Database and Development Indicators

Developing Tools for Assessing the Effectiveness of ADB Operations In Reducing Poverty
(December 2002 - December 2004)

• Issues
• Purpose
• Outputs
• Key Activities
• Contacts

Issues

The Asian Development Bank (ADB) adopted poverty reduction as its overarching goal in 1999, and subsequently embraced the Millennium Development Goals (MDGs) as priority objectives. Both poverty reduction and fostering fulfillment of the MDGs are affirmed in ADB's Long-Term Strategic Framework (2001-2015) and Medium-Term Strategy (2001-2005). An important part of efforts to focus ADB's operations on poverty reduction has been to adapt established impact analysis practices. Efforts to adjust approaches to assess the impact of loans on poverty, prior to and after their implementation, and to develop and apply new methods, have met with mixed success. Resource and time constraints often limit monitoring and assessment of project impact on poverty to what is administratively required.

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ADB and other national and international institutions seek to design projects and identify country- or sector-level strategies offering the greatest reduction of poverty. Analytical techniques are used to assess the poverty impact of projects and programs, and to identify the most effective ways of achieving sustained reductions in poverty. Although ADB and its partner organizations in developing member countries (DMCs) have gained much experience in such analysis, the understanding of the mechanisms that link project and program outputs to sustained reductions in poverty is still partial and the measurement of the poverty impact of interventions is often inadequate. The technical assistance (TA) focuses on the development of tools for monitoring and understanding the poverty impact at various levels, suitable for use in operations by ADB and DMC staff developing and executing ADB-financed interventions. Understanding the impact of ADB operations at the country level requires analysis at sector and project levels. At the same time, understanding the overall poverty impact of discrete policy or project initiatives at the local level requires study at the sector or country level. In assessing the effectiveness of ADB aid, efforts must be considered in the broader context of overall development efforts in the country and with the recognition that ADB is one of many influences in the development arena. Accordingly, the approach taken in the TA will include poverty analysis at various levels (e.g. household, community, and sector), focusing on providing the information and analytical tools needed to define and understand the relationship between poverty reduction efforts and outcomes at the different levels.

Providing ADB staff and partners in DMCs with accurate and easy-to-use data collection and analytical tools can improve the efficiency of poverty analysis while easing the operational burden of carrying out poverty monitoring and assessment activities. Such tools can be applied to strengthen the development and implementation of country strategies and programs (CSPs) and poverty reduction partnership agreements (PRPAs), and will facilitate accountability. This will enable ADB and national agencies in DMCs to sharpen their understanding of the effects of projects and programs on poverty, and to focus their efforts on the most effective interventions.

ADB project implementation sometimes suffers from inadequate attention and resources being applied to distinct aspects of monitoring. Project management teams can get caught up in monitoring financial and other implementation indicators, while neglecting to monitor impact indicators and carefully analyze the causal links between ADB-financed activities and poverty outcomes of greater long-term interest (e.g., indicators of poverty impact and aid effectiveness). Efforts to improve monitoring and poverty impact assessment (MPIA) may suggest reassessment of the resource allocation between country- and sector-level poverty diagnosis and research, project design, and monitoring activities. ADB can make a valuable contribution in MPIA by helping to make it an integral part of local decision-making processes. Accordingly, ADB TA in MPIA should focus on building national capacities. Developing tools for easy and more systematic poverty monitoring will be key in improving the capacity of ADB and DMCs to assess aid effectiveness.

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Purpose

The goal of the TA is to enhance ADB's contribution to poverty reduction in DMCs. The purpose of the TA is to adapt existing approaches and pilot test customized poverty monitoring and analytical tools to enable better understanding and measurement of the underlying factors and mechanisms driving changes in the incidence and severity of poverty in selected DMCs. The TA will develop these tools within the framework of the PRPAs, CSPs, and ongoing ADB projects or programs in selected sectors and countries. The TA will focus on some of the major ADB borrowing countries (although tools will be designed with a view to general applicability). The tools and approaches developed through the TA will foster better identification, design, and monitoring of poverty reduction programs and projects, and thereby improve in the effectiveness of ADB-financed poverty reduction efforts throughout DMCs. The implications of lessons learned regarding the process, structure, and resource requirements for carrying out poverty impact assessment will be reviewed in the final TA report. Several other TAs are being implemented with related scope and objectives. These other efforts will be taken into account to ensure sharing of knowledge and material and to avoid any duplication of effort.

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Outputs

The specific outputs of the TA will be (i) a survey data depository that will provide easy access to relevant statistical data for poverty analysis; (ii) a review of poverty measures and analysis used in final or draft PRPAs and corresponding CSPs; (iii) innovative survey data collection and processing tools to enable more cost-effective collection of baseline and follow-up data at project and sector levels; (iv) poverty and inequality data generated at disaggregated geographic levels (small areas); (v) easy-to-use analytical protocols to model poverty and distributional impacts of ADB-financed initiatives; and (vi) workshops on poverty monitoring and impact assessment techniques for DMC and ADB staff.

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Key Activities

The second activity will review PRPAs and CSPs and will result in brief reports outlining the poverty measures and analyses used in individual DMCs. A summary of the reports will review (i) the methodology used in measuring poverty in DMCs, (ii) the analysis applied in formulating PRPAs and CSPs, and (iii) the poverty monitoring arrangements incorporated in PRPAs and CSPs. The review will provide recommendations on ways of improving the analysis and monitoring of poverty in PRPAs and CSPs with due consideration of practical constraints faced by analysts.

Four subsequent activities will develop and disseminate a number of poverty monitoring and analytical tools intended as inputs into the preparation of poverty strategies and loans. These cover small area estimation techniques, poverty monitoring survey instruments, and sector-specific analytical models for poverty impact assessment. The final activity involves dissemination workshops at ADB and in selected DMCs.

In concert with another ongoing ADB TA, the TA will compile spatially disaggregated data (small area estimates). Poverty statistics at the national or other aggregated levels are often unsuitable for impact assessment of specific projects and policies. Poverty data valid at the local level can be used to develop local poverty profiles and derive information on past poverty dynamics. This information can be applied in project and strategy formulation and assessment to enhance their empirical foundations.

Poverty monitoring survey instruments will be designed, including the development and implementation on a pilot basis of household- and community-level questionnaires and poverty monitoring surveys. The objective is to develop practical alternatives to the time-consuming and expensive collection of income and expenditure data for assessing poverty. The proposed survey instruments will be based on easy-to-collect poverty predictors that are derived using multiple regression and principal component analysis. The development of these tools will build on existing standard survey instruments such as the Core Welfare Indicators Questionnaire and Living Standards Measurement Studies (World Bank), the Multiple Indicators Clusters Survey (United Nations Children's Fund), the Demographic and Health Surveys (Macro International Ltd), etc. The key outputs of this component of the TA will be the development of cost-effective and rapid monitoring data collection instruments, along with recommended administrative procedures for cooperating with national agencies, sampling methods, standard questionnaires, data processing programs and manuals, and guidelines for statistical analysis and poverty assessment based on nonincome data.

Sector-specific analytical models to assess project and policy impact on poverty will be developed, principally through adaptation of existing partial and general equilibrium models. By sharpening the focus of existing models on poverty and distributional issues, models aim to enable more holistic assessment of the impact of projects, policies, and external events on distribution, poverty, and broader welfare. Partial equilibrium models to be adapted include demand or supply response analysis disaggregated across the poor and nonpoor, household models, and measures of market performance. General equilibrium modeling will recollect and adapt existing social accounting matrixes and computable general equilibrium models for selected DMCs, and update and customize models to examine particular sectors and identify distributional consequences of interventions in their broader economic context. When possible, models will be developed as user-friendly Microsoft Excel applications to foster integration of country data for impact assessment by analysts in ADB and DMCs, and will include user instructions, interpretation guidelines, and training material.

Sector and project analytical tools will be developed in the context of ongoing ADB operations to ensure operational relevance and suitability. The following mix of countries and sectors is proposed: (i) the People's Republic of China, for transport infrastructure; (ii) Indonesia, for education; (iii) Pakistan, for governance and finance; and (iv) Viet Nam, for agriculture and natural resource management. The selection reflects core areas of lending among the most active ADB borrowers. TA implementation will proceed in close cooperation with national agencies, with participation of national statistics offices being key for undertaking data collection and statistical capacity building project components. Other national agencies have been identified in each country for collaboration in poverty analysis work under the TA.

To assure proper dissemination and institutionalization of these data collection and analytical tools, activities will result in technical reports and manuals. These will be used to develop training material that will be used in workshops organized in four selected DMCs and at ADB headquarters. The TA team will prepare interim reports for the TA after the first year and a final report at the conclusion of the TA.

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Contacts

Mr. Olivier Dupriez, Poverty Statistician
odupriez@adb.org

Mr. Christopher Edmonds, Economist
cedmonds@adb.org

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