schools and kindergartens). In other poverty-strickenareas, the menu of eligible sub-projectswill include village access roads, small bridges, health posts, schools, latrines, and water points. Cost-recoveryschemes and beneficiary contributionswill be key elements in the success of such activities.

Weak institutionalcapacities of Community-BasedOrganizations (CBOs) owned by the poor: Although Senegal is characterizedby a dynamic associativesector, individualbenefit (particularlyin remote rural villages) from associationsis not significant,thereby threateningthe continued success of the movement. Indigenousassociations and groups have developedcommunity-based organizations as a solution for confrontingeconomic, social, and political challenges.However, without access to economic opportunities,these organizationscannot benefit from institutionalresources. The consequenceis that

-6 - CBOs have had difficulty in: (i) identifying projects which correctly correspond to their needs; (ii) fornulating and managing projects; (iii) getting the informationnecessary to design and monitor contracts for basic social services and infrastructureprojects implementedby Non-GovernmentalOrganizations (NGOs) or the local private sector; (iv) monitoring and analyzing economic, social, and poverty data; and (v) building partnershipswith other CBOs, NGOs, local government, and other decentralized structures to ensure that these institutions respond to the needs of the poor.

The project will attempt to strengthen the capacity of the associationsso that they might better assist individuals by providing safety nets through capacity building training. It will also reinforce the capacity of selected CBOs to focus their activities on women and youth, especially in the field of project design for software activities such as training poor in HIVIAIDS,nutrition, and ECD activities. The project will also support: (i) capacity-buildingactivities in resource managementwithin savings and credit associationsand health "mutuelles " active at the grassroots level; (ii) promotion of information flow into communitiesand their organizations (care must be taken to ensure that the information flow is simple and easily understandableby the poor; if necessary, information should be provided in local languages); (iii) delivery of literacy and post-alpha programs; (iv) training of CBO leadersin organization managementand project formulation and implementation; (v) building of databases on contractors and services providedat the communitylevel; (vi) definition of procedures and systems for contracting; and (vii) monitoring by CBOs of projects executed by contractors, including, NGOs.

Weak capacityto monitor and analyze poverty data and insufficientcoordination of efforts: Poverty monitoring, strategic communication,and technical assistance to users and producers of social (statistical) data is a real need in Senegal. One of the most immediate needs in the social sector is a strong up-to-date database of the key indicators of poverty, based on continuing and participatory poverty assessments (PPAs). To address this need, the Government is preparing a strategy for an integrated approach for data collection and analysis, based on the existing structures at the regional, departmental,and local levels. A key aspect of this strategy is the development of a completeeconomic and social data baseline with output indicators reflecting an efficient information and monitoring system. The project will support the implementationof this strategy and will provide capacity building at the central level. In addition, the project will contribute to the financing of Household Budget Surveys and two light surveys which will provide data to monitor poverty levels during the life span of the project. Qualitative surveys and PPAs will complement the quantitativedata collection and analysis process. Ultimately, the project will help the Govemment devise long-term strategies to sustain this effort by earmarkingfunds for poverty monitoring and analysis nationwide.

4. Program descriptionand performancetriggers for subsequentloans: Phase 1: Start-up and concentrationin poverty-strickenzones

This phase will be limited to: (i) setting up the institutionalsystem in five regions; (ii) selectinga limited number of communities to test and experimentwith ways of working with the most vulnerable groups of poor communities(poor women and youth in poverty-strickenzones) so they will leam to manage their own developmentresources effectively and economic and social services; (iii) testingtools and procedures for the design and implementationof the sub-projectsin selected communities; (iv) monitoring and evaluating the ongoing test projects; (v) consolidatingand capitalizing on lessons learned for scaling up of activities; (vi) building capacities for communities with a view to broadening prcject impact; and (vii) development and implementationof a simple and practical Management Information System (MIS).

-7 - The above strategy applies to all project components. For example,with regard to the Basic Community Infrastructuresub-component, this phase will: (i) test the community-based sub-contractingmechanism for the provision of infrastructurein a limited number of demand-driven sub-projects; (ii) closely monitor and evaluate these pilot interventions;iii) prepare to scale up the approach in other IDA-assistedprojects. With regard to component 4, this phase will supportthe deve lopment of a comprehensivebaseline poverty data and establishmentof a permanent monitoring system.

PerformanceTriggers conditioning the transition to phase 2:

* Implementationtools are performing accordingto established standards

- SDF structures are set up and operational: Social Fund ManagementUnit (SFMU), the Community DevelopmentSupport Unit (CDSU), the Micro-Finance Support Unit (MFSU),the Information Monitoringand Evaluation Unit (IMEU),the Financial and AdministrativeUnit (FAU) and the Regional Fund ManagementUnit (RFMU); - the micro-financesystem is operational in 5 targeted regions through a network of at least 10 PFIs - creation of 300 SCAs implementing 300 IGAs; - 80% of 57 target "CommunautesRurales " have developedtheir own local developmentplans which are appraised and approved; they are based on the priority needs of vulnerable groups, as reflected in the PPA, and ready to be translated into sub-projectsfor funding; - The Poverty ManagementInformation System (PMIS) is developedand generates useful informationregularly disseminatedto Ministries, Local Governmentsand CBOs for their developmentplans; - The results and lessons learned from the first phase of the program have been communicatedto SFMA, CBOs, NGOs, Local Governments,PFIs and other potential stakeholders involved in implementingPhase II.

* Outcome Indicators 30 % of test communitiesmaking developmentdecisions based on priorities of local developmentplans 50 % of vulnerable groups receiving TA under the project meet the micro-finance institution credit criteria.

* Output Indicator 75 % of projects formulated and implementedby the CBOs (trained under the project) which reflect criteria of sound design and are implementedaccording to the strategy of the SDF.

Phase 2: Scaling up and geographical expansion

This phase will expand the strategies tested in the pilot phase on a larger scale or in different contexts. Keeping in mind the overarchingaim of the project, the strategy will focus on the deliverymechanism of the projects implemented. Where successful, this approach will be applied to other projects in the target areas. More specifically, the second phase entails: (i) scaling up of all components (SDG & SDC) in targeted villages where other donors are not implementingsimilar activities; (ii) monitoring and evaluation of the project implementationmechanism and activities; and (iii) capitalizingon lessons learned.

PerformanceTriggers conditioning the transition to phase 3

-8 - * The SDF approach is expanded to other regions not covered by other donors

- PPAs are conductedin all target communitieswhere other donors are not implementing similar activities - The micro-financeactivities harmonizedwith micro-financecomponents of other donor-financedprojects - Increase in cost-share of the PMIS by the Govemment: recurrent cost supportedby the Government budget progressively up to 50%

* Outcome indicators - 70 % of test communities making developmentdecisions based on developmentplan - 75 % of vulnerable groups receiving TA under the project meet the micro-finance institution'scredit criteria

* Output indicators - 75 % of projects formulatedand implementedby the CBOs (trainedunder the project) reflect criteria of sound design and are implementedaccording to the strategy of the project.

Phase 3: Fine-tuning

The third phase of the project aims at:

(i) fine-tuning the operational mechanismof the SDF; (ii) harmonizationof procedures(community procurement, financialmanagement, monitoring and evaluation)of community-basedprojects with other donors based on constant M&E feedback; and (iii) capitalizationon lessons learned for long-term sustainability. Projects will be extended to a greater number of villages. Other priority areas not touched during Phases I and 2 will be targeted.

* Outcome indicators - 90% of communities targeted under phase 2 are satisfied with the services of the SDF, feel that it is equitable and transparent, and are able to work with the SDF as well as with other donors.

* Output indicators - database on poverty conditions is operational

-9- C. Programand ProjectDescription Summary 1. Project components(see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):

Indicative Bank- % of Component Sector costs % of financing Bank- ______(US$M) Total (US$M) financing 1. Basic Social Services and Social Investment 12.35 26.5 12.04 40.1 Community Infrastructure Funds 2. Access to Micro-Finance: 19.79 42.5 4.31 14.4 Increase access to micro-finance services and financing Income-GeneratingActivities

3. Vulnerable Groups and CBOs Social Funds & 3.54 7.6 3.54 11.8 Capacity Building Social Assistance -- Institutional Development -- Capacity Building

4. Social Fund Management (including Institutional 9.80 21.1 9.06 30.2 poverty monitoring) Development -- Poverty strategy and monitoring -- Project Implementation Unit

5. PPF Social Funds & 1.05 2.3 1.05 3.5 Social Assistance Total Project Costs 46.53 100.0 30.00 100.0 Total FinancingRequired 46.53 100.0 30.00 100.0

2. Key policy and institutional reforms supported by the project: Mainstreaminggender in povertyreduction programs and governmentbudgeting. The causes and impact of poverty are different for men and for women, and planners must understand gender differences in access to and control of economic and social assets in order to create a gender-responsivepolicy environment. In the context of public expendituresbudgeting and program and project formulation,there are many areas in which men and women agree on priorities, or the sequencing of interventions. But, there are also many other areas in which they differ. Therefore,the collectionand disseminationof key sex-desegregatedpoverty indicators,awareness raising at the conununity and national levels, and gender-inclusivebudget planning and public expenditure review (sex-desegregatedexpenditure incidence analysis) are necessary activities to be implementedin the course of the program.

Management of poverty data. Collection and managementof poverty data for monitoring living conditions entails the collaborationof producers and users of data, i.e., organizations working in various sectors: health, education, integrated social services,community development, employment,agriculture,

- 1 0 - NGOs/CBOs,research institutions and the public and the private sectors.The Social DevelopmentProject aims to support the emergence and effectivefunctioning of a networkof producersand users of data on the one hand, and to implementa sustainablesystem for poverty monitoringon the other.

By the end of the second phase, the SocialFund Unit will become an autonomous,sustainable national institution,managed according to a well-definedoperational manual, and with a specific mandate to support the most vulnerable populationsin their efforts to use available resources to improve their standard of living.

3. Benefits and target population: Benefits.The project is expected to generatethe followingbenefits: i) increasingaccess to and improvingthe quality of basic social servicesat the communitylevel; (ii) building and strengtheningthe capacity of the targeted poor to design and manage developmentactivities that have an impact on their welfare;(iii) building and strengtheningthe capacity of PFIs and CBOs to work effectivelywith the poorest and most vulnerable targeted groups; and (iv) strengtheningthe national capacity to collect and analyze poverty data, monitor poverty trends effectively,and inform policy leading for poverty reduction.

T'argetGroups. The target population is mostly poor communities,located in both remote rural areas and urban areas. The SDF aims to target 57 communautes rurales (administrativeunits consisting of an averageof 65 villages each) and seven urban villages during the pilot phase. Special consideration will be given to the vulnerable groups, particularlywomen, youths, and other sociallymarginalized groups. The other set of beneficiariesare the PFIs, CBOs and district councils and authorities,whose planning,management, and implementationskills will be strengthenedby the project.

The Government and its partners have agreed to reach all the poor in the country through a geographic distributionof the regions among the donors.The IDA-financedSDF will be implementedin the regions of Louga, Kolda, Kaolack, and Dakar; the ADB-financedSocial Fund will be implementedin the regions of Thies, Dakar, Tambacounda,and Diourbel; and the UNDP-financedEnlarged Poverty Alleviation(EPAP) will be implementedin the Departmentsof Kedougou,Bambey and Dakar. 1JSAIDhas a micro-financeproject that will target institutions in the regions of Tambacounda,Kolda, Ziguinchor,Thies, and Dakar (Pikine and Rufisque).

- 11 - 4. Institutionaland implementationarrangements: Managementand Coordinationof the Poverty-AlleviationProgram and Donor support

National Programfor Poverty Alleviation.The overall Governmentframework to fight poverty is the National Program for Poverty Alleviation (NPPA) which was prepared on the basis of discussions between the Govemment,the CollectivitesLocales, the CBOs and NGOs, the private sector, and donors, responsibility for the NPPA was transferred in October 2000 from the Ministry of Planning to the Ministry of Economyand Finance. The NPPA constitutesthe basis of the strategy in the Poverty Reduction StrategyPaper (PRSP). Poverty-alleviationobjectives and strategiesdefined by the NPPA are shared and implementedby several Ministries through, (a) sector-wideprograms implementedby sectoral Ministries, such as the 10-yearNational Health DevelopmentProgram (1995-2005) supported by the ongoingfive-year investmentprogram, the Ten-YearEducation and Training Program (2000-2010), and the Rural InfrastructureNational Program, and (b) several social funds implemented and coordinatedby the Ministry of Family Affairs and National Solidarity (MFSN),such as the present IDA-financedSocial DevelopmentFund, the ADB-financedPoverty-alleviation Project, and the UNDP-financed(EPAP). Since 1998 (arrete 3025 of the Prime Minister), the NPPA has been coordinated by the Orientationand CoordinationCommittee (OCC) which is a large body chaired by the Ministerin charge of the NPPA, and includes representativesof all TechnicalMinistries involved in the NPPA, Local Governmentassociations, and the civil society. Since October 2000 (decret 2000-837),the Ministry of Economyand Finance (MEF) is responsiblefor the formulation and coordinationof the national strategy for Poverty Alleviation-- includingthe PRSP preparation,while the MFSN is responsiblefor the operationalcoordination and implementationof all poverty-alleviation programs.

Ministryof Economy and Finances(MEF). For the preparation of the PRSP, the Directorate of Statistics of the MEF is carrying out the baseline data survey and will carry out the update of the country poverty profile, as well as regular poverty assessmentsin the future to provide informationfor monitoring implementation of the PRSP. The Cellule de Suivi des programmes de Lutte contre la Pauvrete (CSLP) of the MEF has the responsibilityto: (i) ensure synergies and complementarityof all investmentprograms and their consistencywith poverty-reductionobjectives; (ii) monitor the progress of the PPA/PRSP through a comprehensivecomputerized Poverty Information System (PIS) and performance indicatorsto be set up in the PRSP; (iii) provide information related to poverty-reduction progress to all partners. The MEF will meet once a year for a joint review of the progress of the PPA with all partners includingthe donors. This yearly joint review will include: (i) progress in the actions carried out by other sector-wideprojects in education,health, and rural developmentas far as poverty alleviationis concernedand (ii) progress in the actions of all social fund and projects coordinatedby the MFSN.

The Ministry of Family Affairs and National Solidaritywill carry out its responsibilityof operational coordinationof all programs of poverty alleviationthrough a Structure de Suivi et de Coordination Operationnelle (SSCO), supportedby IDA under the project, which will coordinateall the social funds regardless of the origin of funds (IDA, AfDB, UNDP, etc.). During project preparation, the Govemmentdecided to delegate implementationof the IDA-financedSocial DevelopmentFund Project to a new executingagency created by the Government for this purpose, the Social Fund ManagementAssociation (SFMA) which operates under the supervisionof the MFSN. The delegation is embodiedin an Accord de Gestion Subsidiairebetween the MEF and the new SFMA. The DevelopmentCredit Agreementbetween the Governmentand IDA is complementedby a ProjectAgreement between the Government and the SFMA. It wag agreed during negotiationsthat the

- 12 - MEF and SFMA will enter into an agreement (Protocole d'Accord) to clarify the use by the MEF of the MIS and other resources provided by the SFMA from IDA funds under this Project. The SSCO will monitor the implementationby the SMFA of the IDA-financedSocial DevelopmentFund Project, as well as the other social funds, through a specific module of the PIS and the Agency'sMIS. The MFSN will meet once a year with donors to review the progress of all programs under the supervision of the MFSN.

SDF Management

The Social Fund ManagementAssociation (SFMA).The implementationagency of the IDA-financed SDF will be the SFMA, created and registered in November 9, 2000 (RegistrationNo 10386), as an autonomous agency with the status of a non-profit association under the Law 68-08, following the AGETIP model. The Association will be composed of:

* the General Assembly (GA) which consists of representativesof four Ministries (MFSN, MEF, MP and MJ) involved in poverty alleviation, of Collectivites Locales, and civil society. During negotiations the Governmentprovided assurancesthat the composition of the GA will be extended to include representativesof other Ministries in charge of investmentprograms that address poverty reduction.

* the Social Fund ManagementUnit (SFMU) comprisinghigh-level professionals in the fields of community-drivendevelopment and micro-finance,recruited on a competitive basis from the private sector market under procedures conformingto with World Bank guidelines.

General Assembly of the SFMA. The GA of the SFMA will be the "Managing BoardiConseil d'Administration" of the Association. It will be chaired by the Minister in charge of the operational coordination of the programs of poverty alleviation, and will have the responsibility to: (i) approve the Manuals of Procedures (MOPs) for the management of the funds; (ii) jointly review, with the SDF donors, the progress on implementationof the Operation Plan and Budget (OPB) for the previous year; (iii) discuss and approve the OPB submittedby SFMU for the following year; and measure the progress of the project on the basis of the long list of performance indicators in the MOPs, and the short list in the DevelopmentCredit Agreement; (iv) recruit and evaluate the General Director of the SFMU.

Social Fund ManagementUnit. The SFMU will be accountable to the GA (Managing Board), although this Board will have no influence on SFMU decisionsbetween the two annual reviews by the Board. The SFMU will be made up of four distinct functioningsub-units. Components I and 3 will be implementedthrough the CommnunityDevelopment Support Unit (CDSU) while component 2 will be implemented through the Micro-FinanceSupport Unit (MFSU). The Information,Monitoring, and Evaluation Unit (IMEU) and the Financial and AdministrativeUnit (FAU) in charge of accountingand personnel, will complementthe SFMU. The SFMU will manage the Special Account. The Central SFMU (CSFU) will be responsible for the regional branches (RFMU). The RFMU will be expectedto act as a technical arm of the Regional Development Agency (RDA) for poverty alleviation. All national and regional units will be staffed with out-sourcedprofessionals having the relevant skills in each area of expertise,recruited by the GD according to procedures acceptable to the Bank. The SFMU will operate on the basis of the following principles: (a) transparency, simplicity,and flexibility; (b) execution by PFIs and CBOs, eventually with the assistance of NGOs, through contractual arrangementsresulting from fair and transparent selection;(c) stakeholder/beneficiary participation which must be gender inclusive; (d) monitoring and evaluation of the performanceof

- 13- SFMiUsand partners' to enable implementationof corrective measures; and (e) replicability. The four- main componentsthat will be managed by the SFMU are: (i) improve access to social services and basic infrastructure;(ii) improve ability to access credit; (iii) build CBO managementcapacity; and (iv) develop the poverty-reductionmanagement system, through the following management arrangements:

a) Accessto social services and basic infrastructure.The strategy to improve the above-mentioned access is to provide small grants (called Social DevelopmentGrants -- SDGs) to communitiesfor financing micro-projects(MPs) proposed and implementedby targeted communities.The SFMU /CDSU will have the overall responsibilityfor the coordinationand implementationof the component. It will be supportedby the technical assistance from an institution(possibly an NGO) in nation-wide, urban/rural,and multi-sectorconmmunity development, to be selected on a competitivebasis and in place at project start up the responsibilitiescoordinated by the SFMU are listed below. They are detailed in a specificmodule of the Operation Manual, along with the criteria and processesfor submitting,appraising, financing,executing, and monitoring and evaluating the communities'MPs.

* the Managing Board will have the responsibilityof defining the targetingcriteria and listingof targetedeligible communities and the eligibility criteria for grants to sub-projectsunder the SDF, and evaluatingthe progress of the component; * the Directorateof Statistics (DS) will be responsible,(under the CSFU), for the technical preparationof the draft list of targeted communitieson the basis of the criteria mentionedabove; * the SDSU/RFMUwill be responsiblefor informing the targeted communitiesabout the opportunitiesprovided by the SDF and the proceduresto access and manage the financial resources (includingthe specificmodule of the operational manual,the standard forms for preparing a micro-project,and grant application for the procurementof works, goods, and servicesfinanced by the grant, and reporting on the progress of the MP). The SDSU/RFMUJwill also be responsiblefor approving the appraised MP, transferring the grant to the communitybank account for approved MPs , and monitoringthe execution of the MPs by the communitiesbeneficiaries of grants; * the Commurities will be responsiblefor the preparationand implementationof the MPs, including the managementof grants, the procurement of works, goods, and services included in the MPs and reportingon the completionof the MPs; * A TechnicalCommittee at the Departmentlevel, composedof representativesof the Local Governments/Communaut&sLocales; will be responsiblefor appraising the MPs submitted by the eligible communitieson the basis of the pre-determinedcriteria; * NGOs and/or Technicianswill be responsiblefor providing technical support to the Communities under contracts for services defined in the MPs. A specific Operation Manual for making grants to MPs, acceptableby IDA, will be prepared by the SFU and submitted to IDA before negotiations.

b) Access to Micro-FinanceThe Micro-FinanceSupport Unit (MFSU) will be establishedto performn all activities under the micro-financecomponent. While it will operate within the frameworkof the Social Fund ManagementUnit, the MFSU will be completely distinct from the CDSU, both in terms of institutionalstructure as well as staff. The MFSU staff should be made up of at least three high-level professionalsincluding one micro-financeexpert with a very good knowledge of the Senegalese micro-financeindustry, one expert in training, and one expert in monitoring and evaluation. The MFSU will be supportedby the technical assistance from an institution specializedin institution building of PFIs, including trainingby experts, to be selectedcompetitively and to be in place at project start up. A specificmodule of the Operation Manual will govern implementationof this component. Funds dedicatedto this component are named the Social DevelopmentCredit (SDC). The strategy for the SDC will be two-fold:

- 14 - (i) the MFSU will work via established PFIs that meet the eligibility criteria defined in Annexes 2 and 16. Partner micro-finance organizationswill be selected on a competitive basis to enter into an agreement with the SFMU to provide financial servicesto poor communities for income-generating activities using their own funds. The MFSU will not provide any line of credit to selected partner financial institutionsgiven the high level of liquiditythat exists in the micro-financeindustry in Senegal. In addition, several current initiativesprovide lines of credit to PFIs, including PMA (Fund for agricultural loans), Fonds Suisse-Senegalais, Fonds Belge-Senegalais,AfDB's poverty-alleviation project and the Dyna Enterprises funded by USAID. UNDP has a line of credit for ACEP (a major microfinancenetwork) while Caisse Fran aise is planning to set up another credit line in the coming months. The SDC will support "social intermediation"activities by PFIs through a grant mechanism that will cover the costs of outreach and providing information to targeted groups and communities by PFIs, including training in establishing and managing solidarity groups in association with an PFI. The vast majority of micro-finance interventionsoperate at a very low professional level. Insufficient competence has been identified in the areas of: govemance, intemal control, managing growth, and financial informationmanagement. Support for other identified deficiencieswill be provided on demand. The PFI will remain absolutely independentas far as its procedures and policies are concemed. Continued assistance to the PFI will be subject to institutionalperformance and full justification of the use of previous support.

(ii) in poorest areas where no regular PFI can be enticed to operate, the SDC will finance group IGAs accordingto the following arrangements: * A community-basedorganization (or groups within it) will propose an IGA, most likely promoted through an NGO, supported by a business plan, and a commitment to provide at least 10% of the cost, of which at least 5% will be in cash. * Upon approval,the SFMU will provide training, capacity building, and equipment (if necessary) for creation and/or strengthening of the group's Savings and Credit Association (SCA) or village bank, which will mobilize the required cash and in-kind contributionsto start the IGA, and open an account in a licensedfinancial intermediary. An implementingagency will be responsiblefor providing technical assistance to the CBO in managing the IGA and meeting its obligations,as well as for reporting, the cost of which may be borne implementingby either the implementingagency as promoter or by the SDC. If no financial intermediaryis sufficientlynear by or willing to participate, the implementingagency will also handle transactions. * The CBO will sign an agreement with the SFMU, the financial intermediaryand the implementing agency to recover the cost of the IGA investment.The financial intermediarywill be responsiblefor financial aspects of monitoring and recovery of "the loan" against a fee built into the amount. * IGA Investment. The SMFU will provides a grant (the SDC) for procurement (usually through an implementingagency) of the necessary equipment,construction, and initial inputs (as in the case of normal SDF projects), and certify completionand commissioningof the investment. * Implementation and Recovery. The CBO will carry out the IGA, utilizing its cash contribution for initial cash on hand, setting aside sufficient income for operating costs and maintenance, and making cost-recovery loan payments into its account at the financial intermediary. Additionaltraining and capacity building may be provided, both for operation of the IGA and managementof the SCA, either through the implementingagency or through additional requests to SDC. * Capitalization of SCA and Subsequent Lending. Upon completion of the required payments, the accumulatedfunds will be released to the SCA for it to use for lending to members (in groups or as individuals),maintenance and upgrading of the IGA, future IGAs and other uses. Groups that have established a good track record of payment into their financial intermediaryaccounts may be able to obtain additional credit from the intermediaryin the future or to "graduate"their SCA into a licensed

- 15- savings and credit cooperative. c) Capacity buildingof Vulnerable Groups and CBOs. The CSFU/SDG, through the RFMU, will have the overall responsibility for building capacity of the program beneficiaries including CBOs, NGOs, Local Governments,and private firms. Capacity building activities managed by the RFMU will be implementedin the areas targeted under component 1, and will include: disseminationof information,training, establishing local networks and building operational capacity. The MOP outlines the implementationprinciples of the se activities. d) Poverty-ReductionManagement System.The responsibility for monitoring and evaluation of the NPPA/PRSP will be under the CSLP. M&E activities related to NPPA/PRSP will be based on informationprovided by a global computerized web-basedPoverty ManagementInformation System (PMIS) to be developedunder the Project. The objective of the PMIS will be to: (i) provide decision makers (includingin the Ministries of Family Affairs, Education, Health, Rural Development,) at the central, regional, and local levels with relevant updated and detailed information on the poverty status of the population;(ii) provide the same decision makers with information on the perception of poverty by the poor. The difficultiesthe poor face in trying to improve their situation and to access Govemment services.In parallel, the SMFA will develop the ManagementInformation System for the Social Fund (SF-MIS), which will be totally compatible with the PMIS and designed to be able to cover all Social Funds in the country, regardless of the origin of funds. It will operate under the responsibility of the IMEU and cover the information needs of the SMFU and the SSCO in the Ministry of Family Affairs and National Solidarity to support the Ministry's decision making process for operational coordination. The objective of the SF-MIS will be to: (i) track all information related to the inputs supplied by the Social Funds and all other social sectors; (ii) develop cross-analysisbetween inputs and outputs for managementdecision-making; (iii) provide the poor (and all other beneficiaries) with relevant information related to the delivery of Govemment inputs and their measurable impacts of these inputs. The managementof the MIS will make necessary the out-sourcingof the provision of a large range of information,to include building partnerships with: (a) communicationspecialists including the media and journalists; and (b) NGOs to oversee project implementationat the local level, alert the managementunit about any emergingproblems, and synthesize the lessons leamed from implementationexperience for wider dissemination.

FinancialManagement, Financial Reporting, Auditing Arrangements(see Annex 15) Financial management system: Sound financial management systems will be installed at all levels necessary to ensure that all project expendituresare recorded and reported based on the project's financial informationneeds. These systems will comply with the World Bank's operational policies and procedures (OP/BP 10.02).At the present project preparation stage and with regard to the project activities and implementationarrangements, the levels at which the accounting systems will be installed are: (i) the CSFU; (ii) the RFMU; (iii) the PFIs; and (iv) the communities. The CSFU will have overall responsibility for the project's financial management system. It will be equipped with a computerized financialmanagement system, including: general accounting,cost accounting,budgeting, contract management, and physical progress monitoring. This will enable keeping track of and reporting on all the project's expenses by source of funds, expenditures categories, activities, and beneficiaries. But since the SFMU will be created as an autonomous agency that should become sustainableby the end of the first phase, its own financial situation should be looked at very closely. Therefore,in addition to the project's financial statements,the CSFU's financial management system will be capable of preparing the SFMU's own financial statements according to the laws and regulations related to its legal statutes. At the RFMU level, an appropriatefinancial management system will be installed. It will

- 16 - enable keeping track of and reporting on the project's and SFMU'stransactions at the regional levels. All records at the regional levels will be consolidated at the central level. The selectedPFIs in the micro-finance component should be able to provide all the financial information needed on their savings and credit activities.The selected institutionswill have a strong and viable financial situation to ensure that the resources received from the project are safeguarded.Therefore, specific selection criteriawill be defined to ensure that these requirementsare met (see Annex 2). The financialmanagement capacities of the communitieswill be strengthenedas part of the project's a ctivities. This will help ensure transparent financial management of the grants and a viable sustainable financial situation of the income-generatingactivities, in which the communities will be involved under the micro-financecomponent. The manual of administrative,financial, and accounting proceduresfor the project was developedand will be taken into account in the design of the project's overall financial managementsystem. Financial reporting: The project will prepare quarterly Project Management Reports (PMRs), each of which will: (i) set forth actual sources and applicationsof funds for the Project, both cumulativelyand for the period covered by said report, and projected sources and applicationsfor funds for the six-months period following the period covered by said report; (ii) show separately expendituresfinanced out of the proceedsof the Credit during the period covered by said report and expendituresproposed to be financed out of the proceeds of the Credit during the six-monthperiod following the period covered by said report; (iii) describe physical progress in Project implementation,both cumulativelyand for the period covered by said report; and explain variances between the actual and previously forecast implementationtargets; and (iv) set forth the status of procurement under the Project and expendituresunder contracts financed out of the proceeds of the Credit, as at the end of the period covered the report. In additionto these quarterly PMRs, annual financial statements will be prepared for the project and for the SFMUJas an autonomous agency. The annual financial statements of the PFIs involved in the micro-financecomponent will also be required to evaluate the continuousviability of their financial situation. Auditing: The accounts of the project including those for the Special Account will be audited for each fiscal year as well as the annual financial statements of the PFIs involved in the micro-financecomponent and the SFMU's own annual financial statements.The auditors will be independent and acceptable to IDA. TIheaudit reports will need to be acceptable to IDA will and be submittednot later than six months after the end of each period audited.

D. Project Rationale 1. Project alternatives consideredand reasons for rejection: The SDF project targets the poorest population living in geographicallyisolated villages and in urban areas. The project aims to build capacity within these groups in order to improve their access to basic social services,management of their own development,and accessto micro-finance. In addition, the project will improve in-country capacity of poverty managementsystems. The project will respond to the Poor people's demand for social services by enabling them to sub-contractdirectly with service providers, either among the NGOs or in private sector: the poor will thus be able to identify, plan, and implement their own projects. Furthermore,the project will provide opportunitiesnational and decentralizedlevels of govenmmentsto collaborate with NGOs/CBOs and the local private sector for the delivery of basic infrastructureand social services,while simultaneouslybuilding the social capital of targeted poor groups.

- 17 - The project will be implementedby the Social Fund ManagementUnit (SFMU) to be created as an autonomous agency. It will be staffed with service contractors. Project oversight will be the responsibility of SFMA under the Ministry in charge of coordinationof the NPPA. The SFMU will operate along the following principles: (a) transparency, simplicity, and flexibility; (b) execution by NGOs, CBOs, and the private sector ('faire-faire" approach) to ensure the decentralizedand target-specificnature of the activities; (c) stakeholders/beneficiariesparticipation ; (d) supervision and monitoring by an autonomous project unit to enable the implementationof corrective measures; and (e) replicability.

The rationale for the adoption of the SDF approach is as follows:

(i) Traditional top-down projects with a centralizedmanagement structure have not proven to be an effective mechanismto implement demand-drivenprojects, a conceptwhich is at the core of the over-archingcapacity building aim of this project. The specificneeds of more vulnerable sub-sections of the community can only be met through a grass-rootparticipatory mechanism.

(ii) The project component I (access to basic community social services and infrastructure) will introduce an innovativeapproach to community capacity building: that of community based sub-contractingwith NGOs and the private sector for project implementation. This is a break from past projects where intermediaries(such as NGOs) between the SDF and ultimatebeneficiaries have been the focus of capacity-buildingefforts and have absorbed much of the gain in terms of capacity building that comes from exposure to project management. The SDF will ensure that adequate training and support is given directly to the beneficiariesto allow them to gain the most from the experience.

(iii) The social assessment (Annex I1) emphasizes that a striking characteristic of poor villages is their strong independenceand reluctance to become dependenton the Governmentfor the fulfillmentof their needs. The independent structureof the SDF and the mechanismof direct communitycontracting provides the opportunity for communities to build their capacity to manage their own developmentneeds, without funnelingthe efforts through the Government bureaucracy.

(iv) The micro-financecomponent of the project has been thoroughly considered for its importance for poverty alleviation in Senegal. The social assessment findings (Annex 11) and the presence of a substantial number of PFIs and smaller SCAs in the country are testimonyto the strong demand for credit for income-generatingactivities. Moreover, lack of access to credit is an important characteristic that differentiatespoorer and more vulnerable groups from more advantagedgroups. The project aims to expand the credit network to these groups by providing incentivesto credit providers to expand their target clientele. The recommendationsof the Quality EnhancementReview have been incorporatedinto the design of this component, so that the SDF will contract out all activities of this component to eligible PFIs and SCAs.

(v) The AGETIP structure as an alternative: The AGETIP was considered inappropriate as the structure for project implementation. Firstly, projects implementedthrough this structure do not respond to the variety of needs that arise from a demand-driven approach. Secondly, the structure does not facilitate a participatoryapproach which regard to project design and implementation. This is crucial to meeting the project objective of capacity building for vulnerable groups. Thirdly, AGETIP supports Government schemes in rural areas, working on a premise that the Government strategy is an accurate representation of the reality and priorities. The project aims to target specificallythe groups that have been marginalizedby this very process. Hence it is imperative that the mechanism used is a new one, and that it espouses the concept of participation and capacity building aimed at giving communitiesthe ability and means to control

- 18- their own needs.

Keepingthe above issues in mind the project has been designedwith a phased approach,and it will be implementedthrough a SDF, managed by a unit that will function independentlyof the Government structure.

Why an APL? A frameworkfor the devolutionof managementof community-basedprojects to the district and decentralizedlevels is needed for the long term. The method of "learningby doing" which is highly advocatedin the SDF project, and gradual involvementof people at the district and local levels should prove to be very successful, especially in emphasizingthe comnmunitydemand-driven approach. This learningmode will be finalized in an APL format as we will agree on the outline of a ten-yearprogram, while building on the events and stock taking of the learningprocesses mid-way.

2. Major related projects financed by the Bank and/or other developmentagencies (completed, ongoingand planned). LatestSupervision SectorIssue j Project (PSR)Ratings ______(Bank-financed{__ rojects onil) Implementation Development Bank-financed Progress (IP) Objective (DO) Social/population-- Senegal HRDPIHealth & Population S S (completed)

Basic Education -- Senegal Literacy Project: priority HS HS Women HRDP2/ Education V HS S (Completed) Education Quality for All Health -- Senegal Health SIP S S Health -- Senegal EndemicDiseases Project U S Poverty/Health-- Senegal CommunityNutrition Project S S Agriculture -- Senegal National Rural Infrastructure Project Otherdevelopment agencies AfDB Poverty AlleviationProject NDF Poverty AlleviationProject UNDP Local InvestmentFunds EU Micro-realizations/ Decentralization

IP/DORatings: HS (HighlySatisfactory), S (Satisfactory), U (Unsatisfactory),HU (HighlyUnsatisfactory)

3. Lessons learned and reflected in the project design:

The project design reflects lessons learned from donor and national experiences with social funds as well as from Bank's experiencewith other social investmentfunds. The followingare the most relevant lessons leamed.

- 19- Lesson 1: Clear objectives and consistency with national developmentstrategies are essential for the SDF needs, therefore, to maintain clear and limited objectives.Efficiency of operationalpolicies and procedures,as well as overall program effectiveness,depend upon clear understandingof the SDF role in an overall developmentstrategy framework.It is important for Government to clarify SDF's role in the context of national policies for social development,poverty reduction, and decentralization.Furthermore, it is important to remember that SDF is designed to finance and oversee implementationof sub-projects and not to make policies, and that while SDF managers and staff may bring important perspectives to inform policy discussions,participation and coordinationof all actors relevant to such discussions (includingthe public, private, and NGO/CBO/MIS sectors) should be assured.

Lesson 2 (cf. ICR HRDP1): A well tailored role for NGOs under Govermmentcontract can prove very effective and may be both less expensive and more participatorythan direct Govemment implementationat the community level. This is especially relevant in the context of decentralizationof service delivery and state disengagementfrom service provision and infrastructuremanagement.

Lesson 3 (cf. ICR HRDP1): Central coordination units in Ministries may be sources of delay and rivalry rather than serving to facilitate the collaboration,implementation, and disbursement efficiency.Further more, when the project ends, the PCU managementor technical capacity is dispersed, leadingto little gain in institutionalcapacity or sustainability. Such units are not sustainable and decrease institutionalizationof aid managementcapacity.

Lessons learned from the implementationof AGETIP I and II and the ongoing female literacy project have also been considered.

Lesson 4: Experience from similar projects financed by the Bank and other donors show that the success of such projects derives from: (i) the design and implementationscheme based on community-feltneeds; (ii) building and investing in local organizationsfor operation and maintenance; and (iii) ensuring communityownership, transparency, and accountability.Govenmment commitment, sustainable funding mechanisms,and attention to cost recovery are also key elements for designing a sustainable intervention.

Lesson 5: Social fund interventionsdo not work where policies are biased against the poor. The interventionshave to be an integral part of the Govermnent'swillingness and commitmentto help the poor. The commitmentdescribed in para. 4 below suggeststhat this willingnessand commitment are present in this case.

Lesson 6: Lessons learned from other Bank-supportedSocial Funds show that sustainabilityis a critical issue. Sub-projectsustainability requires a participatoryprocess that seeks open consultation with cornmunitieson their needs and priorities and involvementof the community throughoutthe project cycle to secure commitment to sub-projectoperation and maintenance To achieve success, sub-project sustainabilityrequires coordinated support from both the central and local govemments, with clearly defined roles and responsibilitiesfor each.

Lesson 7: Bank experience with other Social Funds shows that the development of key institutional characteristics is a necessary condition for success of any project. The project will place emphasis on the institotional characteristics that are considered most critical for the success of the SDF: operational efficiency, transparency, and accountability,which are bolstered by clear resource-allocationcriteria and operational guidelines,reliable independent audits and evaluations,an effective MIS, and vigilant

- 20 - supervisionby extemal financial agencies; clear and simple procurement and disbursementprocedures; a proper targeting mechanism;and improved attentionto monitoring and evaluation activities, including beneficiary assessments.

Lessons drawn from the Bank's global experience are incorporated in Phase 1 of the Social Fund, such as the emphasis on community-baseddevelopment; independence of the Social Fund; no direct lending by the Social Fund; and conformity to "Best Practice" in micro-financein order to ensure long-term financial and institutional suatainability.

4. Indicationsof borrower commitmentand ownership: The Governmentof Senegal has prepared a National Poverty AlleviationProgram associatedwith an Action Plan for Women's Development. It has stated its willingness to develop a 'faire-faire" approach with the NGOs, CBOs, and private firms for the implementationof the NPPA.

Ihe borrower, under the leadership of the PlanningDirectorate, has shown full commnitmentto the SDF project. A preparatory committee with representativesfrom the Ministry of Economyand Finances, Ministry of Social Development,Ministry of Family Affairs and National Solidarity,the Ministry of Youth, NGOs, and CBOs has been functioningfor 15 months. The committee is assistedby two consultants who are producing studies that are into project design process. This committeehas produced an official program that was submitted to the Bank for funding, along with the TORs for the proposed studies. These initiativeshave all been funded by the borrower, a clear indication of commitment and interest. In March 1999, the committeeorganized a one-week workshop on the logical frameworkof the project. The committeehas followed the completionof the project preparationand approved technical documentsprepared within that framework. Also the Government has coordinated other projects in the country, so that the SDF Project will play a complementaryrole to other existing Projects, like the Quality E,ducationfor All Project, the rural developmentproject, literacy project, and other social fund projects funded by other donors.

5. Value added of Bank support in this project: The Bank has always spearheadedliving condition assessmentsin Senegal. No full assessment has been done since the Bank assessment in 1994. An update of the poverty profile was done in 1995, based on survey results and studies conducted under previous Bank projects, such as PAGD, PDRHI. The Bank has capitalized on its experience with social funds in other countries as well as on country-specific knowledge gainedthrough the implementationof AGETIP I and II, the Female Literacy Project, and the Nutrition CommunityProject. The Bank is in a strategicposition to help the Government mobilize resources and launch initiatives for sustainablepoverty alleviation,

E. SummaryProject Analysis (Detailed assessmentsare in the project file, see Annex 8) 1. Economic (see Annex 4): O Cost benefit NPV=US$ million; ERR = % (see Annex 4) * Cost effectiveness O Other (specify) The scope and mix of the selected sub-projectswill be determined directly with the participatoryinvolvement of the CBOs and the various mechanisms ensuring participationof excluded groups in community decision-making.

- 21 - In addition to the genuine demand expressedby poor communitiesor individuals,and organizationsof the poor, a sub-projectmust be evaluated under objective criteria shared by all partners of the SDF to ensure an equitable process for approval and implementation.In practice, it is necessary to simplify the justification techniques. Theoreticalsoundness needs to be balanced against operational constraints,human resources limitations, time constraints, and the intensity of the social demand.

Even if the sub-projects are all geared toward reducing poverty, their efficiency will be variable as also their duration, economic dimension, and the costs and expected benefits. Since resources to be allocated are finite, it is wise for beneficiariesto articulate their choices around their competing expressed needs and objective evaluation of the possible interventions.

The essence of an economic analysis is to compare all of the benefits of the proposed action to all the costs with a project said to pass a benefit-cost test if the sum of all the benefits is greater than the sum of all the costs. Such an analysis is seriously defective without monetary values for the social gains and services affected by a proposed action. Thus, the methods for evaluating sub-projects are just mere instruments of decision-making.Nonetheless, there are other criteria of social dimensionsto be considered when evaluating the value of sub-projects.Quantitative factors must be substituted as much as possible for subjective judgments on the choice to be made to avoid oversimplification.

In the economic analysis, informationhas to be collected, organized,and used to make an objective decision. Any project will be analyzedwith sets of criteria reconciling three ultimate objectives:

- To have better investmentor fund-allocationdecision; * To alert CBOs on the risks taken and the exclusion of alternativeopportunities implied by their choice; and D To guide decision makers in minimizing negative outcomes from sub-optimalresources allocations.

To render operationalthe economic approach,a sample of IEC, Community Infrastructure,and income-generatingsub-projects format is provided based on typical cost, market, and impact analysis. As illustration,estimates in health and education areas are given based on data from projects already completed in similar conditions in Senegal (Annex 4).

Cost-benefitanalysis

In the case of income-generatingactivities, cost-benefitanalysis is more desirable. Its accuracywill depend on data available to the beneficiariesor their contractors.A format is provided in the operation manual. In the context of the SDF, cost-benefit analysis is required for income-generatingsub-projects, the financial flows, rate of returns, and the cash-flow analysis must be computed rigorouslyin the analysis in addition to the analysis of the sub-projectenvironment. Given the scope of sub-projects envisaged under the SDF and the social dimension of their goals, the evaluation criteria must be kept as simple as possible, by not using the discount rate method, which is an instrumentthat takes into account the temporal dimension of money, and to put into the analysis and the decision making the real opportunity cost of capital.

Finally, the use of the following criteria are recommended:

* The flows of net benefits before and after funding * The net results and the cash flows forecasted

If the funds requested are beyond specificlevels as shown in Annex 4, simple analysis should be completed

- 22 - with computation of the payback period of the funds invested, the return on capital, and cost-benefitratio.

Cost-effectivenessanalysis

This analysis is recommended for the basic social services and communityinfrastructure as well as the capacity-buildingcomponent. The reason is that problems arise when one tries to place monetary value on social benefits. In health, education, and other social services,the attempt will be perilous and very much biased by judgment, values, or non-autonomousrevealed preferences.Thus, instead of benefit, desirable outcomes can be summarized as effectivenesswhich will be expressedin physical terms or scale of quality. Thus, effectivenessstands as a second best proxy for estimating the fulfillment of the goals sought.

For a cost-effectivenessanalysis, the table of financial flows must provide the costs and benefits for each period. Some of the benefits could be expressed in monetary terms. However, they must be complementedby non-monetarybenefits expressed in physical units or qualitative scale.

The effectivenesscould be expressed according to criteria set beyond monetary values, particularly in social projects. It represents the level of reaching the objectives of the sub-project.The assessment of that level is based on qualitativeterms, taking into account the baseline situation and the importance that the decision-makersput on the qualitative advantages of the project. Where possible, social benefits that are intangiblemust be transformed or provide with a close social substitutethat one can quantify and value easily.

In the absence of directly quantifiable indicators,an assessment based on the following is made:

* Ratios of cost and physical benefit * Indirectperformance indicatorsand/or derived representativeof the desired effects on the characteristics of poverty, and the resources of the Government and communities.

Financial(see Annex 5) NPV=US$ million; FRR= % (see Annex 4)

Financialrisk analysis

This analysis determines the ultimate financing decision. Experiencewith similar projects within the Bank portfolio as well as others show that communities generallyprioritize investmentswhich can be expectedto have high rates of returns. The SDF operational manual will include simple financial eligibility criteria, particularly for income-generatingsub-projects.

The risk analysis may lead to the calculation after project worth criteria of critical values of the sub-project, i.e., the values of variation for key variables. A critical value is the value when reached given an unfavorable trend, will render the project unprofitable in relation to its objectives.This critical value is determinedin relation to one criterion, the other things being held constant. The percent variations can be compared to determine the most critical values, for the sub-project is the most sensitive to and show how robust the project is in a changing environment and unexpected situations.

2. Financial(see Annex 4 and Annex 5): NPV=US$ million; FRR= % (see Annex 4)

Cost-recovery

- 23 - Beneficiarieswill be expected to contribute to the cost of sub-projects.A detailed financial analysis was finalized during the appraisal mission, including assessment of operationaland maintenance arrangements based on the sample of sub-projectsanalyzed in the economic analysis.From the analysis of the environment and the foreseenparticipation of beneficiaries, some level of cost-recoveryis envisioned at a rate of around 5

Fiscal Impact: The fiscal analysis impact applies to costs and benefits identifiablebefore and after project which could be tied to fiscal flows. These concem:

* The impact on public resources * The costs-recoveryin social and communityactivities undertaken by the central and decentralizedpublic entities * Collectedrevenues in terms of taxes, spared losses, and saved expenses by public entities in direct relation to the sub-project.

Generally, a direct quantificationcan be done on:

* Taxes on revenues of new employees v Partial or integral costs recovered 9 Indirect taxes deriving from induced activities of sub-projects * Local direct and indirect taxes • Rural taxes and taxes on markets * Savings on social expenditures.

Since the SDF unit will not be a branch of the govemment but an autonomousbody, its institutional design will encourage contributionsfrom local beneficiaries. Contributionsfrom Govemment will also be added to fiscal impact at the start up of the SDF management unit by allowing access to recurrent cost-budgeting.

3. Technical:

The issue of technical capacity and quality of a sub-projectwill be addressed during its selectionprocess. The assessment will determine if the sub-projectis technically sound and useful lessons will be drawn from experience with other donor-fundedprojects. The SFMU will use national technical standards,where these are available and appropriate, and will assist in developing appropriatestandards for those type of projects for which these are not available. Standards are detailed in the operational manual. The SFMU will promote the use of simple, appropriate, and environmentallysound technologies correspondingto the needs and capabilitiesof the beneficiary communities.Labor-intensive work will be encouraged while insuring technical quality.

4. Institutional:

This section aims to provide a picture of the institutional arrangementsand the institutional capacity for the SDF project. The nature of the project necessitates an institutional arrangement in which national, regional, and local bodies buy into a common project mandate, but are clear of their specific roles and responsibilitieswith regard to the various project components. Although the project will formally be mapped to the MFSN, the Social Fund will function as a privatelymanaged institution. This is in keeping with the high independenceamong poor communitiesstemming from their reluctanceto become dependent

- 24 - on the Government structurefor meeting basic needs. The SDF will consist of two bodies: the Social DevelopmentGrant which will implementcomponents I and 3, while the Social DevelopmentCredit will irmplementcomponent 2.

Although the SDF is situated outside the Government structure,the project emphasizes the strong involvementof local Government structures, specificallyin phase 3 of the project. It is envisaged that by this time, the capacity-buildingobjective of the project will result in greater participation of local vulnerable groups in local govemment decisions, and that local developmentplans will, as a result, be more reflective of real needs. Capacity building in local governmentis a specific objectiveof the on-going PNIR project and hence is not directly targetedby this project.

The overarchingcapacity-building aim of the project is highlyvisible in its experimentalapproach to community sub-contracting. This will be operationalizedthrough arrangements for direct contracts between the SDF and the beneficiary community, sub-group,or individuals. Where deemed necessary, beneficiary groups/individualswill be encouraged to sub-contractparts of the project to the private sector or NGOs. This is a break from past projects where intermediariesbetween the SDF and ultimate beneficiariesabsorbed much of the gain in terms of capacity building that comes from exposure to project management. The SDF will ensure that adequate training and support is given to beneficiariesthey benefit the most from the experience. 4.1 Executing agencies: The implementationunit of the SDF project will be the SFMU which has been newly created as an autonomous agency outside the normal Government structure. It will be staffed with out-sourced high-level professionals,including a small team in Dakar and branches in the regions. To speed up the start-up of the activities the technical capacity of the SMFU will be improvedby the recruitment of two large and specialized firms: one consultant (presumably a large NGO) for providing technical assistance to the CDSU in the area of community developmentfor component 1, the other for providing technical assistance to the MFSU in the area of PFI capacity building. The Central SFMU will be responsible for the regional branches (REMUs)and accountableto the GA. The SFMU will operate on the basis of the principlesincluding: execution by CBOs with assistance of NGOs, and PFIs, intensive use of the private sector, and local public structures if needed, to ensure the decentralizedand target-specific nature of the activities. The Directorate of Statistic (DS) will be responsible for the implementationof the Poverty Monitoringcomponent and the Cellule de Suivi des programmes de Lutte contre la Pauvrete (CSLP) within the MEF will be in charge of the production of the annual report on poverty. 4.2 Project management: An institutionalassessment study was conducted to evaluate the capacity of the major players in the SDF Project, and their strengths and weaknesses. As mentioned above, the project necessitates an institutional network that ranges from the national to the village level. Keeping this in mind, the study covered eight national ministries, as well as a gamut of NGOs and CBOs currently active in the regions of Dakar, Kaolack, and Tambacounda. The institutional arrangements for the project, are based on the findings of this study.

The Government Structure The SDF project will be mapped to the MFSN which was deemedto be the most ready to implementthe project. But all practical purposes, the SDF is an independent structure (the SFMA), which will be staffed by non-government staff and will function as a private institution in the private sector. To ensure borrower commitment,and to make sure the project is in line with the Government'slarger poverty

- 25 - program (PLP) of which the SDF is a part, the board managing the PLP has been involved in project design from the start. This committee consists of representatives from the eight stakeholderministries and NGOs. Some of these members may serve on the managing board of the SFMA.

The Ministry in charge of statistics has a central role in the poverty-managementsystems (component4) of the project. The poverty-monitoringsystems developedthrough this component will be used to enhance the quality of projects for a wide range of Ministries, such as health, education, and rural development. This componentfocuses heavily on direct capacity building and technology investmentwithin the Government structures.

The involvement of the Govemment structure in the operation of the project will be greater and more direct at the regional and sub-regional levels. The study emphasizes that many of the local/regionalbodies of the ministries could be well integrated to the project, with stronger human and technical resources. The project structure encouragesthe support of regional Government units (especially the local technical support units of the Ministry of "Decentralisation et Amenagement du Territoire)which will be responsible for ensuring that projects fundedby the SDF (especiallywith regard to component 1) fit into regional poverty planning strategies,i.e., they complementand not compete with other development initiativesin the area.

Non-Governmental Organizations (NGOs) and Community-Based Organizations (CBOs) Senegal has a substantialnumber of NGOs and CBOs, although they tend to be concentrated in specific regions, such as Dakar, and often work in similar areas, such as women, and basic health, and education. The project aims to target these very issues, i.e., to extend the network of these organizationsby providing incentives for active NGOs to work in new, more needy areas of the country and to foster the development of CBOs in these targeted poor areas which are characterizedby a lack of organized local capacity. Moreover, the innovative feature of community-basedsub-contracting will encourageNGOs (and the private sector) to tailor their services to issues prioritized by the most needy communities.

In a broad sense, NGOs and CBOs buy strongly into the overarchingpoverty-reduction and capacity-buildingaims of the projects. They have the advantage of good local knowledge,have established a rapport with communities, and have decentralized structure and operations. However,here there lies a significant differencebetween the two groups. NGOs, especially larger, internationalNGOs have more sustainable work programs stemming from financial stability tend to view local operations as an implementingarm of a more centralized capacity, i.e., local staff rarely have any decision-makingpowers or initiative. The result is that although these organizationswork at the grassroots level, the projects are not always designed for priority local needs, and often lack the innovationand inspirationthat comes from true ownership and participation. Local NGOs are often better at shaping projects to reflect local needs, but suffer from severe financial insecurity, which results in their inputs being short, sporadic,and lacking in long-term vision and sustainability. As a group, NGOs suffer from poor administrative and management capacity, an absence of formal procedures and consistencywith regard to project implementation,poor logistics, and a lack of visible results, stemmingpartly from poor research and project-evaluation techniques. Although NGOs are not a target group of the project, the project aims to capitalize on the project implementationexperience of NGOs, through community-basedsub-contracting. It is envisaged that this will result in a more sustainable and realistic demand-basedrole for NGOs within the development paradigm.

CBOs have a strong advantage over NGOs in that they reflect the true expression of grassroots initiative, motivated primarily by a pressing desire to solve local problems. Their excellent understandingof socio-culturalissues makes them crucial partners in the development process if the principles of participationare applied. The project takes this perspective and works on the assumption (recommended in

- 26 - the study) that CBOs are the primary local development institutionthat are sustainable over the long run. The SDF's innovative community-basedsub-contracting mechanism (see above and Annex 2) aims to ensure that the project will foster the organization of the poor into groups (Component 3) and the process of project implementation(Component 1) will give these organizationsmuch needed managerial and capacity-buildingexperience that is often lost to them through the use of intermediarieslike NGOs. The study observes that the most active CBOs are those that have a long-term association with a larger body and are involved in the project over a considerablelength of time. It is envisaged that the SDF will provide such a stable resource base that will furnish the time and support structure to enhance the growth and crystallizationof these organizations. Capacity enhancementof the poor is a primary goal of the SDF and will be effectedindirectly (through sub-contracting)in Component 1 and more directly in Component3 of the project. Sub-contractingwill have the added advantage of enabling CBOs to observe and learn project implementationskills from NGOs and the private sector and provide a platform on which links with these service providers can be established.

M-ficro-financeProviders The social assessment emphasized the strong need within targeted communities credit for income-generatingactivities. Senegal has a wide range of PFIs and SCAs, the latter being smaller and less formal and organizedthan the former. The institutionalassessment study mentionsthat despite the existence of these bodies, there is not enough credit available, to match the high need within the country. More importantly,the conditions of credit favored by most PFIs (e.g., collateral), and the regions of their operation means that, in most cases, the poorest and most vulnerable groups targeted by the SDF are not touched by these institutions. These institutions are seen as being flexible and adaptiveto clients needs and also having an ability to mobilize local potential. The SDF micro-finance component builds on these slrengths. It aims to extend the provision of financialservices to poorer sections of society.

This aim will be met through a two-pronged strategy. Firstly, PFIs will be sub-contractedto implement this component, i.e., supplying financial servicesto poor populations. Secondly,the institutions themselves will be targeted for capacity building to enable them to reach this new clientele. The SDF will fund the costs of intermediationto be carried out by PFIs by covering the cost of outreach and providing informationto targeted groups and communities,including training in establishingand managing solidarity groups.

SCAs that are managed by the poor themselves or through the help of an NGO will benefit from: (i) training and technical assistance in operational procedures and; (ii) building and equipment (computers, and office furnishings)to set up small village banks.

7TheSDF as a development institution Project input into establishing and managingthe SFMA is viewed as a long-term capacity-building exercise. It is envisaged that the SFMA will continue beyond the life-span of the project by which time it will be established enough to generate its own finances and be viewed as a central agency for poverty-targeted initiatives. 4.3 Procurementissues: The procurement/contractmanagement system proposed for the SFMU was reviewed before Project negotiations, and an action plan to build adequate capacity in the new SFM[J was agreed upon at negotiations for implementationbefore Credit effectiveness(see Annex 6). After completionof the action plan by the new SFMU, a World Bank Procurement Analyst will carry out an assessment of SFMU's capacity to handle procurement and to supervise and monitor procurement carried out by other actors in the project that will be involved in procurement, in accordancewith World Bank policies and procedures.

- 27 - Other actors in the project with procurement responsibilities are PFIs and CBOs. The PFIs will be assessed when they are evaluated and selected to participate in the project. The CBOs have no procurement experience and capacity. The objective of the project is to build this capacity through a learning process. All training and/or consultantservices necessary will be provided to the SFMU to ensure compliance with World Bank procurement policies and procedures.All training and/or consultant services necessary will be provided by the SFMU to the CBOs and PFIs to ensure compliance with World Bank procurementpolicies and compliance with procedures spelledout in the Manuals of Procedures agreed upon with the World Bank. 4.4 Financial management issues: Sound financial management systems will be installed at all levels necessary to ensure that all project expendituresare recorded and reported, based on the project's financial informationneeds. These systems will comply with the Bank's operationalpolicies and procedures (OP/BP 10.02). At the present preparation stage of the project and with regard to the project's activities and implementationarrangements, the levels at which accounting systems will be installed are: (i) the CSFU; (ii) the RFMU; (iii) the PFIs; (iv) the communities.

The financialmanagement capacities of the communitieswill be strengthenedas part of the project's activitiesto ensure transparent financial management of the grants they will receive and a sustainable and viable financial situation for the income-generatingactivities in which they will be involved as part of the micro-creditcomponent. The manual of administrative,financial, and accountingprocedures of the project was developed. Bank commentsare included in the final version. The results of this work will be taken into account to fine tune the design of the project's overall financial managementsystem. 5. Environmental: EnvironmentalCategory: B (Partial Assessment) 5.1 Summarizethe steps undertaken for environmental assessment and EMP preparation(including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. An environmentalassessmerit was done from January to March 2000 and the final report was issued in June 2000. The report was based on a comprehensivedocumentation of the national poverty-alleviation program, extensive field visits in three different regions, and various meetings in Dakar with agencies and resource persons involved in the design and implementationof the national program.

During the EA process, wide public consultation was performed in three districts of the project area; Pikine, Bambey, and Kolda. Meetings and individual and group interviews were arranged with target groups (youth, women, professional associations and NGOs) to discuss environmentalissues and potential social and health issues including AIDS and sexually transmitted diseases. Necessary mitigation measures (includinginstitutional capacity building) were recommended in the EMP on the basis of the public consultation findings.

Environmentalissues raised by the report are related to the fact that the SDF is a financial lending intermediaryand as such, micro-projectsand sub-projects will operate as stand-alone operations. Therefore,the micro-projectsand sub-projects may generate environmental impacts on natural resources, health, and hygiene and should be properly assessed. The project will finance, through the approved micro-projectsand sub-projects,actions to mitigate the assessed envirronmentalissue. 5.2 What are the main features of the EMP and are they adequate? The EMP is a composite of three main items:

- 28 - * The Manual of Procedures for the micro-projectsand sub-projectsincludes specific sectionsproviding: environmentalmanagement rules for the preparation and implementationof the micro- and sub-projects, guidance, and costs estimates for implementingmitigation measures; * The Manual of procedures includes a check-list for environmentalreview of micro- and sub-projects and a frameworkfor their environmentalassessment, taking into account the EA recommendations; * A yearly review of the implemenationof the environmentalrules of the Manual of Procedures.

All micro-projectsand sub-projectswill be appraised on the basis of criteria including specific environmentalcriteria defined in the EA and incorporatedin the Manuel of Procedures. The appraisal committee will be trained to be able to apply the environmentalcriteria and to propose adequateactions to be carried out by the communities under their micro-projectsor sub-projects,as necessary. Training regardingenvironmental issues eventually generated by micro- or sub-projectwill be provided to the NGOs which will support communities. Training on such environmentalissues will also part of GMT program (component3). 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: June 20, 2000

A first draft EnvironmentalAssessment (EA) report was submittedfor review and comments to the Bank. Comments were given by the Bank and encorporatedin the final version, provided in June 2000. This version is deemed acceptable by the Bank.

5.4 How have stakeholdersbeen consultedat the stage of (a) environmentalscreening and (b) draft EA report on the environmentalimpacts and proposed environmentmanagement plan? Describe mechanisms of consultationthat were used and which groups were consulted? a) At the stage of environmentalscreening, environmentalissues were included in the agenda of the national project preparation committee and discussedamong all represented stakeholders (local leaders, beneficiaries,national and local Government representatives,NGO and CBO leaders. The Ministry of Environmentis also a member of the national committee;

b) At the onset of the EA study, field visits were organized in three different urban and rural locations that represent the full range of projects areas. Potential beneficiaries(youth and women's groups, NGOs, CBOs, and producers' groups) were either individuallyinterviewed or invited to general meetings and focus-groups.

Special care was taken to reach groups vulnerable to AIDS and STDs. Therefore, with help from public health and welfare workers, male and female sex workers were speciallytargeted and interviewed to assess the magnitude of health risks, verify the current medical and social care system, and design adequate mitigatingmeasures. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? Ihe annual progress reports on the project will include a specific section on the review of the environmental aspects of the projects: (i) number of micro- and sub-projects generatingenvironmental issues; (ii) number of micro- and sub-projectswhose design addressesthese environmentalissues; (iii) evaluation of the effectivenessof the implementationof the mitigation measures designed in the micro- and sub-projects.The indicators include the costs of mitigationmeasures into the budget of the micro-projectsand sub-projects;

- 29 - 6. Social: 6.1 Summarizekey social issues relevant to the project objectives, and specify the project's social developmentoutcomes. The objectives of the project are (i) to support projects and activities prioritized by the target poor communitiesthrough the establishmentof a Social Fund mechanism; (ii) to provide tools and technical assistance (such as training, information databases, network building, and hands-on sharing of best practice) to poor individuals and groups so they can better prioritize, plan, implement, and sustainably manage their own initiatives and activities; (iii) to encourageand enhance the organization of the poor into informal or formal groups such as CBOs, and to build the capacity of such groups; and (iv) to improve the managementand monitoringof poverty initiativesat national, regional, and local levels.

A social assessment was conducted as part of the project preparation. The findings and issues reflected in the social assessment correspond with the objectives of the project. Since the project targets poor communitiesand priorityis given to women and youth. Major finding of the social assessment reflect project goals.

The socio-culturalattributes in all villages are characterizedby strong patriarchal leadership in the figure of a respected and elderly village chief. All villages demonstrateda high degree of consultationbetween men and women. However,the division of labor was demarcatedstrictly along gender lines. Men and women play different roles in their villages based on their socio-culturalideologies.

In all villages it was found that kin networks are strong and determinant factors in residential pattems and marriage choices, few or no "strangers"live in the village selected (i.e., seasonal workers or people outside of the local historical experience). All villages display a high sense of collective communityconsciousness, with strong social networking pattems, which in part are the coping strategies for poverty reduction.

Lack of formal institutions:None of the villages had a formal village development association,women's development group, or a youth association, although one village, Thianga Omar Gueye, had an informal women's association.Women organized themselves to network socially and to counsel, mentor, and give advice to the younger generation. It is through such network meetings that cultural issues such as rituals, initiations, marriages, and other social and cultural affairs affecting villagers lives are discussed and decided.

Access to credit: All villages expressed a great deal of interest in obtaining access to credit. Women had income-generatingactivities, which they managed as a group or individually,and whose income they used for the welfare householdwelfare. Women were particularlykeen to obtain credit for income-generating activities, especially during the rainy season when poverty is at its worst.

Issues of demographic,environmental, and agriculturalchange: All villages visited expressed the opinion that their economic situation had become worse over the last 20 years and that the level of poverty has increased;the seasons cited were the combinationsof climatic and environmentalchange, increased population pressure, and changes in agricultural policies. The lack of agricultural inputs, such as fertilizer and equipment,soil erosion, increased soil alkalinity, and the lack of training/appropriatetechnology have all contributedto the decline in agricultural productivity and to poverty.

Lack of health and education: Health problems were high on the list of village priorities in every case, and both men and women expressed their concern about access to improved pre-natal and maternal care. The women complainedthat smoke inhalationfrom cooking with wood created major respiratoryand eye

- 30 - problems, which are difficult to treat due to the lack of health care and resources. Furthermore, the heavy burden that grain pounding puts on women's health represents a serious health problems.

Education was also a major priority in the villages visited. Children's health and education was equally prioritized. In both pastoral or agricultural villages. Education and adult literacy were also priority concerns. Both men and women in all the villages worry that if education is provided, will the curriculum be appropriateto serve their needs, will there be enough female teachers, will there be enough toilets and water facilities for both boys and girls, and will girls be used to perform domestic type chores in the school environment.

Insecurity: The theft of livestock is an ever present problem in the daily lives of villagers today. In urban areas, the crime rate is high, and women are often the most targeted.

Lack of access to water: Lack of access to water is a serious development constraint for agricultural and cattle productivity and for household consumption and use. All the villages articulateda strong demand for water. Activityprofiles done with women in Kerr Ibra Fall and Thianga Omar Gueye revealed that women spend 6 to 7 hours per day drawing and fetching water. In Kerr Ibra Fall the well was 45 meters deep and the women complainedof severe back and shoulder pains caused by drawing water. In other villages women have to walk as much as 10 kilometers to draw water from wells.

Lack of storage facilitiesfor agriculturalproduce and lack of pasture for cattle: Both men and women in all villages articulated stronglythe lack of storage for agricultural produce as a major problem which resulted in a lot of produce wastage. Women also complainedof their lack of knowledge of conservation techniques, which leads to spoilage of agriculturalproduce not or immediatelyconsumed sold. Most women who have no access to markets have to sell their produce to middlemen, who are highly exploitative.

Lack of transport: For all villages the lack of transport is a major constraint. For example, in Thianga Omar Gueye and Kerr Ibra Fall, activity profiles with women revealed that lack of transportationseverely inhibits their income- earning capacity because of their geographic isolation. 6.2 Participatory Approach: How are key stakeholdersparticipating in the project? A participatory approach was used to obtain stakeholderparticipation and all beneficiarieswere involved.

(a) The preparation of the project has been a collaborativeprocess involving members of a preparatory committee, with representatives from key Ministries,NGOs, and CBOs.

Several workshops were conducted with representationof key stakeholdersto help define the project objectives and outputs. The result was the project design summary presented in Annex 1, based on the draft logical frameworkdeveloped by the committee.

(b) The social assessment was conducted using a participatoryapproach and techniques, such as semi-structuredinterviews, focus groups discussions, daily activity profiles, participant observations, historical profiles, well-beingranking, and social mapping to determine the needs and realities of poor communities in the seven villages visited. Using these participatorymethods, the villagers were encouraged to identify and prioritizetheir problems and solutions, identify gender issues relating to poverty, and design suitable local action plans that, when implemented,can lead to sustainable development.

(c) Poverty mapping was conducted throughout the entire country. Each village was visited.The results of

- 31 - this mapping will lead to a Participatory Poverty Assessment (PPA) in each of the targeted villages and the needs identifiedby the villagers were incorporatedinto the project design. 6.3 How does the project involve consultationsor collaborationwith NGOs or other civil society organizations? Role of NGOs and CBOs: NGOs and CBOs will play different roles depending on the project component. For example,in the basic social services and infrastructure,NGOs will be contracted by communities to undertakeparticipatory planning exercises training, and IEC activities. The implementationof this componentis fully the responsibilityof beneficiariesand their organizations.

For the micro-creditcomponent, NGOs and CBOs as well as special PFIs will be contracted on a competitivebasis. In addition, these civil societyinstitutions will indirectlybenefit from project activities, particularlythe capacity-buildingcomponent. 6.4 What institutionalarrangements have been provided to ensure the project achieves its social developmentoutcomes? Institutionalarrangements at the communitylevel: The social assessment findingsshed some light on institutionalarrangements at the village level. All villages demonstrateda high degree of independence vis-a-vis their relationshipswith government services,neighbors, or other external institutions.Although some could cite specificexperiences with a government serviceor non-governmentaldevelopment activity in their zones, each case was related to initiatives on the part of the villagers in question to solve a particular local problem, as opposed to a search for general support.

Each village also demonstrated observable pride in its survival skills and relative independence and self-reliance. All the villages expressed the importanceof institutions for poverty reduction, however it was noted that institutions have not played any significant role in their lives and livelihoods. Villagers participated in ranking institutions and creating favorable criteria for collaborating with institutions for growth and prosperity. For example, in Thanga Omar Gueye, a semi-structuredinterview with a group of women revealed the following as favorable criteria for working with institutions. They should: * know the reality of the communities * not look down on the poor * be very honest and open * listen to the voices of all the poor, and not play favorites * be dependableand accountableto the community * not have a political agenda * be very sensitive to women's needs. 6.5 How will the project monitor performancein terms of social developmentoutcomes? The project will monitor performance in terms of social developmentoutcomes based on the following quantitative and qualitative indicators: Quantitative: * Controllingone's immediate environment:homes repaired, walls from local materials, number of concrete/mud homes, number of radios, kind of furniture * Number of children in primary school * Number of regular attendees in adult literacy classes * Sustained anti-malarial program at the village level with regular sessions each month * Regular vaccinationprogram for small children and pregnant women * Number of men trained in income-generationactivities * Number of small enterprises resulting from training and small loans

- 32 - * Number of villages or households reportingdecline in the number of livestock thefts due to new strategies for increased village security * Sustainednumber of young men remaining resident in the village throughoutthe year as opposed to out-migrationfor income opportunities.

Qualitative: * Local morality, sustained low level of village violence,whether among men, against children, or againstwomen or among women * Increasedand sustained home hygiene, increased awarenessof disease spread through animal manure, spoiled food, and poor sanitation. * Concurrenceof men and women on expressedneeds * Presence of non-project related income-generatingactivities (offshoots of project activity, resulting from increasedknowledge) * Consistentattendance in training activities * Sustained participation across residential and ethnic lines.

Indicators for InstitutionalPerformance at the local level: Institutions: - have to target rural areas where access to credit is limited and where there is sufficient demand.

scan build a sustainable village-basedcredit system and train communities in their operation.

* can successfullytransfer business know how, small technology and a local model for supply and marketing.They should make sure that at least 3% of the project costs be devoted to social awarenesscampaigns using local medium of communication.

* for indicators of success, annual or semi-annual financial audits, technical reviews, and supervision missions must be conducted.

* at least for credit programs, institutions must make sure that villagers including women, be part of the credit committee.They will then be responsiblefor loan appraisal, selectionof loan recipients, setting loans amounts, determiningcollateral and repayment requirements,and defining and enforcing sanctions for late payment or default

* should maintainedregularly all receipts

* should successfullymediate organizationalconflicts and harmonize differingpoints of view

* should develop village action plans which reflect wide participation, and create a consensuson what the villagers want to achieve next

* should agree on priorities which are executed according to plan.

- 33 - 7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? Policy Applicability Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes 0 No Natural habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes 0 No Forestry (OP 4.36, GP 4.36) 0 Yes * No Pest Management(OP 4.09) O Yes * No Cultural Property (OPN 11.03) 0 Yes * No Indigenous Peoples (OD 4.20) 0 Yes * No Involuntary Resettlement (OD 4.30) 0 Yes * No Safetyof Dams (OP 437, BP4.37) 0 Yes * No Projectsin InternationalWaters (OP 7.50, BP 7.50, GP 7.50) 0 Yes * No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60) 0 Yes * No

7.2 Describeprovisions made by the project to ensure compliance with applicable safeguard policies. The EA recommends that all sub-projects (and eventually major projects) be subject to EA prior to their fundingby the SDF. This is consistent with Bank policy for financialintermediary lending. This process is chosen to securecommitment and complianceof beneficiarieswith national and Bank policies.

F. Sustainabilityand Risks I. Sustainability:

The key factors critical to the sustainability issue are: (a) capacity building at all levels; (b) identification and participationof beneficiaries; (c) partnership and collaborationof stakeholders; and (d) quality of sub-projects. Furthermore, enabling beneficiary organizationsto sub-contract with service providers with the aim of empowering the poor to identify, plan and implementtheir own project, is crucial for sustainability. The APL option should promote long-termsustainability as the second phase will build on the first for expanding and consolidatingachievements. By phase two of the project, the SDF will have started mobilizing funding for poverty alleviation from other donors and the private sector, including its operating costs. It is anticipated that the SDF will become an autonomous like a foundation institution, and address poverty issues at the community level and seek long-term fundingto build permanent endowments. It will address locally defined problems, thereby facilitating local participation and ownership, eventually leading to sustainability.

2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk Mitigation Measure FromOutputs to Objective CBOs, NGOs, and pnrvate firms M TA to be provided by the SDF lack technical capacity to implement the program

- 34 - From Componentsto Outputs Weak coordination among all M Enhancement of the role of the national stakeholders committee in coordinating the different existing social funds for poverty alleviation

Establishment of an autonomous SDF Management Unit operating on the basis of the following principles: transparency, simplicity, and flexibility

(The existence of clear policies and procedures, transparent management, stakeholder participation, and timely financial reporting should allow for good coordination.)

OverallRisk Rating M RiskRating - H (High Risk),S (SubstantialRisk), M (Modest Risk),N(Negligible or Low Risk)

3. Possible Controversial Aspects: None identified

G. Main LoanConditions

1. Effectiveness Condition

Trhe following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions:

3 the Borrower has opened the Project Account and has deposited therein the initial deposit;

3 the Subsidiary Administration Agreement has been executed on behalf of the Borrower and SFMA; * the Borrower has established the accounting and financial management system for the Project satisfactory to the Association; * the Borrower has appointed extemal auditors with qualifications and experience satisfactory to the Association and has employed them for purposes of auditing the financial statements, the Beneficiary Grant and IGA Grant activities and the intemal controls of SFMA; * the Borrower has adopted the Project Implementation Plan, in form and substance satisfactory to the Association; * the Borrower has adopted the Procedures Manual in form and substance satisfactory to the Association; * the Borrower has appointed key personnel to SFMA with qualifications and experience satisfactory to the Association including a Director, an Administrative and Financial Officer, a Microfinance Officer, a Monitoring and Evaluation Officer, five Procurement Officers, an Officer in charge of Community-Based Organizations, and has employed them all in accordance with the provisions of the

- 35 - Project Agreement; and * the Borrowerhas completed the procurementplan for the first two years of Project implementation, satisfactoryin forn and substance to the Association. * the Project Agreement has been duly authorized or ratified by SFMA and is legally binding on SFMA in accordance with its terms; and * the SubsidiaryAdministration Agreement has been duly authorized or ratified by the Borrower and SFMA and is legally binding upon the Borrower and SFMA in accordance with its terms.

2. Other [classifyaccording to covenant types used in the Legal Agreements.] * Signingof at least three ParticipationAgreements with three PFIs is a condition of disbursementof the micro-financecomponent.

Assuranceswere sought and obtained during negotiations on the following: * The project will be implemented in accordancewith the ImplementationManual and any change to the manual will be subjectto agreement with IDA. * A PPA will be developed in each selected village/communitybefore the identificationof any sub-project. * 57 Local DevelopmentPlans will be developedby the end of the project first phase. * The first beneficiary assessment report will be submittedby September 30, 2001. * The results of the HouseholdBudget Survey and the associatedpoverty profile and map of the country will be submittedby May 31, 2001. * The Borrowerand IDA will conduct a mid-term review of project implementationeighteen months after the Effective Date. * The Borrower will annually submit to IDA for review an annual progress report and work program planned for the following year. * The project staff will at all times have qualificationscommensurate with their duties and any change in key staff (Director,high-level staff in charge of financialmanagement, monitoring and evaluation, Micro-finance component, social services and infrastructurecomponent, procurement specialists, and staff in charge of the regional Units) will be subjectto IDA agreement.

H. Readiness for Implementation 1 1. a) The engineeringdesign documents for the first year's activities are complete and ready for the start of project implementation. 1 1. b) Not applicable.

O 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. El 3. The Project ImplementationPlan has been appraised and found to be realistic and of satisfactory quality. M 4. The following items are lacking and are discussedunder loan conditions (Section G):

- 36 - The manual of procedures including the project implementationand procurement plans were reviewed at negotiationsand will be finalizedbefore credit effectiveness.The Social Fund ManagementAssociation (SFMA) was created and registered under the national Law as an autonomous agency. The SFMA is the implementationAgency of the Social Fund Project. Its staff is being recruited.

1. Compliancewith BankPolicies 1 1. This project complies with all applicable Bank policies. C 2. The followingexceptions to Bank policies are recommnendedfor approval. The project complies with all other applicableBank policies.

Alassanea *awara r Nic ol s umeBurnett McIntire TeamLea er 0fSector Manager CountryManager

- 37 - Annex 1: Project Design Summary SENEGAL: Social Development Fund Program KeyPerformance Hierarchyof Objectives Indicators Monitoring& Evaluation CriticalAssumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Sustained economicgrowth - Poverty incidenceamong - GDP estimates (Goal to Bank Mission) and reduction in the women and youth decrease incidenceof poverty. "The over-archingobjective - Improvementof basic Poverty Profile Successfuldevelopment and of the 1997 CAS is to human development Surveys on living conditions implementationof sector reduce the incidenceof outcome indicators strategies and poverty and create gainful implementationof the employment,especially for National Program for youth." Poverty Alleviation (NPPA)

ProgramPurpose: End-of-ProgramIndicators: Programreports: (from Purposeto Goal) Poor communities 1.1 Integration of target 1.1 Representative survey Economic growth is broad effectivelymanage their communitiesinto different of economic mix and budget based. own developmentresources economic process areas. of poor community and economic and social developmentplans. serviceswith equal participationof vulnerable groups. 1.2 Increasein the 1.2 Ibid . Governmentcommitment to budgets allocated/public empower CBOs and works to the target contract with NGOs. communitiesbased on their set development agenda. 1.3 Increase in 1.3 Community communitydevelopment awareness survey. projects completed in targeted communitiesand according to local developmentplans. 1.4 A 10% increaseof 1.4 Community vulnerable groups involved involvement assessment and in the decisionmaking gender analysis (against the process in targeted May 2000 baseline social communities. assessment). 1.5 The % of projects specificallyrelated to women and youth needs. 1.6 The % of vulnerable members with leadership positions or formally representing local society.

-38 - KeyPerformance Hierarchyof Objectives Indicators Monitoring& Evaluation CriticalAssumptions Project Development Outcome I Impact Project reports: (from Objective to Purpose) Objective: Indicators: The poorest tested 1. At least 75% of sub- - Monitoring system is in communitiesof Senegal projects funded by the place and performing (data effectivelyimprove their Social Fund achieve their is collected and analyzedon conditionsby using the intended results. time) Social I)evelopmentFund resources in priority developmentareas with participation of vulnerable groups (prioritize,plan, implement) 2. At least 75% of test 2. Ibid communitiesmake developmentdecisions based on their own local developmentplan. 3. About 50% of the most 3. Social assessment/ vulnerable groups within the representative survey communitiesaware of the final results of the sub-projectimplementation and are satisfiedwith the decision making. 4. Community Survey 5. PPAs

-39 - Hierarc o Objctves loticator LoIoIg&Eauton Ciia supin Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: 1. Basic social services 1.1. 300 communities 1.1. Social Fund Review CBOs, NGOs, and private and infrastructurefinanced requesting sub-projects of sub-projectproposals frms have technical by the Social Fund, are complyingwith SDF capacity to implementthe demandedby tested funding criteria. program communities. 1.2. At least 75% of the 1.2 Grant records projects funded and completed. 1.3. At least 2/3 of projects funded are not in physical infrastructure. 1.4. At least 75% of the funded projects include IEC with HIV/AIDS and STDs modules delivered.

2. The ability of the poor 2.1 At least 50% of 2.1. Micro-credit criteria and vulnerablewithin the vulnerable groups (CBOs) review of TA recipients. targetcommunities to receiving TA under the accesscredit and to seize project meet the incomegenerating micro-finance opportunitiesis increased institution-creditcriteria. 2.2. At least 75% of 2.2. CommunitySurvey beneficiariesat the communitylevel aware of the informationprovided on economic opportunities, local financingpossibilities, and prices and marketing system performance. 2.3. At least 30% of 2.3. Micro-creditrecords vulnerable groups (CBOs) accessingmicro-credit. 2.4. ContractedPFIs have achieved 75% of their target within vulnerable groups.

-40 - 3. The capacity of the 3.1. At least 75% of test 3.1. CommunitySurvey. CBOs to manage their own communitymembers ( in the economicdevelopment and vulnerable groups) are satisfy their socio-economic aware of information flow needs is improved. between communities. 3.2. Social Fund Sub- 3.2. Some 75% of Project design and projects formulated and ImplementationRecords. implementedby the CBOs (trainedunder the project) which reflect criteria of sound design and are implementedwithin the constructs of the project. 3.3. Social Fund review 3.3. About 90% of of implementationof NGOs/private firms sub-projectsand contractedby CBO follow involvementof NGOs. transparent procedures. 3.4. Community Survey. 3.4. About 75% of test communitiesunderstand the relationship of the NGOs to the project deliverables.

3.5 75% of trained communitiesin GMT have operational and structured committees and are capable of mobilizing additional resources.

-41 - 4. Vulnerable groups and 4.0 Poverty level of tested communitiesare beneficiary communitiesis efficientlyreached and improved by an index serviced by their demand higher than the basic. The based on the Social developmentand DevelopmentFund. measurementof the changes will be defined in the framework of the PPA. 4.1. About 90% of test 4.1. Internal Records of the communities satisfied with Social Fund. the services of the Social DevelopmentFund and feel it is equitable and transparent. 4.2. About 90% of 4.2. Beneficiary vulnerable members of assessment through Results eligible test communities are of Households Surveys. aware of the objectives of the Social Development Fund. 4.3. Communities are 4.3. Social Fund targeted by the Social Fund Reports. based on the data provided by poverty monitoring. 4.4. PPAs are conducted in all test communities. 4.4. Review of Social 4.5. 3 Annual poverty- Fund targeting against alleviation reports poverty-monitoringreport published. 4.6. Database on poverty conditions. 4.7. One database for each test communityon price, marketing systems performance, financial institutions, and potential contractors.

42 - Kay Perfornance Hierarchyof Objectives Indicators Monitoring& Evaluation CriticalAssumptions ProjectComponents I Inputs: (budgetfor each Projectreports: (fromComponents to Sub-components: component) Outputs) 1. Bas-icSocial Services and $12.35 m Beneficiaryassessment Good coordinationamong Community Infrastructure all stakeholders

2. Access to Micro-finance $19.80 m * Access Micro-finance Services * Support for Capacity Building of Microfinance Institutions

3. Vulnerable Groups and CBOs Capacity Building The existence of clear * Institutional $3.54 m Project reporting policies and procedures, Development transparent management, * CapacityBuilding and stakeholders participation, Training timely financialreporting and should allow good coordination.

4. Social Fund $9.80 m Management * Poverty strategy and monitoring * PIU

-43 - Annex2: DetailedProject Description SENEGAL:Social Development Fund Program

Objectivesof the Project

The Governmentof Senegal has developeda framework for poverty reduction in the form of the Programme de Lutte Contre la Pauvrete (PLP). The Social Development Fund Program (SDFP) has been conceivedwithin this frameworkto ensure that its efforts to reduce poverty in Senegal are part of the country's long-term poverty strategy. The SDFP aims at empoweringthe poor in order to give them increased access to resources and the ability to maintain resources through their own organizationsin a sustainable manner. The SDFP will support, as part of the Govemment's program for poverty reduction (PLP), four main components:

1. Basic Community Services and Infrastructure/Equipment:This componentwill help improve access to social services and infrastructureto poor communities in the targeted poorest urban areas and rural villages. Communitieswill be empowered through self-managementof micro-projects.

2. Micro-finance: This component will help increase access to financial services by poor populationsand support existing ParticipatingFinancial Institutions (PFIs) and Savings and Credit Associations(SCAs) in expanding their target market to vulnerable groups.

3. CapacityBuilding for Community Based Organizations (CBOs) of the poor and vulnerable to manage their own local developmentand initiatives so that they become a key catalyst of sustainable grassrootsdevelopment. Support will be given to CBOs and organized groups of vulnerable populationsin targeted areas in two major domains: (i) institutionaldevelopment, and (ii) human resource capacity-building of CBOs.

4. Poverty Management Systems Development: This component of the SDFP will aim at improving the poverty managementcapacity of Senegal, both under this project and with regard to poverty efforts at large.

Phasing. The project will be carried out in 3 phases. Phase 1 will be for three years and will focus on: (i) setting up and operationalizingthe structureneeded for the project to take off, (ii) sensitizingthe beneficiariesabout the project; and (iii) testing the structure through small-scaleoperations designedto incorporatea leaming process. Phase 2 will scale up the project components in other selected regions that are not supportedby other social funds, in order to reach all the poorest areas. Phase 3 will aim to fine-tune the operationalmechanism of the present SDF, harmonizethis SDF mechanism with those supported in other regions by other donors, and at increase the target groups reached, and eventually explore optionsto enable project closure while maintaining sustainable structures to continue meeting expressed needs. The project emphasizesstrong but gradual involvement of local government structures, from phase I to phase 3 of the project. It is envisaged that by this time, the capacity-buildingobjective of the project will result in greater participation of local vulnerable groups in local govemment decisions, and that local development plans will better reflect the needs of the poor. Capacitybuilding for local govemment is a specific objective of the on-going PNIR project and hence is not targeted by this project.

Target Zones. The project targets the areas with the poorest communities in both urban and rural sectors.

-44 - A country-widepoverty mapping exercise was conductedbased on criteria such as geographicalisolation, access to basic social services, degree of organizedactivity, and population size. For the first phase of the SDFP, the selectionof CommunautesRuralesis based on criteria such as (i) the extent of poverty; (ii) extent and nature of donor interventions; (iii) primary productiveactivity. The urban communes chosen for the project are important focus points for the targeted rural regions. Based on weighted criteria, the 320 ComrniunautesRurales of the country were scored and ranked between0 (the worse off) and 500 (the best off). A threshold of 200 was used to selectthe poor communities. Under this threshold are the 57 poorer CommunautesRurales representing 18%of the total, and comprisingmore than 3,500 villages (average of 65 villageseach), with a total of 570,000 habitants located in the Departments of Linguere,Kebemer, and Louga (Louga region), Kaffrine (Kaolackregion), Kolda and Velingara (KoldaRegion) and Foundiougne (Fatickregion). The five poor urban communitiesselected are: Linguere (Louga region), Kongheul (Kaolackregion), Velingara (Kolda region), Foundiougne(Fatick region), and Guinaw Rail (Dakar region). Details on the methodologyare providedin Annex 13.

Direct targeting in Components1&3. In these two complementaryprojects components,the interventionswill target specificbeneficiary sub-groups. As reflected in the social assessment study (Annex 11),often the most needy sub-groupslive not only in small villages, but also in large, more heterogeneousvillages or in urban areas. The principlehere is to targetthe poorest and the most vulnerablecomrnmunities within the selectedurban communesor communautesrurales(see Annex 13). A ParticipatoryPoverty Assessment (PPA) (see Annex 14) will be conductedin the targeted areas. The PPAs will provide a thorough, contextualunderstanding of the qualitativeaspects of poverty at the communitylevel, and will help identify marginalizedsub-groups. The immediateobjective of the PPA will be to select the limitednumber of the poorest villagesand quarterswithin the above mentioned 57 CommunautesRurales and 5 Communes.Due to the test nature of the first phase, the number of communitiesinvolved will be limited to 450, or up to 15% of the total target. The long term aim of the PPA is to: empower local communitiesto conduct needs assessmentsthrough training of trainers at the communitylevel (communauts rurales and communes);design local developmentplans that reflect the concems and priorities of vulnerablesub-groups in targeted villages, communautesrurales and communes;establish project selectioncriteria (for urban and rural projects) based on priority needs of vulnerablegroups as reflected in the PPAs; and serve as a qualitativecomplement to the quantitative poverty baseline data, for project monitoring and evaluation. Through the PPA, a needs assessment and a local developmentplan outlining priority projectswill be developedand which will be fed into an integrated plan. The methodologyfor the PPA is detailed in annex 13.

Indirect Targetingin Component2: This component2 for extendingmicro-finance services to poor groups and individualswill use the indirect targetingmethodology. Results from the beneficiary assessmentand the economic assessment suggest that the target market of the PFI is a mix of: (i) female clients; (ii) poorest segments of the population; (iii) geographicfocus on rural areas; (iv) micro-entrepreneurs;and (v) potential micro-entrepreneursneeding financial services and training to start a business. Indirect targeting of their clients by the PFI involves: (i) design of products and services attractiveto the specifictarget market; and (ii) self-selectionof the clients by virtue of interest in the type of financialproducts and servicesoffered by the PFI. The project will support PFIs to reach new segments of the target market (poor clients), as well as facilitatethe creation and managementof grassrootsSCAs which can be building blocks for linkageswith licensedPFls. To be relevant and attractive to the poor especially women,the design of financial products and servicesoffered by the PFIs might include: (i) small-sizeloans; (ii) interest rates sufficientto cover lending costs and discouragewealthier clients; (iii) flexible repaymentschedules that fit the activitiesbeing financed; and (iv) appropriateloan guarantees, such as solidaritygroups, and collateral substitutessuch as animals and jewelry.

-45 - Component2 will be implementedin the same geographicareas as components 1 and 3. However, specificbeneficiary sub-groups will not be directly targeted,nor will specificactivities be given preference,except for groups identifiedby the PPA as being too far from the reach of any PFI. These specificlatter groups will be identifiedthrough the PPA process and will receive direct support to develop an IGA and to create a SCA to collect the IGA revenues. The approachtaken will serve to develop poor areas and to facilitatenot only linkages with licensedPFIs but also the creation and managementof grassroots SCAs in areas where no PFIs are present. The project will also provide capacity-buildingsupport to PFIs through training and other activities.

By Component:

ProjectComponent I - US$12.35million

Access to basic social services and communityinfrastructure by poor population

Objective and strategy. The objective of this component is to improve the access of vulnerablegroups and communitiesin the targeted poorest urban and rural areas to basic social services. This componentwill complement the existing national poverty-alleviationprograms in the social sectors. The institutionalarrangements and proceduresare designedto avoid duplication with these programs. The strategy is to empower communitiesby facilitatingand enabling them to self-managethe activities which improve access to and use of these services. Emphasiswill be placed on the process of improvingaccess to a servicerather than the provision of the service. Thus, the procedure for implementationof this component(as detailed in the operationsmanual) will put primary weight on establishingsustainable processesfor increasingboth communityand individual capacity to access and the use of basic social services. As such, any provision of service, such as the building of some infrastructure,will be regarded as an input to achieve the objectiveof improving the access of and its use by target groups.

Implementation.Individual proposals will not be eligible for funding. Targeted communities-- as a group -- will identify and prioritize their needs and interests. Through the PPA process, each targeted communitywill receive support from the project (includingtraining of groups and individuals)to develop a participatory action plan translated into a micro-projectfor funding. Each group will be responsiblefor the formulation,submission, execution, supervision, and evaluation of its micro-project, includingthe managementof the funds granted by the agency to co-financethe micro-project,and the procurement of goods, works, and/or services included in the micro-project,such as contracts with NGOs and specialized firms or consultantsto help the communityimplement the micro-project. Transfersto communities'bank accounts will be made in trenches based on the progress of services rendered. When necessary, the communitywill contract parts of the project to the private sector or NGOs to carry out the procurementprocess. The procedures are outlined in the Operational Manual. The Social DevelopmentGrant (SDG) will ensure that adequatetraining and support are given to beneficiariesto allow them to gain maximum experience. This strategy is expectedto result in better ownershipof the sub-projectby the communities and better accountabilityfor the contracted service or goods providedto the community. This componentis composedof 2 sub-components.

(i) Sub-component1.1: Access to basic communitysocial services (US$ 4,88 million). The poverty assessments (socialand economic) conductedduring the preparationphase of this project highlightsthat access to basic social services and their use is an important indicator of the poor's perceptionof their own poverty. A crucial differencebetween poor and better-off groups is that the

-46 - latter have better access to and use of social services (such as health, education, agriculturalextension, markets, telecommunications,and new technology)both state-ownedand private. The objectiveof this sub-componentis to improve the access to and use of basic social services for targeted poor groups. This will be approachedfrom the perspectiveof supply and demand. From the demand perspective,the project will support communities' sub-projectswhich aim at developingstructures that improve the community's accessto and use of basic social services. For example: a micro-projectpromoting the use of a new technologyin rural areas to preservemilk will make the transportationof milk more feasible for market sale; often, the infrastructureof the market exists in villages, but the lack of knowledgeand technology prevents communitiesfrom fully utilizing it. On the supply side, the project will improvethe environmentwithin the targeted areas to attract providers of basic social services. For example by funding a micro-project aiming at implementinga youth-run IEC campaign, or the promotion of a youth theater group over the local radio. The implementationof activitieswithin this sub-componenthas the objective of improvingthe ability of poor communities to think about and prepare their sub-project. Infrastructurefinanced under micro-projectsof this sub-componentwill cost a maximum of 20 % of the total micro-projectcost, and must be a necessary input to improvingaccess to a basic social service. Micro-projectactivities eligible for fundingwill not be substitutesfor national programs. It is expectedthat they will concentrateon areas such as improvedtechniques for storing and marketing of agriculturalproduce, support of AIDS victims, community-basedradios, ECD, and use of impregnatedmosquito nets. A list outliningprioritized as well as a negative list of non-fundable activities will be included in the OperationManual. The Social development Grantwill provide 100 % grants.

Phase 1. The objectivesof the first phase are: (i) setting up the institutionalsystem in the targeted regions; (ii) setting up the monitoring and evaluationsystem for the component; (iii) implementing ParticipatoryPoverty Assessmentsin the targetedcommunities; (iv) selectinga limited number of communitiesfor testing -- about 400 villages/urbanquarters; (v) disseminatingthe implementation tools to test communitiesincluding the specificOperation Manual, eligibilitycriteria for the micro-projects,and the model of the submissionform for a micro-project; (vi) training the test communitiesin micro-projectmanagement, including financial management and managementof community-basedprocurement; (vii) setting up the institutionalsystem to appraise the micro-projects, (viii) testing the tools and procedures in selectedcommunities -- i.e., collectingcommunities' proposals for micro-projects,appraising their eligibility,approving, financing,and supervisingtheir micro-projects; (ix) execution of about 400 micro-projectsby the test communities(the remaining being carried out under sub-component 1.2); (x) evaluating the test -- i.e., the micro-projects' performance for inputs, processes, and outputs/outcomes;(xi) learning lessons and preparing for scale up and; (xii) building capacities in other communitiesin the targeted regions with a view to further scale up in phase 2.

Phase 2. The objectivesfor the second phase are scaling up the implementationof the SDG through: (i) implementationof the PPA to all targeted communitiesin other regions where other donors are not currentlyimplementing similar activities(about 3,150 communities); (ii) supportingmicro-projects in 50% of the communities(iii) monitoring and evaluating the scale-up activities of the IDA-financed project and of Social Funds financed by other donors; and (iv) leam lessons for phase 3. At the end of this phase it is expected that at least 50% (about 1,600) of the targeted communities(i.e., with a poverty score below 200 according to criteriaused for the initial targeting) have implementedat least one micro-projectand that all these micro-projectshave been evaluatedand their lessons drawn.

Phase 3. For the third phase, the objectives are: (i) fine tuning of implementationof IDA-financed SDG on the basis of lessons learned at the end of phase 2; (ii) harmonizationof procedureswith other

-47 - donors based on M&E in order to shift from the project approach (donor-based)to the program approach (Govemmentbased); (iii) correctionsin view of long- term sustainability;and (iv) implementationof the program in the remaining targetedvillages. At the end of this phase it is expected that at least 90% of the targeted communities(i.e., with a poverty score below 200 according to criteria used for the initial targeting) have successfullyimplemented at least one micro-project.

(ii) Sub-component1.2: Basic communityinfrastructure/equipment (US$ 7,47 million). The objectiveof this sub-componentis to financedemand-driven community micro-projects for the implementationof basic social infrastructurein the conmmunity.The PPA will help assess that the proposedmicro-project is based on the priorities and needs of the vulnerablesub-groups. The Social DevelopmentGrant will provide grants up to 95% of the cost of a micro-project. This sub-component aims to test community-basedmechanisms for the provision of infrastructurewhich is generally suppliedby sector programs (many of them IDA-financed)through more centrallybased approaches. To avoid duplicationwith these sector programs,this componentwill not fund infrastructurein villages where the building of the infrastructureis already covered by other Bank/donor projects such as the Rural National InfrastructureProject, the Quality Education for All Project, or the Health Sector DevelopmentProgram. However,the SDG will fund communities'micro-projects which increasethe effectivenessand use of that infrastructure. For example if a school is built by the QEFA project, the SDG could provide the communityto constructof a canteen attachedto the school to make it more accessibleto children from villages further away who may not have a place to eat near the school. Similarly,the SDG could improve the transportationinfrastructure between a remote group of villages and an existing school. Specificcriteria will be applied to ensure that infrastructureprojects funded by the SDG will serve the intended end and that it will benefit the poorest groups.The set of criteriawill also includeelements to ensure harmonizationwith other sectoralprojects (school mapping in case school constructionor health mapping in case of building health post). These criteria have been expandedin the OperationsManual. Micro-projectsfor the constructionof schools or health post will require the clearance of the regional administrationof the relevant sector to ensure consistencyof the proposed infrastructurewith the School Map or the Health Map.

Phase 1. Activities during the first phase of sub-component2 will be similar to these of the sub-component1, but with the followingdifferences: (i) informnationto communitieswill include standarddesign and technical specifications,and specific criteria of eligibility for each type of infrastructure;(ii) support to communitieswill focus on identifying/confirmingthat infrastructure constructionis their key priority;(iii) managementtraining of the communitywill include specific trainingon the procurementand supervisionof works; (iv) number of demand-drivencommunity sub-projectsfor infrastructurewill be limitedto 150 micro-projects; (v) monitoring and evaluationof the test will includecomparative evaluationwith similar infrastructurebuilt under sectoral projects throughmore conventionalprocurement procedures; and (vi) preparationof the scaling up in phase 2 will includediscussions with parallel sectoralprojects in health, education,or rural developmentto share the knowledgeprovided throughthe test and envisagepossible integrationof the community-basedapproach with the sectoral projects/programs.

Phase 2. During this phase, the project will perform a combination of the test on a larger scale or in differentcontexts with a view to obtain a demand-drivencommunity-based delivery mechanism being graduallyadopted in other sector projects areas where the community-basedapproach is successful. During this phase, a continuousmonitoring and evaluation of the performanceof the community-based approachcompared to the administration-basedapproach of sectoral investmentprograms will inform all sectors of the various approaches, and help build a consensus to the most suitable approach for the future. At the end of the second phase, based on the comparativeevaluation, a decision will be taken

-48 - by each Ministry conceming the adoption of the community-basedapproach in its current investment program.

Phase 3. This phase will aim to harmonize of the approachesbetween the community-basedapproach developedunder this project and those of other sectoral investmentprograms.

Project Component2 - US$19.79million

Access to Micro-finance Services by Poorest Communities. (IDA US$4,31M)

Objectives. The primary objective of the micro-financecomponent is to extend financial services to the poorest communities. This componentwill also focus on social intermediation,i.e., building the social capital and skills that facilitate the access of poor individuals to the financial system. That will ultimately lead to greater financial intermediation,i.e., facilitate the flow of funds between savers and borrowers.

Under the micro-financecomponent, the project will: (i) facilitate access to micro-finance servicesby vulnerable groups and individuals through linkages with established PFIs; (ii) facilitate the creation of grassroots SCAs as well as financing income-generatingactivities by the poorest CBOs; and (iii) provide capacity-buildingsupport to micro-finance intermediaries. Analysis from the Social Assessment and Micro-CreditNeeds Assessment Study (Appendix 11) shows that the poor in remote rural areas lack access to financial services.In addition, there is a high demand for income-generation activities by the poor, particularly women and youth. Women emphasizedthat additional income is most needed during the rainy season when food supplies are at their lowest. At the same time, the agriculturalwork load, both for subsistenceagriculture and cash cropping is at its highest leaving little time for other activities.Villagers, especially women, have a lighter work load in the dry season when income-generatingactivities could be successfullyimplemented. Thus, care must be taken to ensure that income-generationprojects are adequately designedand timed to generate additional household income. Similarly,the seasonal nature of the ability to save and the demand for credit must be taken into account.

Scope. This component will support access to micro-finance services in regions and departments targeted under component I on the basis of poverty criteria, in order to develop synergiesbetween the components I and 2. Activities will complementmicro-finance programs that other donors are undertakingin other regions. The EuropeanUnion (EU) is currently operating in the regions of St-Louis and Dakar. UNDP is providing support to PFIs in the Departmentsof Kedougou, Bambey, and Dakar. The Canadian InternationalDevelopment Agency (CIDA) is focusing its interventionsin the Ziguinchor region and the Department of Kolda, while USAID has a micro-financeproject in the regions of Tambacounda,Kolda, Ziguinchor, Thies, and Dakar (Pikine and Rufisque). In addition, the African DevelopmentBank (AfDB) is planning to supportlarge PFIs such as Credit Mutuel, PAMECAS, and ACEP in the regions of Thies, Diourbel and Tambacounda.

Strategy and Implementation. A defining feature of the poorest and vulnerablesections of Senegalese society is their lack of access to financial services. Despite the large number of institutions and programs in micro-finance (175 savings and credit cooperatives,214 SCAs, and six non-cooperative organizations registered with the Ministry of Finance as of June 2000) the poorest communities still lack access even to micro-finance services.The reasons include geographic isolation, lack of roads and other basic infrastructure,as well as difficulties in meeting PFIs' membershiprequirements. There are also a number of constraints faced by PFIs in their attempt to reach the poorest communities,including (a) inadequacyof

-49 - existing financial products and services for the poorest; (b) low managerialcapacity of a large number of PFIs, particularly SCAs; (c) low skills of PFI staff, and (d) weak internal control. Most PFIs in Senegal are member-based,mutualist organizationsthat mobilize savingsand do not lack funds to on-lend to their clients. But they have major weaknessesin their retailing and managerial capacitiesto expand their outreach on a sustainablebasis. Weaknesseshave also been identifiedin the areas of governance,internal control, managing growth, financial and informationmanagement, as well as quality of staff, all of which call for assistance in capacity building.

The strategy adoptedwill depend on the state of the micro-financeindustry in the targetedregions.

(a) In communitieswhere PFIs are present and active, sufficientlynear to targetedpoor communities, and willingto participatein the project, the Social DevelopmentCredit (SDC) will: (i) provide support to PFIs to extend or adapt their financial products to individuals or groups in poor communities. The SDC will support micro-financeactivities through a matching grant mechanism(10 % of the cost to be borne by the PFI) that will cover the costs of outreach and providing informationto targeted groups and communities by PFIs, including training in establishingand managing solidaritygroups in association with an PFI. Partner PFIs will use their own funds to provide loans to individualsand groups that will have received appropriatetraining suchas grassrootsManagement Training (GMT) to become viable micro-finance clients (see Component3 for descriptionof GMT); (ii) provide support to PFIs for other capacity-building activities to help partnerPFIs become strongerinstitutions and achieve long-term sustainabilityand continue to provide financial servicesto the poorest communities. Capacity-buildingsupport will also be provided on a matching grant basis to licensedPFIs. Activitiesto be financed on a demand-drivenand performance-orientedbasis will include but not be limited to acquisitionof managementinformation system (MIS), accountingsoftware, and office expansion and rehabilitation.

(b) In communitieswhich are beyond the currentreach of existingPFIs, the micro-financecomponent will facilitatethe provision of training, capacitybuilding, and equipment(if necessary) for strengtheningof the community's SCA that could finance individual IGAs. The SCA can apply for funding for a building, safe, and other neededequipment.

(c) In poorest communitieswhich are beyond the current reach of existing PFIs and where it is urgent to build social intermediationskills, the component will provide financingon a matching grant basis for group IGAs. The community(or a group within it) will propose an IGA, possibly promoted throughan NGO, supportedby a business plan, and a commitmentto provide at least 10% of the cost, of which at least 5% in cash. Upon approval of the activity plan, the micro-financecomponent will provide training, capacitybuilding, and equipment(if necessary) for the creation of the group's SCA or village bank (as in part b), which will proceed to mobilize the required cash and in-kind contributionsto start the IGA, and to open an account in a licensed financial intermediaryor PFI. Normally, an implementingagency, such as an NGO, will be contracted to provide for technical assistance to the group in managing the IGA and meeting its obligations,as well as for reporting to SDC, the cost of which may be borne either by the implementing agency as promoter or by SDC. If no financialintermediary is sufficientlynear or willing to participate, the implementingagency will also handlethe group's financialtransactions. The group will sign an agreementwith the SDC, the financial intermediaryand/or the NGO to recover the cost of the IGA investment. The PFI and or NGO will be responsiblefor loan monitoringand recovery against a fee added to the loan amount and set high enough to provide adequate incentivefor loan monitoring and collection. Communitygroups will be responsiblefor paying the fee to the financialintermediary as well as negotiating a decent interest rate to be paid on their deposits. Details of this mechanismare providedin Annex 16.

- 50 - Selectionof PFIs and Other Partners

The selection of suitable PFIs/SCAs and other financial partners, such as micro-finance specializedNGOs, will be performedby the Micro-finance Unit of the Social Fund Agency on the basis of eligibility criteria related to: (i) the PFI's current vision, business plan with monitorablebenchmarks, objectives, and strategy including the promotion of new financial products and services to better reach the poor target market; (ii) the PFI's current human resources; (iii) current programs being implemented; (iv) potential for expansion; (v) financial viability as well as the organization'scapacity to achieve significant scale and outreach, as well as; (vi) identificationof the capacity-buildingneeds of the PFI in order to implement its new vision and business plan.

The selectionprocess will include: (i) broad disseminationof the rules of the game detailed in the Manual of'Procedures for Micro-finance (MP-PFI); (ii) issuance of a request for expression of interest; (iii) assessment of the PFI/SCA having expressed interest to build a short list; (iv) request for proposing a sub-projectto a short list of PFIs; (v) evaluation of the sub-projectby a specialized expert and adjustment of'the proposal; and (vi) agreementsbetween the PFI and the Agency.

The agreement will include: (a) the PFI's business plan to better reach the poorer segment of its target market, and (b) resources provided by the Agency to finance the capacity-buildingprogram of the PFI needed for the success of the business plan. These resources can cover the costs of outreach and providing information to targeted groups and communitiesby PFIs, including training in establishingand managing solidarity groups in association with an PFI, as well as other capacity-buildingactivities, such as office expansion, rehabilitation,accounting software, and the installation of a rigorous MIS.

Selection of partner PFIs will be based on the following criteria: be legally registered with the Senegalese authorities as a provider of micro-financeservices * be in operation for at least a year - be committedto deposit mobilization - have a membershipwhich 30% are women - have at least 3000 clients i have a five-year strategic plan for achieving operational self-sufficiencyand build a strong micro-financeprogram

Contractual Arrangements

The micro-financestrategy outlined above will be implementedunder the following contractual arrangements.One contracting approach will link the SDF Unit and selected existing PFIs/SCAs. A second possible contracting arrangementwill link three partners: (i) the SDF Unit; (ii) selected existing PFIs/SCAs, and (iii) specialized consulting firms to provide capacity-buildingservices. For the activities related to the financing of group IGAs, the third possible contractingarrangement will link: (i) the SDF unit; (ii) CBOs; (iii) the implementingagency/NGO; and/or (iv) the licensed financial intermediary. Implementation of this component will be govemed by a specificManual of Procedures for IMF (MP-IMF) including selectioncriteria, standardform of proposal and contract, and criteria for tranche disbursement on the basis of performancereports and performance objectives. Submissionof a draft of this Manual was a condition of negotiation of the IDA credit; submission of the final version of the Manual, approvedby the authorities and acceptable to IDA will be a condition of effectiveness.

Objectivesto be Achieved under the DifferentPhases of the Project

- 51 - Phase 1. The objectivesto be achieved under this three-yearphase are the following: (a) Setting up the micro-financesystem promoted by the project by: (i) disseminatingthe Manual of procedures(MP-PFI) to all PFIs and CBOs; (ii) assessing and classifying, on one hand, the communities located in areas where PFIs are near the targeted poor communities and willing to participate in the project, and on the other hand, the communitiesthat are beyond the currentreach of existing PFIs, which will be supported to create or strengthen their SCAs to fund individualIGAs, as well as the poorest communities where group IGAs can be financed; (iii) contracting the services of a technical institution specialized in micro-financeto providetechnical assistance to the Agency and the PFIs; and (iv) selecting/hiring implementingagencies for the implementationof the contractingapproach for the group IGAs.

(b) Testing the support to build PFIs/SCAs' capacity to better reach the poor. The Agency will: (i) select/contract consultants for technical assistance; (ii) select/contract with a limited number of PFIs/SCAs -- two or three per region -- in order to test the system, according to procedures detailed in the Operation Manual; (iii) supervise the new operations of the test-PFI accordingto contracts; (iv) evaluate the test by verifying that performance objectives are reached by the PFIs; (v) continuously assess the specific needs of the poorest groups, and the level of relevance of the financial products and services compared to the needs; (vi) provide training to communities (or groups and individuals within them) for preparing business plans to present to PFIs or other financial institutions for appraisal and possible financing; and (vii) evaluate the approach to draw lessons for scaling up in phase 2. In this phase 1 of the project, PFI capacity building assistance will be limited to those that are partners in the program, to improve their effectiveness in implementation. In later phases of the project, this assistance could be expanded to include other PFIs, based on the capacity of SDC staff to appraise and monitor performance of PFIs according to agreed benchmarks. At the end of the first phase, it is expected that the number of poor beneficiaries of the test PFI will have doubled.

(c) Testing the IGA system with a limited number of CBOs. A limitedpilot-test will be performed in comnmuniitiesthat are beyond the current reach of existing PFIs, and which will qualify for financing of group IGAs and start micro-finance activities by: (i) identifying, through the PPAs process, the interested communities to test the approach; (ii) disseminating to the test communities the specific module of the Operational Manual; (iii) providing training to the selected communities for the preparation of their IGA and the creation of the SCA; (iv) providing grant assistance to the CBOs for the implementation of the IGAs; (v) supporting CBOs for the contracting of services from a suitable PFI/NGO to monitor the IGA revenues and the new SCA development; (vi) monitoring and evaluating the test; and (vii) drawing lessons and disseminating them for scaling up in second phase. At the end of the test, the system will be refined and expanded. At the end of the Phase I, it is expected that at least 100 CBOs (about I in every 30 targeted villages) will have successfullyimplemented the approach and created a well-functioningSCA, and that the approachwill have been monitoredand evaluated, and lessons drawn from the evaluation for use during second phase.

Phase 2. The objectiveof this phase is two-pronged: (a) Scaling up the process through: (i) gradually including all PFIs in the targeted areas which are able to meet the selectioncriteria; (ii) monitoring and evaluating the scaling up process and evaluatingthe performance of partner PFIs; and (iii) scalingup the promotion of IGAs to all the poorest segments of the communitiesin the targeted areas;

(b) Harmonizing the micro-finance component of this project with micro-finance components of other donor-financedprojects includingthe impact of other donors' lines of credit.

On the basis of the informationprovided by the Monitoringand Evaluationprocess, lessons will be drawn

- 52 - for phase 3, includinghow to sustain the dialogue with other social funds in orderto harmonizeapproaches with other donor-financedsocial funds.

Phase 3. This phase will focus on expandingthe scale depth, and outreach of participatingPFIs. and support the introductionof innovativeproducts such as micro-insurance.This phase will also focus on consolidatingthe new CBO's village banks or SCAs and supportingtheir eventualgraduation into licensed PFIs.

ProjectComponent 3 - US$3.54 million

CapacityBuilding for VulnerableGroups and CBOs.

Scope, objectives,and Strategy. This componentspecifically targets organizations of the poor and vulnerablesuch as CBOs, women's groups, youth groups, and other formal or informal arrangements based on communalitysuch as trade. The social assessment(Appendix I1) emphasizesthe importance of these groups with regard to the building of economicand socialnetworks which function as safety nets againstvulnerability. The objectiveof the componentis to enhancethe capacityof such groups with regard to participatoryapproaches, needs assessments,project management,institutional set-up, and building resourcenetworks and accessto credit which are crucial in managing and raising the risk thresholdsof poor households. An importantfocus of the strategy to increasecapacity at the communitylevel is the developmentof informationsharing mechanisms, through a large range of different technologies.For example,grpups of women having vegetablegardens could be organizedto discuss and sharetheir experiencesand improvetheir skillswith some technicaladvice. This will also provide a forum in which it will be most cost-effectiveand sustainableto accessbetter technologyand services. Finally, this componentwill enhancethe capacityof the CBOs to managetheir own local developmentand initiativesso that they become a key catalyst of sustainablegrassroots development. To this end, the SocialDevelopment Fund will make direct grants (100%) to CBOs and organized groups of vulnerablepopulations in targeted areas.

Descriptionand implementation.This componentwill aim to strengthencommunity-based networks which are crucial safety nets for coping with poverty and increasingvulnerability thresholds. An institutionaldevelopment phase will cover important areas such as the establishmentof operational capacity for groups (office equipmentand trainingcenters, for example),and local networks. The strategyfor institutionalstrengthening will be gender-inclusive,involving gender sensitivitywhen assessingcapacity-building and institutionaldevelopment needs, in order to ensure that the projectwill actually target marginalizedgroups such as women and youth.

The componentwill also build capacitywithin the targetedcommunities by investingin human resourcesfor which both individualsand groups will be eligible. The capacity-building/trainingcould be geared eithertowards an income-generatingactivity or for generalimprovement of managerialand financial capacities.More specifically,this componentwill focus on: (i) organizationaldevelopment: group formationand sensitization,management skills for small organizations,leadership, human resources management,strategic planning, and local govemance;(ii) financialmanagement: bookkeeping and accounting,administration, disbursements, and procurementat the communitylevel; simplecontracting procedures,contract management and supervision;and working with informal and formnalbanking systems and meeting their basic requirements;(iii) project management:participatory project design (PRA), feasibility studies,market studies,project implementationand monitoring,and managementand maintenanceof infrastructureand equipment;(iv) communication:social communication,traditional

- 53 - systems of communication,advocacy, adult training, training of trainers, training in new information technologies,internet, community radio, negotiationskills for communityleaders, and gender sensitization; and (v) special skills for income-generation,such as carpentry, tailoring,use of herbal medicine, marketing produce, poultry keeping, brick laying, tractor repairs. Capacity-buildingactivities will take into account the literacy levels of the beneficiary groups and will tailor all materials developed, courses given, and any hands-on experience to the capabilitiesof the participants. This is crucial to ensure a concrete impact of this component in terms of it triggeringbetter projects, broader participation,and increased access to financial,technical, and human resources. This componentwill be implementedin local languages and will prioritize the learning-by-doingapproach versus the lecture approach. The Grassroots Management Training (GMT) methodologywill be used as the general training methodology. The objective of the GMT will be to build capacitiesamong SDF partners to strengthen the capacities of the communities to better manage in a sustainable way, their basic services, financialneeds, and income-generatingactivities. The GMT methodologyis detailed in Annex 17. The GMT strategy will provide training to: (i) CBO members such as electedmembers of the grass-root SCA, grassroot-managers,and elected local members of management/maintenance committees of the basic services provided by SDF; (ii) PFI/SCA/NGOtrainers; and (iii) Agency staff.

Phase 1. During this phase, the Agency will focus on the developmentof the followingnetworks: (i) community-basednetworks; (ii) NGO networksdedicated to poverty reduction;and (iii) Local Governmentnetworks for poverty reduction.At the end of the phase, the networks will have: (i) a legal status; (ii) a management organization; (iii) regular meetings; and (iv) action plans.

The GMT will be implemented with the CBOs targeted under componentsI and 2, with the PFIs and SCAs targeted under component 2, by: (i) compilingan inventoryof the available trainers among the PFIs; (ii) building of a pool of at least ten senior trainers among the PFIs (two per PFI) to strengthentheir GMT capacity through training of trainers (TOT) and create an additional supply for communities to choose from; (iii) selection of Senior GMT experts to deliver the TOT workshops; (iv) execution of a trainingneeds assessment (TNA) in the selected five regions; (v) developmentof training materialsbased on the conclusionsof the TNA and including local content; (vi) developmentby the pool of senior trainers of a set of trainer's manuals; (vii) training of Junior trainers, i.e., people working at the grassroots level, either as governmentemployees, or working for an NGO; (viii) training, follow-up and monitoring of communityleaders depending on the type of activitiesbeing undertakenby the communities and on their identifiedspecific needs; (ix) revision of the trainingmaterial and translation in local languages to ensure that communityleaders will be able to use the trainingmaterial and disseminatethe messages to those who have not been trained at the community level; and (x) training of more vulnerable groups participatingin the project. At the end of phase 1, trainers from PFIs and communityleaders' capacity will have been built up sufficientlyto adopt and apply more formal business practices to better manage the infrastructureand the micro-financeactivities under the project, as well as stimulateand support the development of more income-generatingactivities among grassrootspopulations.

At the end of phase I the followingwill have been accomplishedin the targeted communities: * Several training sessions have taken place (at least one per region) for training of trainers and training of grassroots managers; * Number of GMT trainers has increased in each region, (at least two trainers/PFI in each region); * Number of trained grassroots managerswith better skills to manage their basic services,micro-credit, and Income-generatingactivities has increasedand; * New modules have been developed by the new GMT trainers and are available for wider dissemination.

Phase 2. The objectives for the second phase are: (i) scaling up the implementationof the GMT program

-54 - in all the targetedcommunities in the targeted regions, and in other regions where other donors are not currently implementingsimilar activities; (ii) monitoring and evaluatingthe scale-up activities of the GMT program; and (iii) learn lessons for phase 3. At the end of the phase it is expected that at least 50% of the targeted communities (with a poverty score below 200 according to criteriaused for the initial targeting) have successfullybenefited from the GMT program.

Phase 3. For the third phase, the objective is fine tuning of the implementationof the GMT program on the basis of lessons learned at the end of phase 2.

ProjectComponent 4 - US$9.80million

Poverty-Reduction Management System

Scope, objectives, description, and implementation. The objectiveof this component is to create an efficient information management system as a part of the holistic poverty-reductioneffort. Large databases, including a poverty mapping exercise undertaken during the preparation phase of this project, will be coordinated by one unit so that its information can be used by different organizationsin a cost-effective manner. Too often, poverty projects work separately,duplicating studies, rather than building on the efforts of one another. This componentof the SDF Project will aim at improving the poverty managementcapacity of Senegal, both for this project and with regard to poverty- alleviation efforts at large. This component is thus subdividedinto two sub-components: Poverty Monitoring Systems and the SDF ManagementUnit.

(i) Sub-component4.1: Poverty Monitoring - US$ 5,60 million. The Government of Senegal, with the support of major donors like the World Bank, IMF, and UNDP, is preparing a Poverty Reduction Strategy Paper (PRSP) in order to coordinate and synthesize the various poverty efforts carried out by different donors in various regions of the country. Hitherto,there has been no conmmoncoherent strategy and plan. The Government will create under this component a Poverty ManagementInformation System (PMIS) for poverty data collection and analysis, based on existing structures at the regional, departmental,and local levels. The SDF will support the implementationof this MIS and will provide technical assistance by financingthe Household budget survey and two light surveys which will provide the baseline data and indicatorsof living standardsmeasurement, along with a poverty map for monitoring poverty during the entire life span of the project. Qualitative surveys and Participatory Poverty Assessments (PPAs) will complementthe quantitativedata collection and analysis process. The objective is that all the information generated and processed by the PMIS will be used by all sectors (including Education,Health, and Rural Development) for the preparation of their own developmentplans. The Directorate of Statisticsin the Ministry of Economy and Finance will be responsiblefor the implementationof this sub-component. It will also facilitate the functioning of the network of producers and users of data. Furthermore, it will assist the Unit in charge of Poverty Monitoringwithin the Ministry of Economy and Finance in the productionof the annual report on poverty.

Phase 1. The first phase will focus on: (a) the developmentof baseline data, and (b) the creation, development, and operationalizationof a sustainablePMIS to and (i) track poverty data; (ii) track all data related to poverty-alleviationprograms and projects, including the SDFP; (iii) provide relevant and timely informationto the Agency executing staff, the Social Fund Managing Board all Ministries (Health, EducationRural Development),all donors, Local Govemments, and communities and population through mass media; (c) population surveys to generate information on population

- 55 - feed-back for input into the PMIS. At the end of the phase: (i) the information generated by the PMIS will be regularly disseminatedto all Ministries; (ii) all Ministries will use this information to prepare their own developmentplans; and (iii) the Local Governmentsand CBOs will be regularly and appropriately informed of the evolution of poverty in their regions.

Phase 2. During this phase, the focus will be put on: (a) the increasein cost-sharing for the PMIS by the Government. It is expectedthat, at the end of phase 2, the Budget will include a specific budget line item for the recurrent costs of the PMIS and that the costs will be supported by on a progressive basis; (b) monitoring of the use of poverty data by producers and users at all levels (central, decentralized, and local); (c) regularity of poverty surveys; and (d) improvementof the quality, relevance, and timelinessof information.

Phase 3 . At the end of this phase: (a) all the recurrent costs of the global PMIS are supportedby the governmentbudget, and (b) the quality, relevance, and timeliness of information is excellent.

(ii) Sub-component4.2: SDF Management Unit-US $4,20 million The Social Development Fund Program will be managed by the Social DevelopmentFund Management Unit (SFMU) staffed with professionalsunder contract with the Agency. The FU will have two distinct functioning sub-units. Components I and 3 will be implementedthrough the CommunitiesSupport Unit while component 2 will be implementedthrough the Micro-financeSupport Unit. Both will be staffed by personnel with relevant skills in each area of expertise (grant vs credit). The overall implementationof the SDFP will be coordinatedby a small unit of highly qualifiedprofessionals (of whom, at least 25% will be women) overseeing and supervisingthe day-to-day operations of the project. This unit will operate on the basis of the followingprinciples: (i) transparencyof the procedures and decisions;(ii) equity of treatment of all partners, particularly CBOs and NGOs; (iii) accountability upwards to the Agency and downwardsto the beneficiaries;and (iv) autonomy from political influence. The unit will be responsiblefor coordinatingthe implementationof the different project components, preparationof annual work programs and budgets, internal monitoring and contractingof extemal evaluations, and the overall fiduciary or financial and administrativemanagement of funds. The exact compositionof the unit was finalized during the appraisal mission and will be included in the OperationsManual. Strategicproject orientation and policy guidance will be under the responsibility of the Ministry of Family Affairs and National Solidarity.The MonitoringUnit within the Ministry of Economy and Finance (which manages the PLP), will have overall responsibility for the production and publication of the national annual report on poverty, based on reports by the SFMU and other donors. The Board of Governors of the Fund will be in charge of approving the annual plan and budget of activities proposed by the SFMU management, approving audit reports of the project, critically examining the performance of the SFMU, and evaluating the extent to which it is meeting its objectives of poverty alleviation. They will also be responsible for making recommendationsfor corrective actions and approving proposals. This board will meet at least on a quarterly basis. The Agency is created and registered as an autonomous entity. Its General Operations Manual was reviewed during the negotiation of the IDA credit and will be finalized before credit effectiveness. The recruitment of key staff of the SFMUand the installation of a sound financialmanagement system will be conditions of effectiveness.

Phase 1. This phase will entail: (i) creation and functioning of the institutional system; (ii) disseminatingthe implementationtools of the various components;(iii) testing tools and procedures; (iv) development and installationof the specific module of the MIS related to information on the resources managed by the Agency; (v) management by the SFMU of all the tests carried out under components 1 and 2; (vi) monitoring and evaluating the performance of the SMFU on the basis of criteria included in the General OperationsManual; (vii) disseminationof information generated under

- 56 - the present projects to Social Fund projects financed by other donors, and to other sectors involved in poverty alleviation(Education, Health, and Rural Development); and (viii) coordinationamong donors.

Phase 2. During this phase, the SFMU will focus on: (i) managing the scale up of various tests carried out during phase 1; (ii) monitoring and evaluating the performanceof the project while scaling up; (iii) carrying out the coordination with other social funds to harmonize proceduresand graduallyintegrate them; (iv) canying out the coordinationwith other programs in other sectors to integrate lessons leamed by the Social Fund approach (community-baseddevelopment) into sector programs. By end of phase 2, the SDFMU will have started mobilizing funding for poverty alleviation from other donors and the private sector, including for operating costs. At the end of the Phase 2, it is anticipated that the Agency will become an institution like a foundationaddressing poverty issues at the communitylevel and seeking long-term fundingto build permanent endowments. This institutionwill address locally defined problems, thereby facilitating local participationand ownership,and eventually leading to sustainability.

Phase 3. Phase 3 will focus on: (i) fine turning implementationof the IDA financed SDF; (ii) harmonizationof procedures with other donor-financedsocial funds, based on M&E; and eventual integration of social funds when the proceduresare sufficientlyharmonized; (iii) integration of community-basedapproaches by other sectors such as Health, Education,and Rural Development; (iv) making necessary corrections to achieve long-term sustainability.

- 57- Annex3: EstimatedProject Costs SENEGAL:Social Development Fund Program

Local Forein Total Project Cost By ComoonentiiUi:S $m_ US Forign US $Million BasicSocial Services and CommunityInfrastructure 6.77 5.58 12.35 Micro-finance 18.88 0.91 19.79 CapacityBuilding for VulnerableGroups 3.20 0.34 3.54 PovertyManagement Systems 6.43 3.36 9.79 PPF 1.05 0.00 1.05 TotalBaseline Cost 36.33 10.19 46.52 PhysicalContingencies 0.00 0.00 PriceContingencies 0.00 0.00 TotalProject Costs 36.33 10.19 46.52 TotalFinancing Required 36.33 10.19 46.52

Lo97 7;0;0 ToFtlreignTol ProjectCost BLyCawegor US $milion US0$miion 1$milion Goods/Grants 1.45 4.35 5.80 Works/Grants 0.10 0.10 0.20 Services 3.41 2.27 5.68 Training 0.84 0.06 0.90 Micro-finance/CB 17.02 1.80 18.82 Subventionsto CBOs 8.07 0.90 8.97 OperatingCost Surveys 4.39 0.71 5.10 PPF 1.05 0.00 1.05 TotalProject Costs 36.33 10.19 46.52 TotalFinancing Required 36.33 10.19 46.52

Identifiabletaxes and duties are 0 (US$m)and the totalproject cost, net of taxes,is 46.52 (US$m). Therefore, the projectcost sharing ratio is 64.49%of total pro

- 58 - Annex4: Cost EffectivenessAnalysis Summary SENEGAL:Social Development Fund Program

Cost-Benefit and Effectiveness Analysis

Principles

1.1 The SDF program is designed to support sub-projectsidentified by community-basedorganizations that are expected to reduce poverty. Such sub-projects are sociallyjustified by their explicit goals focused on improving levels of income, particularly among women and youth, promoting access to basic infrastructure and social services, and expanding institutional capacities self-managedorganizations of the poor. The investmentsand the nature and type of activities will be centered around mechanisms to enable vulnerable groups to prioritize,plan, and implement their own sub-projects.The scope and mix of the selected sub-projectswill be determinedwith participatoryinvolvement of the CBOs and various other mechanismsto ensure the participationof excluded groups in communitydecision-making.

1.2. The major types of sub-projects to be implementedwill be toward enabling and strengtheningthe poor and their organizationsto face their economic environment and compete with other market forces in their income-generatingactivities. Thus, as experience in implementingsub-projects shows, routine and classical project analysis based on a cost-benefit framework is difficult to conduct. The applicability and acceptability of future SDF sub-projectseconomic valuation is questionable in terms of resources, time, and the data base required. This is particularly true when CBOs need to maintain a leadership and transparent role in project identification. In addition, the true social dimension of the SDF program and the urgency of poverty alleviationimply a logical rejection of any profit motive and financial return criteria for project selection.

1.3. In practice, it is necessary to simplify the justification techniques. Theoreticalsoundness needs to be balanced against operational constraints, human resource limitations, time constraints,and the intensity of social demand. Such a balance between theory/constraintsis accepted in the SDF economic approaches but analytical rigor is also required. In fact, experience also shows that social sub-projects are readily justified because of their perceived benefits. Hence, oversimplificationbecomes a danger when the original cost-benefit frameworkand techniques are rejected as inapplicable, or socially inappropriate,since the hypotheses of perfect competition and Pareto optimality conditionshave all to be rejected due to the specific conditions of the sub-projects. Furthermore, any type of marginal contribution against poverty is considered sufficientjustification.

1.4. Without trying to force a conventional cost-benefit frameworkinto any sub-projectdesign, the SDF program will as much as possible support sub-projects that are identified, designed, and organizedthrough a transparent process by the CBOs and for which a rigorous analysis is provided. Any sub-projectwill be analyzed with sets of criteriareconciling three ultimate objectives:

* To have a better investment and fund allocationdecision * To alert CBOs to the risks taken and the alternativeopportunities excluded by their choice * To guide decision-makersin minimizing sub-optimalresource allocations.

Since economic appraisal only covers only a few aspects of projects, the eventual investmentdecision will always rely not only on the financial and economic appraisal. Project analysis in a broader sense is first of all a question of sustainabilitythat depends on social, political, and physical parameters in the face of a changing environment.

- 59 - 1.5. A guide is thereforeprovided in the operationmanual on the type of data to collect,interpret, and compare in a first-stepsimple analysis. Poverty is multidimensionaland it is clear that poverty-alleviation needs to be taken as a durable process. This impliesthat filling information gaps for empowermentand informeddecisions by the poor are essential and shouldbegin with the sub-projectdesign. Therefore, identifyingsub-projects and assuring proper analysis become part of the empowermenttraining in CBOs so that actions are based on improvedand information-baseddecision-making processes.

When necessarythe help of various partnerswill be soughtto provide the different types of analysisto justify choices. In the meantime,one needs to prevent benefits from being capturedby the local elite or powerful and better organizedlocal groups.

1.6. The essence of an economic analysis is to compare all the benefits of the proposed action to all the costs, with a project said to pass a benefit-cost test if the sum of all the benefits is greater than the sum of all the costs. Such an analysis is seriously defectivewithout monetary values for the social gains and services affected by a proposed action. The nature of the SDF objectivesinduces a central problem in the application of the standard economictools to the provisionof social goods, whether indirectlythrough regulation or directly throughpublic provision. The problem is to place a monetary value on social benefits. In health, education,and other social services,the attempt will be perilous and very much biased by judgment values or revealed preferences.Thus, instead of benefit,effectiveness expressed in physical terms or scale of quality could be a proxy for estimating the fulfillmentof the goals sought.

1.7. The principlesof economic analysis should be used with reason. Otherwise, simplified analysesare called for to provide help for informed choice. For any type of sub-project, information has to be sought and collected before empowering decision-making processes by the poor and their CBOs. Such an approach requires minimum analysis and promotes a learning process that will strengthen the CBOs in the management of sub-projects. Hence, data screening and simplified analysis are basic prerequisites for any type of sub-project. They remain a backbone for project selection in SDF program. When conducted by the CBOs themselves or by monitored contractors, they should contribute to the ultimate goal of empowering the poor.

1.8. As the risk of resource misallocation grows and the consequent negative impact increases, it becomes important to find ways to proceed with more precise analysis. The operation manual provides a guide for such an analysis and gives checklists of preferential information and criteria for project selection. While preparing sub-projects, methods will need to be adapted to the scope and level of risks in terms of resource misallocation or duplication of poverty-alleviation targets. The following table shows the type of analysis required for the SDF program sub-projects.

- 60 - Table. Type of Analysis and economicjustification according to scope and fundsneeded for sub-projects

Sub-project Cost Income-generating Social services and Infornation-Education- (CFA million) sub-projects infrastructure Communication sub-projects sub-projects

<1l0 M. CFA Simple analysis Simple analysis Simple analysis 10 to 30 M. CFA Simple analysis and Simple analysis and Simple analysis and justification justification justification required required required

30 to 100 M. CFA Simple financial analysis Simple cost-efficiency Simple cost-efficiency analysis analysis > 100 M. CFA Detailed financial Detailed cost-efficiency Detailed cost-efficiency analysis analysis analysis NB: M. = Millions

Cost Benefit and Cost EffectivenessAnalysis

2.1. When economicassessment is possible, a blue-printdesign for the main project types is proposed in the operation manual. To help make it adaptableto the scope of the SDF program, three examples are developedto help improve adequatethe design of sub-projects,especially the income-generatingprojects.

2.2. Since in the SDF program,participatory identification and managementof sub-projects will be essential and central the participation of beneficiariesis considereda highly cost-effectiveinput. The vested interests of individualparticipants and the ultimate goal of the CBO for their empowermentover demand-drivenactivities they decided themselves are also consideredas the basis for maximizationof cost savings and accountability.Outcomes are expected to be reinforcedby the contractingprocedures with private or institutionalprincipals whose contracts (supervised by SDF) will promote sustainabilityof the sub-projects.

The operation manual provides the bases to structure participatoryidentification and selectionof sub-projects, as well as to conduct simplifiedor more detailed analyses.

2.3. In preparing income-generatingsub-projects, current market prices are the data available to use for any type of analysis,even a simple analysis. Costs and revenueswill be collected from production and marketing systems studies. In the case of social and community infrastructureor services,data has to be carefully checkedfrom Govemment,NGO, other CBOs, or any independent source.

Fiscal Impact

3.1. The SDF program has fiscal impacts at the central, and local governmentlevels. Activities drivenby the income-generatingsub-projects, new or accelerated flows of services and resources,and alleviationof poverty will necessarily entail activities subjectto central and local governmenttax systems. Furthermore,Central and Local Governmentinvolvement in the SDF program operationswill likely require their own financialparticipation. Therefore, sub-projects,at the aggregate level, will induce changes in

- 61 - expendituresand revenues as a result of the SDF program. Since sub-projectswill mainly be demand driven and directed toward infrastructure,social interventions,and income-generatingactivities, it is difficult to compute the fiscal dimension and to have an exact quantitativeassessment of their fiscal impact. In addition, the exact combination of sub-projectsis not known. The operationmanual gives details concerningthe methodologyand the hypothesisused for the analysis. However,a qualitativeassessment of the trend and direction of changes in revenues and expendituresinduced by the program can be drawn.

3.2. At the central government level, the expansionand improvementof social infrastructureand services will yield little additional tax revenue. Costs will be incurred by the participationof the governmentin SDF implementation. In the long term, the enabling effects of increasedsocial infrastructure,better informationon markets, and more direct involvementof the poor and CBOs in marketingsystems should promote higher incomes, increaseeconomic output, and larger tax bases.

3.3. At the local governmentlevels, trends will be close to those describedabove but taxes will be more rapidly and directly gained through local user fees, especiallymarket fees. Allocationsto CBOs will be matched by contributionsfrom CBOs (in kind, labor, and cash). The mechanism will therefore help in the operation,maintenance, and repair of the completed infrastructureand reduce or stabilizethe usual budgetary resources. This process will reinforce incentives for increasedownership and promote sustainabilityof the sub-projects.

3.4. A managementunit for the SDF will be installedwith inputs from the Central Government. The interventionand procedures of the SDF will have a fiscal impact at the Central or Local Government levels.

Summary of benefits and costs: Due to the demand-drivenaproach, the nature of individualmicro-projects and sub-projects,is not identifiedat this stage.

Main Assumptions: Refer to the above table at the end of paragraph 1.8.

Cost-effectiveness indicators: Examplesof cost-effectivenessindicators valid in the context of Senegal during project preparationare on the followingpage.

- 62 - Examples of cost effectiveness indicators

Health Health post (with housing, without nursery) 26 000 000/35 000 000 Health post (with housing and nursery) 64 000 000 Annual stock for health post (Record books, 200 000 stationery) Equipment (furniture, work materials) 8 169 700 /11 000 000 Initial stock of essential drugs and current materials 800 000 Healthroom 2 850 000/7000 000 Health room and nursery 15 000 000 Stock in current materials 50 000 Equipment (furniture, material for work) 400 000/1 000 000 Initial stock of essential drugs and current material 300 000 Rural nursery 8 000 000 Equipment of a rural nursery 2 000 000

Services Pricing Adult fees (HR) 100/300 Infant fees (HR) 50/300 Doctor's visit 500/1000 Maximum margin on drugs (from a government 50 % national pharmacy to the beneficiary) Maximum margin on drugs (HP, HR) 30%/40 % Vaccination 50/100

Education Classroom 4 750 000 Equipment and school material 1 000 000

Other Infrastructures Youth center in rural area 30 000 000 Fences (m) 25 000 Communal house 15 000 000

Hygiene Water provision in rural area (meter) 5 500

- 63 - Annex 5: FinancialSummary SENEGAL:Social DevelopmentFund Program Years Ending

| Year I I Year22 Year3 | Year4 | Year5 | Year 6 | Year 7 Total Financing Required Project Costs InvestmentCosts 11.2 12.6 17.6 0.0 0.0 0.0 0.0 RecurrentCosts 1.4 2.4 1.3 0.0 0.0 0.0 0.0 Total Project Costs 12.6 15.0 18.9 0.0 0.0 0.0 0.0 Total Financing 12.6 15.0 18.9 0.0 0.0 0.0 0.0 Financing IBRDIIDA 10.5 9.5 9.9 0.0 0.0 0.0 0.0 Government 0.1 0.1 0.1 0.0 0.0 0.0 0.0 Central 0.1 0.1 1.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 UserFees/Beneficiaries 0.1 0.2 0.3 0.0 0.0 0.0 0.0 Others 1.9 5.2 8.6 0.0 0.0 0.0 0.0 Total Project Financing 12.6 15.0 18.9 0.0 0.0 0.0 0.0

Year 1 Year 2 Year 3 Year4 Year5l Year 6 Year7 Total Financing Required Project Costs InvestmentCosts 11.2 12.6 17.6 0.0 0.0 0.0 0.0 RecurrentCosts 1.4 2.4 1.3 0.0 0.0 0.0 0.0 Total Project Costs 12.6 15.0 18.9 0.0 0.0 0.0 0.0 Total Financing 12.6 15.0 18.9 0.0 0.0 0.0 0.0 Financing IBRD/IDA 10.5 9.5 9.9 0.0 0.0 0.0 0.0 Government 0.1 0.1 0.1 0.0 0.0 0.0 0.0 Central 0.1 0.1 0.1 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 UserFees/Beneficiaries 0.1 0.2 0.3 0.0 0.0 0.0 0.0 Others 1.9 5.2 8.6 0.0 0.0 0.0 0.0 Total Project Financing 12.6 15.0 18.9 0.0 0.0 0.0 0.0

Main assumptions:

-64 - Annex 6: Procurement and DisbursementArrangements SENEGAL: Social DevelopmentFund Program

Procurement

Guidelines. A CountryProcurement Assessment Review (CPPAR)was conducted in July 1994. The findings of this review remain valid. In general, Senegal'sprocurement laws and regulations do not conflict with IDA guidelines.No special exception,permits, or licenses need to be specified in Credit documents since Senegal'sprocurement practices allow IDA proceduresto take precedence over any contrary provisions in local regulations. IDA-financed Works and Goods will be purchased in accordance with World Bank's Guidelines: Procurementunder IBRD loans and IDA Credits (January 1995, revised January and August 1996, September 1997 and January 1999). World Bank's Standard Bidding Documents will be used for InternationalCompetitive Bidding (ICB) procedures.National CompetitiveBidding (NCB) procedures advertised locally will be carried out in accordancewith Senegal'sprocurement laws and regulations, acceptableto IDA provided that: (i) any bidder is given sufficient time to submit (four weeks at least); (ii) bid evaluation and bidder qualificationsare clearly specified in the bidding documents; (iii) no preference margin is granted to domestic manufacturers; (iv) eligible foreign firms are not precluded from the competitions;and (v) prior to issuing the first call for bids, a draft standard bidding document is submitted to IDA and deemed acceptable by it. The standardbidding documentfor NCB will be based on the World Bank's StandardBidding Document with appropriatemodifications for advertisementof the Invitation For Bids (which may be limited to the major national daily newspaper), the currency of bid price and payment, applicable laws, etc. IDA-financed Consulting services will be procured in accordancewith the Guidelines for Selection and Employment of Consultantsby World Bank Borrowers, January 1997, revised September 1997 and January 1999. The project will use the Bank's StandardRequest for Proposals (RFP) for selectionof Consultants.

Procurement Notices. A General ProcurementNotice (GPN) will be published in the UN Development Business and in a national paper. The GPN will be updated annually in case ICB procurement is not completed in the first year of the project. SpecificProcurement Notices (SPN) will be required for goods and works contracts procured under ICB and NCB bases.

Procurement Plans. Except for Community micro-projectsand PFI sub-projects, a Project Procurement Plan (PPP) covering the entire project period, showing contract packages, and for each package its estimatedcost and procurement method and processingtimes until completion,and bidding documents for items to be procured under ICB in the first year of the project, will be prepared and submitted to IDA for review prior to credit effectiveness.Submission of a PPP for the entire project, acceptable to IDA, will be a condition of credit effectiveness. By October I of each year, the SFMU will submit to IDA for no objection, an updated version of the PPP according to actual procurement activities for the past year and subsequent revision of the plan for the following years. For micro-projectsto be implementedby CBOs and sub-projectsto be implementedby PFI and communities,no global and annual procurementplans will be prepared, as sub-projectswill be generated by the communitiesfrom time to time during the project implementationperiod. However, the appraisal document of each approved micro-project and sub-project will include a procurement schedule for completing the project.

Scope of Procurement. Procurementunder the project will involve the following:

* Access to Social Services - Community micro-projects. Component 1, estimated to cost US$12.35 million equivalent,will consist of: (a) grants to finance a limited number of micro-projects(about 400)

- 65 - estimatedto average the equivalent of US$5,000 each, for micro-projectscarried out by the communitiesto improve their access to social services (sub-component 1.1) and $30,000 each, for about 150 micro-projectsaiming at increase access to social infrastructure(sub-component 1.2); the total of grants to CBOs is estimatedat the equivalent of US$8.97 million; (b) training of the communities; and (c) consultant services, mainly by NGOs, to provide technical assistance to the SFMU/CDSU,information and training to communities, and to carry out the participatory needs assessment with communities, totaling US$2.93 million. The objective of the present first phase of the APL is to test the procedures with a few communitiesbefore scaling up to the second APL phase. Procurementprocedures will be carried out by the communitiesand will include procurement of works, goods, and/or services according to the micro-projectsto be prepared by the Communities,appraised and approved by the project. Procedures for the selectionby the project of the micro-projectsproposed by the communities as well as the proceduresto be carried out by the communities to procure works, goods, and services within the approved micro-projects,will be detailed in a specific Manual of Procedures For Community micro-projects(MP-CMP) which is being developed during project preparationand will be validated by an ad-hoc group comprisingrepresentatives of the Government, the SFMA, partner institutions experiencedin community-drivendevelopment such as NGOs, and communities.The format and presentation of the MP-CMP will be tailored to fit the education level of the communities. Adequate training for the correct understandingand use of the procurement sections of the MP-CMP will be provided to communities' leaders and procurement agents by specialists financed under the CapacityBuilding component (component3), and by the procurement specialists of the regional offices of the CDSU as part of their regular activity. Submission of a version of this Manual of Procedures (MP-CMP), acceptable to IDA was a condition of negotiations. The Bank received a draft which was reviewed during negotiation. Submissionof a revised version of this Manual of Procedures (MP-PFI), acceptable to IDA, will be a condition of effectiveness.

Access to micro-finance -micro-finance sub-projects. The component 2, estimated to cost US$19.80 million equivalent, will consist of: (a) grants to finance a limited number of sub-projects (about 15) carried out by existing Micro Finance Institutions (PFIs) estimatedto average the equivalent of US$ 35,000 each and totaling US$0.6 million, aiming at building additionalfinancial and management capacity of the selected PFIs, in order to be able to reach poorer segments of their target market of borrowers, or to expand existing target market of poor borrowers. This support from the Project is expected to leverage an increase in PFIs lendingto poor (financedfrom existing PFI resources) estimated at the equivalent of US$15.11million. Procedures for the selectionby the Agency of the sub-projects proposed by the PFIs as well as the procedures to be carried out by the PFIs to procure works, goods, and services within the approved sub-projects,will be detailed in a specific module of the Manual of Procedures for PFI (MP-PFI) which is being developed during project preparation and will be validated by an ad-hoc group comprisingrepresentatives of the Government, the SFMA, PFIs and communitiesexperienced in micro-finance;(b) grants to finance CBOs' income-generating sub-projects in communities which are beyond the reach of existing PFI. CBOs' sub-projects (about 350) estimated to average the equivalent of US$8,000 each and totaling the equivalent of US$3.13 million, will include the creation -- and/or improvement of existing capacity -- of a community-owned Saving and Credit Association (SCA) to collect revenues generated by the IGA, and an agreement between the new SCA and an existing PFI for the financing, from the PFI's own resources, of further financial products and services, such as credit, provided by the SCA to community members. Procedures for the selectionby the Agency of the sub-projectsproposed by the communities (CBOs) for IGAs, as well as the procedures to be carried out by the CBOs to procure works, goods, and services within the approved sub-projects,will be detailed in a specificmodule of the MP-PFI; (c) Training and Consultant services of firms, specialized in micro-finance,to support the SFMU/MFSU, the PFIs and the CBOs in the implementationof the component'sactivities (US$1.0 million equivalent).

- 66 - Training for correct use of the procurement sectionsof the MP-PFI will be provided to the PFIs and CBOs by specialistsof the SDFU as part of their regular activity. Submissionof a version of this MP-PFI, acceptableto the Bank, was a conditionof negotiations.The Bank received a draft which was reviewed during negotiations. Submissionof a revised version of this MP-PFI,acceptable to IDA, will be a condition of effectiveness.

* Capacity Buildingfor Vulnerable Groups and the CBOs. Component3, estimatedto cost US$3.54 million equivalent,will cover: (a) training and other related costs for deliveringvarious services to CBOs under the micro-projectand the sub-projectcomponents, includingprocurement training; (b) consultantcontracts with serviceproviders specialized in community-drivendevelopment, such as NGOs, for the Information Education Communication(IEC) and the GrassrootsManagement Training (GMT); and (c) goods for supportingthe capacity-buildingprogram. By October I of each year, the SFMU will prepare and submit to IDA for no objection,a training plan for the following year for IDA's review, commentsand approvalbefore it is implemented.

* The Poverty Monitoring component (Comp. 4.1), estimatedto cost US$5.60 million equivalent,will cover the implementationcost of the Directorate of Statistics of the MEF of a yearly nationwide Priority Poverty Survey (PPS) and ParticipatoryPoverty Assessments (PPA) and the disseminationof results under appropriateformats for decision-makingby policy-makersand managers in all sectors and at various levels. It is estimated from similar past experiencethat 60% of the budgeted resources will translate into operating costs for field surveyors (about US$3.0 million equivalent),while 40% will finance procurementof goods (mainlythe Poverty InformationSystem, computers, vehicles and printing -- about US$1.42 million equivalent),consultant services (studies, data inputting and processing-- about US$1.0 million equivalent),and training.

_ The Project Management component (comp. 4.2), estimatedto cost US$4.20 million equivalent,will cover: (a) the developmentand installationof a computerizedintegrated MIS designedfor the needs of the three phases of the APL and office equipment(about US$1.0 million equivalent); (b) consultant services for the developmentand implementationof a strong assessmentmechanism in order to ensure a quality evaluation of the tests carried out as the core objective of APL phase 1, including information and research (about US$0.3 million equivalent);(c) procurementof servicesof high-levelprofessionals to staff the core teams of the central and regional offices of the SFU during the project period (about US$1.49 million equivalent)under the method for selectionof individual consultants,and through a sequencingunder which the Director General is first recruited, then he/she participates in the recruitment of each of the other central and regional staff; (d) other consultantssuch as financial and technical auditors,researchers, and long-distancecommunication providers for tele-conferencing;(e) equipmentand incremental operating costs; and (f) limited civil works for rehabilitationof offices (about US$0.20 million).

Responsibilities.The SFMU will be responsiblefor the supervision,administration, and monitoring of procurementunder the project, and for carrying out all procurement activities except these carried out by Communitiesand PFIs under componentsI and 2 which are financed through grants. In addition, the SFMU will provide adequateprocurement support to CBOs and PFIs with procurementresponsibilities underthe project. The SFMU will: (i) recruit six-highlevel procurement specialistsexperienced in the Bank's procurementprocedures and equipped with skills to provide procurementtraining (to Communities and PFIs): one at the central office (CSFU) and one in each of the five regional offices (RFMUs); and (ii) contractwith an external firm with institutionalprocurement capacity for providing in-servicetraining to SFMU procurement staff to develop their skills as trainers of communities and to PFIs in procurement matters related to the sub-projects.At project appraisal, the TOR of the individual consultant for the

-67 - position of Director General of the SFMU was agreed upon by the Bank and the recruitment procedure was initiated by the Government. The TOR of the other individual consultants, and the firm for services above mentioned in (a) and (b) will be finalized and, when agreed upon by the Bank, recruitment procedures will be initiated by the Govemment, according to an action plan agreed upon during project negotiations and included in this Annex. The recruitment of the above-mentioned procurement staff will be a condition of credit effectiveness. The SFMU will collect and record information regarding procurement administration managed by itself as well as other entities with procurement responsibilities (CBOs and PFIs), and will send quarterly reports based on this information to the Government and the Bank. These reports will indicate: (i) the status of procurement; (ii) an updated procurement plan; and (iii) compliance with aggregate limits on specified procurement methods. Procurement audits of each project component will be carried out on a semi-annual basis and will be part of the annual audits of the project accounts to ensure that procurement under the project is carried out in accordance with World Bank policies and procedures. Training in procurement according to Bank policies and procedures will be provided during the project life to the SFMU and other project beneficiaries.

Capacity Assessments. Once established, the SFMU will undergo an assessment, conducted by a World Bank Procurement Analyst, to determine its capacity to procure goods, works, and services, and to supervise and monitor procurement carried out by other actors in the project that will be involved in procurement, in accordance with World Bank policies and procedures. Compliance of the SFMU's procurement capacity level with the required level to manage project procurement according to WB requirements will be a condition of effectiveness. Other actors in the project with procurement responsibilities are PFIs and CBOs. The PFIs will be assessed when they are appraised and selected to participate in the project. The CBOs have little or no procurement experience and capacity. The objective of the project is to build this capacity through a learning process. All training and/or consultant services necessary will be provided to the SFMvIUto ensure compliance with World Bank procurement policies and procedures. All training and/or consultant services necessary will be provided to the CBOs and PFIs to ensure compliance with World Bank procurement policies as well as compliance with procedures spelled out in the Manuals of Procedures agreed upon by the WB.

Risk Rating. Due to the creation of the management structure on one hand, and to the limited existing procurement capacity of the Communities and the PFIs, on the other hand, the Project is rated "high risk". Measures taken to address this rating are two fold: (a) pre-requisite skills of recruited staff, provision of adequate technical assistance and training as summarized in the above paragraph; (b) very small-scale tests during the first phase of the APL (about 550 communities for component 1, about 15 PFIs and 350 CBOs for component 2), before scaling up to the second phase. The objective during the first phase is to concentrate efforts at building the capacities to carry out the test successfully, draw lessons from the test, including lessons in procurement, and fine-tune the procedures before scaling up to the second phase.

ProcurementMethods (Table A)

1. Works. Contracts for civil-works financed under IDA Credit, estimated to cost about US$ 0.20 million, will be limitedto the rehabilitationof offices to accommodatethe SFMT units at the central and regional levels. To the extent possible, works will be groupedtogether and procured through NCB. Contracts for small works which will not be possible to package with the others and estimated to cost less than US$30,000 per contract,up to an aggregate amount of US$50,000 equivalent,will be procuredunder lump-sum fixed-price contracts awarded on the basis of quotations obtained in writing from at least three qualified local contractors. The written invitation must include a detailed description of the works including basic specifications, the required completion period, a basic forrn of agreement acceptable to IDA, and relevant drawings when applicable. The contract will be awarded to the contractor who offers

- 68 - the lowest price quotationfor the required work, provided he demonstratesthat he has the experienceand resourcesto completethe contract successfully .

2. Goods. Goods to be financed under the IDA credit (totalingUS$ 5.7 million equivalent)will be groupedinto packages of at least US$100,000equivalent to be procured through ICB in accordancewith the World Bank's Guidelines. These goods include those required for the Poverty InformationSystem and the SFMU InformationSystem to be implementedat the central,regional and local levels, furnitureand equipment,vehicles and spare parts, for the SFMU, the Directorateof Statistics in the MEF, and for the PFIs and CBOs as part of the capacity-buildingcomponent. The two Information Systems will be procured through ICB on the basis of the SBD: Supply and Installationof InforTnationSystems published by the World Bank in February 1999. Supplies that have to be purchased on an annual basis such as IEC and pnnted materials,and other goods and equipmentlocally available,with a unit value exceedingUS$30,000 equivalent and which cannot be groupedtogether into packages exceedingUS$100,000 equivalent and are unlikelyto be of interestto foreign suppliers because of their small size and the geographicaldispersion of the delivery points, will be awarded on the basis of NCB in accordancewith proceduresacceptable to IDA, up to an aggregate amountof US$0.50 million equivalent. Small quantitiesof items such as office supplies, consumablematerials and spare parts normally consideredto be standarditems and which cannot be groupedtogether into packages of at least US$30,000 equivalent,will be purchased locally through National Shoppingbased on price quotations obtained in writing from at least three eligible suppliers, provided that the aggregate amount of such contracts does not exceedUS$0. 10 million equivalent.

3. Micro-projects(component 1) and sub-projects(component 2). Goods and works required for micro-projectsand sub-projects financed through grants to CBOs and PFIs will be procured in accordance with provisions of para. 3.15 of the ProcurementGuidelines, related to Community Participationin Procurement, as specified in the Manual of General Procedures (MGP) and its specificmodules such as the MP-CMP and the MP-PFI. These latter documents will detail the procurement proceduresto be followed by the CBOs and the PFIs. Submissionby the Government of a draft Manual of General Procedures (MGP), and its specific modules Manual of Procedures for Communitymicro-projects (MP-CMP) and Manual of Procedures for Micro-Finance(MP-MF), acceptableto IDA was a condition of negotiations. The Bank receiveda draft which was reviewed during negotiations.Submission and adoption of the finalized versions of the specific modules of the MP-CMP and MP-MF, acceptableto IDA, will be a condition of credit effectiveness.

4. Consultant services. Consultant services to be financed by IDA (totalingUS$4.32 million equivalent)will be for: (i) studies: elaboration of baseline data, test assessments,poverty surveys, conception of the MIS strategic structure,architectural design and civil engineeringservices; (ii) technical assistance and training in the area of quality procurement services,community capacity building, IEC, test assessment,MIS design and management, and monitoring and evaluation;(iii) services of distancecommunication providers; (iv) contracts with institutionsspecialized in community-baseddevelopment, such as NGOs, for services appropriateto their specific strengths; (v) research contracts; (vi) key staff of the SFMU including procurement specialists;(vii) technical and financial audits and procurement audits. Consultantservices will be procuredin accordancewith the Guidelines for Selection and Employmentof Consultantsby World Bank Borrowers (published in January 1997 and updated in September 1997 and January 1999). Standard World Bank documents -- StandardRequest for Proposal: Selection of Consultants, dated July 1997 and revised April 1998 and July 1999 -- will be used whenever appropriate. Recruitmentwill be through competitionamong qualifiedfirms short-listedon the basis of replies to a Request for Expressionof Interest, in which the selectionwill be based on the Quality-and Cost-BasedSelection procedure (QCBS). For financial audits (of a standard nature), the Least-Cost Selection will be most appropriatemethod.

- 69 - Services of lecturers and small studies that can be providedby individual consultantswill be selected through comparisonof qualificationsamong those expressinginterest in the assignmentor approached directly. Contractsof the SFMU key staff which will be paid under the category Operation Costs (totaling US$1.49 million equivalent)will be also procuredaccording to the procedure of selectionof individual consultants.When the estimated contract amount is greater than US$100,000 equivalent,a Request for Expressionof Interestwill be published in a nationalnewspaper and in UN DevelopmentBusiness. Single-SourceSelection may be exceptionablyused for the recruitmentof a tele-conferencingservice provider in case only one institution expressesits interest and has the capacity to deliver this kind of service.

Short lists of consultantsfor contracts estimatedunder US$50,000 equivalent may comprisenational consultantsprovided that a sufficientnumber of qualified firms (at least three) are availableat competitive costs. The short lists will be based on a Request for Expressionof Interest which may be published in the UN DevelopmentBusiness and a national newspaper.However, if foreign firms have expressedinterest, they will not be excluded from consideration.The StandardRequest for Proposal and Form of Contract, as developedby the Bank,will be used. Simplifiedcontracts will be used for short-termassignments of individualconsultants, i.e., those not exceeding six months.

Procurementmethods (Table A)

Table A: Project Costs by Procurement Arrangements (US$ millionequivalent)

1. Works 0.00 0.20 0.00 0.00 0.20 (0.00) (0.18) (0.00) (0.00) (0.18) 2. Goods 5.04 0.50 0.10 0.17 5.81 (5.03) (0.50) (0. 1 0) (0.00) (5.63) 3. Services 0.00 0.00 6.58 0.00 6.58 and Training (0.00) (0.00) (6.58) (0.00) (6.58) 4. Micro-ProjectsCBO and 0.00 0.00 12.79 15.00 27.79 Sub-projectsPFIIIGA (0.00) (0.00) (12.02) (0.00) (12.02) 5. Incremental Operating 0.00 0.00 4.89 0.20 5.09 Costs (0.00) (0.00) (4.54) (0.00) (4.54) PPFrefinancing 0.00 0.00 1.05 0.00 1.05 (0.00) (0.00) (1.05) (0.00) (1.05) Total 5.04 0.70 25.41 15.37 46.52 (5.03) (0.68) (24.29) (0.00) (30.00) Figuresin parenthesisare the amountsto be financedby the IDA Credit. All costs includecontingencies

2 Includescivil works and goodsto be procuredthrough national shopping, consulting services, services of contractedstaff of the projectmanagement office, training, technical assistance services, and incremental operatingcosts related to: (i) managingthe project,and (ii)re-lending project funds to localgovernment units.

Priorreview thresholds (Table B) With respect to goods and works, prior review by the Bank of procurement documentationwill be carried

- 70 - out for all ICB contracts, for contracts for works under NCB, and the first three contracts for goods under NCB. With respect to grants, prior review will be carried out for the first 50 Agreements with CBOs for grants for micro projects, for the first 50 Agreements with CBOs for grants for IGAs, and for 20% of the followingAgreements for both micro-projectsand IGAs. Procurementdocumentation on all post-reviewed contracts and the agreementsfor micro-projectsand sub-projectsshould remain in the project files in possession of the SFMU for eventual audits.

With respect to consultant services and training, prior Bank review will be required for all terms of reference, irrespective of contract value. For each contract with consulting firms estimatedto cost US$75,000 or more, after the technical proposal has been evaluated, the technical evaluation report will be submittedto the Bank for its review prior to the opening of the priced proposals. Contracts with individual consultants, estimatedto cost US$30,000 or more, will be submitted to the Bank for its prior review. For contracts below the above thresholds, terms of reference shall be funished to the Bank for its review. All other contracts will be subject to ex-post review by the Bank.

Table B: Thresholds for Procurement Methods and Prior Review

ContractValue ContractsSubject to Expenditure Threshold Procurement PriorReview Category (US$ thousands) Method (US$ millions)

1. Works Above NCB Prior IDA Review US$30,000 Aggregate amount under US$0.20 million

Below OTHER Post review US$30,000 Aggregate amount under US$50.000

2. Goods Above ICB Prior IDA Review US$100,000 Total US$5.04 million

Between NCB Prior review of the first 3 US$30,000 and contracts; Post review of the US$100,000 following contracts; Aggregate amount under US$0.5 million

Below OTHER Prior review of the first 3 US$30,000 contracts; Post review of the following contracts; Aggregate amount under US$100.000

- 71 - 4. Grants for Below USS5,000 Manual of Procedures for Aggregate amount CBOs' (micro-projects for access to Community Micro-Projects US$3.11 million micro-projects social services) (MP-CMP) Prior review of the first (Access to Agreements, post review of social services 20% of the Agreements that and basic follow infrastructures Manual of Procedures for Above USS5,000 Community Micro-Projects Aggregate amount (micro-projectsfor accessto (MP-CMP) US$5.86million infrastructure Prior review of the first 20 Agreements, post review of 20% of the Agreements that follow

5. Grants for Below US$ 10,000 Manual of Procedures for Aggregate amount micro-finance Sub-projects for Income- Micro Finance Institutions US$3.13 million sub-projects Generating Activities (MP-PFI) Prior review of the first 50 Agreements, post review of the 20% of the following Agreements

Above US$10,000 Manual of Procedures for Aggregate amount Sub-projects of Micro- Finance Micro Finance Institutions US$0.6 million Institutions (MP-PFI) Prior review of all Agreements

6. Consultant (a) Individuals: Section V of the Directives Prior IDA review Services above US$30,000 Section V of the Directives Individuals: Prior review of the first 5 below USS30,000 contracts, post review of the 20% of the following Quality and Cost Based contracts Selection (QCBS) (b) Firms Prior IDA review above US$75,000 Quality and Cost Based Selection (QCBS) Firms below Prior review of the first 5 US$75,000 contracts, post review of the 20% of the following Least Cost Selection contracts

(c) Audit Prior IDA review

Total value of contracts subject to prior review: US$7.2 million equivalent

Overall ProcurementRisk Assessment: High

Assessment of the Project Procurement/ContractManagement System: The procurement/contract managementsystem relating to this project was reviewed before negotiations.The objective of the review was to determinewhether the procurement/contractmanagement system adopted by the project conforms to the Bank's guidelinesfor procurement in investmentprojects. The review was based on the "Assessmentof Agency's Capacityto Implement Project Procurement, Setting of Prior Review Thresholds and Procurement Supervision Plan" guidelines issued by the Bank. It was assessed that the project satisfiesthe Bank's minimum procurement managementrequirements. However the project does not have in place an adequateprocurement/contract management system that can provide the appropriatedata on major

- 72 - procurementand contract management (PMR-Section3) as required by IDA. The agreed action plan by the Borrowerto remedy the situation is detailed below.

Action Plan

Tasks Responsibility CompletionDate

1. Recruitment of the Director of the SFMU * Preparation of terms of reference CoordinatorPNLP done * Approval of terms of reference IDA done * Publication of Request for Application Coordinator/PNLP done * Transmissionof proposed contract with evaluation report and interview report MFSN 22 November 2000 * Approval of proposed contract IDA 2 December2000 * Signatureof contract and beginning of assignment SFMA 5 December 2000 president/Director 2. Recruitmentof the six Procurement Specialists * Preparationof terms of reference 27 November 2000 * Approval of terms of reference MFSN 7 December 2000 * Publicationof Request for Application IDA 11 December2000 * Submissionof Applicationsby Applicants SFMA 11 January 2001 * Evaluation of Applicationsand transmissionof Applicants proposed contract with evaluation report and SFMA 1st February 2001 interview report 11 February 2001 * Approval of proposed contract IDA 18 February 2001 * Signatureof contract and beginmingof assignment SFMU/consultants

3. Manual of Procedures for Community Micro-Projects and Manual of Procedures for Micro-FinanceInstitution * preparationof the two draft Manuals SFMA Done before negotiation * discussion of the two draft Manuals during IDA/Government 16 November 2000 negotiations SFMA 20 December 2000 * Finalization of the three draft manuals after IDA 5 January 2001 negotiations SFMA 15 January 2001 * Review of the draft manuals * Validation of the two draft Manuals with CBOs and SFMA 2 February PFI partners respectively * Submissionof the three draft Manuals to the General SFMA 6 February 2001 Assembly of the Fund IDA 13 February 2001 * Submissionof Manuals to IDA for Non-objection

4. Assessment of the procurement capacitv of the SFMU After the installation of the * Mission to assess the compliance of the SFMU's IDA procurement specialists, procurement capacity level with the required level to presumably 28 February 2000. manage project procurement according to WB Credit effectiveness requirements IDA * Compliancewith WB requirements

-73 - Disbursement

Allocationof creditproceeds (Table C)

Table C: Allocation of Credit Proceeds

Expenditure Cateaory Amount in US%million Fininding Percentage 1. Civil works 0.16 85% 2. Goods 5.07 100% of foreign expenditures and 85% of local expenditures

3. Training and Consultants services 5.92 100% 4. Grants a) sub-pprojects for CBOs Comp.l.l 2.54 100%

b) sub-projects for CBOs Comp. 1.2 5.27 95% c) sub-projects for PFIs Comp. 2 0.52 90% d) sub-projects for IGAs Comp. 2 2.49 90% 5. Operating costs 4.08 85% 6. PPF 1.05 7. Non-allocated 2.90

Total Project Costs 30.00

Total 30.00 _

Disbursements of the IDA credit will be made for civil works, goods, consultant services and training and operating expenses that are eligible for IDA financing. The credit will be disbursed over a period of 42 months, taking into account that the credit's closing date will be six months after the project completion date. While operating under traditional disbursement procedures all disbursements will be fully documented at the time of submission of withdrawal applications, except for expenditures made against the Statement of Expenditures (SOEs). Once the project's financial management is deemed satisfactory enough to fulfill all the requirements for disbursements on the basis of Project Management Reports (PMRs), the project will have the option to switch to PMR-based disbursements.

Use of statements of expenditures (SOEs): All replenishment or reimbursement applications will be submitted monthly or when the Special Accounts (SAs) will be reduced by one-third, whichever comes first. All replenishment applications will be fully documented except for: (a) contracts of less than US$100,000 equivalent for works and goods; (b) US$ 75,000 equivalent for consulting firms; US$30,000 equivalent for individual consultants; and (c) US$30,000 for grants, training and operating costs, which may be claimed on the basis of (SOEs). SOE documentation will be retained at the Social Development Fund Unit for review by the WB Country Office or IDA supervision missions. Table C shows disbursements by category of expenditure and financing percentages.

Special account: (a) Special Account under Traditional Disbursement Procedures

To facilitate disbursements, the SFMU will open an IDA Special Account at a commercial bank for IDA's

- 74 - share of eligible expenditures.The authorized allocationof this account will amount to FCFA 1.5 billion. The authorized allocationshall be limited initially to an amount of FCFA 750,000,000until the aggregate amount of withdrawalsfrom the Credit account plus the total amount of all outstandingcommitments entered into by the Association shall equal or exceed the equivalent of SDR 3,000,000. Each replenishment request will be accompanied,as necessary,by an up-to-datebank statement and a reconciliation statement. In parallel, advance accountswill be opened in a commercialbank and managed by the RFMU to cover eligible expenses. The initial deposit to these accountswill be made by the SFMU and will be sufficientin amount to cover 90 days of expenditures. Expenses incurred by the RFMU using these accountswill be reimbursed by the SFMU from the Special Account. The SFMU will be responsiblefor ensuring the accountingfor the Advance Accounts and the Special Account. The SFMU will ensure the preparationof replenishmentrequests for the SFMU-SAwhich will-becontrolled and transmittedto IDA by the Direction de la Dette et de l'Investissement (DDI).

(b) Special Account for Withdrawal Made on the Basis of PMRs

Upon receipt of each application for withdrawal of an amount of the Credit, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account an amount equal to the lesser of: (a) the amount so requested;and (b) the amount which the Associationhas deternined, based on the PMR accompanyingsaid application,is required to be depositedin order to finance eligibleexpenditures during the six-monthperiod following the date of such report; provided, however, that the amount so deposited, when added to the amountindicated by said PMR to be remaining in the SpecialAccount, shall not exceed the amount of FCFA 2.2 billion.

GovernmentFunds. For program execution,the Govermnenthas agreed to put a minimum amountof 100 million FCFA per year from the BCI (budget consolide d'investissement)into the Ministry of Economyand Finance budget to cover the share of investmentand operating expendituresnot fmanced by IDA or other donors. The Governmenthas also agreedto deposit in a Project Account opened in the Public Treasury an annual amount of 100 million FCFA representingthe amount necessary to cover recurrent expenditures,at the latest by March 31, each year. At the time of negotiations, the Government agreedto make an initial deposit of 100 million FCFA in the Project Account, which is a condition of IDA credit effectiveness. This ProjectAccount will be an advanceaccount managed by the SFMU. See Annex 15 for additionaldevelopment of the financial managementof the program, including financialsystem evaluation, accounting,preparation of financialreporting, audits, financial staff, LACI requirements,and the action plan for financial capacity-buildingwithin the SFMU.

-75- Annex 7: Project Processing Schedule SENEGAL: Social Development Fund Program

ProjectSchedule Planned Actual Time taken to prepare the project (months) 12 14 First Bank mission (identification) 04/02/99 05/02/99 Appraisal mission departure 04/17/2000 07/26/2000 Negotiations 05/17/2000 11/14/2000 Planned Date of Effectiveness 03/31/2000

Prepared by: Ministry of Planning, Ministry of Economy and Finance and Ministry of Family Affairs and National Solidarity

Preparation assistance: Project Preparation Facility (US$450,000; US$600,000)

Bank staff who worked on the project included: Name Speciality Alassane Diawara Task Leader Demba Balde Social Scientist/NGOLiaison Roxanne Hakim Social Anthropologist Serge Theunynck Senior Implementation Specialist/ProcurementAccredited Specialist Ahmadou Moustapha Ndiaye Financial Management Specilaist Haddy Jatou Sey Consultant,Gender Specialist Essimi Menye Statistician Nadine Poupart Economist Andre Nzapayeke Consultant, Capacity Building Susan Opper Education Specialist/ECD SolangeAlliali Sr. Counsel, LEGOP Wolfgang Chadab DisbursementOfficer Korotoumou Ouattara Micro-fmance Specialist Margueritte Monnet Consultant, Training Specialist Iradj Alikhani Sr. Economist, AFTPS Marie Madeleine Ndaw Task Team Assistant Myrina McCullough Operations Analyst Elsie Maka Task Team Assistant

Quality Assurance Reviews were received from: Steen Jorgensen (Director, SDV); Lynne Sherburne-Benz (Sr. Economist, HDNSP); Julia Van Domelen (Sr. EconomistHDNSP); Joyita Mukberjee (Private Sector DevelopmentSpecialist). Quality Knowledgereviews were given by: Florent Agueh (Director,AFTQK); and Bernard Abeille (Lead Procurement Specialist,AFTQK); Nadjib Sefta (Lead ProcurementSpecialist, AFTQK). Comments were received from William Steel (Sr. Adviser, AFTPS).

- 76 - Annex 8: Documents in the Project File* SENEGAL: Social DevelopmentFund Program

A. ProjectImplementation Plan The OperationalManual was reviewed during negotiationsin November 2000. Its adoptionby the Borroweris a condition of effectiveness.

B. BankStaff Assessments Social Assessment InstitutionalAssessment ProcurementAssessment Financial ManagementAssessment

C. Other

Feasibility Studies Prepared by

- Rapportdiagnostic du Projet Fonds d'investissementsocial Comitede pilotage - Atelier de mise Ajour du profil de pauvret6 Comit6de pilotage - Elaborationdu cadre logique Groupe de suivi - Etude /Systemes alternatifsde fmancementdes activites des femmes Groupe de suivi - Etude/Les strategiesde lutte contre la pauvret6d6velopp6es par les COGEP femmes - Etudes sur les formes d'organisationsdes jeunes Amsatou Thiaw CISSE - Etudes/Bilandes activites de prevention, de formationet de Ameth NDOUR & Codou reinsertiondes jeunes BOP - Etudes /la mise en place d'un systeme permanentd'analyse et de Abdou K. GUEYE & suivi des conditionsde vie des menages Amadou BA - Etude/Elaborationd'un programme de collecte de donnees sur les Gustave Th. GAYE & conditionsde vie des menages pour 5 ans Elhadji DIOUM - Etude sur l'evolution des conditions de vie des populationsde 1988 CEMA- Afrique & A 1998 DPS/Matar GUEYE - Realisationd'un document et d'un CDRom sur les statistiques Consultant independant relatives aux conditions de vie des menages - Etude/Mise Ajour du profil de pauvrete au Senegal idem - Etude sur la cartographie de la pauvrete au Senegal idem - Etude /Mise Ajour de la matrice de comptabilitesociale DPS/M.B. SYLLA - Etude/Integrationdes resultats de l'ESAM dans la comptabilite Arona DIA/DP nationale -Microfinanceet acces des pauvres aux services et produits offerts Soce SENE au Senegal

Evaluationenvironnementale Evaluationenvironnementale et gestion des impacts Tropica/Mbarack DIOP

- 77 - Evaluation sociale Perceptionof poverty: local definitionof decline, growth and Khadi Jatou SEY & Wendy development WILSON

Evaluationinstitutionnelle - Montage institutionnelpour la mise en place du fonds d' MGP/Afrique investissementsocial - Identificationdu r6le des ONG dans la mise en ceuvredu FIS Andre NZAPAYEKE

*Includingelectronic files

- 78 - Annex - Senegal

Status of Bank Group Operations (Operations Portfolio) As Of Date 11128/2000 Closed Prolects

Active Prolects Last PSR Supervision Rating bI Amount In USS Development lmDlementatlon ni Project ID Project Name Fiscal YearI IDA; Undisb. Z .JblZdye Proase I II i mC) > P051610 AG.EXPORTPROMOTION S S 1998 8 5.7 > P002367 AGR.SRCVES&PROD.ORGS S S 1999 27.4 23.9 r x P035615 COMMNUTRITION S S 1995 18.2 0.6 ce) 5 P069198 DistanceLeamrnig Center- LIL # 2000 2.1 2.1 C) C, P041567 ENDEMICDISEASES S S 1997 14.9 12 f . P051357 ENERGYSEC. ADJ. S S 1998 100 74.2 C0 P002373 HIGHEREDUC I S S 1996 26.5 9.1 <

P002369 INTEGR.HEALTHS.DEV. S S 1998 50 32.6 tD .

CO P057996 NAT.INFRA.PROGRAM U U 2000 28.5 27.6 - 0 P035621 PILOT FEMALELITERACY HS HS 1996 12.6 2.1 P002376 PRIV.SCTR.CAP.BLDG S S 1995 12.5 2.7 ° P047319 Quality EducationFor AlI Program 2000 50 49.3 -n u P046648 REGIONALPOWER S S 1997 10.5 4.5 P042056 SUST PARTENGY MGMT S 1997 0 2.8 t. P046768 SUST.PART.ENGY.MGMT. S S 1997 5.2 3.8 C P055471 TRADEREFORM AND COMPETITIVENESS 2001 100 97 0 P002366 TRANSPORTII S S 1999 90 79.7 P002365 URB DEVT& DECEN PRO S S 1998 75 54.1 P055472 URBAN MOBILITYIMPROVEMENT PROGRAM HS HS 2000 70 69 P044383 URBAN TRANSREF TA S S 1997 6.6 2.3 P002346 WATER SECTOR HS S 1995 100 51 P067498 Y2K NATIONALACTION PLAN SUPPORTPROJECT S S 2000 10.2 9

Total 818.1 615.1

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. Senegal Statementof IFC's Heldand DisbursedPortfolio As of 9/30/00 (In US DollarsMillions)

Held Disbursed

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1996197/98 AEFSERT 0.12 0 0 0 0.12 0 0 0 1980 BHS 0 0.46 0 0 0 0.46 0 0 1999 Cisents duSahel 12.39 2.17 2.17 0 0 0 0 0 1997 GTtlDakar t137 L58 0 9.44 7.82 1.27 0 9.44 1998 SEF SENTA 0.22 0 0 0 0.22 0 0 0 1994/96 SOGECA 0 0 0 0 0 0 0 0

TotalPortfolio: 24.1 4.21 2.17 9.44 8.16 1.73 0 9.44

Approvals Pending Comnitment Loan Equity Quasi Partic 2001 SEFRoyal Saly 1000 0 0 0 1998 GTiDakar[ncr. 3113.26 219.96 0 0

TotaiPending Coniwanient: 4113.26 219.96 0 0

- 80 - Annex 10: Country at a Glance SENEGAL:Social DevelopmentFund Program Sub- POVERTYand SOCIAL Saharan Low- Senegal Africa income Developmentdiamond' 19S9 Population,mWid-year (millions) 9.3 642 2.417 Life expectancy GNPper capita (Alas method.USS) 510 500 410 GNP(Atlas methodtUSS billions) 4.7 321 988 Averageannual growth. 1993-99 Population(%) 2.7 Z6 1.9 G Laborlorce %) 26 2.3 GNP \. Gross per I vnary Mostrecent estimate(latest year available,1993-99 capit , enrolnment Poverty(% ofpopulationbelow nafional poveny line) Urbanpopulation % of totalpopulation) 45 34 31 Lifeexpectancy at birth (years) 52 50 60 Infantmortality (per 1.000live births) 68 92 77 Childmalnutrition % of childrenunder 5) 22 32 43 Accessto sale water Accessto improvedwater source t% of popufation) 51 43 64 iiteracy (% ofpopulatfionage 15+) 67 39 39 Grossprdmary enrollment (% of school-agepopulation) 66 78 96 Senegal Male 71 85 102 Low-incomegroup Female 57 71 86 KEYECONOMIC RATIOS and LONG-TERMTRENDS 1979 1989 1998 19S9 Economicrats' GDP(uS$ billions) 2.8 4.6 4.7 4.8 Grossdomesfic investmenUGDP 11.4 1 1.9 18.6 18.8 Trade Exportsof goodsand servicestGDP 30.9 26.7 33.0 32.0 Grossdomestic savings/GOP 2.4 6.4 12.8 12.4 Grossnaional savingstGDP -2.2 2.3 12.4 1 1.5 Currentaccount balancetGDP -15.1 -9.7 -6.2 -7.3 Domestc InterestpaymentstGDP 1.8 3.2 1.9 1.8 Savings Investrent TotaldbteGDP 40.8 70.7 71.2 65.4 . Totaldebt servicetexports 15.2 26.6 9.7 9.5 Presentvalue of debiGDP 43.2 44.0 Presentvalue of debt/exports 120.5 126.7 Indebtedness 1979-89 1989-99 1998 1999 1990g3 (averageannual growth) GDP 2.9 3.1 5.7 5.1 5.2 -Senegaf GNP er capita -0.1 0.6 3.0 2.5 2.5 - ---Low-incomegroup Exportsof goodsand services 3.0 2.0 5.8 6.0 8.5

STRUCTUREof theECONOMY 1979 1989 1998 1999 Growthof investmentand GOP (%) (% of GDP) Agriculture 23.7 19.4 17.4 17.9 2 Industry 15.0 18.8 24.2 25.3 "- Manufacturing 10.4 13.3 15.8 16.7 e Services 61.4 61.9 58.4 56.9 .10 _9 9 ge Privateconsumption 80.3 78.0 76.9 76.8 o20 Generalgovemment consumption 17.3 15.6 10.3 10.8 -- GDI GDP tmportsof goodsand services 40.0 321 38.7 38.4

1979.89 1989-99 1998 199s Growthof exportsand lmponts%) (averageannual growth)J Agriculture 1.8 1.5 -3.2 6.0 '5 Industry 4.2 4.1 8.5 6.3 re Manufacturing 4.6 3.4 7.8 4.9 s Services 3.0 3.3 7.6 4.5

Privateconsumption 22 3.0 6.0 5.7 s' 95 95 9? gs w Generalgovemment consumption 3.4 -0.5 1.4 2 3 Grossdomestic investment 41 4.8 17.6 1.7 -rp Importsof goodsand services 1.7 1.1 10.8 4.4 *Exrs *rt Grossnational Product 2.8 3.4 5.8 5.33

Note:1999 data are preliminary estimates.

- Thediamonds show four key indicatorsin the country(in bold)compared with its income-groupaverage. If dataare missing.the diamondwill be incomPlete.

- 81- Senegal

PRICES and GOVERNMENTFINANCE 1979 1989 1998 1999 Inflation (%) Domestic prices 40 - (% change) 40 Consumer prices 9.7 0.4 1.1 0.8 s Implicit GDP deflator 9.7 0.9 1.9 2.2 20

Government finance r0 (% of GDP, includes current grants) 0 f g ' 9 a Current revenue 18.4 17.8 17.4 17.2 -10 94 9 Current budget balance -0.1 5.8 5.0 -G DP deflator eCPI Overall surplus/deficit -2.9 -2.6 -3.4

TRADE (US$ milltons) 1979 1989 1998 1999 Export and Import levels (US$ mill.) Total exports (fob) 478 759 966 960 1i000 Groundnut t50 52 64 140D Fish 70 24 33 1200 Manufactures 167 258 244 1000 Total imports (ct) 1,134 1,383 1.506 oo i Food 334 344 345 400 Fuel and energy t55 153 202 Capital goods 173 218 2 o 93 94 95 96 97 96 99 Export price index (1995=100) 1.04 116 117 Import price index (1995=100) 83 99 105 UExports imrportns Terms of trade (1995=100) 127 116 112

BALANCE ofPAYMENTS 1979 1989 1998 1999 Current account balanceto GDP(%) (US$ ntillions) Exportsofgoodsandservices 816 1255 1,540 1534 0 Imports of goods and services 1,104 1,514 1.807 1.842 2 i Resource balance -288 -260 -267 -308 Net income -79 -205 -76 -72 Net current transfers -48 16 54 28 *6 Current account balance -415 -448 -289 -352 - Financing items (net) 265 543 314 377 .10 Changes in net reserves 150 -95 -25 -25 -12 Memo: Reserves including gold (USS millions) 34 31 428 440 Conversion rate (DEC, local/US$) 212.7 319.0 590.0 615.7

EXTERNAL DEBT and RESOURCE FLOWS 1979 1989 1998 1999 (US$ millions) ComposItIonof 1999debt (US$mill.) Total debt outstandingand disbursed 1.122 3,269 3,324 3,138 IBRD 41 94 9 5 F: 6k20 IDA 88 592 1,448 1,588 Total debt service 135 359 163 158 E: 845 IBRD 6 18 8 5 IDA 1 6 18 15

Composition of net resourceflows B: 1.58a Official grants 148 293 241 204 Official creditors 359 573 409 346 Private creditors 47 -51 -27 -28 0: 418 Foreign direct investment 6 -15 7 169 Portfolio equity 0 -205 -36 -39 C: 199 World Bank program Commitments 32 22 233 0 A - IBRO E - 8ilateral Disbursements 27 49 108 70 8 - IDA D - Otherrmulilterat F -Pival Principal repayments 3 11 16 19 C - IMF G - Shot-term Net flows 25 38 93 51 _ Interest payments 4 13 10 1 Net transfers 21 25 82 50

Development Economics 12/1/00

- 82 - Additional Annex No.: 11

Summary Findings of Social Assessment SENEGAL: Social DevelopmentFund Program

Perceptions of Poverty: Local Definitionsof Decline, Growth and Development

1. Introduction

This study aims to answer certain questions. Among the questions which this social assessment (SA) study answers are those concerning the self-perceptionof villagers in some of the poorest villages in Senegal. In addition, the study aims to understand: Issues relating to poverty for different groups of men, women, and youth The different roles, needs, interests, opportunities/constraintsof men, women, and youth The socio/cultural ideologies!traditional beliefs/customs.

2.

Methodology

2.1 Literature review The team spent a few weeks togetherreviewing and discussing the major literature on poverty, especially gender issues in poverty, since poverty affectsmen and women differently and on social assessmentsin Senegal in particular, and in the Sahel in general. There have been few qualitative studies of poverty in the rural sector in Senegal. Those which have been done, are primarily linked to the implementationof various NGO activities (i.e., Winrock, 1996; Christian Children's Fund, 1998-99, etc.) and tied to a particular region. The national government, through census activities of the Ministry of Agriculture (1998), has provided a solid base for such studies. In terms of similar studies based on the same Ministry of Agriculture data base, USAID carried out a national study in 1999 on rural and urban perceptions of decentralization.This study, like the present one, attemptedto elicit people's thoughts and ideas about current conditionsin Senegal and in their communities in particular. Studies carried out by the Ministry of Educationand the Ministry of Women and Social Solidaritytend to be region specific, but on the level of the region they give quite good data by sector. This has been helpful in comparing our notes with what has been stated for the nation as a whole on a much, larger scale. It is evident that a sample of six villages can only be indicative.However, inasmuch as there were particular common characteristicswhich were used to establish the sample, we can assume that there are many, many more villages which are similar to those visited.

2.2 Design of the field approach

In designing the study, a decision was made to follow ecological/historicaldivision in the country. This allows coverage of the characteristics of all regions mentioned in the pre- project paper, as well as to establish a historical frame of reference which brought more consistencybetween the study team's frame of reference and the historical (geo-political)frame of reference of those studied. The regions are: peanut basin, kaffrine, upper Casamance (Fouladou),Eastern Senegal (Bundu), Diery, Ferlo, and Malika (suburban Dakar).

- 83 - Target groups to conduct the SA were identified through purposive sampling. Criteria was then established for selectingvillages from these regions. The team then applied its selection criteriato the national agricultural census with a view towards identifying the choices among the poorest, most marginal villages in the country. It was decided against choosing such households out of more diverse, heterogeneous communities due to Bank expressedconcern of mitigation of negative impact at the time of project implementation. It was decided to select communitieswhich reflectedthe limited criteria which were set up as a profile of representativepoverty. They are therefore most representativeof the poorest communities in Senegal, although they may not include the poorest or most marginalizedfamilies of Senegal, in absolute terms. The criteria were: 1. size of village (average size 800 - 1,000 people); 2. ecological/historicalzone; 3. absence of markets (lumo); 4. production factors and endowments; 5. lack of social services and infrastructure; 6. distance from the surfaced road (6 kilometers radius of the road, and beyond 6 kilometers); 7. geographical isolation.

As such the followingvillages visited were: Malika Sur Mer (Dakar); Thiaga Omar Gueye; Kerr Ibra Fall (Kaffrine); Mbelogne (matam); Sourribourdaka(Bakel Matam); Kadialele (Bundu); and Belel Doulo (Linguere).

2.3 Methods used:

Panricipatorymethods/techniques such as semi-structuredinterviews, focus group discussions, daily activity profiles, social mapping and problemr/solutionmatrix, and participant observation were used to gather data on the different perceptions of men, women, and youth in the villages visited. These techniques enabled communitymembers to interact with each other in identifyingtheir own problems/solutions, prioritizing them, and coming up with suitable action plans. Understandingthe critical issues raised by communities,will enable the SDF to design projects to fit the needs of all concemed.

This approach,enabled the team to analyze the socio-culturaland economic characteristics of the group of communitiesselected as a group, and the socio-culturaleconomic characteristicsof traditionally disadvantagedcategories in each village within the group. To this end, women, youth, the elderly, or other potentially vulnerable groups (ethnic minority, class, caste) were described in relation to their geographic and demographicspecificity.

2.4 A frameworkfor integrating gender issues:

The methodologicalprinciples for integratinggender into the SA are based on the primary objective of the SDF to reduce poverty. The main targets for this fund are women and youth, because they have been shown to be affectedby poverty the most. In Senegal, there are high gender differences and dispanties in all the key elements of poverty. (Please refer to Annex 12) Mainstreaming Gender into SDF Project for detailed review of the status of women). However here are few sited examples.

In terms of capacity development, women have less access to social services such as education,health, water, and transport. In terms of opportunities,women have less access to the formal economy and labor market, credit, agricultural inputs, and technology, thus leading to lower agricultural productivity and also a huge gender differential in earnings.Furthermore, there are huge gender disparitiesin the division of

- 84 - labor, which reflects the different roles played by men and women. This in turn, leads to a highly segregatedlabor market by gender.

Culturally and traditionally,men and women play different roles learned through the socializationprocess. The overwhelmingmajority of women are conditionedby male-dominatedinstitutions governingthe family, society, and the economy. By custom, the life of a woman is shaped by the patriarchalnature of the social system. Her reproductive role is emphasized by social, cultural, and religious traditions. Understanding the differences in these roles, by conductinggender analysis, will enable us to design appropriatestrategies for gender intervention.

3. Key findings

All villages, including the village in the pen-urban sector,relied heavily on livestock managementas an important aspect of their economic activity. All the villages demonstrateda keen interest towards education, early childhood education, and in each instance we learned that the villagers were determinedto provide both western and Islamic education t6 their children. Although all villages comprised fairly religious communities,maraboutic leadershipdid not play a central role in the day- to- day management or decision-makingof any of the villages, although some were foundedin relation to support of various maraboutic leaders.

The socio-culturalattributes in all villages were characterizedby strong patriarchal leadership in the figure of a respected and elderly village chief. All villages demonstrateda high degree of consultationbetween men and women. However, the division of labor was demarcatedstrictly along gender lines. Men and women play different roles in their villages based on their socio-culturalideologies. In all villages kin networks were strong and determinantfactors in residential patterns and marriage choices, few to no "strangers"lived in the village selected (i.e., seasonal workers,people outside of the local historical experience).All villages displayed a high sense of communitycollective consciousness,with strong social networkingpatterns, which in part are coping strategies for poverty reduction.

EndogenousInstitutional arrangements: All villages demonstrateda high degree of independencevis-a-vis their relationshipswith Government services,neighbors, or other exogenousinstitutions. Each village also demonstratedobservable pride in its survival skills, relative independence,and self-reliance.All the villages noted the importanceof institutions to poverty reduction, although it was said that exogenous formal institutionshave not played any significantrole in their lives and livelihoods.In fact, villagers participated in ranking outside institutions and creating favorable criteria for collaboratingwith institutions for growth and prosperity. For example, in Thianga Omar Gueye, a semi-structuredinterview with a group of women ranked the following as favorable criteria for working with exogenous institutions.

Institutions: Should know the reality of the communities Don 't look down on thepoor Should be very honest and open Should listen to the voices of all the poor, and not play favorites Should be dependable and accountable to the community Should not have a political agenda They should be very sensitive to women 's needs

Another interestingfinding was the local, personalized concept of institution.Villagers said that in terms of their social environment,the head of the village, the religious imam, or a few people of high social standing

- 85 - were consideredas institutions,because they could readily provide for the poorest in terms of economic, social, and spiritual well-being. The following text presents other issues which the villages stressed as priority investments for their development.

Education, including adult literacy, was also a major priority in all the villages visited. In the same way, children'shealth and educationwere equally prioritized. Villages expressed that they have no access to education, and to schools. However, in Malika Sur Mer, a focus group discussion with women revealed that all their children under the age of 7 are now enrolled in school due to the Government law of compulsory education. In other villages such as Kadialele and Soumbourdaka,villagers have made great effort to put their children in school, and even though they do not have 100% participation of all children, they expressed a strong desire to achieve this goal. The major stated constraint is access. In Malika sur Mer, children have to travel all the way to Dakar to attend school, leaving their village everyday at 6:a.m. m order to make it on time. In Mbelogne, they walk 4 kilometersto the nearest school, and in Keur Ibra Fall, about 5 kilometers. The closest school to Kadialele is even farther.

The financial costs of this to parents is huge. The indirect costs of schooling such as books, pencils, uniforms, or decent clothing, transportationallowance and lunch monies are just not affordable to most parents in villages. Consequently,sacrifices are made between foregoing health care or nutritious food for the family in order to have cash to supplement for the education of the children. Both men and women in all the villages worry that if education is provided, the curriculummay still not serve their needs. They wonder if there are enough female teachers, enough toilets and water facilities for both boys and girls, and whether girls will be used to perform domestic chores in the school environment. These critical issues must be discussed with institutions responsiblefor education.

Access to credit: All villages expressed a great deal of interest in obtaining financial resources in the form of credit. Although each village attested to having out-migrationof young men in search of salaried work, still the majority of young men stayed at home, and most of them were involved in income-generating off-farm activities, such as sale of wood, gum, tree crops, or livestock trading. In each case as well, women had income-generatingactivities which they managed as a group or individually, and whose income they used for the welfare of the household. Women were particularly keen to obtain credit, especiallyduring the rainy reason when poverty is at its peak. Women felt that having access to credit will provide for income-generationactivities, or use of the money to increaseproductivity and raise their meager earnings. However,obtaining credit was a major problem for both genders, particularly women. In all of the villages visited reasons such as lack of collateral, illiteracy, distance to credit institutions, lack of transport and money, shyness and low self-esteemwere all contributing factors as to why credit was difficult to obtain.

Health problems: Health problems were high on the list of village priorities in each case, and both men and women expressed their concem for access to improved pre-nataland maternal care. In all of the villages visited women complainedthat smoke inhalationfrom cooking with wood led to respiratoryand eye problems, which are difficult to treat due to lack of health care services and resources. In Thianga Omar Gueye, for example, the activity profile done with women further revealed the difficultiesand pain they endure due to day-to-dayroutine of pounding com and millet for household consumption.They get up at pre-dawn to pound and grind grain for the moming meal. Then, they would walk long distancesto collect wood and draw water for cooking. Between pounding and grindinggrain, collecting water and fetching wood, one elderly woman aged 47 stood up and said "all my life this has been my occupation,pounding and grinding grain, fetching water and wood, and cooking and having children. l am so tired I am so sick I am sufferingfrom continual back and hand ache; feel my hands, they are so hard I don 'tfeel sensation anymore. I have no money to cure myself there is no health center and the work must continue, otherwise who would do it, the men no, it's a woman 's job"

- 86 - The heavy burden that grain pounding puts on women's health, and the pollution from cooking and its impact on their health are serious problems. It was revealed in all of the villages that the rainy seasons are the worse period in terms of health for the entire villages, particularly women; they have no sources of income during that period and almost everythingbecomes more expensive. This season is characterizedby bouts of malaria for all members of the household, which ironically falls at the time that the labor demand is greatest. It is the period when poverty affects people the most. Household food consumptionbecomes very poor and children and the elderly are most affected by under-nourishment.It is also the period where they watch their young and elderly die of poverty-relateddiseases, such as diarrhea, malaria, cholera, and yellow fever. The new threat, AIDS, is not apparently discussed publicly, and this sort of public information and debate is a great need in these marginalizedvillages as well.

Lack of fornal institutions:None of the villages had a formal village developmentassociation, women's development group, or young peoples' association, althoughone village did have an informal association of village emigres who contributed from time to time to village needs. Another village, Thianga Omar Gueye, had an informal women's association. Women organizedthemselves to network socially, and to counsel, mentor, and give advice to the younger generation. It is through these meetings that cultural issues such as rituals, initiations, marriages and other social and cultural affairs affecting their lives are discussed and decided. Recently, the women have started contributing small amounts of money in the sum of CFA 3,000 each into their association.However, for now, the money is used for ceremonial purposes.

Issues of demographic,environmental, and agriculturalchange: All villages visited expressedthe opinion that their economic situation had become worse over the last 20 years and that the level of poverty has increased;the reasons cited were the combination of climatic and environmentalchange and increased population pressure in their regions. Recent studies in Senegal, such as that conducted by the Drylands Research Center of the U.K. in collaborationwith ISRA and local researchers (Mike Mortimer, Mary Tiffen, Abdoul Fall, eds. 1999) have shown that the combination of change in agriculturalpolicy in the early 1980s (such as the structural adjustment programs) along with the lasting effects of the droughts of 1973-74 and 1982-3have led most rural farmers to describe increasingly dire life conditions and production problems. These agriculturalpolicies severely impacted women the most. It has increased the time burden for women as they were forced to simultaneouslywork on the cash crop productionsystem, their own farning for subsistenceand home consumption,as well as manage the reproductive,household work and communityaffairs. As a result, their work for the most part was unremunerated,their income went down, they worked longer hours, and their health and that of their families,deteriorated. Also lack of agricultural inputs, such as fertilizersand farm equipment,as well as soil erosion, increased salinity in the soil (particularlyin Kaffrine and in Sedhiou), and lack of training/appropriatetechnology have all contributedto the decline in agricultural productivity and to greater poverty.

Insecurity: The theft of livestock is a major problem in the daily lives of rural villages today, as reported during the interviews. It was a significant factor affectingthe prioritization of village needs in every case. In urban areas, there is a high crime rate, and women are very aware of this security risk and have taken precautions for their safety. This has now also become a growing reality in the rural sector, where civil disturbances in neighboringregions (lower Casmance, Guinea Bissau) have increased the number of young men with military experienceand no employment or strong family attachments. Women and men also expressedworries about food insecurity, especially during the rainy season,often called the "hungry season" before the harvests. With the lack of suitable storage facilities,and diminishing production levels, this is an acute problem in the rural sector today. Lack of storage for agricultural produce had became a major problem which results in a lot of wastage of produce. Women also complainedof their lack of knowledge of conservationtechniques, which leads to spoilageof agricultural

- 87 - produce not immediatelyconsumed sold. Most women who have no access to markets, must sell their produce to middlemen,who are highly exploitative

Lack of access to water: The lack of access to water is a consistent constraint to development in terms of agricultural and cattle productivity and household consumptionand use. All the villages articulated a strong demand for water. Activity profiles done with women in Kerr Ibra Fall and Thianga Omar Gueye, revealed that women spend 6 to 7 hours of their time per day drawing water. In Keur [bra Fall the well was 45 meters deep and the women complainedof severeback and shoulder pains due to drawing water. In other villageswomen have to walk about 10 kilometersto draw water from wells. Poverty in terms of lack of material goods was especially evident. When we discussedthis issue, equipment and materialswere so few that they were virtually "village holdings" as opposed to personal belongings distributedamong various households.

Lack of pasture for cattle and small ruminants was also articulated strongly by both men and women in all villages. Villagers expressed interest in training for the production and use of dry fodder.

Lack of transport was a major constraint to all villages. Activity profiles in Thianga Omar Gueye, Kadialele, and Keur Ibra Fall revealed that lack of transportationseverely inhibits their income-earning capacity due to geographic isolation. In Thianga Omar Gueye during the rainy season, not even the middlemen would come to their village to buy produce,due to the conditions of the unpaved muddy roads. Much produce would therefore rot. In Malika Sur Mer, the women complainedhow lack of transport affects their health, particularly for a woman in labor. She has to be transported by cart and horse to the tar road which is about 4 kilometers in order to get transportationfor the nearest health center or hospital.

Marketing constraints: In all but two villages, the main source of income for women is selling milk in the market. On market days, women have to wake up at pre-dawn, to take care of their household and domestic chores before beginning the grueling trek to the market. Without any transport and lighting of roads, they have to walk miles along wooded unpaved, winding, roads. This poses a threat to their lives due to the increased violence and insecurity in the area. Very few can afford to rent a cart or a horse. Once they reach the tar road, they then have to wait for transportationwhich is not as frequent as they would have liked it to be, causing major delay in sales. Without cold storage, they cannot accumulate the quantity of milk and butter which would make a significant differencein the economic efficiency of the market activities.This point was stressed repeatedly, showing an appreciable sophisticationof technologicalinputs which would improve their economic performance as women and as economic actors in the dairy industry.

4. Analysis and Conclusion of Field Data

The sample provided an interesting glimpse of very independent village people who value their ability to manage and direct their own lives without excessive dependence on others, whether neighbors or the Government. It is clear that in each case village residents made a conscious decision to remain in their villages and resist deserting what they consider an inherited good, both in the social and economic sense. There appears to be a strong cultural emphasis on self-reliance and discipline in each case, as well as significant importance placed on consensus building as a decision-making strategy. There is also an observable attempt, and in some cases, observable success, in maintaining the integrity of the community by placing high value on adult education,early childhoodand youth education, and youth employment.

Several correlations can be made between the stories of the various villages discussed above. One is that the geographic isolation of these villages is linked with the practice of livestock rearing. Another is that all villages have male leaders who have spent some time in large cities in Senegal or abroad. A third is the

-88 - presence of strong local leadership in the form of an elder kinsman and his wife, also originatingfrom a common ethnic or kin-relatedbackground. Even in the case of Mbelogne (Mataam) where the populationis made up of black Moors and Tukolor (Hal-Pulaaren),kinship was easily recognizable as a significant factor of social cohesion; there was observable strong presence and participation of young men in the village life, and leadership was a function of the historicbackground of the village and resulting kin-networks.In Mbelogne, Moor families and Hal-Pulaarenfamilies are inter-relatedby family ties that are deeper than the present generation and extend back to the founding of the village.

Women in all villages were vocal and presentedtheir perceptions during village-wide meetings as well as apart in their own meetings with the team. In no case did we find that women's aspirations were opposed to what their husbands expressed as future and current needs for their development. Occasionally,priorities differed between men and women, as the men seemed more concerned about infrastructureissues such as electricity and roads than the women. In Thianga Omar Gueye and in Mbelogne, livestock trading was an important feature of the local economy. In ThiangaOmar Gueye young men took the animalsto Mabo market, while in Mbelogne,villagers relied on a network of three to four neighboringtowns for marketing their animals. In all cases, herd off-take strategiesincluded exploitationof two or three herds: sheep, goats, and cattle. In all cases, livestock theft was a major issue, and rural insecurity was identifiedas a major developmentproblem as much effort had to go into surveillanceof animals, and losses were significantgiven the economic value of livestock units.

In all the villagesvisited, the married women are housewives,but who carry out some secondaryeconomic activities. In the case of Malika sur Mer which is typically Fulbe, the women go to town to sell milk from their cows. They share this vocation with the women of Kadialelein Casamanceand Belel Doulo in the Ferlo (Linguere), as well as Soumboudaka.It should be noted that four out of the six villages visited were primarily Haal-pulaarenand that their major economic activity was livestock raising. Of the two that were not, one, Keur Ibra Fall, was mixed Fulbe and Wolof, and the major economic activity was directlyrelated to livestockraising, as most of the young men were tiafunke, or livestock traders. The occupation of livestock trader in addition to farmer was shared across ethnic lines. The chief of the village of Keur lbra Fall was the son of tradesman himself, although his father was a dry goods tradesman. Like the chief of Malika-sur-Mer,the chief of Keur Ibra Fall had significanturban-related experience,having worked in an arms factorytowards the end of World War II. In the village of Soumbourdaka, which was also a Haal-Pulaar village (Bakel department, eastem Senegal), we found several household heads who had formerlybeen migrant workers in Dakar and in France. They had retumed voluntarily to village life in the hopes of improving living conditions for their families. The one village that had a very small Hal-Pulaar populationwas Thianga Omar Gueye. Yet, even in this village, many of the young men worked to maintain the village livestock herds. In addition, during the historical profile we learned that the village was foundedby Fulbe and Wolof families together, who migrated from Nioro-du-Rip. In fact, the term "Thianga"in Pulaar, means valley, according to Paul Grenier, 1960, p. 28, referring to the Ferlo region. There were 12 large carre, or extended families,in this village. Some of the male heads of householdhad also studied Quran and Arabic writing during short residences in larger villages and neighboringtowns. Most of the men work as seasonal agricultural workers.

Villagers were found to have intimate knowledgeabout their surroundingnatural resources, the local administrationsthat govem their areas, and local economics. They are less well-informed about recent gains in technologyor newer Govemmentpolicy development. There is a real need for improved informationnetworks in the rural sector. Rural people can make better decisions when they are better informed.

The villages which the team visited have, through the last two decades, been fairly culturallyconservative.

- 89 - Their geographic isolation is a chosen condition,and the elders in these villages are able to exercise a level of social control that might not have been possible in larger or more cosmopolitanvillages. In Malika sur Mer, village chief fought his way to notoriety as a consequenceof protecting his household and surroundinglands from urban encroachment.

In each case villagers were interviewed about what they foresaw as potential problems should an externally funded developmentproject be initiated in their village. The response of all villagers was that inasmuch as their aim is to solidify family and communityties by creating disincentivesto out-migration,and since many of the neighboring villages included relatives of theirs, they did not percei-veany threats to their social solidarity or existing local institutions in the implementationof a developmentproject or development activities in their communities. Most of what villagers want to do is a resumption and improvement of what they did successfullyin the past, rather than the initiation of new and unknown activities. This includes improving their current methods of farming, improving their knowledgeof livestock management, increasingtheir ability to record their commercial transactions,and increasingthe number of children in school as well as the time (years spent) in school. Their perception is that with more education and training opportunities,they will be able to increaseproduction levels, manage their money better, and create more cash-earningopportunities. Both men and women called for training in literacy, numeracy, and agricultural and artisanal skills.

In Thianga Omar Gueye, young men expressedthe need for more training in vocational skills such as carpentry,metal work, and machine mechanics, as did the youth of Keur Ibra Fall and Kadialele. In all villages except Belel Doulo, men assistedwomen in the search for wood, and in two cases, found wood was an important economic factor for income generation.

- 90 - Additional Annex No.: 12

SENEGAL: Social DevelopmentFund Program

MainstreamingGender into the SDF Project

Introduction The Social Investment Fund Project for Senegal is designedto contribute towards poverty reduction. The main objective of the project is to contribute to the sustainablereduction of the proportion of women and youth living below the poverty line. More specifically,the project aims to: offer micro-creditto poor women and youth; improve access to basic infrastructureand social services in poverty-strickenzones; and improve the capacity of NGOs and CBOs to address poverty reduction.In-order to design specific strategies to combat women's and youth's poverty, the situationof women should be known. Section one offers a brief overview of their situation. Section two will outline a gender frameworkfor poverty analysis and, section three will look at strategies for mainstreaminggender into the SDF.

Sectionone: Overview of women in Senegal Researchthroughout Sub-SaharanAfrica has revealed that poverty affect women and youth, the most active category of the population in a substantialway. In Senegal 51 % of the population are women, and 61% of them are living in the rural areas. Due to unemployment,low productivity and low income, they continue to be a very vulnerablegroup. Eighteen percent of Senegalesehouseholds are now headedby women. Fifty-six percent of these families have 5 to 11 dependents.

The illiteracy rate for women is 66% and for men for 47%, and the female drop-out rate is high. The majority of young rural women (80%) aged 15-39 are illiterate.Ninety percent of the women living in the regions of Diourbel, Tambacounda,Kolda, and Louga are illiterate, and 65-70% of women living in Kaolack, Fatick, St. Louis and Thies are also illiterate. A recent analysis in the country showed that children of illiterate mothers are 50% more likely to die in childhood,and illiterate women want 1.8 more children on the same income as literate mothers.

The literacy rate for girls is lower than boys. In 1997, only 44% of girls were enrolledin primary schools. The problem is worse in the rural areas and among the poorest families. Many factors which contribute to this problem include: institutionalconstraints, lack of access to schooling,poverty, socio-culturalfactors, and macro-economic conditions.As a result only 10% of poor rural households can read and write.

Due to the low level of literacy, and other factors, only 6% of women are found in the formal sector and they are concentratedin low paying, low skill type of work. Less than 3% of women in the formal sector held higher leveljobs in the medical, legal, and academic fields.

Rural Sector Women represent about half of the labor force engaged in agriculture, which is their main source of employment (over 60%). Peanuts and millets are the main crops followedby maize, rice, cotton, and vegetables.Women do not have firm traditionalrights over land, their right of access to land must be renewed every cropping season,with the compound head maintainingthe right to take the land away from them.

Women perform the majority of agricultural work. With the exceptionof land clearing, women are involved

-91 - in all agriculturaltasks. During the harvest season, women commonlywork very long hours 13 to 15 of which seven are spent in the fields, where they perform the most labor demanding chores like seeding, weeding,harvesting, and threshing;during the dry season women spend more time in gathering wood, making crafts, and doing other jobs around the compound.Their leisure time is associatedwith light household chores and off-farm activities such as marketing or water collection.

Women face serious time constraints due to the multiplicityof different activities undertaken simultaneously,such as child care, agriculturalwork, cooking, cleaning,and water and firewood collection. Women work longer hours than men. Their days are fragmentedas they change from one activityto the next. They have less free time and limited choices for social interaction.Agricultural practices in women's plots are completely manual and the technology used is very rudimentary. They barely have accessto agricultural extension and farm inputs.

Informal Sector The majority of women play a key role in the informal sector where they perform a wide range of income-generating activities from trade, handcraft to food processing and catering. Studies have revealed that women represent the majority of agents in the informal sector, and they hold the monopoly of food trade in markets all over the country. However they suffer seriousconstraints of limited access to basic social services; land, credit, infrastructure,legal and regulatory framework, agricultural inputs, and technology. As a result, they are concentratedin less skilled, less capital intensive and low productive activities that do not provide full-time employment.

Legal Status In Senegal, the legal system is a complex interaction of statutory,customary and Islamic law. After independence,a western-inspiredconstitution was adopted, however,personal affairs are still conducted in accordance with unwritten customary and Islamic laws. The Senegalese constitution has ratified most internationalconventions, which suppressed any form of discriminationbased on gender. For example, the family law adopted in 1972 represented a major step for women, as it introducedmeasures in support of women's rights and established certain equality in a couple's marriage. The family law also outlawed the custom which forced a widowed woman to marry her husband's brother, but this is still practiced in rural areas today.

The labor code specified that no gender distinction should be made in the application of the law, but women are still excluded from certain activities which are deemed as men's work. Women are discriminatedin both their access to employmentand training. High-level goverrment jobs are stronglymale dominated,and the principleof equal work for equal pay is ambivalent because in some industries, women are paid by the task, while men receive a daily age. This results in lower pay for women. Their access to salariedjob is also constrained by other factors which interfere with their domestic responsibilities such as: long working hours, difficulty commuting from home to work, insufficientsocial services such as day care centers, and poor access to water.

The land law inacted in 1964 stated that all land belonged to the state. This law granted farmers equal access to land regardless of caste or gender. This automatically illegalized the inegalitarian aspects of customary land tenure. The 1972 administrativereform established a system of local govemment to manage rural land in a way that reflected local priorities and conditions. Land is still distributed according to customary law. There is evidencethat social inequalities still persist and that the powerful who have a strong presence in rural councils where women are not present, are still able to manipulate the land allocationsystem to the detriment of small farmers and women in particular.

- 92 - Health Status Women suffer from low health and nutritional status. The average life expectance at birth is 48 years, and in 1990, the infant and child mortality rate (under 5) is 84 and 184 per 100,000. Senegal's maternal mortalityrate is ranked as one of the highest rate in the world, and it is the leading cause of death among women of reproductive age with 9 per 1,000. In addition, many women suffer from serious illnesses related to pregnancy or child birth. Women use less health care facilities than they need. Their demand for health services is low due to several reasons: inadequate access to antenatal care, inadequatemanpower and equipment,illiteracy about health care issues, cultural beliefs, and lack of resources and transportation to access the health care system, and most of all, lack of adequate information.

There is a high rate of malnutrition among the Senegalesepopulation, with women and childrenaffected the most. Nutrition surveys carried out in the country revealed a high level of maternal malnutrition,and serious micro-nutrientdeficiencies. Some 44% of adolescentfemales and 36% of adult females are suffering from anemia. There is a high level of under nutrition among children under 5 years. Health records revealed that the low birth weight of infants is another indicator for maternal malnutrition.

Sexually transmitteddiseases (STDs ere becoming a serious health problem for women. A recent survey revealed a high incidence of STDs among pregnant women; 90% of women surveyed tested positive for gonorrhea, 5% for syphilis, and 25% for trichomones.The effects of STDs can be devastating. About 1% of the populationare infected with the HIV/AIDS virus. The implicationsfor women can be severe. They are usually responsible for caring for the sick (children and elderly) taking them back and forth to hospitals and taking care of most nutritional and medical needs. Thus, there is a great need to heighten understanding and urgency of the health problems through effective advocacy and awarenessraising.

Youth Youth in Senegal faced considerableconstraints as well. The unemploymentrate for youth between the ages of 17-35 is 40% in the urban areas, compared to 29% of the total population. This is mainly due to their lack of education and training. Primary school enrollment rate is 62% and the drop-out rate is a high 75%. Twenty-threepercent of children under 5 years suffer from malnutrition. Young adults and adolescents are especially vulnerable to HIV/AIDS, and other STDs.

Due to the dismal conditions of women and youth, the SDF Project is designed specificallyto target and reduce the proportionof women and youth living below the poverty line. However,in order to fully design a project that will really reflect the needs and realities of women and youth (includingpoor boys and men), we must understandthe roles they play, the constraints they face, and their needs or interests.The next section outlines a gender analysis framework.

Section two: A gender framework for poverty analysis

Understandingthe role of women 0 In Senegal,men and women play differentroles due to the socializationprocess. The overwhelming majority of women are conditionedby male-dominatedinstitutions governing the family, society, and the economy. By custom, the life of a woman is shaped by the patriarchal nature of the social system. Her reproductive role is emphasized by social, cultural, and religious traditions. To fulfill this role, a girl is married-off at puberty and immediatelybegins to reproduce. She is immediately classified as a mother and housewiferesponsible for reproductivework within the household. The division of labor reflects the different roles played by men and women, which in tum leads to a highly segregatedlabor market by gender. In both the urban and rural contexts women usually undertakeproductive work in the house or nearby to balance it with reproductivework. In cases where women have to travel for

- 93 - work, other females automaticallytake over their reproductive work.

Understanding gender analysis

An understandingthat the role of men and women differ their constraints,opportunities, needs, and incentives also differ, as a result, their priorities differ will enable us to design appropriatestrategies for gender intervention.This can be achieved through gender analysis. It involves asking questions about the differences between men's and women's activities,roles, and resourcesto identifydevelopment needs. Assessing these differences makes it possible to determine men and women's constraints and opportunities. Gender analysis can help ensure provision of services that men and women want and that are appropriateto their circumstances.This requires understandingmen's and women's role in the sector by analyzing quantitative and qualitative information about their activities, resources and constraints, and benefits and incentives.

This is why it is important to incorporate social and gender analysis into the project preparationand implementationprocess. Stakeholder analysis is a tool for understandingthe context within which a project is designed and operate. Stakeholderanalysis will help in identifyingthe various groups of stakeholders along with the appropriatedegree of their involvement in a project or sector activity. This will bring to light the different roles played by communitymen and women and the different incentivesthat motivate them. Since men and women usually belong to different sub-groupsof stakeholders,they will have different levels of involvement in projects. Stakeholder analysis will also bring to light the different socio-culturalfactors that need to be considered for project sustainability. The diagram below is a gender analysis framework that sheds light on various variables that interplay in communities. Understanding this dynamism will enable any project to be gender inclusive.

The first component is the activity profile, which identifieswhat men and women do (in this case we can include youth), and where and when they do these activities. It is based on the gender division of labor and defines the productive and reproductiveactivities of the project population by gender, age, ethnicity, social class, and other characteristics.

The second component is the access and control profile. This investigates what resources are available for individuals to pursue their activities, what benefits they derive from utilizing resources, and what gender patterns exists in access to and control over resources. Resourcesmay include labor, time, capital, land, training, and education and knowledge building.

The third component is the determinants, which overarches all the factors. It is the determinants that shape the context for carrying out the different activities, allocating resources,and making decisions. They include: cultural factors, social norms, traditions,religion, and organizational and institutional arrangements.In the application of gender analysis framework,the determinants are considered first because, they shape the project environment. The next section will focus on strategies for including gender into the SDF Project.

Section three: Strategies for mainstreaminggender into the SDFP

In analyzingthe logical framework from a gender perspective,the following recommendationsare made.

- 94 - 1. Gender training is needed for the team that will conduct social/needsassessment based on the economic, social, and technical situation of each community in a zone. Because the findingsof the needs assessment will help in designing appropriatestrategies and interventionsfor poverty reduction in a community, it is critical that the assessment be done in a qualitative/participatorymanner with gender issues in mind. This involveslooking at the differences between men and women's activities,roles, and resources in order to identifytheir developmentneeds. Assessing these differences,makes it possibleto determine men's and women's constraints and opportunities.This will ensure provision of services that are appropriate to their situation. Being aware of these differences will also enable communities to be more supportive in achieving sustainable development.If possible a gender expert should be in the team

2. Projects or sub-projectsthat will be designed from the needs assessmentsmust be driven by the demands of men, women, and youth in a communityin order to achieve communityparticipation and development. Therefore it is important to structure project rules and procedures to facilitate participation of men, women and youth. It is equally important to make projects flexible, so that gender issues that are learned may be adressed appropriately. It is equally important to base men's and women's involvementon the local cultural context. The socio-economicand cultural factors that determine the status of women within their given communityand context must be taken into considerationin designing a project. This will help avoid negative impacts in any given project.

3. In conducting research on how people perceive poverty, it is important to have the perception of men's, women's, and youth's view of what poverty means to them. This will enable us to know which group is affected the most and will help us design appropriate strategies for interventions.

4. The team conducting the assessment shouldpay particular attention to women's workload and its implications. 5. Any time that research is conducted, the data must be desegregatedby gender. This is particularly important when it comes to measuring household living conditions. Having a global figure for who the poor are will not tell us the condition of women or youth. Desegregating the data will help us analyze the real situation of men, women, and children based on the indicators that the researchers are using. For example, if research is done on income,we would like to know men's income, women's income and children's if there is any, also the sources of income based on gender differences should be collected. Quantifyingthis data will allow us to see the many unpaid activities that women perform in and would thus develop strategiesfor increasingthe income level of women. 6. In additionto desegregatingdata by gender, it is equally important to desegregate it.by age, marital status, ethnicity, and socio-economicstatus. Because a community is not a homogeneous group, the level or degree of poverty varies even among women based on their location in the stratifiedgroup. For example, female headed households with 11 dependants,no education, and limited capacity are consideredto be the poorest. 7. Monitoringand evaluation. Monitoringshould be an ongoing activity accompanyingthe implementationprocess. M&E can be undertaken with specificquestions using gender planning tools. One such tool, gender roles identification,can be used in monitoring the impact of the project. As the project is being implemented,the following questions are asked: * What will be the impact on women in their productiverole? Will the project positively or negatively affect women's access to: land, opportunitiesfor paid employment,the labor of other household members for economic activities, existing new technology,credit, particularly where formal collateral arrangementsfor women are not available, skill training and information, income generationfor her productive work, and basic social services? * What will be the impact on women in their reproductiverole? Will the program positively/negatively

-95 - affect women's access to: the labor of other householdmembers for domestic work; items of household consumption such as firewood or water; basic services such as health clinics, transport; food for adequate nutrition; land for housing; and income generationfor the household? * What will be the impact on women in their communitymanaging role? Will the project positively/negativelyaffect women's access to: existing communitylevel decision making;new communitylevel decision making introducedby the project; and income, particularly where the project relies on their voluntary labor? * What will be the impact on women's ability to balance their triple role? Will the project increase women's work in one of their roles to the detriment of their other roles. For example, if increased time is required in productive work, will this reduce their capacity to undertake existing tasks in their triple role?

Since the overall objectives of SDF is to facilitate the process through which poor communitiesparticipate in economic and social activities leading to sustainabledevelopment, a closer look at each component from a gender perspectiveis required to achieve this goal.

Component One: Access to basic social infrastructureand services improved. Enabling women to have access to basic social infrastructureand services and improving and utilizing the existing infrastructurewithin their communities,could lead to poverty reduction and the improvementin the household living conditions. Since women are the primary care givers and responsible for maintenanceof the household, providing them with access to health, education,water, and other social serviceswill have a significant impact on lives in the community. Each componentwill be looked at from a gender perspective.

Health: Women's fertility, health, and economic well-being are closely linked.Because they are married at an early age, women are pregnant or breastfeeding at least 16 years of their reproductive life. This long period places heavy demandson women's health and energy and severely restricts the type of economic activity they can undertake, the length of time they can devote to it, their productivity, and their ability to migrate. In addition, they suffer from low health and nutritional status. Many factors contribute to women's poor health. It is, therefore, important to include women in the design and deliveryof health care. For that, the following gender issues shouldbe taken into account: What are the different kinds of health services available in a community? VWhouses it and how often? What are the conditions of those that are available? Is there a user fee? Is it affordableto men, women, and youth? What time do health servicesoperate? Do they take women's needs into consideration? Are the staff gender sensitive? What is their attitude towards the very poor and handicaped When do men, women, and youth use these facilities, does their use vary by season? What are the reproductivehealth needs--familyplanning, prenatal care, and STD diagnosis and treatment of men and women? Are the reproductive services addressingthese needs and in what way may they be different for men and women? What differences exist in the health risks for men and women and how do these differ in terms of timing, severity, prevention, and treatment? What are the implications in terms of health servicedelivery? What is the incidence of AIDS and STDs by sex and what are the trends, and do information campaignsaddress gender needs?

- 96 - Strategiesfor improvingwomen's health include: 1. Improving their access to health services as well as reorientingthe health care system to meet women's needs. Some diseases, including HIV and other STDs, afflict women more than men, so programs to control and prevent these diseases should have a strong gender focus. Health staff at all levels shouldbe sensitizedto women's needs and problems.

2. Bringing services closer to home will reduce their costs and time spent in travel. Improving women's access to services requires improving outreach and expandingprimary health care. More women can be reached if the quality of health care at the periphery is strengthened. 3. Integratingnon-government providers into the health system. Many women, particularly those living in the rural areas, visit traditional healers for various social, economic, and cultural reasons. Emphasis should be placed on providing intensive training programs to the traditional birth attendants and private practitioners as well as strengtheningtheir links to the health care system. This would improve women's access to health care. 4. Supporting and intensifyinginformation, education,and communicationactivities to provide detailed information about contraceptivesand where to get them. Various channels of communication should be advocated, taking women's illiteracy into consideration,their access to such information,and education. 5. Involving male partners more in family planning and contraceptiveuse may increase the use of contraceptionamong women. Sensitizing men, counseling,and addressingtheir misgivings about contraceptionmight prove to be a better strategy than targeting women alone. 6. Building consensus among parents, teachers, and religious bodies on how to address young adult's reproductiveand health care needs. There needs to be a very clear policy on how much and what type of information to give to young people, at what age, and what mechanismto use to distribute information. 7. Extendingand strengthening family life education. The national school curriculumneeds to convey accurate, useful information about reproduction, safe sex, and AIDS STDs. A separate plan shouldbe developed to reach out of school young adult. 8. Using religious education and religious leaders to preach to the public on appropriatesocial behavior and conduct can be an effective tool for preventing STDs.

Community Education Research has shown that educating women and girls is the single most important investmentfor social and economic development. A plethora of research and evidence have been documented,including from the World Bank. Women and girls face several barriers to education. Removing the barriers will enable women to participatefully in economic and social development.In designingand delivering education programs, the following gender issues should be taken into account: what are the reasons for low enrollment; what gender differences exist in literacy rates, educational enrollment and attaimnent,drop-out and retention rates, and reasons for school drop-out; what are the implications of gender differences in terms of programs designed to increaseboys' and girls' educationalachievement levels; * are education programs tailored to the needs and circumstancesof boys and girls; - are there differences in the type and quality of informal and formal training available to women and men; is there a trade-off between school and market or home-basedwork for boys and girls; does lack of child care differentiallyaffect boys' and girls' school attendance; what are the implicationsof boys and girls market and home-basedwork on programs designed to increase educational attainmentand achievement

- 97 - Strategies for improving women's/girls' education In order to strengthenwomen's role in the national economy,it is essential to improve their education. However,if schooling is unlikelyto result in higher income, betterjobs, a better lifestyle, or the acquisition of skills needed for daily life, there will be little motivation for education.And when the barriers to labor markets or cultural norms in society prevent women from taking up formal employment,the return to girls' education are perceived as low. Strategiesfor improving women's/girls' education include:

1. Addressinggirls' time constraints.Interventions that reduce demands on women's time will increasethe likelihood of girls' education. Providing school-basedchild care would free girls from sibling care commitmentsand permit them to go to school.

2. Offering a more flexible school schedule.Girls are often overloaded with both reproductiveand productivework. Therefore,school hours should be organizedto avoid conflict with girls' householdand other tasks. Schools that operate double shifts should give households the flexibility in selectingtime slots appropriate for their daughters.

3. Increasing access to the education system will reduce distanceand increasegirls' enrollment.

4. Subsidizing girls' education. High direct costs of educafinggirls can be reduced through subsidies. Girls' enrollmentand academic performancecan be improvedby providing incentives,such as scholarships,fee waivers, and free textbooks, particularly in remote areas, where girls' enrollment is very low.

5. Organizinginformation, education, and communicationcampaigns to encourage investingin girls' education. A nation-widecampaign directed mainly at parents and communityleaders could provide informationabout the economic and social benefits of girls' education and raise awareness. Religious leadersshould be used to advocatethe importance of education,especially female education.

6. Improvingthe quality of education by reforming the curriculum, textbooks, testing, and teacher training.

7. Makingthe school environmentmore gender-sensitive.This entails gender training for teachers, and creating school facilities that meets girls' needs.

8. Recruiting more women teachers, especiallyin the rural areas and providing them with incentives to stay in their recruitedpositions.

9. Providingcommunity managed schools. This will enable parents and associationsto be actively involved in the maintenanceof schools and be involved in decisionmaking that affecttheir children's education.

10. Expanding non-formaleducation for out of school girls and women. The literacy project is doing quite well in reaching and educating illiteratewomen.

Water Women with the help of their children are the primary collectors, users, and managers of water in the household. They select water sources on the basis of their perception about access, quantity, quality and reliabilityof facilities,and the time and effort required to use them. Women have a strong influence on household sanitary habits and overall use of the facilities.

-98 - In addition, they are traditionallyresponsible for disposinghousehold waste and educating and training children in hygiene.Water plays an integral role in women's development.Clean and safe water are needed for cooking and drinking,water is needed for washing, cleaning,building, and farming. The type and source of water consumed determinesthe health of the woman and the household. The following gender issues should be addressedin designing and implementingstrategies for water: Are there significantgender differentialsin access, use, and acceptabilityof water facilities Do women use safe water sources, and what is their source of water Has the coverage of underserved water supply decreased or increased over the past Is there awarenessabout hygienic behavior among the community overall, and among men, women, and children Do men, women, and children adopt health-promotionbehaviors How do women store drinking water at home, and what are the health or hygienic implications Has the distanceand time taken to collect water increased or decreasedover time

Componenttwo: Micro-finance Women in Senegalare very active economicallyin the informal sector, and the majority of women in this sector perform income-generatingactivities. Improving their productivity is critical to reducing poverty and achievingsustainable development. Developing women-owned enterprises enables women to meet their current needs, augment their earnings from income-generatingactivities, and acquire resources for future investments. However,their success in business activities is constrainedby cultural, educational,and economic factors. Improving their prospects will require expanding the financial and business support services available to micro-enterprises,a sector in which women predominate.

Constraintswomen face

Limited access to financial services Cultural norms Household responsibilities Women working from home face serioushandicaps in reaching clients in central districts and reaching more lucrative markets due to lack of access to infrastructureand social services Level of education and skills

In addition, women have trouble meeting bank requirementsdue to lack of collateral.Persistent cultural norms may also discourage women from seeking loans, a spouse's disapproval,even intimidationmay add to the difficulty a woman faces in getting credit. Therefore,various strategies should be designed to fit women's needs. Strategies for mainstreaminggender into micro-creditinclude:

StrengtheningMicro-finance Services: Women have traditionallyturned to informal financial institutions for credit which have for a long time providedthem with convenientand appropriatefinancial services. However few have developed the capacity to reach a large number of women, particularly the very poor and marginalized in a lasting and effective way. Capacity-buildingsupport is needed to make existing programs more efficient and sustainable,broaden their outreach, and provide incentivesto design new programs. The following are guidelinesfor supportingmicro-finance institutions.

Institutions should: I. Redesign their programs to accommodategender-targeting mechanisms; for example,modifying collateral requirementsso that women can qualify; consider illiteracyin procedures and marketing; increase the number of female officers; and remove from existing programs inadvertentbarriers to women's participation.For example, eligibility restrictions that exclude sectors in which women predominate,and

-99 - lending requirementsthat call for a spouse's counter signature. 2. Provide credit services that respond to the preference of poor entrepreneurs and women 3. Streamlineoperating procedures 4. Provide a serious loan collectionattitude based on the fact that the economicallydisadvantaged and women clients can indeed repay their loans 5. Set interest rates and fees just high enough to cover costs 6. Give their clients liquidity by imposing few or no restrictions on access to their saving 7. Offer more convenient locations and hours of operation 8. Accept very small deposits and tom or worn bills 9. Build confidenceand trust among clients 10. Build linkages and networks among other institutions; for example, a cooperativerelationship between the informal sector and NGOs in partnership with the formal banking sector could improve the flow of informationand fumds 11. Enable NGOs and informal agents to introducewomen to financial discipline and enable them to build favorable savings and credit records, reinvest internal resources, and build their business skills 12. Set policies that would protect women from excessiveinterest rates on loans 13. Introduce legal reform within the system to modify the collateral and foreclosurepolicies to be more gender- responsive;this would reduce the transactioncosts for contract monitoring and enforcement which have traditionallymade lending to women difficult 14. Find other substitutes for collateral in cases where women's access to finance is restricted by custom and land rights.

Componentthree: Provisionof training and education

One way to help self-employed women become more productive is to teach basic business,financial and leadershipskills in education and literacy programs for women. Such programs would be effectiveif they have women on their staff to promote and deliver servicesand use community networks and self- help groups acceptedby women. More female loan officers need to be trained and more business women should be encouraged to serve as mentors for other women. Another way of increasingproductivity is to give girls greater access to education and training; this is central to improving women's ability to succeed in business

Provision of business support services

CBOs and NGOs must be provided with services to serve the interests of the poor. They shouldbe equipped to offer grassroots managementtraining to improve the business skills of poor, often illiterate women. Women should be empowered to improve their ability to select viable projects, plan their business and increase savings and profits. This support service should be made easily accessibleto all women. Support should be appropriate to the level of the business activity. For example, community-based education programs can be a suitable optionifor subsistenceactivities. Women, whose micro enterprised are not stable, can benefit from groups that can provide support and channel assistance to them. The Govemment should recognize how much informal activities are contributing to the national welfare and improve the climate for entrepreneurs. This includes creating policies favorable to women's needs.

Component four: Building the capacity of the steeringcommittee at the national level to manage and coordinatethe poverty program in Senegal

In building the capacity of the steering committee,care must be taken to ensure that gender needs are taken into consideration.The members of the committee must be trained in gender issues. At least 30% of the

- 100 - group should be women. The institutional constraintsthat foster a negative environment for gender issues must be alleviated.This involve changes in behavior and attitudes. Policies to improve the status of women must be mainstreamedinto the manual of procedures.Decision makers must have the politicalwill to incorporategender into the poverty program.

Conclusion Gender analysis provides visibility to the importance of gender variables in project design. For sustainable developmentto occur,recognizing that men and women play a complementaryrole in Senegalese society will enable us to design projects that will serve the needs and interests of the community. This will become a reality only when the separateroles of men and women are understood.

- 101 - Additional Annex No.: 13

Note on Strategy for Poverty Targeting in the Social DevelopmentFund Project

SENEGAL: Social Development Fund Program

The Social DevelopmentFund (SDF) Project aims to alleviatepoverty in Senegal through increased access to basic social services (component 1), micro-finance(component 2), capacity building at the communitylevel (component 3), and the establishmentof a poverty-monitoringsystem (component 4). This objective cannot be achieved without a good understandingof poverty in Senegal in terms of its characteristics,dimensions, density, and geographic impact.

The development of a poverty-targetingstrategy is crucial to ensure that the project meets its objectives. This note aims to outline the strategy underlying the SDF Project.

It is primarily components 1 & 3 of the project that have a strategy of direct targeting, with regard to geographic area of intervention,type of interventionand specific beneficiarysub-groups. Component 2 will target the same geographic areas as components 1 & 3. However, specificbeneficiary sub-groups will not be directly targeted, nor will specific activitiesbe given preference. The approach taken is that components 1 & 3 will serve to develop poor areas resulting in them being targeted by participating financial institutions (PFIs) and savings and credit associations(SCAs). Component2 will focus primarily on the PFIs and SCAs themselves on the areas of technical advice and capacity building.

Components I & 3 are viewed as complementaryto each other. These componentstarget the poorest and most vulnerable groups in rural and urban Senegal, to increase the capacity of these groups to manage their own development, such as increasing their access to basic social services.

Poverty in Senegal is largely a rural phenomenon. However,given the economic and social relationshipsbetween the rural and urban sectors, the SDF will target both. This will be done keeping in mind the different nature of poverty in villages and cities, and the need to design initiativesto respond to them. Poverty in rural areas is characterized by a lack of access to basic social infrastructure(water, health, education, and markets), whereas the main issues in the urban areas is high unemploymentrates, juvenile delinquency,prostitution, the use of drugs and violence. Rural-urbanmigration is an increasingphenomenon in Senegal which needs to be addressed if poverty-alleviationefforts in the country are to have an impact. The targeted areas for the pilot project reflect this recognition of the rural-urban link and the need for an integrated approachto development.

A two-prongedstrategy of poverty mapping/targetinghas been adopted to provide both quantitative and qualitative data. This exercise has been carried out as part of component 4 and will form the base data for all future poverty initiatives in the country. This initiativehas used both the more classical statistical survey-basedmethodology of poverty mapping to enable standardizedcomparisons across the country, as well as Participatory Poverty Assessments (PPAs). Such a strategy is designed to present a more dynamic picture of the ground reality.

The primary activity for building a poverty database involved a detailed survey of all rural villages (13,390 in total) in Senegal. The survey collected information on each village concerning the access to infrastructure(drinking water, roads, health post, school, and hop/market),using specified distance criteria. The villages, grouped into rural communitiesknown as 'communautes rurales' (CRs)

- 102 - (administrativeunits comprising a number of villages) were given indices and ranked in order of their lack of access to infrastructure. This variable has been used as the main proxy indicator of poverty for this study. Villages that fell into the same category of infrastructureaccess (i.e., having the same index), were re-ranked using the variables of populationlacking accessto drinkingwater at the village level, access to drinking water is seen to be crucial for development as it is important to prevent out-migration. It is only if villagers can see a future in the village, that they will be motivated to invest in its developmentand revenue activity.

Using the five main criteria of infrastructureaccess (described above), the index of access ranges from 0 to 500, where 0 represents a CR with no infrastructure (except in most cases a traditional well), and 500 represents one that has adequate access to all basic infrastructure (as defined above). Thus for phase 1 of the project, CRs with an index of 200 or below will be targeted in specified regions. These villages are the poorest in the country and lack basic developmentneeds such as water, health and education access, and markets.

Phase I of the project is a preparatory phase which aims at setting up the project structure, ensuring that mechanisms for deliveryare in place, and testing the economic and social viability of sub-projects. Hence this phase will include some pilot projects, the main aim of which will be to compare various strategies for communitydevelopment and test the efficiency and rationale of the delivery mechanism (community disbursement,procurement, project management, and monitoring).

One strategy will be to target an entire CR and an urban sub-district ('quartier') and finance a local integrated developmentplan founded on a PPA. Another strategy will be to fund individual sub-projects initiatedby community-basedgroups at the village level or within the target urban areas. These projects will only be funded if they are representedin the needs assessmentPPA which will take into account priorities of CBOs, other community-basedgroups, and vulnerable sub-sectionsof the c-ommunity.The pilot phase will test both strategies and the expansion phase will be built on the positive experiences of these strategies.

The pilot phase will target the following rural and urban areas: CRs with an index of 200 or below in three departments in the region of Louga (Dept. of Linguere = 14 CR; Dept. of Louga = 6 CR; Dept. of Kebemer = 6 CR) CRs having an indice of 200 or below in one department in the region of Kaolack (Dept. of Kaffrine = 11CR) CRs having an index of 200 or below in two departments in the region of Kolda (Dept. of Kolda = 10 CR; Dept. of Velingara = 6 CR) CRs having an indice of 200 or below in one Department in the region of Fatick (Dept. of Foundiougne= 4 CR) the urban commune of Linguere,region of Louga * the urban commune of Kongheul,Department of Kaffrine,region of Kaolack; the urban commune of Velingara,Department of Velingara,region of Kolda the urban commnuneof Foundiougne,Departrnent of Foundiougne,region of Fatick the urban commune of Guinaw Rail, Department of Pikine, region of Dakar

Thus a total of 57 CRs and 5 urban communes will be targeted in the pilot phase.

The targeting of the areas for the pilot phase are based on the followingrationale.

(i) The extent ofpoverty: The regions of Kolda and Louga have the largest number of CRs with

- 103 - indices of 200 or below. Fioundiougnein Fatick is also ranked as one of the poorest departments. The Department of Kaffrine in the region of Kaolack has one of the highest concentrationsof CRs with indices of 200 or below. The communes chosen are important centers of developmentfor these poor regions. Guinaw Rail represents one of the poorest slums of the city of Dakar.

(ii) Other donor interventions: The World Bank as the donor of last resort places strong emphasis on ensuring coordination among poverty-reductioninitiatives in the country. The targeting process has taken into account, other similar initiativesand aimed at concentratingthe SDF in areas which are not being targeted by other donors. Major donors with interventionsin the targeted areas are the European Union - EU, African Development Bank - AfDB, multi-donor based Local Development Fund - LDF. The kind of interventionand the duration of their projects have also been taken into account. The entire region of Louga and the Departmentof Kaffrine in the region of Kaolack are characterizedby an absence of poverty interventions. They dominate the list of areas lacking interventionssubmitted by rural leaders. * The eliminationof the Departmentof Sedhiouin Kolda region is based on the presenceof the AfDB and LDF in the area. * The region of Tamba, although ranked as the region with the highest number of CRs after Louga and Kolda, was eliminatedbecause of the presence of similar projects throughoutthe region (AfDB and LDF). * The commune of Kongheulwas chosen instead of Kaffrine which is the Department capital as it is a relativelynew commune and has had much less investmentthan Kaffrine which has attracted substantialinvestment. Although there is the presence of the EU in the Department of Kolda, it was retained as a target region for the SDF as the size of the project is not significant. Moreover,the EU initiative focuses primarily on capacity building of rural groups. Thus it will be interesting to test how the SDF initiative can build on the EU project. * Projects such as the National Rural InfrastructureProject (NRIP), Health Sector Investment Program (Health SIP) and Quality Education for All (QEFA), all funded by the World Bank, target the whole country through the project life. Coordinationwith these projects will be taken into account in the Manual of Procedures of the SDF. SDF will not fund sub-projectswhich will be covered by these projects but may fund activities which build on the benefits of other projects. For example, if a village needs a school, but has been targeted by the QEFA project, the SDF will not construct a school. However, it could fund the constructionand operationof a school canteen with the aim of extendingthe school to reach villages further away whose children may not have access to a home for their midday meal. Similarly the AfDB interventionin 60 communesin Senegalwill be taken into account at the level of project activity. Since the AfDB interventionfocuses primarily on infiastructure,the SDF will focus its effort on the other componentsof the project in the targeted urban areas.

(iii) Diversity: The areas provide a diverse context in which to test the project approach. Louga has dry and arid terrain inhabited largely by nomadic pastoralists. The Department of Kaffrine in Kaolack is characterizedby its importance as the granary of Senegal (peanuts and millet). Kolda represents a more forested ecologicalzone where the main productive activity is agriculture,forest produce, and sedentaryanimal husbandry. The inclusionof Foundiougnewas based on its high dependenceon fishery and tourism, which provides an interesting contextwithin which to test the project.

(iv) An integrated approach to development: The urban communes chosen (except Guinaw Rail) are important focus points for development of the regions of Louga, Kolda and Fatick. It was decided that a strategy of focused interventionswould lead to more integratedand sustainable development.

- 104 - * The communeof Linguere is the capital of the Department of Linguere.Due to socio-economic difficulties, the basic conditions of the populationare deterioratingrapidly. Emphasis is on improving the community's abilityto better utilize existing infrastructure;IEC for health; and AIDS; prevention and hygiene would go a long way in improvingthe conditionsof its inhabitants. The project impact in the Sahelian arid pastoral zone of Louga will be intensifiedwith the development of Linguere as an urban base. Emphasis will be placed on creating viable linkages between Linguere and the vibrant cattle center of Dahra. The commune of Kongheul is a newly growingtown that is becoming an increasinglyimportant commercial center for the rural villages which depend primarily on the cultivationof peanuts and millet. * The commune of Velingara was selected for SDF interventionin the rain-fed south-eastern zone of the country. Despite its apparent deprivation, Velingara is the center of an important agricultural zone where cotton, rice, and fruit production is developing. * The commune of Foundiougneis at the center of the impoverishedzone of Fatick. Agriculture in this zone has shrunk due to the increasing salinizationof soil, thereby having a detrimentalimpact on rural incomes. Nonetheless, the area is surviving due to the presence of fisheries and tourism, making it an interestingand different context in which to work. Guinaw Rail stands out from the other urban targeted areas as its choice was not based on its importance as a center for surroundingareas. It represents one of the poorest slums in the city of Dakar. Although it has received much attentionrecently, and has been the focus of studies, there has been little impact in terms of poverty reduction. The SDF can build on these initiatives. Guinaw Rail as a target area complements the other regions as it presents an opportunity to test the SDF mechanisms and interventiontools in the context of a large metropolis.

(iv) Logistics and expansion: The target areas can be grouped into five eco-geographiczones which is important for management of the pilot. The five test areas provide a good basis to test the project strategies and for gradual expansion based on the lessons learned.

The village ranking exercise described above is useful as working frameworkfor poverty alleviation initiatives within the country. However, the quantitative approachhas its limitations and is not a sufficient basis for project assessment. For instance, the survey would enable one to distinguish between villages that had pumped water supply over those which may only have a traditionalwell. However, it cannot provide a sense of the conditionof the pump, whether it is serving the entire community or marginalizingsome (such as through its location), whether the provisionof mechanized water is at all a priority, or whether the construction of a road linking the village to a nearby market is more important. Moreover,such a study is not designedto take into account the heterogeneitythat invariably exists in most communitieswith regard to developmentaccess - differencesbased on age, gender, and other social barriers such as caste. Such qualitative data is necessary for a more accurate picture of needs and initiatives at the sub-projectlevel. Keeping this in mind, a PPA will be conducted in the targeted areas. An important aim of the PPA is be to ensure the participationof the poorer villages and the marginalized sections of the communitythat are the main target groups. Thus the PPA will be conductedat the village level, for all villages withinthe targeted CRs which have an index of 200 or less. Through the PPA, a needs assessment and a local development plan outlining priority projects will be developedat the village level, which will feed into the integrated plan for the CR. Sub-projects financedby the SDF must be identified only by the specified targeted villages (i.e., having an index of 200 or less) although their implementationwill involve planning at the CR level to ensure that they have the maximum impact.

The project will further focus on targeting specificbeneficiary groups that are seen as having less access to resources, such as women, youth, castes, and economicallypoorer households. This will be

- 105- done through the PPA process described above, as well as through beneficiary-selectioncriteria and project priority criteria. These will be detailed in the Manual of Procedures.

The pilot phase of the project has thus adopted a strategy of integrated regional development,through a methodologyof participation and project ownership to ensure that the process of development does not further marginalize the poor, but becomes a vehicle for their development.

Next steps

The main approach and strategy to poverty targetingas describedabove has been developed in consultationwith representatives from the Ministry of Statistics and the inter-ministerialcommittee managing the Programme de Lutte contre la Pauvrete (PLP) within whose frameworkthe SDF is situated. Althoughthe main rationale informing the choice of target areas has been agreed upon, there remain a few tasks to complete the excercise. These are outlinedbelow.

(i) The base data available through the World Bank CommunityNutrition Project need to be examined to strengthen the basis of targeting the urban areas for the SDF.

(ii) The table showing major donor intervention(EU, LDF, and AfDB) in SDF areas needs to be completed. Donor interventionsmust be indicatedwith reference to the nature of intervention,area of intervention (where possible at level of CRs, or at the level of Department),period of intervention, and size of intervention.

(iii) The three major World Bank funded initiativesmentioned above (QEFA, Health SIP, and NRIP) need to be detailed in terms of the areas of interventionfor each phase of the projects. This is important to ensure coordinationbetween sub-projects funded by the SDF and these larger projects. Details will be outlined in the Manual of Procedures.

(iv) The nomadic nature of the inhabitants in Louga needs to be taken into considerationwith regard to infrastructureinitiatives in the region. A clear strategy needs to be highlightedin the manual of procedures.

- 106- RURAL COMMUNITIESTARGETED BY THE SDFP REGIONS CLASSIFED ACCORDING TO DEGREE OF POVERTY

NO. OF CR NO. OF VILLAGES POPULATION AVERAGE ACCESS ______INDEX REGIONS TARG. TOTAL TARG. TOTAL TARG. TOTAL TARG. TOTAL CR _ CR CR CR LOUGA 26 48 1419 2 532 207 981 394 751 92 194 KOLDA 23 43 1417 2 228 282 483 569 842 130 219 TAMBA 22 35 1 067 1444 230 007 363 957 132 196 KAOLACK 14 41 716 2 031 169 835 567 039 111 246 DIOURBEL 9 32 296 1184 81921 530481 172 313 ZIGUINCHOR 7 25 214 497 80 092 252 950 157 324 FATICK 6 35 327 945 122 982 502 943 125 314 THIES 6 31 512 1563 65 650 642 183 158 342 ST-LOUIS 2 28 120 919 29 140 595 903 150 375 DAKAR 0 2 0 47 0 57 187 - 500 TOTAL 115 320 6 088 13 390 1 270 091 4 477 236 126 271

- 107- CLASSIFICATIONOF "DEPARTEMENTS"ACCORDING TO DEGREE OF POVERTY

NO. OF NO. OF VILLAGES POPULATION AVERAGE ACCESS "COMMUNAUTES INDEX RURALES" REGIONS TARG. TOTAL TARG. TOTAL TARG. TOTAL TARG. TOTAL CR CR CR CR LINGUERE 14 17 637 771 111 138 131 781 79 109 KAFFRINE I1 21 559 1 003 125 045 271 672 100 193 KOLDA 10 13 722 948 118 383 159 439 100 138 TAMBACOUNDA 9 12 650 751 141213 177 227 139 179 KEDOUGOU 7 10 161 250 42 850 68 614 121 170 SEDHIOU 7 20 328 779 93 168 292 803 150 268 BAKEL 6 13 256 443 45 944 118 116 133 231 KEBEMER 6 16 347 898 35 236 126 501 83 225 VEL1NGARA 6 10 367 501 70 932 117 600 158 225 LOUGA 6 15 435 863 61 607 136469 133 257 TIVAOUANE 6 14 512 976 66 650 185 656 158 275 MBACKE 4 11 93 335 24 191 253 286 175 300 DIOURBEL 4 10 145 370 41155 90 601 163 270 FOUNDIOUGNE 4 9 233 356 82 027 147 877 113 222 ZIGUINCHOR 3 5 60 91 31 391 53 498 167 220 BIGNONA 3 16 139 327 44 277 171478 150 363 NIORO 3 11 157 547 44 790 156 432 150 250 GOSSAS 2 12 94 337 40 955 133 724 150 300 OUSSOUYE 1 4 15 79 4 424 27 794 150 300 MATAM 1 12 57 342 9 238 238 227 150 383 BAMBEY 1 11 58 479 16 575 186 594 200 364 DAGANA 1 6 63 334 19 902 150 676 150 325 RUFISQUE 0 2 0 47 0 57 187 - 500 PODOR 0 10 0 243 0 207 000 - 395 KAOLACK 0 9 0 481 0 138 935 - 367 MBOUR 0 8 0 189 0 220 489 - 381 THIES 0 9 0 398 0 236 038 - 411 FATICK 0 14 0 352 0 221 342 - 386 TOTAL 115 320 6 088 13 390 1 270 091 4 477 236 126 271

Terms of Referencefor ParticipatoryPoverty Assessment (PPA) Team

Backgroundof the Social DevelopmentFund Proiect

The Government of Senegal has developed a framework for poverty reduction in the form of the PLP. The Social Development Fund (SDF) Program was conceived within this framework to ensure that its efforts to reduce poverty in Senegal are part of the country's long-term poverty strategy. The SDF Program is, therefore, based on a combination of operational responses and practical instruments aimed at empowering the poor in order to give them increased access to resources and the ability to maintainresources through their own organizationsin a sustainablemanner. The four main component of the SDF project are:

Component 1: Basic Social Services and Community Infrastructure: The objective of this component is to

- 108- improve the access of communities in the targeted poorest urban areas and rural villages to basic social services and infrastructure. More specifically,this component will target vulnerable groups within these areas and villages. A parallel objective is to empower communitiesby exposing them to managing the implementationof sub-projects.

Component 2: Micro-credit: This component aims at supportingexisting micro-finance institutionsin expanding their target market by establishing a financial product that reaches a greater number of poor groups and individuals.

Component3: This component would enhance the capacity of the CBOs and other community-based organizationsof the poor and vulnerable to manage their own local development and initiativesso that they become a key catalyst of sustainablegrassroots development. To do this, the SDF would make direct grants (100%) to CBOs and organized groups of vulnerablepopulations in targeted areas in two major domains: (i) institutionaldevelopment, and (ii) capacity building of the human resource base.

Component4: Poverty ManagementSystems Development: This component of the SDF Project would aim at improving the poverty management capacity of Senegal, both in reference to this project and with regard to poverty efforts at large.

Rationale for the PPA The project aims to target the poorest communities in Senegal,both urban and rural, who do not have adequate access to developmentresources: material, financial, and human. A number of villages for the pilot phase of the project have been selected on the basis of a country-widepoverty mapping exercise based on criteria such as geographical isolation, access to basic social services, degree of organized activity, and population size. A PPA is therefore necessary to have a deeper, contextual understanding of the qualitative aspects of poverty at the communitylevel.

All projects initiated and proposedby communities will be subject to a selection criteria to ensure that the process encourages and enables the more vulnerable within poor villages to participate more meaningfully in the developmentprocess. However,other segments of the communitywill not be excluded.The ultimate aim is to be inclusive rather than exclusive with regard to gender, age, caste, and other social barriers. Finally, the PPA will develop an action plan which represents the needs of all the sub-groups in the village. Any project funded through the SDF will have to fit into such a plan.

Objectivesof the PPA

To empower local communitiesto conduct needs assessmentsthrough a training of trainers at the communitylevel (CRs and communes); To design local development plans that reflect the concerns and priorities of vulnerable sub-groups in targeted villages, CRs, and communes; To establish project selection criteria (for urban and rural projects) based on priority needs of vulnerable groups as reflected in the PPAs; To serve as a qualitative complementto the quantitativepoverty baseline data, to be used for project monitoring and evaluation.

Methodology

Each targeted CR and conmmunewill designate three representatives(from target villages only), of which one will be a woman and one a youth to be trained in PPA principles and techniques. This training will last

- 109 - about 2-3 days and will be conducted in groups of not more than 15 people. This training will be hands-on and will include the actual conduct of PPAs in chosen targeted villages.

The trained representativeswill then facilitate PPAs in all the targeted villages within their CR or commune and design a prioritiseddevelopment plan at the village level or 'quartier' level. These plans will serve as the basis of a larger plan at the CR or commune level, and as validationfor village level sub-projects. The formulation of this larger will also be based on the participatoryapproach and must include participation of the individualstrained in the PPA technique.

Consultant's Tasks

1. To conduct the training of trainers in PPA as detailed above.

2. To establish project selection criteria (for urban and rural projects) based on priority needs of vulnerable groups as reflected in the PPAs.

3. To synthesize the findings of the PPA so it can serve as a qualitative complementto the quantitative poverty baselinedata, to be used for project monitoring and evaluation.

4. To submit a report summarizingthe key findings of each training exercise.

5. This assignmentrequires substantialexperience both in the technique of training of trainers and PPA.

- 110 - Additional Annex No.: 14

InstitutionalArrangements - Choice of Legal Status of the SFMU SENEGAL: Social DevelopmentFund Program During the project appraisal mission, the legal structureof the Social Fund managementwas discussedin depth. An appropriatestructure was proposed by the partners, including the Ministry of Finance, during a working session chairedby the Coordinatorof the Poverty AlleviationProgram and attendedby the representatives from the following departments and organizations:Ministry of Economy and Finance: DDI, DPS and Direction de la Coop&ation Economique et Financiere; Ministry of Planning:Direction du Plan and Conseil Technique; Ministry of Family Affairs and National Solidarity;Ministry of Youth; Poverty AlleviationProgram; UNDP and World Bank.

1. ImplementationArrangements

1.2 The principles governing the SDF managementorganization are as follows: (a) efficiency;(b) equity; (c) transparency;(d) accountability;(e) economy; (f) sustainability;and (g) good governance.

1.3 Efficiency: The main concern here is the rapidity in the conclusionof cofinancing agreementsand disbursementof funds to the beneficiaries of these agreements(CBOs, PFIs). The SDF resource management structure should be able to: (i) rapidly mobilize resources from financial partners, including IDA; and (ii) quickly make these resources available to the eligiblebeneficiaries. With regard to grants for CBO micro-projects,for example, the aim is to finance a large number of very small projects, throughout the country (starting with the targeted regions). The speed with which funds are disbursed to CBOs is a prerequisite for the success of this component. In this regard, the managementarrangements for the Special Account and the procurement procedures of the sub-projectswill be crucial factors of success or failure.

1.4 Equity: This pertains to the management structure's objectivityin allocating funds among eligible beneficiaries. There are two aspects involved: (a) equal information to applicants that would enable all groups to submit proposals with full knowledge of the eligibility criteria for receiving Fund resources; (b) equal treatment of the beneficiaries as regards their entitlementsunder the agreements. The structure should conformsolely to the technical rules of resource managementas described in the Manual of Procedures and shouldnot be subject to any outside influence.

1.5 Transparency. This is an essential criterion because it ensures that the partners will all have the same information on decisions taken at every step of the process as well as the reasons for these decisions. This criterion is based on a relationship of trust between partners, a condition of success for such a program. The conditions needed to satisfy this criteria are: (a) la presence of observerswho have the trust of the beneficiaries at every step of decision-makingregarding the allocation of resources, particularlyduring project appraisal sessions of the sub-projectspresented by potential beneficiaries; (b) the publication and distribution of information on the resulting allocation of resources (selected sub-projectsin relation to those presented and the reasons of rejection of those not chosen).

1.6 Accountability. This pertains to the responsibilityof the management unit both to render sound financial and accountingservices and to attain the set goals as regards the number of poor who have been touched by the project and have consequentlyimproved their living conditions. The managementunit

- 111 - should be both accountable upward (to Govemment and financialpartners including IDA) and accountable downward (to communities,CBO beneficiaries, and local governments)for these two areas of responsibility

1.7 Sustainability. The management unit put in place at the start of the project should be structured in such a way as to be sustainable beyond the project, subject to the availability of funds to be managed. For this, a managementunit, operating on the basis of a Govemmentcontract, receiving fees for management services which could be determinedin terms of a percentage of the funds managed could meet the criteria.

1.8 Governance. This refers to a judicious distributionof roles between the Govemment and the executing institutions. Senegal inherited a heavily centralizedstructure whereby the Govemment had to ensure both its essential functions of policy-making,promotion, coordination and financing of activities, and monitoring and evaluation of results, as well as serve as an executing agent. Such a dual role has proven to be incompatibleand ineffective. Over the last few years, the State has distanced itself from the role of executing agent and has adopted a 'faire-faire " policy, which has shown good results wherever it has been applied (Health, Literacy, etc). According to this policy, the State entrusts the executing functions it held in the past to private operators. These operators are often civil-societygenerated NGOs (literacy providers) or State-initiatedagents (AGETIP). The development of the struggle against poverty should be viewed within this perspectiveof improved Govemance.

2. Available legal structures

2.1 The partners reviewed the pros and cons of the various legal structures available in Senegal. They can be divided into two groups, public and private. Those within the public domain include the civil service and autonomouspublic domain departments; private agencies include associations (such as AGETIP) and foundations (such as the Private Sector Foundation). A summary of the pros and cons as discussed by the partners follows.

2.2 Public Service Option. An ad hoc Project Unit could be established like the Project Coordinating Units of many projects financed by extemal sources. This option was discarded by the partners because, of all possible solutions, this one was considered the most disadvantageous.

(a) Advantages: This option, from a legal point of view, has the advantage of quickly becoming operational. It does not require the establishmentof a new entity. All it needs to become functional is the recruitment of staff by the Govemment.

(b) Disadvantages: (i) The efficiency of such a unit is limitedbecause the Special Account cannot be entrusted to the unit; it must be managed by the DDI. Furthermore, the procurement procedures must follow those of the general Senegalese procurementpractices. Both these systems are cumbersomeand slow. (ii) Equity of partnership is not maintained in this system because the management of the unit falls directly under the authority of one of the partners. (iii) Experiencehas shown that accountability is less rigorous when the unit is managed by the Public Administrationthan by an autonomous structure under contract to the Administration. (iv) Cost-effectiveness is not guaranteed because operating costs are not limited to the caps on costs dictated by the Credit. (v) sustainability of the system is weak as the management structurehas no obligation to raise funds; (vi) The evolution towards better govemance (by leavingpolicymaking to the Govenmmentand executing functions to contracted agencies),would be impeded.

2.3. Autonomous State Agency. This option was not taken into consideration by the Ministry of Finance

- 112 - because Senegal has no experience in autonomouspublic financial establishmentsentrusted with financing private operators.

(a) Advantages. There is no concept of such a legal entity within the Senegalese legal system, so there is no means of judging its advantages .

(b) Disadvantages. Again, since there is no concept of such an entity, the entire legal and institutional frameworkwould have to be built from scratch, and at present, seems to be beyond the reach of the project.

2.4 Foundation Option. This option involves consideringthe possibility of utilizing an existing legal frameworkset up at the time of the establishmentof the Private Sector Foundation(financed by IDA). Although this option appeared to respond to the project's objectives, it was not selected because it did not suit a sectionof the clientele targeted by the project.

(a) Advantages. The aims of the Foundation(allocation of goods, rights and other resources to general good works for non profit) is in line with the objective of the project: to ensure the access of poor populations to basic or micro-financed infrastructures. As a product of the sector, the Foundation helps develop and organize that sector. Like AGETIP, a foundation can easily avail itself of capacities to manage small contracts for community sub-projectswith due diligence. It could be a durable structure whose existence would not be strictly dependenton the project. Nonetheless, its duration is linked to the availabilityof resources to reach its objectives: if the objectives are achieved or if the resources are depleted,the Foundationwill be dissolved. Finally, such a structure can be used to channel funds from other sources to poor communities.

(b) Disadvantages. The Foundation is a product of the sector it serves. The sector must be sufficiently developedto use such a tool, which is not the case for most of the poorest communitiesin Senegal. On the other hand, such an option could be envisaged for the group of PFIs. Since the proposed structure is meant to ensure the managementof funds for 2 componentsof the project (support to communities and support for micro-financing),it is capable of filling the requirementsfor only half the activities. Besides, although there has been one initial experience of Foundationwork in Senegal,the Govenmment'sexperience in the matter is very limited and the creation of a second Foundationwould likely entail a lengthy set-up a period, incompatiblewith the scheduled effectivenessof the IDA Credit.

2.5 Non-ProfitAssociation Option :. This scenario examines the feasibilityof using a non-profit association legal structure, similar to the one used for the AGETIP, for the establishmentof a specialized Agency. The Govemnmentof Senegal has already established a number of these institutions - for example, the AGETIP and AGM - with a view to delegate management of public resources to an administrative body using private sector systems and procedures. In these cases, the General Assembly of the Association,which is the goveming body and to which managementunits are accountable,comprises representativesof the State and the private sector who are partners in the implementationof the Association's objectives. This solution was selected by all partners during the Appraisal mission since it met all required conditions. The choice between an existing Association or the establishmentof a new Association is discussed in paras. 2.7 and 2.8 below.

(a) Advantages. This option has been widely tested by Government through AGETIP (since 1993) and ADM (1995) in all sectors, including the social sector (the communitynutrition program and women adult literacy project). The Ministry of Finance agrees to delegate to the Associationthe management of IDA's Special Account,provided that acceptable financial capacity is in place (an IDA requirement as well), since such a body would have the status of an autonomous legal entity. Past experience has demonstratedthat

- 113 - efficiency, equity, transparency, accountability, sustainabilityand good govemance criteria are better satisfied through this type of structure.

(b) Disadvantages. With the exception describedin para. 2.7 below, no disadvantageshave been found with this proposed structure.

2.6 IntermediateOption: from the Administrationto the Association. Partners have discussed an intermediate solutionunder which the Fund could be managed during the first phase of the APL by a Project Unit (option 2.2 discussed above) to migrate into an Associationwhich would be established during this initial phase. This option aimed at eliminatingthe problem of a long gestation before Credit Effectiveness. It was not selected since the risk of having the Fund managementremain indefinitelyunder option 2.2 <> is too high.

(a) Advantages. Start-up within an established legal structure that is immediately available, thus minimizingany risks of delay in declaring the IDA Credit effective.

(b) Disadavantages. During the transition period, the Special Account would be managed by DDI (involving cumbersomedisbursement procedures) and procurementmethods would be those generally applied by the administration(with slow procedures). Since these arrangementsare not desirable in the medium- and long-term,the first phase of the APL, which is normally aimed at testing innovationsbefore generalization,would not be able to play its role and be used for testing, on a reduced scale, the desired institutional frameworkbefore its generalization.

2.7 Existing Association -AGETIP Option :. The opportunity to use the existing Association - AGETIP - was discussed and rejected. The main reason is that instead of using AGETIP for this purpose, the Government wishes to use its positive experiencewith AGETIP to replicate similar arrangements, whenever necessary, in order to achieve equivalent results through AGETIP-like structures . Furthermore, the Govemment appeared to be concerned about perpetuatinga kind of AGETIPmonopoly.

(a) Advantages. The use of an existing structure offers many advantages including : (i) its immediate use; (ii) vast experiencenot only in constructionbut also in social sectors (nutrition, literacy) which enables it to develop new capabilitieson a sound basis; (iii) efficiency since a large part of its fixed costs would be shared between all projects executedby the Agency; and (iv) a solid and diversifiedexperience with IDA financing.

(b) Disadvantages. AGETIP was established by governmentto illustrate the following case: outsourcing the services of contract managementto a specialized agency operating under commercial legal provisions and staffed with highly qualifiedprofessionals recruited in the labor market is more efficient than the direct managementof these contracts by the government. If the Government uses AGETIP, it would lose the benefit of replicatinga good managementmodel.

2.8 Solution: Establishmentof a new non-profitassociation. All partners considered that the best option was to establish a new fund management agency with the legal status of a non-profit association, based on the AGETIP model, for the followingreasons:

(a) Advantages. A new structure would be designed to serve Social Fund exclusivelyand will have the built-in advantages of efficiency, equity, transparency, accountability,sustainablility and proper governance. It will be able to benefit from the experienceof all the other agencies through specific agreementsaimed at transferringto the team of the new fund managementagency, the skills and knowledge

-114- of the teams of the current agencies (AGETIP, ADM). The Ministry of Finance will delegate to it, the managementof the Special Account.The Government will grant it special privileges,governed by the Operation Manual, as regards procurement for micro-projectsand sub-projects with the CBOs and PFIs.

Disadvantages. The establishmentof a new entity is obviouslytime-consuming. However, given the Government's experience,this disadvantagewas overcome.

3. Practical Modalitiesfor establishingthe Fund managementstructure

3.1 Establishinga body with the status of a non-profit association is simple. It would suffice to deposit the statutes with the appropriate authorities at the Ministry of Interior.

3.2 FoundingMembers of the Association. During appraisal, it was suggestedthat the founding members of the association- who will constitute the initial General Assembly - could consist of the members of the Secretariat Technique de Coordination et de Suivi - also called CoordinationNationale de la Lutte Contre la Pauvrete (CNLP). To ensure that the efficiency criteria are observed, the General Assembly should be composed of representativesof the main bodies involved in poverty alleviationin the private and public sectors and especially the coordinators of the major Government programs contributing to poverty reduction (PDIS, Nutrition, Literacy, PDEF, etc. projects). To take into account the equity criterion, the compositionof the General Assembly should reflect the range of national partners involved in poverty (representativesof Government,NGOs, CBOs and PFIs, among others).

3.3 Statutes. During appraisal, it was decided that the statutes could be drafted quickly by the project's preparatory team which should form the nucleus of the General Assembly. The aims of the Association could simply reflect the objectives of the Social Fund Program under preparation (see Log Frame). The practical modalities for the operation of the Association, which should be included in the Bylaws, could be based on the following paragraphs and refer to the Operation Manual under preparation.

3.4 Executive Organ of the Association. A small number of executiveofficers would be responsiblefor the operation of the Association (convening of General Assembly meetings, preparationof progress reports, recruitment of the Director General of the Social Fund and other key personnel).

3.5 Management Organs. The managementorgan is the SFMU, composed of high-level experts recruited on a competitive basis from the private sector. The SFMU will be under a Director General (a financial expert) who will be responsiblefor the expendituresincurred under the Fund. The SFMU will have a central office in Dakar (the National Social Fund Unit) and an office in each region: the RFMU. At the national and regional levels, the managementunits will consist of two sub-units,one for managementof grants to the CBOs and the other for management of grants to PFIs and IGAs. The Director General will be recruited first according to the Directives for the recruitment of individual consultants. The remaining key staff will be recruited accordingto the same procedures with the General Director participatingin the meetings of the technical evaluation committee.

3.6 Special Account. The IDA-financedspecial accountwill be managed by the Director General according to financial and accountingprocedures in the Operation Manual and approved by the Ministry of Finance and IDA.

- 115 - Additional Annex No.: 15

FinancialManagement Capacity Assessment/Financial Management Arrangements

Senegal - Social DevelopmentFund Program

FinancialManagement Capacity Assessment 1. An assessment of the financial managementcapacity was done during project appraisal for the Social Fund ManagementUnit (SFMU) which will be responsiblefor the Project financial management. The objective of the assessmentwas to review compliance with the Bank's financial management requirements (OP/BP 10.02) and to assess the SFMU eligibility for Project Management Report (PMR) based disbursementmethod.

2. The project will be implementedby the SFMU which will be established as an autonomous association. It will function as a privately managed institution outside the regular Government structure. The SFMU will be based in Dakar with branches in the targeted regions. Activities will be executedby CBOs with assistance of NGOs, the private sector, and local public structures. The Directorate of Statistic (DS) will be responsiblefor the implementationof sub-component1 of component 4. The SFMU will have overall responsibility for the program financial management. One special account will be opened for the whole program.It will be managed by the SFMU which will make all necessary disbursementsfor all components.

3. Given these parameters, the financial managementcapacity assessment covers mainly the SFMU. However, besides the SFMU, there are other financial managementaspects, namely those related to the micro-credit component and the grant activities,that need to be considered in this assessment due to their importance to the success of the project. These aspects will be covered as well in the financialmanagement assessment. Yet, since the SFMU is a new entity to be created, the assessment of its financial management capacity at the current stage of the project cycle consists rather in identifyingthe needs to be fulfilled and defining an action plan to show how the implementingentity can develop appropriatefinancial management capacity in order to ensure that an adequate financial management satisfactoryto IDA will be in place prior to project effectivenessat the latest. FinancialManagement Arrangements The Social Fund Unit 4. Accountingsystem: The legal statute of an associationrequires from the SFMU to have its own accounting system that must adhere to the West African AccountingSystem (Systeme Comptable Ouest Africain or SYSCOA). As the project executing agency, the SFMU will also have to keep separateaccounts for the project activities. The accounting system of the SFMU as an association must allow for the overall financial situation of the entity in order to determine its financial viability and hence its sustainability,as it is expectedthat the SFMU should be sustainable beyond project completion.The assessment of SFMU's accounting system must therefore be done with regard to these aspects.

5. The SFMU will have to maintain both the project's accounts and its own set of accounts as an autonomous non-profit yet revenue-earningentity. This second aspect is very important as it will help in the assessment of the SFMU's performance regarding its objective to mobilize an increasing share of financing for its operating expenses,to achieve self-sufficiencywithin the project implementationperiod. Given this

- 116 - objective, the financial viability of the SFMU is vital to the success of the project. To meet these requirements,the SFMU will be equipped with a computerizedfinancial management system appropriateto the scale and nature of the project and capable of recordingand reporting the project's operationsby components, sub-components,activities, expenditurescategories, regardless origin of funds, as well as its own operations. The computerized financial managementsystem will be multi-currencyand include the following modules which should be integrated:general accounting,cost accounting,budgeting, contract management, fixed assets register, preparation of withdrawal applications, and generatingreports. It will also be able to cope with a decentralizedaccounting system to allow the branches to keep their accounts locally and to consolidateall the accounts at the national level.

6. Detailed terms of reference for the selectionof the accounting software were prepared and submitted to IDA during negotiation.This will allow to take into account the design of the accounting system as requested in the procedures manual below. The software should be installed and function satisfactorily prior to effectiveness.

7. Manual of administrativeaccounting and financial procedures : A consultant was recruited prior to project appraisal to develop a manual of administrative,accounting, and financial procedures.The draft manual was made available during the appraisal mission. It includes the following parts: i) itroduction; ii) Organizationof the project: a) Objectives and components,b) Administrativeorganization, c) Accounting organization;iii) Description of the procedures: a) cash management; b) Procurement;c) Personnel; and d) other procedures. The draft manual was reviewed during the appraisal mission and the conclusions of the review are annexed to this report. Basically, a lot of improvementwas needed as the manual did not reflect the specific characteristics of the Social Fund Program (nature of its activities, and its decentralized organization). It described standard procedures that are applicableto any institution, whereas some key factors should be taken into account as described in the annex.

8. Given the weaknessesidentified, the manual was upgraded taking into accountthe comments received from the appraisal mission. A revised version satisfactoryto the Bank was submitted during negotiations.

9. Financial reportin: Two sets of financial statements will be required: the project's separate financial statementsand the SFMU's (as an autonomousentity) financial statements. The project's separate financial statementswill comprise:i) a statementof Source and Application of Funds for the project during the current financial year, and cumulatively since the start of the project, and ii) a balance sheet. These two financial statementswill be prepared annually. In addition, the SFMU will agree during negotiations to submit a quarterly report using the PMR models including financial statements, procurement/contracts schedule, and output monitoring, one month after the end of each quarter.

10. Due to its legal status as an association, the SFMU is required for its own operationto follow the West African Accounting System commonly called SYSCOA,under which a set of financial statements must be prepared annually. They include a balance sheet, an income statement, and a cash-flow statement which will provide the necessary information on the financial situationof the SFMU. The SFMU will be required to submit these annual financial statementsto the Bank.

11. AuditingThe financial statements of the project will be audited for each fiscal year by an independent auditor acceptable to IDA, in accordancewith standards on auditing also acceptableto IDA. Audit reports of reasonable scope and detail will be submittedto IDA within six months of the end of the audited period. The auditor will provide an opinion on: the project financial statements (statement of Source and Application of Funds and Balance sheet)

- 117 - the statementof expenditures(SOE) the special account (SA)

12. In addition to the audit of the project's financial statementsmentioned above, the SFMU proper financial statementswill also be audited for each fiscal year by an independent auditor acceptable to IDA in accordance with standards on auditingalso acceptable to IDA. Audit reports of reasonable scope and detail will be submittedto IDA within six months of the end of the audited period.

13. The auditor will also issue a separate managementreport on Internal Controls and operational procedures outlining any recommendationsfor improving intemnalaccounting controls and operational procedures identified as a result of the financial statement audit.

14. The audit report will be submitted to IDA within six months after the end of each financial year. The selectionan auditor acceptable to IDA for the project and the Leasing cooperative accordingto terms of reference satisfactoryto IDA is a condition of effectiveness. Draft request for proposals for the selection of the project auditor including terms of reference covering aspects described above was prepared and submitted during negotiations. Selection of the auditor based on these terms of reference will be a conditionfor credit effectiveness.

15. Accountingstaffing: A Finance Director will be hired to take the overall responsibilityof the project's financial management. He will be assisted with a right mix of staff including a qualified Accountant at the Social Fund Unit and a Administrativeand Finance Assistant in each of the regional branches. The recruitment of this core team is a of effectiveness.

Micro-finance component 16. Financial managementsystem: As indicated above, component 2 includes provision of financial supportto economicallyand socially vulnerableindividuals and groups under the responsibilityof PFIs which include formal organizations,or informal ones such as NGOs and CBOs working with community-basedSavings and Credit Association (SCAs). Given the faire-faire approach of the project, the SFMU will not be directly involved in the financialmanagement of the micro-financeactivities, except for disbursing to the PFIs and SCAs. It is rather expected that the PFIs will have the responsibility to handle administrative and financial managementmatters of the micro-finance activities. The PFIs will not be selected before the project is effective. Therefore,the emphasis should be put on the eligibility criteria for the selectionof the PFIs participating to the project. Besides purely technical criteria, these PFIs' financial situation at the time of selectionand during the life of the project should also be considered through their audited annual financial statements. Submission of such audit reports should be included in the financial covenant of the contract between the SFMU and the PFIs. In addition, the PFIs will be required to submit quarterly the financial situation of the micro-credit activities in accordance with format and a content acceptableto the Bank. These quarterly reports should allow an evaluation of progress made on and effectivenessof the micro-creditactivities. To ensure that the selected PFIs will be able to provide the SFMU with the information required, the appropriatenessand effectivenessof their management information system will be included in the eligibility criteria. Approval by the Bank of the request for proposals for the selection of the PFIs will ensure that the above-mentionedaspects are taken into account.

17. Audit: As indicated above, the participatingPFIs will be required to submit their annual audited financial statementsto the SFMU. This requirement will help determine whether the financial situation of these PFIs is viable and project resources are safeguarded. In addition, the audit of the project will include specific controls to ensure that the micro-credit activities are managed properly. This audit will be done on

- 118 - a sample basis annually to determine whether the micro-credit activities are managed properly by the PFIs. Preparation of the draft request for proposals for the selection of the project auditor including terms of reference covering aspects describedabove was a condition for negotiations. Selection of the auditor based on these terms of reference will be a conditionfor credit effectiveness.

Financial management at the community level 18. Financial managementsystem: One of the most important aspects of the project is to channel funds directly to the communities through either the Social DevelopmentCredit (SDC) or the Social DevelopmentGrant (SDG). The SFMU will not be directly involved in the financial managementof the sub-projectsfinanced by the SDG or the income-generatingactivities financed by the SDC. This does not mean that the financial management of the sub-projectsor the income-generatingactivities should be overlooked.On the contrary, an appropriatefinancial management system at the communitylevel will: i) help ensure that funds received are used for the purpose intended,and ii) contribute to the financial viability and the sustainability of income-generatingactivities. For this purpose, the project manual of administrativeand accountingprocedures describes what is required from the grant or credit recipients in terms of financialmanagement. To fulfill these requirements,training will be provided when necessary to strengthen the recipients' financial managementcapacity so that they can manage the funds received properly and report on their use.

19. Audit: Grant or credit recipients at the community level will be required to allow project staff and designatedauditors to review their accounts as well as the implementationof the activities financed. Project staff will review the eligibility and supportingdocuments of expenses made by the beneficiaries prior to release of any new funds to their bank accounts. As part of the project's audit, the auditors will be requestedto review on a samplebasis expenses made by grant recipients to ensure that the funds are used for the purpose intended. Preparation of the draft request for proposals for the selection of the project auditor including terrns of reference covering aspects described above was a condition for negotiations. Selectionof the auditor based on these terms of reference will be a conditionfor credit effectiveness.

Use of the PMR-baseddisbursement method 20. Based on the description above, all the tools necessary to prepare quarterly PMRs are expected to be in place accordingthe proposed action plan laid out in the last paragraph of this armex.These tools consist of the computerizedfinancial managementsystem and the manual of administrative and accounting procedures.The computerized financialmanagement system will be customizedto the specificneeds of the project to allow an automatic generation of the quarterly PMR according to the models presented in the LACI ImplementationHandbook and Financial Management Manual (draft version). However, given that the project implementingagency, the SFMU, is a new entity and despite all measures proposed above to develop appropriatefinancial management capacity,it is recommended to begin with traditional disbursement arrangementsthrough a Special Account and SOEs. It is expected that after a period of 18 months of project implementation, the SFMU's financialmanagement capacitieswill be strengthened enough to prepare accurate PMRs that could be used as a basis of disbursement as required under Financial ManagementInitiative (FMI). A new assessmentof the financialmanagement system will be done after 18 months starting from the date of effectiveness for compatibility with the FMI and to propose the use of the PMR-based disbursementmethod or any strengtheningaction plan necessary to meet the FMI requirements.In the interim period, the SFMU will prepare and submit to the Bank quarterly PMRs on a test basis.

-119- COMPLIANCEWITH OP/BPIO.02 REQUIREMENTS FOR AN ACTION PLAN

The establishmentof the Program financial managementsystem (Administrative,Accounting and Financial Manual of Procedures, recruitment of key accounting staff, initial training, system test, etc) is a condition of credit effectiveness. It consists of two phases: the interim phase consisting of activities precedent to effectivenessand ending with Program actual effectiveness,assumed to be March 2001, and the final phase (18 month period) culminatingin the adoption of PMR-based disbursements (Please note that the second phase is just indicative).The action plan below divides the actionsto be taken during each of the two phases, and the dates by which that they are due to be completed.

- 120 - Tasks Responsibility CompletionDate

INTERIM PHASE

1. Selection, purchase and installation of the financial management software Approval of terms of reference SFMA and IDA 31 October 2000 Transmission of draft requests for proposals, SFMA 10 November 2000 includingterms of reference and shortlist, for non-objection IDA 17 November 2000 Approval of draft requests for proposals SFMA 30 November 2000 Transmissionof requests of proposals to short-listedfirms 29 December 2000 Reception of technical and financialproposals SFMA 10 January 2001 Opening and evaluation of technical proposals IDA 20 January 2001 Approval of technical proposals evaluation report SFMA 25 January 2001 - Opening and evaluation of financial proposals IDA 31 January 2001 Approval of financial proposals evaluation report SFMA Signatureof contract and beginning of software Consultant 15 February 2001 installation~ ~ ~ ~ ~ ~ ~ ~ onulan installation Consultant and IDA Before credit Softwvareinstalled and evaluatedefctvns effectiveness

2. Recruitment of accountingstaff ( finance director. CSFU accountant, RFMU administrationand finance assistants Preparation of drafts terms of reference SFMA 15 November 2000 Approval of terms of reference IDA 22 November 2000 Selection of accountingstaff and IDA approval SFMA and IDA Before credit effectiveness

3. Manual of Administrative,Financial and Accounting Procedures Selection of the Consultant Done Finalization of draft manual Done Comments on draft manual Government and IDA Done Final version of the manual IDA Done

- 121 - 4. Selection of the project auditor Transmission of draft requests for proposals, SFMA Done including terms of reference and shortlist, for non-objection IDA 30 November 2000 Approval of draft requests for proposals SFMA 15 December 2000 Transmission of requests of proposals to short-listedfirms SFMA 20 January 2001 Reception of technical and financial proposals SFMA 30 January 2001 Opening and evaluation of technical proposals IDA 10 February 2001 Approval of technical proposals evaluation report SFMA Opening and evaluation of financial proposals IDA 20 February 2001 Approval of financial proposals evaluation report SFMA 27 February 2001 Signature of Contract Effectiveness conditions

FINAL PHASE

5. Application of PMR-based disbursement method Preparation of Project ManagementReports using Social Fund One month after the end the accrual model reporting format ManagementUnit of each quarter after - Re-assessmentof financial managementcapacity to credit effectiveness. determine whether it allows the use of PMR-based IDA 18 months after credit disbursementmethod or, if necessary, define additional effectiveness strengtheningmeasures

- 122 - Additional Annex No.: 16

Technical Note on the Micro-financecomponent Improvingaccess to Microfinancein Communitiesbeyond the current reach of existing MFIs

Senegal: Social DevelopmentFund Program

Scope. The micro-financecomponent will support accessto micro-finance services in regions and departments targetedunder component I on the basis of defined poverty criteria, in order to develop synergies between the components 1 and 2. Activities will complement micro-financeprograms that other donors are undertakingin other regions. The EuropeanUnion (EU) is currently operating in the regions of St-Louis and Dakar. UNDP is providing support to MFIs in the Departments of Kedougou, Bambey, and Dakar. The Canadian InternationalDevelopment Agency (CIDA) is focusing its interventionin the Ziguinchor region and the Department of Kolda, while USAID has a micro-finance project that will target institutions in the regions of Tambacounda,Kolda, Ziguinchor, Thies, and Dakar (Pikine and Rufisque). In addition, the African DevelopmentBank (AfDB) is planning to support large MFIs such as Credit Mutuel, PAMECAS, and ACEP in the regions of Thies, Diourbel, and Tambacounda.

Strategy and implementation. A defining feature of the poorest and more vulnerable sections of Senegalese society is the lack of access to financial services. Despite the large number of institutionsand programs in micro-finance(175 savings and credit cooperatives,214 SCAs, and 6 non-cooperative organizationsregistered with the Ministry of Finance as of June 2000) the poorest communitiesstill lack access to micro-finance services.The reasons include geographic isolation, lack of roads and other basic infrastructure,as well as difficultiesin meeting PFIs' membershiprequirements. There are also a number of constraints faced by PFIs in their attempts to reach the poorest communities, including (a) inadequacyof existing financialproducts and services for the poorest; (b) low managerial capacity of a large number of PFIs, particularly SCAs; (c) low skills of PFI staff; and (d) weak internal controls. Most PFIs in Senegal are member-basedmutualist organizationsthat mobilize savings and do not lack funds to on-lend to their clients. Instead they have major weaknesses in their retailing and managerial capacities to expand outreach on a sustainablebasis. Weaknesseshave been identifiedin the areas of governance,internal controls, managing growth, financial and information management, as well as quality of staff, all of which call for capacity- building assistance.

Under the micro-financecomponent, the project will: 1. Facilitate access to micro-finance servicesby vulnerable groups and individuals through linkages with established PFIs; 2. Facilitate the creation of grassroots SCAs; and 3. Finance income-generatingactivities of the poorest CBOs.

The adopted strategy will depend on the state of the micro-financeindustry in the targeted regions.

1. Linkages with EstablishedPFIs

- 123 - In communitieswhere PFIs are present and active, sufficientlynear to targeted poor communities,and willing to participate in the project, the Social DevelopmentCredit (SDC) will: (i) provide support to PFIs to extend or adapt their financial products to individuals or groups in poor communities. The SDC will supportrelated micro-financeactivities through a matching grant mechanism that will cover the costs of outreach and providing information to targeted groups and communitiesby PFIs, includingtraining in establishing and managing solidarity groups in association with an PFI. Partner PFIs will use their own funds to provide loans to individuals and groups that would have received appropriatetraining, such as grassroots Management Training (GMT) to become viable micro-financeclients; (ii) provide support to PFIs for other capacity-buildingactivities to help partner PFIs become stronger institutions and achieve long-term sustainability and continue to provide financial services to the poorest communities. Capacity building support will be provided on a matching grant basis (10% of the cost to be bome by the PFI) to licensed PFIs. Activities to be financed on a demand-drivenand performance-orientedbasis will include but not be limited to acquisition of a management information system (MIS), accounting software, and office expansion and rehabilitation.

ImplementationGuidelines

The Micro-finance Departmentof the Social Fund Unit will be responsible for implementationof the micro-financecomponent including the selection of suitablePFIs as partners in the project. The selection process will include: (i) Information campaign; (ii) issuance of a request for expression of interest; (iii) assessment of the PFIs having expressed interest to build a short list; (iv) request for proposing a sub-project to a short list of PFIs; (v) evaluation of the sub-projectby a specialized expert and adjustment of the proposal; (vi) Contractual/Partnershipagreement between the PFI and the SDF unit.

Partnership Agreement: The PartnershipAgreement between the SDC and the PFI defines the rules of the game for their future relationship. It describes fully the rights and responsibilitiesof the parties involved, the reporting requirements,and the institutional targets against which the PFI will be monitored. The institutional targets in the PartnershipAgreement are not synonymous with the financial projections contained in the business plan, although they may be related. Institutionaltargets are concrete minimum targets that the management of the PFI is committedto meet, giving the PFI some latitude should something go wrong. The indicators that are monitored arise from the results of the institutional appraisal and the goals set out in the business plan. Target indicators should relate to client outreach, portfolio quality, growth, and cost recovery, and should not exceed five in total.

The PartnershipAgreement also stipulatesthe scope and the nature of the institution building-supportthe PFI will receive on a grant-matchingbasis. The support will depend on the specific needs of the institution and reflect the results of the institutional appraisal and the goals set out in the business plan. The SDC's institution-buildingsupport will consist of a tailor-made package of services that responds to the self-diagnosedneeds expressedby the PFI. Service might include:

Linkages with existing local providers such as CAP-AF for training services Provide PFIs with the opportunityto learn from each other Ensure deliveryof short, practical, and relevant courses in response to the expressedneeds and preferences of the PFIs. Relevant courses include accountingfor micro-finance,business planning and financial analysis,delinquency management, internal controls,human resource management. interest rate calculation;improving the efficiency of paper-based managementinformation systems (MIS) and preparing and executing the transformationinto a computer-basedMIS.

- 124 - Selectionof Partner PFIs

The selectionof suitable PFIs will take into consideration(in additionto specific eligibilitycriteria below): (i) the PFI's current vision, businessplan with monitorablebenchmarks, objectives;and strategy including the promotion of new financial products and servicesto better reach the poor target market; (ii) the PFI's current financialand human resources; (iii) current programsbeing implemented;(iv) potential for expansion;(v) financial viability as well as the organization'scapacity to achieve significant scale and outreach; and (vi) identificationof the capacity-buildingneeds of the PFI in order to implementits new vision and business plan.

More specifically,the following criteriawill apply in the selectionprocess: * be legally registered with the Senegaleseauthorities as a provider of micro-financeservices * be in operation for at least a year * be involvedin deposit mobilization * have a membershipof which 30% are women * have at least 3,000 clients * have a three-to-five year business plan with monitorableindicators for achieving operational self-sufficiencyand build a strong micro-financeprogram

ContractualArrangements

Contractualagreements will be signed between (i) the SDF Unit and (ii) selectedPFIs. The agreementwill include: (a) the PFI's business plan to better reach a poorer segment of its target market, and (b) resources to be provided by the SDF unit to finance the capacity-buildingprogram of the PFI needed for the success of the businessplan. These resources can cover the costs of outreach and providing information to targeted groups and communitiesby PFIs, includingtraining in establishingand managing solidarity groups in association with an PFI, as well as other capacity building activities such as office expansion, rehabilitation,accounting software and the installation of a rigorous MIS, as well as training of PFI staff. In certain cases, a contractual agreement will also be signed between the SDF unit and specialized consulting firms to provide capacity-buildingservices such as training.

2. Facilitatingthe Creation andlor Strengtheningof SCAs

In communitiesthat are beyond the current reach of existing PFIs, the SDC will facilitate the provision of training, capacity building, and equipment(if necessary) for the creation and/or strengtheningof the community's SCA that could finance individualIGAs. The SCA can apply for SDC funding for a building, safe, and other needed equipment.

SelectionCriteria of Partner SCAs

be legally registered with the Senegaleseauthorities as a provider of micro-financeservices be in operation for at least a year be committedto deposit mobilization

- 125 - * have a membership of which 30% are women have at least 100 members/clients * have a five-year business plan with monitorableindicators for achieving operational self-sufficiencyand build a strong micro-finance program

ContractualArrangements

Contractualagreements will be signed between (i) the SDF Unit and (ii) selected SCAs and (iii) the ImplementingAgency (IA). Given the low managerial capacity of the majority of SCAs, it is assumed that an IA, most likely an NGO, will be involved in the provision of technical, promotional, organizational,and support services.Eligible NGOs must be legally registered in Senegal and have experience in microfinance activities. The contractual agreement will include: (a) the SCA's business plan for expansion for the next five years, and (b) resources provided by the SDF unit to finance the capacity building program of the SCA needed for the success of the business plan. These resources can cover funding for a building, safe, and other needed equipment.Training will also be financed to build the capacity of the SCA.

3. Financing Income-GeneratingActivities (IGAs)

In poorest communities that are beyond the current reach of existing PFIs and where it is urgent to build social intermediationskills, the SDC will provide financing on a matching grant basis for group IGAs. The community (or group within it) will propose an IGA, possibly promoted through an NGO, supported by a business plan and a commitment to provide at least 10% of the cost, of which at least 5% in cash. Upon approval of the activity plan, the SDC will provide training, capacity building, and equipment (if necessary) for the creation of the group's SCA or village bank, which will proceed to mobilize the required cash and in-kind contributionsto start the IGA, and to open an account in a licensed financialintermediary or PFI. Normally, an implementingagency, such as an NGO, will be contracted to provide for technical assistance to the group in managing the IGA and meeting its obligations, as well as for reporting to SDC, the cost of which may be borne either by the implementingagency as promoter or by SDC. If no fnancial intermediaryis sufficientlynear or willing to participate,the implementingagency will also handle the group's financial transactions.The group will sign an agreement with the SDC, the financial intermediary and/or the NGO to recover the cost of the IGA investment.The PFI and or NGO will be responsible for " loan" monitoring and recovery against a fee added to the amount and set high enough to provide adequate incentive for loan monitoring and collection.Community groups will be responsible for paying the fee to the financial intermediary as well as negotiating a decent interest rate to be paid on their deposits.

SelectionGuidelines for Funding IGAs

The following guidelines should help ensure that financing of IGAs will contribute to, rather than undennine, the developmentof good micro-financeat the communitylevel: Grant assistance (matching grant) will be targeted to poorest conimunities or groups (accordingto SDF poverty criteria) that are beyond the current reach of financial institutions including PFIs. The investments should not compete directly with private investment (existing or likely). The beneficiaries should contribute at least partly in cash; the cash contribution should be around 10% and, in any case, no less than 5% of the total project cost. This cash contribution could serve toward the initial working capital to operate the activities.

- 126 - Grants should be combined with training (e.g. GrassrootsManagement Training) and support to establish local SCAs to capture increased income flows and finance future IGAs (group or individual)on a sustainable basis. That is: - The CBO should be trained and facilitated to set up its own SCA, village bank or group within a micro-financeprogram; - The local SCA should be linked to a licensed financialintermediary, ideally an PFI that can serve it over the long term; - A cost recovery obligation commits the group to capturing income from the project through its SCA and utilizing it to help capitalize the SCA for future lending and financing within the group; - Individuallending will be left to second-roundrecycling of the income generated from the IGA and captured through cost recovery into the SCA.

Training for individuals and groups in skills for income-generatingactivities will be funded under component 3 through matching grants. The World Bank Institute (WBI) has an established (GMT) program which has been pilot-tested in Senegal and will be suitable for the required community training. GMT training includes household managementand business and financial skills that improve the ability of targeted groups (especiallyrural women) to manage their income-earningactivities and finances,often obviating the need to seek credit and making them more successfulwhen they do.

ImplementationArrangements

IGA Investment - SDC provides a grant for procurement (usually through an implementingagency) of the necessary equipment, construction,and initial inputs (as in the case of normal SDF projects) and certifies completionand commissioningof the investment.

Implementation and Recovery * The CBO carries out the IGA, utilizing its cash contributionfor initial cash on hand, setting aside sufficient income for operating costs and maintenance, and making cost (loan) recovery payments into its account at the financial intermediary.

- Additionaltraining and capacity building may be provided, both for operation of the IGA and managementof the SCA, either through the implementingagency or through additional requests to SDC

Capitalization of SCA and Subsequent Lending * Upon completion of the required payments, the accumulatedfunds are released to the SCA for it to use for lending to members (in groups or as individuals),maintenance and upgrading of the IGA, future IGAs, and other uses.

* Groups that have established a good track record of payment into their financial intermediary accounts may be able to obtain additional credit from the intermediaryin the future or to "graduate" their SCA into a licensedsavings and credit cooperative.

ContractualArrangements

For the activities related to the financing of group IGAs, a contractual arrangement will link: (i) the SDF unit; (ii) CBOs; (iii) the implementingagency/NGO; and/or (iv) the licensed financial intermediaryto implementthe activities described above. Under the contractual agreement,the SDC will provide funding

- 127 - for training, capacity building, and equipment (if necessary) for the creation of the group's SCA or village bank, which will proceed to mobilize the required cash and in-kind contributionsto start the IGA, and to open an account in a licensed financial intermediaryor PFI. The implementingagency/NGO will be contracted to provide technical assistance to the CBO in managing the IGA and meeting its obligations,as well as for reporting to SDC, the cost of which could be borne by the SDC. If no financial intermediaryis sufficientlynear or willing to participate, the implementingagency will also handle the group's financial transactions. The group will sign an agreement with the SDC, the financial intermediary, and/or the NGO to recover the cost of the IGA investment.The PFI and/ or NGO will be responsible for "loan" monitoring and recovery against a fee added to the amount and set high enough to provide adequateincentive for loan monitoring and collection.Community groups will be responsible for paying the fee to the financial intermediaryas well as negotiating a decent interest rate to be paid on their deposits. .

Role of the SDF Unit in Achieving the Objectivesof Phase 1

The objectives to be achieved under this three-year phase are: (a) Setting up the micro-financesystem promoted by the project by: (i) disseminatingthe Manual of Procedures (MP-PFI) to all PFIs and CBOs; (ii) assessing and classifying, on one hand, the communities located in areas where PFIs are near to targeted poor communities, and willing to participate in the project; and on the other hand, the communities that are beyond the current reach of existing PFIs, which will be supported to create or strengthen their SCAs to fund individual IGAs, as well as the poorest communities where group IGAs can be financed; (iii) contracting the services of a technical institution specialized in micro-finance to provide technical assistance to the SDF unit and the PFIs; and (iv) selecting/hiring implementingagencies for the implementationof the contractingapproach for the group IGAs.

(b) Testing the support to build PFI/SCAs' capacityto better reach the poor. The SDF unit will: (i) select/contractconsultants for technical assistance; (ii) select/contractwith a limited number of PFI/SCAs -- 2 or 3 per region -- in order to test the system, according to procedures detailed in the operation manual; (iii) supervise the new operations of the test-PFI according to contracts; (iv) evaluate the test by verifying that performance objectives are reached by the PFIs; (v) continuously assess the specific needs of the poorest groups, and the level of relevance of the financialproducts and services comparedto the needs; (vi) provide training to communities (or groups and individualswithin them) for preparing business plans to present to PFIs or other financial institutions for appraisal and possible financing;and (vii) evaluate the approach to draw lessons for scaling up in phase 2. In phase 1 of the project, PFI capacity-buildingassistance will be limited to those that are partners in the program, to improve their effectivenessin implementation.In later phases of the project, this assistance could be expandedto include other PFIs, based on the capacity of SDC staff to appraise and monitor performance of PFIs according to agreed benchmarks. At the end of the first phase, it is expectedthat the number of poor beneficiariesof the test PFI will have doubled.

(c) Testing the IGA system with a limited number of CBOs. Pilot-test 10-25 communities that are beyond the current reach of existing PFIs, and that will qualify for financing of group IGAs and start micro-financeactivities by: (i) identifying,through the PPAs process, the interested communities to test the approach; (ii) disseminatingto the test communities the specific module of the operational manual; (iii) providing training to the selected communities for the preparation of their IGA and the creation of the SCA; (iv) providing grant assistance to the CBOs for the implementationof the IGAs; (v) supporting CBOs for the contracting of services from a suitable PFI/NGO to monitor the IGA revenues and the new SCA development;(vi) monitoring and evaluating the test; and (vii) drawing lessons and disseminatingthem for

- 128 - scaling up in Phase 2. At the end of the test, the system will be refined and expanded. At the end of the Phase 1, it is expected that at least 100 CBOs (about 1 in every 30 targeted villages) will have successfully implementedthe approach and created a well-functioningSCA, and that the approachwill have been monitoredand evaluated, and lessons drawn from the evaluation,for the second phase.

- 129 - Additional Annex No.: 17

Grassroots ManagementTraining (GMT) for CBOs CapacityBuilding

SENEGAL- Social Development Fund Program

GrassrootsManagement Training (GMT) methodologywill be most appropriateto train Senegalese trainers to strengthen the capacities of the communities and local partners benefiting from the SDF and provide a larger pool of trainers for CBOs to choose from. GMT is a training methodologydeveloped by the World Bank Institute (WBI) Country partners through six pilot projects initiated in Africa (Burkina Faso, Nigeria, Malawi, Tanzania, Senegal) and India. GMT targets grassroots communities with low levels of literacy and schooling, and engaged in income generating activities.

In Senegal, the WBI pilot project has built capacity among training institutions (ENSA/Thies),NGOs (ACA, Maisons Familiales Rurales de la Region de Thies, OXFAM/GrandeBretagne, Plan International de Thies, AFRICARE/Kaolack,and PROGES/Casamance)and CBOs to better train grassroots managers. More than 88 trainers at three different levels (master trainers, junior trainers, and women leaders) have directly trained 652 women from 94 women's groups in four regions (Thies, Diourbel, Kaolack, and Casamance). In addition, more than 5000 women have been indirectlytrained through 48 follow-up sessionsin the villages. The training material includes seven trainers' manuals, seven video tapes, and four audio cassettes in local language. Produced training modules have been translated in Wolof and recorded on audio cassettes for the use of illiterate women. Topics include human resource management, financial management,micro-project management, credit management, and marketing.GMT programs are often linked with literacy and health programs as was the case with Senegal.

At the end of the pilot project, an expanded network of GMT trainers from Senegal, Burkina Faso, and Mali was formed. This network has created an association of experts who are able to reproduce GMT training adapted to local conditions and environment and for a variety of activities. The associationand ACA work closely together and share the same headquartersin Dakar, Senegal.

As a trainingmethodology, GMT has been designed for and with NGOs and training institutions,to use participatory and gender-aware training material to strengthen the capacities of grassroots people to improve their conditions of life, by better managing theirs groups, projects, businesses and micro projects, and credits, in groups or as individuals.

GMT assumes no literacy and no numeracy skills. It offers training in local languages, using drawings, figurines, films, role plays, dramas, and proverbs. The curriculum reflects the reality of life, the opportunities,and constraints that the communities face in their businesses.

GMT trainers do not lecture; they provide case studies, ask for questions and facilitate the discussions among participants,assuming that by sharing their experiences, and drawing out their knowledge, participants will find the better solutions to the problems they have assessed during a previous participatory training needs assessment. Then, the facilitator can provide information and some theoretical inputs.

GMT is also designed to take into account the gender dimension of the training determininghow, when, and where training delivery and follow-uphave to be organized to ensure that women will not be excluded and

- 130- increase their participation.

In the six years during which projects were piloted, severalproducts were developed,including modules for trainers of grassroots people, training of trainers, and participatorytraining needs assessments.At the end of the pilotedprojects, the VBI facilitated the expansionof the GMT methodologyto other projects. A wide range of trained trainers are using the methodologyin severalcountries, including Senegal, adapting the modules to the local situation through natural resources management,agriculture, micro-credit, and nutrition projects.

How can GMT answer the needs of SDF?

SDF is focusingon poverty reduction in poor communities.Not only do poor communitymembers often lack basic social and economic infrastructureand services,they also have very limited literacy and numeracy skills as prerequisites to be trained in a formal institutionto better manage their infrastructure and other resourceendowments.

The GMT methodologyhas been developedto meet the trainingneeds of these specifictarget groups.. There are good reasons to apply the GMT methodologyto SDF project: the evaluation of the GMT' initiativesin Africa and in India has proven that GMT made an impact on the lives of those who benefit from GMT projects. It has helped to improve team work in local groups and have better division of work, make better business decisions, select and manage better their activities,run their collectiveprojects with more transparency,increase their incomes and savings, develop self-esteemand raise the social status of women in the community,improve their living conditionsand assumebetter control of their lives.

Objectivesof the GMT component

The overallobjective of the capacity-buildingcomponent will be to improve, in the long term, the living conditionsof the targeted communities.The objectiveof the GMT component will be to build capacities among SDF' partners to strengthen the capacities of the communitiesto better manage in a sustainable way, their basic services,their micro-credit,and their income-generatingactivities.

Target groups for GMT:

In order to reach the assigned objective,the GMT strategy would address training at two different levels: at the grassroots level and at the level of partners in charge of training and financialservices delivery.

At the communitylevel, there are three target groups of people: (a) Elected membersof the "Groupementsd'epargne et de credit" (GEC), and "Mutuellesd'epargne et de credit" who are responsiblefor the managementof their micro-financeprojects; (b) Grassrootsmanagers having benefited from credit and who are engaged in income-generatingactivities; and (c) Elected local members of management/maintenancecommittees of the basic servicesprovided by SDF (such as schools, health care centers, markets, water taps/pumps).

At the local partners level, GMT experts will have to train the trainers of micro-financeinternediaries represented in the targetedregions including,licensed PFIs and NGOs, SCAs, that are willing to collaboratewith the SDF to help the poorest communitiesmobilize local savings and have access to micro-credit.

- 131 - For SDF staff members, the GMT approach will be used to improve their ability to better manage their interactionswith the communities and local partnersby learningto take into accounttheir real needs, interests, and capacities, in a participatory, bottom-up,and gender-awareapproach. The training curriculummight include modules on approachto community,participatory planning, and awareness training.

Proposed GMT Strategy for Phase 1:

The proposed GMT strategy outlinedbelow aims at building and expanding the market for trainers in order to provide a wider array of choices to communitiesseeking to receive training. The strategy will be implementedas follows:

* Undertake an informationand sensitizationcampaign aimed at PFIs already working in the targeted regions (e.g., ACEP, PAMECAS, CMS, CRS, CONACAP,ASADE, FDEA, APEC, and Plan Internationa),and get their approval to collaboratewith the project. * Provide informationto targetedcommunities and potential local partners on the objectives of the SDF project. * Make an inventory of the availabletrainers among the PFIs alreadyworking in the targeted regions and build a pool of 10 senior trainers among the PFIs (Two PFI) to strengthen their GMT capacity through a training of trainers (TOT). 3 Select two senior GMT experts to deliver the training of trainers (TOT) workshop. Seniors are confirmedskilled trainers who already have the abilityto train adults.They will have the responsibility of assessing the training needs at the grassroots level, build the trainingmaterial, and train juniors trainers. Juniors are people working at the grassrootslevel, either as governmentemployees, or working for an NGO as Educateurs ruraux/ Educatrices rurales. They are not trainers by profession. Also, because very often, they live in the villagesand provide support for equipment,micro-finance, and vocational training, juniors have a very good knowledgeof communitydevelopment, and have developedsome "on-the-job"skills which would be useful for trainingof communitymembers using freshly developedmodules. * Conducta training needs assessment(TNA) in the five selectedregions. * Developthe trainingmaterial based on the conclusionsof the TNA. and local information.The pool of ten senior trainers will develop a set of trainer's manuals. However,the WBII Senegalese moduleswill serve as model of a step-by-steptraining program,and as an example of the learning cycle process and as a participatoryand bottom-up approach. * Train the Junior Trainers. * Train and provide a follow up and monitoringof communityleaders. The focus of the training may vary dependingon the type of activitiesbeing undertakenby the communitiesand on their identified specificneeds. The final aim is to build the capacity of communityleaders to adopt and apply more formal business practicesto better manage the infrastructureand the micro-finance activitiesunder the project and to stimulateand support the developmentof more income-generatingactivities among grassroots populations. * Revise the training material and translate it in local languages,to ensure that communityleaders will be able to use the training material and disseminate the messagesat those who have not been trained at the communitylevel.

The final aim of the GMT trainingis to train groups and individual in poor communitiesparticipating in the project.At the end of the TOT phase, communitieswill have a larger pool of trainers to choose from as they seek to contract training service providers.

- 132 - MAP SECTION

Atlantic FC,--' \ 16' 15 14A 13 12' Ocean AShOri -N ALGERIA OCeanrXghnigl'ALGERIA /1 M A U R I TA NIA SENEGAL f'_i j / / < SOCIAL DEVELOPMENT N MAURITANIA N-I/ ToNouakchott FUND PROJECT MA L I es l• _ S

- b-t-Dagana7 o7 PROJECTTARGETED REGIONS D/Oukr/ko ---- " RRiAcr-d TnuE NIGER TolLoPRIMARY ROADS Dinsn' BRIASOoyFsuo acd A'KSECONDARY ROADS GU~NEA~'GUINEA ___ b Guier S INT - 55155AU$ ~,. GaIYo'~> -c-F--ANA,-RAILROADS 4 TA Saint- . L7uiL Thlge0 SELECTEDTOWNS Lo9bar.L 0 U I S ®~~~~~~~(REGION CAPITALS Gandio, 0 ~~~~~~~~~~~~~~~~~~~~~AIRPORTS

iov~~~~~~~~~rA ~~OuoSowPORTS m REGION BOUNDARIES UG ayor ' ,_,. ,/K- INTERNATIONAL Atlontic YRonr .;_ BOUNDARIES

13~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~V6DobfoX1 Z°\imngMsias 15' D~~~BIAKAjru l ' O _TGaonr <

X~~~~~~~~~~~~~~~ I =, '77' Kuidir S

~~~~~~~~~~~~~~~~~~~~~~~~~~~~CaR0 510 \R j~ h frmnsowonuie,clrs,eointosadnyhe

Dalafi~~ ~ ~~~~~- on on~~ths mo ont iml,o thelipart fTe ol BManGroup, Ksanya \

nni 12tKILOMETERS * hisdmotwa ponlea uedb thetaufany territoygony endtorsTemnakoarl 1 r

o170 _ lyuv