India - Rural Women's Development and Empowerment Project

Document of The World Bank Report No. 16031-IN STAFF APPRAISAL REPORT INDIA RURAL WOMEN'S DEVELOPMENT AND EMPOWERMENT PROJECT March 4, 1997 South Asia Country Department II (Bhutan, India, Nepal) Population and Human Resources Operations Division  CURRENCY EQUIVALENTS (as of July, 1996) Currency Unit Rupee US$1.00 Rupee 35.00 US$0.029 = Rupee 1.00 WEIGHTS AND MEASURES I Kilogram (kg) = 2.204 Pound (lb) 1,000 Kilogram I Metric Ton (mt) I Kilometer (km) = 0.62 Miles (m) I Hectare (ha) 2.47 Acres (ac) FISCAL YEAR April I - March 31 Vice-Presictent Mieko Nishimizu Director Robert S. Drysdale Division Chief Richard Skolnik Task Manager Ashok K. Seth  ABBREVIATIONS AND ACRONYMS AC Association of clusters ACE Asian Center for Entrepreneurship AIDS Acquired Immune Deficiency Syndrome BIRD Bankers Institute for Rural Development CAS Country Assistance Strategy CG Cluster of Self-Help Groups CHC Community Health Center CLWG Cluster Level Working Group CPM Computerized Project Management System CPSU Central Project Support Unit DEA Department of Economic Affairs DPCC District Project Coordination Committee DPM District Project Managers DWCD Department of Women and Child Development EDI Economic Development Institute FWWB Friends of Women's World Banking GOI Government of India IAS Indian Administrative Service IC Information & Communications ICB International Competitive Bidding ICDS Integrated Child Development Services ICECD International Centre for Entrepreneurship and Career Development IDA International Development Agency IFAD International Fund for Agricultural Development IMR Infant Mortality Rate KVK Krishi Vigyan Kendra LCB Local Competitive Bidding LDC Land Development Corporation M&E Monitoring and Evaluation MHRD Ministry of Human Resource Development MIS Management Information Systems MYRADA Mysore Rehabilitation and Development Agency NABARD National Bank for Agriculture and Rural Development NGOs Non-Governmental Organizations NIESBUD National Institute for Entrepreneurship and Small Business Development PAR Performance Audit Report PCR Project Completion Report PHC Primary Health Center PRADAN Professional Assistance for Development Action PTI Program of Targeted Interventions RBI Reserve Bank of India RFRP Rural Financing Reform Program RMK Rashtriya Mahila Kosh SEWA Self-Employed Women's Association SHG Self-Help Group  SOE Statement of Expenses SPSC State Project Steering Committee SPWG State Project Working Group TLC Total Literacy Campaign UPLDC Uttar Pradesh Land Development Corporation WDCs Women's Development Corporations WEMTOP Women's Enterprise Management Training Outreach Program WWC Women's Welfare Corporation  INDIA RURAL WOMEN'S DEVELOPMENT AND EMPOWERMENT PROJECT TABLE OF CONTENTS Page No. CREDIT AND PROJECT SUMMARY ................................................i 1. WOMEN AND DEVELOPMENT ...............................................1I A. Country Profile ................................................1 B. Status of Women ...............................................1l C. Policy and Development Approach to Women ................................................2 D. Institutions Involved in Women's Development ................................................4 E. Experience with Past Bank Lending ................................................5 F. Experience of IFAD Supported Projects ................................................6 G. Project Preparation Process ................................................7 II. THE PROJECT ................................................8 A. Rationale ................................................8 B. Project Area and Target Group ................................................11 C. Project Objectives and Strategy ............................................... 12 D. Summary Description of Project Components ............................................... 13 E. Detailed Features ............................................... 14 III. COST ESTIMATES, FINANCING AND DISBURSEMENTS . ........................................... 24 A. Project Costs ............................................... 24 B. Financing ............................................... 25 C. Procurement ............................................. 28 D. Disbursement ............................................. 32 E. Accounts and Audits ............................................. 33 IV. PROJECT IMPLEMENTATION AND MONITORING ............................................... 34 A. Organization and Management ................................................ 34 B. Project Implementation ............................................... 35 C. Beneficiary Participation ............................................... 37 D. Credit Financing and Lending Terms ................................................ 37 E. Training ............................................... . 37 F. Information, Communications and Learning from Experience . ........................................... 38 G. Project Planning and Monitoring and Evaluation ......................................... 39 H. Project Performance Review ............................................... 41 I. Project Supervision and Performance Indicators ............................................... 41 V. PROJECT IMPACTS AND JUSTIFICATION ............................................... 44 A. Production and Marketing ............................................... 44 B. Project Benefits ............................................... 45 C. Economic and Financial Analysis ............................................... 45  D. Social Impact .................................. 48 E. Environmental Impact .................................. 48 F. Sustainability .................................. 49 G. Risks ................................... 49 VI. ASSURANCES AND RECOMMENDATIONS .................................... 50 ANNEXES 1. Project Costs .53 2. Lessons Learned from IFAD's Tamil Nadu Women's Development Project .65 3. Status of Women, Target Group and Project Area .75 4. Self-help Group Concept .87 5. NGO Participation .101 6. SHG Clusters and Associations .109 7. Mobilization of Funds by SHGs .115 8. Women's Participation in On-Fann Activities .127 9. Women's Participation in Non-Farm Activities .135 10. Social Development .155 11. Project Organization and Management .165 12. Training .201 13. Information and Communication .209 14. Monitoring and Evaluation .217 15. Strategy for Intervention in Tribal Areas .229 16. Implementation and Supervision Plan .237 17. Procurement and Disbursement .249 18. Financial and Economic Analysis .257 19. Documents Available in Project File .291 MAPS A. Bihar IBRD 28268 B. Gujarat IBRD 28269 C. Haryana IBRD 28270 D. Karnataka IBRD 28271 E. Madhya Pradesh IBRD 28272 F. Uttar Pradesh IBRD 28273 This report is based on preparation work (Project Formulation Report) performed by the state government officials in consultation with local women and NGO staff, with the assistance of IFAD, and an appraisal mission that visited India in June/July 1996. The mission comprised Ashok Seth (Task Manager), Meera Chatterjee (Social Development Specialist), Mary Clark (Economist), Eid Did (Procurement Specialist), Sudha Kothari (NGO Specialist), Mam Chand (Procurement Specialist), Shreelata Rao-Seshadri (Social Scientist), R. Suresh (Agriculturist) and Tara Vishwanath (M&E Specialist). Mr. Prayag Tewari, IFAD Project Controller, also participated in the mission. The peer reviewers were Lynn Bennett (Social Issues) and Colin Bruce (Economic Issues). Sunita Dhar, Pradeep Kashyap, Vimla Ramachandran and Vanita Vishwanath were external reviewers. Gertrude Stubblefield, Brenda Scott and Marcia Whiskey provided secretarial support. Richard Skolnik (Division Chief, SA2PH) and Heinz Vergin (Director, SA2) provided managerial oversight.  i INDIA RURAL WOMEN'S DEVELOPMENT AND EMPOWERMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President Beneficiaries: Govemments of Bihar, Gujarat, Haryana, Kamataka, Madhya Pradesh and Uttar Pradesh. Amount: IDA SDR 13,500,000 (US$19.5 million equivalent) IFAD SDR 13,300,000 (US$19.2 million equivalent) Poverty: Program of Targeted Interventions (PTI). The project is classified as a PTI because the beneficiaries would be women below the poverty line in rural areas. Terms: Standard Intemational Development Association (IDA) terms with 35 years to maturity. On-Lending Terms: As a Centrally-sponsored project, the proceeds of the IDA Credit/IFAD Loan would be available to the states of Bihar, Gujarat, Haryana, Karnataka, Madhya Pradesh and Uttar Pradesh as a grant. GOI would assume the foreign exchange risk. Description: The proposed multi-state investment operation would be implemented over a five year period in a phased manner. It would commence a long-term process to improve women's economic and social status. The scope and coverage of the project in the participating states would be govemed by the relative success of the main intervenors in establishing and sustaining self- reliant Self Help Groups (SHGs). The project design allows flexibility to introduce changes based on implementation experience. The project would pursue its objectives through the following components: (a) Institutional Capacity Building for Women's Development including: (i) establishment of self-reliant women's groups through support to NGOs to establish woman's SHGs based on savings and credit; building capacity of new and existing SHGs through training and awareness raising; and assistance to SHGs to establish a track record of sound credit management to make them attractive clients to the lending institutions. The project would strengthen the capacity of support agencies, e.g., WDCs, NGOs, financial institutions and line departments to provide better service to poor women and sensitize them to gender issues.  agencies, e.g., WDCs, NGOs, financial institutions and line departments to provide better service to poor women and sensitize them to gender issues. (b) Establish Support Mechanisms for Women Managed Income GeneratingActivities. The project would assist SHGs to access group loans from lending institutions for investments in income generating activities, both on-farm and non-farm, following demonstration of capacity for credit management based on the group's own savings. In addition, it would provide support for skill training, technology transfer, technical support and promotion of market linkages. (c) Establish Mechanisms to Access Social Programs and Leverage Funds for Community Assets Creation. To improve the quality of women's lives and release time for productive purposes, the project would assist in improving women's access to social services such as health and child care and creating or improving community assets such as drinking water and multipurpose meeting halls by leveraging contributions from on-going government programs or the community. Priorities for such investments would be decided in consultation with the communities. (d) Provide Effective Project Management Systems. Strengthen capacity of central and state level agencies to manage the project based on implementation experience and feedback provided by the concurrent monitoring and evaluation system to be established under the project. Benefits: Immediate benefits would flow from: (a) creation of women's self-help groups and their ability to control income and their own development; (b) enhanced involvement of women in income generating activities through access to funds from their own savings and integration of women into the mainstream delivery mechanisms for credit; (c) improved management and technical skills for income generating activities; (d) improvements in women's health and reduction in their drudgery; and (e) strengthening of key support agencies (NGOs, WDCs, financial institutions, line departments) enabling them to be more effective in addressing women's needs. Longer term benefits for women would include: (i) increased self- reliance and self-confidence to address the constraints faced by them and increased ability to mobilize various public and private sector services for their benefit; and (ii) improvement in their social status in the family and community. It is estimated that the project would assist in the formation of about 7,400 groups benefiting about 130,000 women. Risks: The proposed project carries several risks. Some are general problems associated with implementation of projects in India including late start-up, frequent management turnover and weak implementation capacity. Most of these risks have been substantially reduced through project design, which  iii emphasizes organizational capacity building, recruitment of contractual staff on a longterm basis at the management level, and early recruitment of key staff to facilitate project start-up. In addition, hiring of NGOs, formation of a small number of SHGs, and orientation and training of project implementors have been launched prior to project effectiveness using PPF advance and retroactive financing facilities. These actions would expedite project implementation and generate valuable experience. There are other risks specifically associated with the project. First, an adequate number of competent NGOs may not be found to form and support SHGs, and this may result in an overload on the limited number of experienced NGOs. To address this, the project would support capacity building of motivated NGOs who presently lack experience of SHG formation, encouraging them to participate in the project. In addition, transparent contractual arrangements specifying roles and responsibilities of public institutions, NGOs and SHGs, with appropriate funding, have been developed in consultations between the WDCs and partner NGOs to provide a supportive environment for project implementation. In the later years of the project mature SHGs would be encouraged to take over some of the functions initially performed by NGOs. Second, the WDCs may not develop adequate capacity to effectively coordinate project activities. Institutional strengthening of the WlDCs through staffing with relevant expertise would be emphasized in the project to mitigate this risk. In addition, phased implementation of the project would ensure that adequate training is provided to staff before project coverage is expanded. Feedback from the concurrent M&E system would indicate the readiness of the WDCs to cope with an expanded area of operation. Third, insufficient attention may be provided by the technical line departments in support of income generating activities, especially on-farm, and in provision of social services. The project addresses this risk through the training of staff of support agencies, including gender sensitization, and through the strengthening of linkages between key project implementors (WDCs, NGOs) and line departments to effectively respond to women's needs. Funds are also available to tap other private sources of technical support, especially for non-farm activities, where deficiencies are anticipated. An associated risk is the limited capacity within some states to support micro-enterprises. To address this, the project would finance support from successful private sector women entrepreneurs to help in identification and capacity building of local entrepreneurs willing to assist SHG members in establishing new enterprises of their choice and/or developing market linkages for businesses.  iv A fourth risk is that banks may not be as responsive as envisaged in providing loans to the groups. The project seeks to reduce this risk by enhancing the expertise of the groups in credit finance management based on internal savings. This would help to develop a sound credit history thus making the groups attractive clients for the lending institutions. Furthermore, infornation, motivation and sensitization workshops would be held for participating bankers to convey, among others, the message that lending to SHGs reduces the transaction costs of banks compared to direct lending to individuals. A final risk is that the women may not be able to generate additional income because of difficulties in overcoming time and labor constraints. To address this, the project provides support for activities to reduce drudgery and improve access to social services, especially health and child care facilities. Estimated Project Costs: US$ million Local Foreign Total Institutional Capacity Building for Women's Development Establish Self-Reliant Women's Groups 9.1 - 9.1 Strengthen Participating Agencies to Support 4.2 0.7 4.9 Women's Development 13.3 0.7 14.0 Establish Support Mechanisms for Women Managed Income Generating Activities Mobilization of Investment Funds 11.8 - 11.8 Provision of Business Management and Technical 8.7 - 8.7 Support Services to SHG members 20.5 - 20.5 Establish Mechanisms to Access Social Programs 7.5 0.3 7.8 and Leverage Funds for Community Assets Creation Provide Effective Project Management System Project Management 6.4 0.4 6.9 Concurrent Monitoring and Evaluation 2.2 - 2.2 8.3 0.4 9.0 Total Baseline Cost 49.9 1.4 51.3 Physical Contingencies 2.1 0.1 2.2 Price Contingencies 0.2 0.1 0.3 Total Project Costs 52.2 1.6 53.8  v Financing Plan: US$ million Local Foreign Total % IDA 18.7 0.8 19.5 36 IFAD 18.4 0.8 19.2 36 GOVIState Governments 3.7 - 3.7 7 Institutional Finance 8.5 8.5 16 Beneficiaries 2.9 - 2.9 5 Total financed 52.2 1.6 53.8 100 Estimated IDA and IFAD Disbursements (US$ millions): FY97 FY98 FY99 FY00 FY01 FY02 Annual IDA 1.3 3.0 4.1 4.7 4.4 2.0 Cumulative IDA 1.3 4.3 8.4 13.1 17.5 19.5 Annual IFAD 1.2 2.9 4.0 4.7 4.4 2.0 Cumulative IFAD 1.2 4.1 8.1 12.8 17.2 19.2 Total annual 2.5 5.9 8.1 9.4 8.8 4.0 Total cumulative 2.5 8.4 16.5 25.9 34.7 38.7 Figures appear not to add up due to rounding Estimated Rate of Return: 25% Project Identification Number: 44449   -1- INDIA RURAL WOMEN'S DEVELOPMENT AND EMPOWERMENT PROJECT I. WOMEN AND DEVELOPMENT A. Country Profile 1.01 With an area of 3.39 million square kilometers and a population of 846 million (1991 Census), India is the seventh largest country in the world and the second most populous. Although India has made substantial progress in improving living conditions, the rate of economic growth has been modest until recently and its impact has been diluted by the increase in population which continues to grow at about 2.1 percent per year. As a result, widespread poverty remains a dominant feature of India's socio-economic condition, with around 30-40 percent of the Indian population (230-320 million) living below the poverty line, and a per capita GDP of US$330 (1991). 1.02 Key changes following liberalization have included an increase in the rate of growth and a modified structure of the economy. The faster growth of the services and manufacturing sectors has resulted in a decline in the contribution of agriculture to about 30 percent of GDP, and an increase in the importance of services and industry, which now account for 41 percent and 29 percent of GDP, respectively. Although declining in its contribution to GDP, agriculture remains a key economic activity, providing a livelihood for over 64 percent of the population. B. Status of Women 1.03 Over the last quarter of a century, improved household food security, an expanding health care system, and maternal and child health interventions have brought about significant gains in women's health status. The life expectancy at birth for females has risen from about 32 years in 1951 to about 60 years in 1991. The differential between the female and male infant mortality rates (IMR) has been bridged, with a male IMR of 81 and a female IMR of 80 per 1,000 live births. The maternal mortality ratio is about 440 per 100,000 live births. The girl child has become the focus of the universal primary education campaign and, in 1993-94, 71.4 percent of girls of primary school age were enrolled in primary school. 1.04 However, gender analysis of most social and economic indicators demonstrates that women in India continue to be relatively disadvantaged in matters of survival, health, nutrition, literacy and productivity. India is one of the few countries where males significantly outnumber females: according to the 1991 Census, the sex ratio was 927 females to every 1,000 males. From birth women are discriminated against in terms of access to the basic necessities of life - nutrition, health care and education. While female morbidity rates are in excess of those among males, fewer women than men use health services. The disparity between male and female literacy is vast. In 1991, 39 percent of women over the age of seven years were literate,  -2- compared with 64 percent of men. Of the 324 million illiterates enumerated in the 1991 Census, 61 percent were women. 1.05 Women are a vital part of the Indian economy, constituting one-third of the national labor force. Although most women are considered "marginal workers", by the definition used in national statistics, they are major contributors to the survival of the family. The poorer the family, the greater is its dependence on women's income. Indian women contribute a much larger share of their earnings to basic family maintenance than do men. Women's earnings have an immediate positive effect on the incidence and severity of poverty as increases in women's income translate into better health and nutrition, particularly for children. Despite this, social conventions and gender ideology deprive them of the resources which would enable them to increase their economic and social status. More than 90 percent of rural women are unskilled, restricting them to low paid occupations. Women generally have no control over land and other productive assets, which largely excludes them from access to institutional credit and renders them dependent on high cost informal sources of credit to secure capital for self-employment activities. 1.06 Women form the backbone of agriculture, comprising the majority of agricultural laborers. Seventy to eighty percent of all field work is done by women, and most post harvest and processing tasks are their sole responsibility. Women are also heavily involved in animal husbandry, particularly small livestock. They account for 85 percent of persons engaged in dairy production. Gender divisions in agriculture are stark with all activities involving manual labor assigned to women, whilst all operations involving machinery and draught animals are generally performed by men. Female agricultural laborers are among the poorest sections of Indian society. Agricultural wages for women are on average 30-50 percent less than those for men. 1.07 Gender discrimination, the ascription of traditional roles to men and women, and gender violence continue to be pervasive problems. Within this broad framework, the situation of women varies significantly across regions and according to the socio-economic status of the household and its position in the caste hierarchy. Socio-cultural values are more heavily biased against women in the north than in the south; amongst caste Hindus than amongst Scheduled Tribes or Scheduled Castes; and among land-owning cultivators than among landless laborers and marginal farm families. C. Policy and Development Approach to Women 1.08 Since independence, the Government of India's policies for women's development have evolved in emphasis, from an initial welfare oriented approach to the current focus on economic development and empowerment. Significant changes occurred in the mid-1980s with the Seventh Five Year Plan which operationalized the concern for women's equality and empowerment, and focused on inculcating confidence among women, generating awareness of their rights and privileges, training them for economic activity and employment, and bringing them into the mainstream of national development. New structures were created to oversee the development of women with the establishment of the Department of Women and Child Development (DWCD) within the Ministry of Human Resource Development of the Government  -3- of India (GOI). Women's Development Corporations (WDCs) were set up in most states to implement the new strategy of economic development for women through facilitating access to training, entrepreneurship development, credit, technical consultancy services and marketing facilities. 1.09 The Eighth Five Year Plan marked a further shift towards empowerment of women, emphasizing women as equal partners and participants in the development process. At the national level, GOI has maintained strong advocacy for providing more equitable growth opportunities for women. Many sectoral programs include components to address women's needs through targeted activities. A prime example of this commitment is the Panchayati Raj Act which reserves one-third of seats and chairpersonships of panchayats for women. More recent developments include the formulation of a National Policy for Women and emphasis on gender equity in programs dealing with poverty. 1.10 Changes at the national level are paralleled by evolving state government policies and plans for women's development. Several states have adopted formal policies for women which include: (a) increased participation by women in local decision making processes; (b) an increasing focus of poverty alleviation programs on women; (c) mandates to eliminate discrimination against girl children and adolescents in matters of food, health, education and child labor; (d) greater spread of self-help groups and community based organizations; and (e) recognition of the need to sensitize all levels of bureaucracy, legislators, and law enforcement agencies to gender issues. In one of the states participating in the project (Kamataka) the government has 'earmarked' 30 percent of the funds of certain development programs for expenditure on women, and this is being proposed at the national level in the Ninth Five Year Plan (1997-2002). 1.11 Recently, to meet women's expressed need for improved access to credit, particularly to small loans which allow them to engage in risk-averse, multi-production strategies and thereby to improve the livelihoods of their families, thrift and credit or "Self-Help Groups" (SHGs) have been promoted. These groups initially draw on their own accumulated savings to provide loans to their members, and later link with the formal credit system to access funds,overcoming the limitations of their own resources. Most SHGs have been promoted by NGOs with more progress being made in the south than in the north. 1.12 Key continuing constraints that impede women's quest for greater economic development and social empowerment include: (a) limited institutional capacity of government and non-government agencies to address both the social and economic needs of women; (b) target oriented, top-down approaches to implementation of development programs with inadequate emphasis on self- reliant grassroots organizations such as thrift and credit groups; (c) lack of resources and skills that constrain women's abilities to maximize their earnings and contribute to the alleviation of poverty; (d) inadequate access to support services, especially health care, education, child care and drudgery reducing/time saving technologies; and (e) social inhibitions to equal involvement of women in family and community affairs.  -4- D. Institutions Involved in Women's Development 1.13 At the center, the Department of Women and Child Development (DWCD) in the Ministry of Human Resource Development, GOI has the overall mandate for guiding and assisting line departments in implementing projects to aid women's development. Within most states, broad responsibility for women's issues is similarly vested in the state Department of Women and Child Development. In addition, the Women's Development Corporations (WDCs)' have a role in enhancing the economic development of women. 1.14 The WDCs are semi-autonomous government undertakings (mostly registered under the Companies Act) established with the specific mandate to assist women to developeconomic activities. This mandate provides a broad focus whilst their status as Corporations confers independent decision-making powers and greater operational flexibility than a government department to work with NGOs and other private sector agencies. However, since their establishment, the WDCs have been poorly staffed with the requisite skills in business 2 development, and inadequately funded to implement the assigned mandate. The high turnover of Indian Administrative Service (IAS) officers seconded as Managing Directors has resulted in discontinuity of management and a lack of consistency and direction in development approaches. As a result, their implementation capacity at present is weak. If these constraints were overcome, they could play an important role in advancing women's economic and social development. 1.15 NGOs also play a significant role in promoting women's economic and social development. Many focus on health, education and other social issues, and some assist women to gain greater economic independence. A number of NGOs are now supporting the formation of women's thrift and credit SHGs, and assisting them to invest in income generating activities. 1.16 In the formal credit sector, both commercial banks and regional rural banks are beginning to feature as lenders to women's groups although more motivational work is required to spread awareness of the potential benefits of this strategy. The interest of the banks, however, is limited to credit delivery; and it is unlikely that sponsorship of SHGs by banks will provide women with the full range of services to derive the wider social benefits of SHG membership. The Rashtriya Mahila Kosh (RMK), the national women's credit fund established in 1993, also provides credit through NGOs to poor, assetless, self-employed women who are not able to access the formal credit system. Nomenclature varies between the states. It is Women's Development Corporation in Bihar, Haryana and Karnataka; Women's Economic Development Corporation in Gujarat and Madhya Pradesh; and Women's Welfare Corporation in Uttar Pradesh. The principal exceptions amongst the project states are in Bihar, where the WDC is registered under the Societies Registration Act, and Madhya Pradesh, where the WDC is registered under the MP Non-Trading Corporation Rules and Act. 2 In most cases the authorized share capital of the WDCs, which was to be provided by GOI and the state government in the ratio 49:51, has not been fully paid up.  -5- 1.17 The National Bank for Agriculture and Rural Development (NABARD)3 has undertaken development work to improve the access of neglected sectors/ communities to institutional credit. One of the most successful and innovative experiments has been the linking of SHGs with banks to provide the rural poor access to the banking system. A pilot project was started in 1992 after the Reserve Bank of India (RBI) allowed banks to finance informal and unregistered groups without collateral and gave liberty to such groups to decide their own terms and conditions for financial transactions. This effort was highly successful and covered around 5,000 groups against the original target of 500. The repayment performance of the the groups has been more than 95 percent. Eighty percent of the groups were formed by women. Encouraged by the success of the program, RBI has made financing of SHGs by banks a part of their mainstream lending operations. A pioneer in this field, NABARD continues to support this approach and has accumulated valuable experience in understanding and propagating the concept of SHG financing by banks. It has organized a number of training programs, seminars, workshops and review meetings, and published literature for the benefit of banks, NGOs and women beneficiaries. 1.18 The main technical line departments covering areas of women's work are: Agriculture, Animal Husbandry, Horticulture, Sericulture, Rural Development, Industries, the Khadi and Village Industries Board and the Khadi and Village Industries Commission. Although women should form an equal part of their clientele, these line departments have generally not been effective in providing technical support services to women. Various sectoral schemes focused on women have been devised to improve the situation, such as the training of women in agriculture, but their outreach is limited and there is widespread need to sensitize line department staff to the importance and potential of serving women. Women are also inadequately served by social sector departments, such as Health and Family Welfare, Education and ICDS due to deficiencies in the design and/or provision of services. E. Experience with Past Bank Lending 1.19 Bank Lending. Although the Bank has not invested in a freestanding women's development project in India in the past, its projects in the social and agricultural sectors have included gender specific activities targeting poor women for additional facilities and services. The experience from these projects is varied and extensive enough to provide a number of important lessons for the preparation and implementation of this project. In the social sectors, the Bank has financed twenty-four projects in the population, health, nutrition and education sub-sectors since the 1960s, at a total cost of US$3.4 billion. Areas of support have included: technician education and basic/primary education; nutrition and child development; family welfare; control of specific diseases such as AIDS, leprosy and cataract blindness; and state health sector reform. In 3 NABARD is an apex development finance institution for agriculture and rural credit. It was established in 1982 by an Act of Parliament, and took over certain development and statutory functions from the Reserve Bank of India (RBI), and refinance functions from the Agriculture Refinance and Development Corporation. It works under the overall guidance and control of RBI in regard to monetary policies, credit expansion, interest rate, etc. It supplements the resources of banks by providing refinance to Commercial Banks, Cooperative Banks and Regional Rural Banks for rural credit, based on certain parameters and limits.  -6- agriculture, 133 operations have received US$10.6 billion equivalent of IBRD/IDA financing (19 percent IBRD, 81 percent IDA), with irrigation projects dominating the portfolio. Other areas financed have included: agricultural support services (research, extension, credit), commercial agriculture (seeds, fisheries, sericulture, dairy, rubber), forestry, watershed development, and three state-specific (Tamil Nadu, Rajasthan and Assam) agricultural development projects. Several of these projects have focussed attention on women's participation in the economic activities, and some have used the modality of women's group formation. In Uttar Pradesh IDA is assisting a Sodic Lands Reclamation Project (Cr. 251 0-IN) which includes a component to form women's self- help groups with the help of NGOs to augment the income of poor farm families. The Women's Enterprise Management Training Outreach Program (WEMTOP), sponsored by the Economic Development Institute (EDI), has worked through local NGOs to provide management training to poor and illiterate women micro-entrepreneurs, and developed expertise in micro-enterprise and participatory monitoring and evaluation skills. The project operated in selected areas in Bihar, Orissa and Rajasthan. 1.20 Implementation Performance and Lessons Learned. Project Completion Reports (PCRs) or Performance Audit Reports (PARs) are available for a number of social and agricultural sector projects. While the projects have met an important part of their development objectives, they have suffered from a number of generic implementation problems. These have included: late start-up, poor procurement, slow disbursement, institutional weaknesses, including frequent management turnover, untimely and inadequate flow-of-funds, poor quality of civil works and maintenance of building and equipment, and inadequate attention to software and qualitative aspects. In addition, some specific lessons of relevance to the proposed project have highlighted the importance of early action on: (a) social assessment to underpin targeting of beneficiaries and their participation, both in the design and implementation of project activities; (b) clearly defined arrangements for the participation of NGOs which are committed to the objectives of the project; (c) strong monitoring and evaluation arrangements with flexibility in project design to allow introduction of appropriate and timely corrective action; and (d) greater participation by the private sector, especially in input delivery. F. Experience of IFAD Supported Projects 1.21 IFAD lending. IFAD's lending to India in the past ten years has been directed towards the most vulnerable groups in rural society, namely Scheduled Castes (SCs), Scheduled Tribes (STs), landless, small and marginal farmers, and women. Support for women was targeted in the freestanding Tamil Nadu Women's Development Project which formed women's SHGs, supported by NGOs and animators, to mobilize women and build self-reliance through self- managed group savings funds and improved access to credit for suitable economic activities. The Maharashtra Rural Credit Project and two Andhra Pradesh Tribal Development Projects also incorporate components specifically directed towards increasing women's self-reliance and improving their access to credit through the formation of women's SHGs. The respective state WDCs are involved in the implementation of the Tamil Nadu and Maharashtra projects. Through their involvement in the projects, these WDCs have been strengthened and oriented towards the needs of poor rural women.  -7- 1.22 Implementation Performance and Lessons Learned. General lessons emerging from these recent projects are that: (a) the development of grassroots institutions is essential if benefits acquired by the poor are to be protected; (b) the landless and women need to be specifically targeted; and (c) economic development is a necessary but insufficient condition to improve the lot of women and other deprived groups; attention needs also to be given to empowerment to ensure that the financial rewards of their efforts remain under their control. 1.23 The lessons learned from past IDA and IFAD lending are central to the design of the proposed project, providing a number of specific lessons for group formation and management. These include: (a) in facilitating effective implementation of women's development initiatives, NGOs can play a key role but their caliber and performance are crucial to the success of the project and they often require training and capacity building with regard to participatory processes and sustaining groups; (b) one of the best indicators of the dynamism and cohesion of a group is the degree of rotation of small loans to members based on their own savings before accessing bank credit; (c) the process of federating groups into a cluster should not be undertaken until the groups have attained a mature level of functioning, appreciate the importance of a federation, and are in a position to control it; (d) capacity of agencies involved in project implementation, especially at the district level, should be carefully evaluated and, wherever appropriate, strengthened to effectively implement the project; (e) lending institutions involved in financing groups need to have staff trained in working with resource poor clients; (f) emphasis needs to be placed on diversifying the productive activities undertaken by women which must have good market potential; and (g) members are willing to borrow without subsidies provided loans are given on time and investments are sound. G. Project Preparation Process 1.24 District Selection Criteria. The selection criteria used by the state agencies in identifying the project districts included: economic and social backwardness (poverty, female illiteracy, adverse sex ratio, percentage of SCs and STs); regional socio-economic variations within the states; and implementation capacity (availability of NGOs, lending institutions, and public and private sector support agencies). Information on the districts selected as a result of this work is given in para 2.07 and Annex 3. 1.25 Participatory Preparation Process. The project has been prepared with the participation of all the key stakeholders and has been finalized after wide consultations with them during pre-appraisal and appraisal. The key implementing agencies, the state WDCs, prepared initial project proposals in December 1994 with the help of consultants and interactions with potential women beneficiaries, women members of existing SHGs, and potential NGO partners. IFAD supported the preparation process on an on-going basis and held consultations with public and private agencies on problems faced by women. These discussions were followed by joint Bank-IFAD missions which verified the recommendations of the preparation report. Jointly with WDCs, these missions held detailed discussions with NABARD, financial institutions, other resource institutions and bilateral donor agencies involved in assisting women's development, especially to draw on existing experience. Discussions were also held with key providers of technical support services in both the public and private sectors to elicit their support and to  -8- define areas of their likely assistance under the project. State and district level officials and elected representatives participated in discussions and provided information and views which influenced the development of project objectives, scope and activities. Finally, workshop held at the start of the Appraisal Mission, attended by the WDCs, collaborating NGOs, bankers and other resource agencies, facilitated a thorough review of the project proposals and resulted in refinements of the project proposal. The preparation report was shared with a group of NGOs prior to appraisal to elicit their views on the proposed project design and its components. Consultations were also held with representatives of a selected number of bilateral donors. The proposed project responds to guidance received during these consultations. These consultations also highlighted the need for flexibility in the design of this process oriented project so as to respond to changing needs and to develop mutually beneficial alliances with others working on women's issues. 1.26 Project Preparation Facility Advance. In July 1996, in response to a request from GOI, the Bank provided a US$250,000 Project Preparation Facility (PPF) Advance. The advance is being used to launch pre-project activities on a pilot basis to generate experience to expedite implementation following effectiveness, and to strengthen the capacity of the key project implementors in preparation for project start-up. Specifically, the advance is financing the induction of NGOs and the formation by them of a limited number of SHGs, and orientation and training of project implementors to the project concept. A portion of the IDA credit would be used to refinance the advance. II. THE PROJECT A. Rationale 2.01 The strategy for Bank assistance to India is to support policies and investments that promote economic growth and social development in the context of macro-economic stability. The Bank's Country Assistance Strategy (CAS) for FY96-98 (Report No. 14509), emphasizes the need to support the government's development policies aimed at reducing poverty, which remains India's major socio-economic problem. Further, it supports the government's plans to facilitate greater private sector participation in a wide range of economic activities and to accelerate human resource development with special attention to gender issues. The government in India has shown increasing concern with the quality of growth and with how the benefits of growth are distributed across regions and social groups. The FY97 progress report on the CAS stresses the need for Bank operations to focus attention on the redressal of gender inequalities to enhance the quality and level of economic development in the country. Set in the context of the government's policies and the Bank's enhanced efforts to address gender issues effectively in its portfolio, the proposed project is consistent with the CAS. The proposed operation would also be consistent with the policy changes being proposed by the Bank under the Rural Financial Reform Program (RFRP). While emphasizing the financial self-sustainability of lending institutions, the RFRP would work with the Government to expand poverty-reduction activities, especially the SHG linkage program already started by NABARD.  -9- 2.02 The project would also be consistent with the Country Department's women-in- development strategy which emphasizes: (i) widening efforts to reach women with basic amenities and services; (ii) addressing issues of gender bias and the social constraints facing women in order to orient services to them as well as to create effective demand for the services; and (iii) linking economic and social services to capitalize on their mutually reinforcing effects and thereby enhance their effectiveness. The Bank's research indicates that there are significant gains from investing in women.4 Expanding women's economic opportunities and increasing the income they control results in greater economic efficiency, improved child health and nutrition, and reduced poverty. 2.03 The project would be consistent with IFAD's Strategy for the Economic Advancement of Poor Rural Women which emphasises the need for: (i) rural women to organise themselves into social and economic groups if they are to assert their role and benefit equitably from economic development; (ii) efforts to modify social attitudes and value systems; (iii) enhanced financial services for poor rural women, with easy access, and which build on mobilisation of their own savings through women managed thrift and credit; (iv) improved social services to contribute to their productivity; and (v) the active promotion of women's role in the development process and control over resources placed at their disposal. 2.04 The entrenched nature of constraints faced by women and limited success of past government interventions has highlighted the need for new approaches to address the diverse needs of women. The most important social innovation to help the poor in recent years has been the success of the thrift and credit based SHGs, especially-those formed by women. These groups, assisted by NGOs, have successfully developed a system of revolving credit for the benefit of group members based on their own savings. Linking of SHGs to formal financial institutions has further enhanced availability of credit financing to the groups with a high rate of loan repayment. SHGs have been successful in generating additional income, jobs and small enterprises. IDA's (and IFAD's) involvement in the proposed project would provide resources for wider application of these successful models and innovative approaches developed in India and overseas. IDA's and IFAD's assistance would strengthen the implementation capacity of existing institutions, enable more effective utilization of resources allocated to women's programs, and accelerate the learning process. 2.05 A favorable climate to address gender inequalities through grassroots institutions has been created by the Panchayati Raj Act which ensures representation of women in local self- government. This has led to a recognition of the need to develop women's capacities for more effective participation in decision making. These developments offer a window of opportunity for IDA and IFAD to focus a freestanding operation on improving the socio-economic status of poor women. While a multi-state project would be resource intensive to manage and supervise, its flexible approach would provide scope for innovation in operational modalities. The cultural, ecological and socio-economic variations between the states will provide a broad-based learning experience and the project would facilitate sharing of experience amongst the participating states. Advancing Gender Equality - From Concept to Action, World Bank Publication, 1995  -10- Ultimately, this would provide a better basis for policy dialogue with the Government on women's issues. 2.06 Project Readiness. Since the appraisal of the project in July 1996, the participating states have taken a number of actions to improve readiness to implement the project. These include: formation of a small number of SHGs with the help of NGOs in selected blocks in one or two districts; training of existing staff and participating NGOs in SHG concepts and Bank procurement procedures; an inter-state workshop to exchange ideas and information; and identification of resource institutions to assist in the implementation of the project. This has enhanced implementation capacity and provided experience to expedite implementation following effectiveness. 2.07 In addition, prior to negotiations, both the DWCD, GOI and the state governments have taken actions to expedite project implementation. DWCD has (i) appointed a Project Implementation Expert at the CPSU; (ii) developed a draft Memorandum of Understanding specifying funds flow and implementation arrangements to be signed by the DWCD, the nodal departments of the state governments, and the state WDCs; (iii) identified the lead training institution, viz. the National Institute of Public Cooperation and Child Development; and (iv) prepared an Action Plan for the CPSU for the first fifteen months of the project (January 1997 to March 1998). The states have (i) appointed a consultant or regular Project Director in Gujarat, Karnataka, Madhya Pradesh and Haryana; (ii) initiated formal hiring processes for the regular Project Director and other key staff in all states except Bihar; (iii) prepared Procurement Plans for the first two years of the project; (iv) established the State Project Steering Committee, State Project Working Group and District Project Coordination Committee in the states of Gujarat, Haryana and Madhya Pradesh; (v) signed contracts with an initial group of NGOs for the implementation of the project in Phase I districts in Haryana, Gujarat, Karnataka and Uttar Pradesh; in the cases of Bihar and Madhya Pradesh, proposals for agreements with identified NGOs have been received by IDA and will be completed following IDA approval; and (vi) prepared Action Plans for the states for the first fifteen months of project implementation (January 1997 to March 1998). 2.08 During the first year after effectiveness, project activities would be restricted to a few blocks in one or two districts in each state (with the exception of Uttar Pradesh where the project would work with SHGs formed in 13 districts under the IDA-assisted U.P.Sodic Lands Reclamation Project). Expansion of project activities to other districts would only take place after the project implementors have acquired and trained the requisite staff, and ensured the availability of trained NGOs and the responsiveness of other service providers. While the underlying concept of the project builds on past experience (paras 1.20, 1.22 and 1.23), flexibility in the design, phased implementation and concurrent M&E system proposed under the project (paras 4.16 to 4.21) allows for a process-oriented approach and the introduction of innovations while building the implementation capacity of participating agencies.  B. Project Area and Target Group 2.09 Project Area. The project would be implemented in a limited number of blocks in selected districts in the six states of Bihar, Gujarat, Haryana, Kamataka, Madhya Pradesh and Uttar Pradesh. In the case of UP, the project would build on the experience of women's group formation gained over the past three years by the UP Land Development Corporation (LDC) under the IDA-assisted UP Sodic Lands Reclamation Project. The UPLDC has formed active SHGs in 13 districts in which it operates. In addition, two new districts (Sitapur and Banda) would be included in the project where activities would be coordinated by the UP Women's Welfare Corporation (WWC). The districts presently identified in each state are listed below. The list would be kept under review and any necessary changes, including additions, made during project implementation would be in consultation and in keeping with criteria agreed with IDA. State No. of Districts Initial Districts Other Districts Bihar 3 Hazaribagh, Muzaffarpur Ranchi Gujarat 4 Panchmahals, Sabarkantha Surendranagar, Bharuch Haryana 3 Sonepat Jind, Bhiwani Karnataka 4 Kolar, Chitradurga Bellary, Tumkur Madhya 6 Hoshangabad, Dewas Sehore, Betul, Pradesh Chhatarpur, Tikamgarh Uttar 15 Allahabad, Aligarh, Banda Pradesh Azamgarh, Etawah, Etah, Fatehpur, Hardoi, Jaunpur, Mainpuri, Pratapgarh, Raebareli, Sultanpur, Unnao, Sitapur 2.10 Target Group. The target group for the project would be women from rural households below the poverty line, defined by the GOI as households of 5.5 persons with an annual income below INR 11,000. The group would largely comprise women from marginal and small farrn households and landless families. Particular emphasis would be placed on including both de jure and defacto female heads of households, who constitute the most disadvantaged groups of women. (In the country as a whole, 30 percent of poor households are estimated to be female headed). In order to ensure strong, cohesive and sustainable affinity groups, no eligibility criteria would be set beyond the poverty criterion in order to allow women genuine freedom of choice in group membership. The participating NGOs would be responsible for identifying women  -12- participants through consultative processes with communities. More information on the project area and target group is given in Annex 3. C. Project Objectives and Strategy 2.11 Objectives. Given the pervasive nature of the issues that negatively impact on women, the overall objective of the project would be to strengthen processes that promote economic development of women and create an environment for social change. The specific objectives would be to: (a) establish women's self-help groups (SHGs) which build self-reliance and self-confidence and provide them greater access to and control over resources; (b) sensitize and strengthen the institutional capacity of support agencies (governnent, NGOs and banks) to proactively address women's needs; (c) increase the incomes of poor women through their involvement in income generating activities, thereby contributing to poverty alleviation; (d) develop linkages between SHGs and lending institutions to ensure women's access to credit financing; and (e) improve access to better health care, education and drudgery reduction facilities. 2.12 Strategy. The experience of other programs has shown that neither empowerment through awareness raising alone, nor development through economic activity alone, can satisfactorily address women's diverse needs. The strategy adopted in this project, therefore, emphasizes the importance of an holistic approach including a judicious blend of empowerment and development activities in order to have a broader impact on the lives of poor women. The project builds on four "pillars", namely, the present successful experience with SHGs, the growing response of banks to group lending, increasing opportunities provided through the Panchayati Raj system for women to play a role in decision making, and the experience gained through other programs including the IDA-assisted U.P. Sodic Lands Reclamation Project (Cr 2510-IN) and IFAD's Tamil Nadu Women's Development Project. 2.13 Facilitating women's access to credit to increase their involvement in income generating activities represents the core activity of the project. To this end, savings and credit (with small loans based initially on the accumulated savings of the SHG) are the foundation for the SHGs to build up a record of sound financial management and credit worthiness as the first step in establishing a long-term relationship with the lending institutions. At the same time, the project expands the scope of present successful SHG programs to providing assistance to enable women to identify and establish viable and remunerative income generating activities. 2.14 To ensure that the process of empowerment is self-sustaining, the project focuses on building women's institutions which will have the capacity to further their development on an on- going basis. Women "owned" affinity groups are crucial to the empowerment process as they provide: (a) mutual support for members and confidence to strive collectively for social change; (b) a forum in which women can critically analyze their situations and devise strategies to overcome their difficulties; (c) a framework for awareness raising, literacy, dissemination of information on health, nutrition, family welfare and legal rights and for delivery of services; and (d) a locus for the development of economic activities.  -13- 2.15 To respond to women's diverse needs, the project focuses on developing participatory processes to identify priorities and devise appropriate responses to meet them. In the interests of sustainability and replicability, emphasis would be placed on developing the capacity of mature SHGs to support the formation of additional groups. The formation of associations of mature SHGs would also be encouraged, both as a means of providing on-going support to existing groups and to further the expansion of the SHG movement. 2.16 Although flexibility would be essential to ensure that project activities respond to the variations in socio-cultural situations between states, it is also important that the project pursues a common philosophy. To achieve this, the following principles would guide the project implementors: (a) self-reliance of the women's groups, with support agencies working consciously towards withdrawal; (b) sustainability of groups, highlighting the importance of the quality of group formation (rather than the number of groups formed); (c) ownership and control by the women so that they determine the form, nature, content and timing of all activities undertaken by the SHGs; (d) the facilitative (non-directive) role of project ftmctionaries; (e) accountability of all project actions to the SHGs; and (f) evaluation of project performance as reflected in the strength and sustainability of SHGs, income generated by the economic activities, and increased capacity of the support agencies to carry the program forward beyond the project period. D. Summary Description of Project Components 2.17 The proposed project would be implemented over a five-year period and could be the start of a long-term program to improve women's economic and social status. The project would pursue its objectives through the following components: (a) Institutional Capacity Building for Women 's Development including: (i) establishing self-reliant women's groups through support to NGOs to establish women's SHGs based on savings and credit; building capacity of new and existing SHGs through training and awareness raising; and assisting them to establish a track record of sound credit management to make them attractive clients to the lending institutions. The project would strengthen the capacity of support agencies, e.g., WDCs, NGOs, financial institutions and line departments to provide better service to poor women and sensitize them to gender issues. (b) Establish Support Mechanisms for Women Managed Income Generating Activities. The project would assist SHGs to access group loans from lending institutions for investments in income generating activities following demonstration of capacity for credit management based on the group's own savings. In addition, it would provide support for skill training, technology transfer, technical support and promotion of market linkages. (c) Establish Mechanisms to Access Social Programs and Leverage Funds for Community Assets Creation. To improve the quality of women's lives and release time for productive purposes, the project would assist in improving women's access to social services such as health and child care and create or improve community assets such as  -14- drinking water and multipurpose meeting halls by leveraging contributions from on-going government programs or the community. Priorities for such investments would be decided in consultation with the communities. (d) Provide Effective Project Management Systems. The project would strengthen capacity of central and state level agencies to manage the project based on implementation experience and feedback provided by the concurrent monitoring and evaluation system to be established under the project. E. Detailed Features (A) Component 1: Institutional Capacity Building for Women's Development (US$14.0 million; 28 percent of Base Cost) 2.18 The formation of strong and sustainable SHGs would be the primary focus of this component. The groups would be supported to acquire the skills to control and manage their own affairs effectively. To facilitate this, the participating agencies would be strengthened and sensitized to issues of gender equity, oriented to the SHG concept and trained in the specific skills which they would be required to impart to the SHGs. Specific activities to be financed under this component are described below. (i) Establishment of Self-Reliant Women's Groups (US$9.1 million; 18 percent of Base Cost) (Annex 4) (a) Formation/induction of SHGs. The project would support the establishment of new SHGs. Some existing SHGs, limited to 30% of the total anticipated number in any state program, would also be supported to gain early experience of SHG participation in income generating activities and the development of group clusters/associations. In selecting existing groups for project support, emphasis would be placed on identifying those which have consistency with the project concept. (Additional information on the approach to the induction of existing groups is given in Annex 4, Section F.) While the project would not be target driven, indicative provision has been made for support to around 7,400 SHGs. On the basis of implementation capacity, it is expected that these would be distributed among the participating states as follows: Bihar - 600; Gujarat - 1,200; Haryana - 600; Karnataka - 1,200; Madhya Pradesh - 1,000 and Uttar Pradesh - 2,800. These numbers have been included for planning purposes. Decision on the ultimate scale of the SHG program in each state would depend on its relative success as determined by feedback from the project's concurrent M&E system. (b) SHG Capacity Building. The project would build the capacity of new and existing women's SHGs by training group members or representatives in group dynamics, group management, participatory skills, leadership skills, and awareness raising, including social issues and legal rights. Appropriate information, education and communication materials would be provided. Exposure visits and inter-group exchange visits (recognized as one of the most effective learning processes) would also be supported.  -15- The project would assist the SHGs to establish a track record in sound management of group savings and credit operations which would make them attractive clients to banks. To facilitate this process, the project would provide intensive training in credit management and accounts. The project would also provide the start-up materials (cash box, accounts ledgers, minute books) required for the savings and credit operations. Provision has been made for imparting functional literacy to group members. This is considered important to facilitate the working of SHGs, particularly the maintenance of accounts and records, to enable more women to take on leadership responsibilities, and to facilitate access to information for both economic and social development. Based on lessons drawn from other functional literacy programs, the project would support modification and printing of available post-literacy reading materials, orientation/retraining of literacy teachers, and coverage of the costs incurred to meet location specific needs by the NGOs managing this activity. Such literacy training would be provided only when there is demand for it from the concerned SHG, and the SHG (or its community) is willing to bear the cost of sustaining the activity, if necessary, after the 18-month period which is considered a reasonable time for group members to acquire basic functional literacy. (c) Formation of New Groups with the Help of Mature SHGs. In order to promote the wider replication of SHGs in a more cost effective and sustainable manner, the project would, on an experimental basis, use mature SHGs to promote the formation of additional SHGs. The project would identify SHG members with leadership ability and provide them with additional training and exposure visits to assist them to undertake this responsibility. (d) Promotion of SHG Clusters and Associations. The project would also facilitate the formation of clusters of (15-25) SHGs (CGs) and associations of (4-8) SHG clusters (ACs) to provide on-going support to the groups and promote further expansion of group formation. The emergence of such clusters/ associations amongst mature groups would be demand driven and allow for organic growth in response to changing needs. Project assistance would comprise provision of expert advice for the development of appropriate institutional structures, orientation of NGOs to the functioning of clusters/associations, leadership training for cluster/association leaders, provisions for exposure visits to existing SHG associations, and networking of clusters/associations both within and outside the project to facilitate exchange of ideas. Prior to launching the process, the project would commission a study by management experts to distill relevant knowledge and develop guidelines on key institutional parameters. The formation of such clusters/associations would be tried initially in the states where SHGs already exist in the project districts. More information on the proposed guiding principles, based on current experience, is given in Annex 6. At Negotiations, assurances were obtained that, by March 31, 1998, DWCD would (i) establish an advisory panel including NGOs with experience of CG/AC formation; and (ii) organize a workshop at which the members of  -16- the advisory panel would assist the participating NGOs to devise a strategy for the formation of CGs/ACs. (e) NGO Support. The project would engage the services, on contract, of outside intervenors to form and sustain SHGs, and would finance the costs of field staff and other operational expenses. Since NGOs are recognized to be the most effective agents for mobilizing and providing on-going support to women's groups, project activities would start in districts/blocks with strong NGOs. The selection of NGOs with an orientation towards promoting self-reliant women's groups would be crucial to the success of the project. Where NGOs with such an orientation lack actual experience of working with SHGs, training would be provided by NGOs or other agencies with appropriate experience. The selection criteria and roles and responsibilities of NGOs in the project are described in Annex 5. In areas without experienced NGOs, WDCs and experienced NGOs would identify socially motivated people within the community to form and support SHGs following appropriate exposure and training. At Negotiations, assurances were obtained from DWCD and the state WDCs that: (a) NGOs contracted under the project would be selected according to the criteria specified in Annex 5; and (b) by December 31, 1998, DWCD would appoint an NGO or other suitably qualified agency to undertake an independent assessment of the performance of the NGOs and of the participatory management processes under the project, and agree with IDA and IFAD on an action plan to implement its recommendations. (ii) Strengthen Participating Agencies to Support Women's Development (US$4.9 million; 10 percent of Base Cost) Promoting attitudinal change and improving the ability of institutions working with poor women to design and manage effective programs are key elements in equipping support agencies to provide better assistance to women. To facilitate this, the project would sensitize the agencies involved in the project to gender issues, namely, the WDCs, NGOs, financial institutions, line departments and other resource agencies, and strengthen their capacity to assist women. In-country and overseas study tours and exposure visits would be available for key staff to increase their awareness of women's development potential and initiatives. Appropriate information, education and communications materials would be produced to facilitate the orientation and training of staff. Activities to be financed in relation to specific agencies would include: (a) Women's Development Corporations (WDCs). To strengthen the implementation capacity of WDCs, the project would assist in the provision of professional staff and necessary support facilities. It would also provide training to enhance management skills, participatory processes including ability to work with SHGs, gender sensitivity, and communication skills. The organizational structure of the state WDCs would be modified to accommodate the requisite skills, namely, business development, marketing, and training. At the same time, WDCs would engage independent qualified financial management consultants to strengthen their financial management system (accounting, auditing and internal control) which at present is weak. The incremental staff to be  -17- provided at the state level would be a Monitoring Officer, Marketing Coordinator, Training Coordinator, Communications Officer and Finance Officer. During Negotiations, the government provided assurances that: (a) by June 30, 1997, all participating WI)Cs would establish accounting, auditing and internal control practices acceptable to IDA; (b) by March 31, 1999, DWCD would organize a management review of the WDCs to further assess the longer term role of WDCs in assisting women's development programs and recommend appropriate adjustments in roles, operational structures and management systems and identify key training needs. (b) Non Governmental Organizatons (NGOs). The capacity of partner NGOs would be strengthened to enable them to provide more effective support under the project and to enhance their commitment and orientation to assisting women's development in the longer term. Training would be provided in participatory processes for effective interaction with groups, gender sensitization, communication skills, the SHG concept, group development processes, group accounts and record keeping, and entrepreneurship development to enable them to become more effective promoters of economic activities. Where necessary, resource NGOs would assist in building the capacity of smaller, local NGOs. (c)Financial Institutions/line departments. The project would also sensitize staff at financial institutions and selected technical line department staff to gender issues and strengthen their capacity to actively promote women's development by providing training in the SHG concept, participatory management, gender sensitization and communication. B. Component 2: Support Mechanisms for Women Managed Income Generating Activities (US$20.3 million; 40 percent of Base Cost) 2.19 Economic activities to be taken up would be selected by the women participants from a range of on-farm and non-farm activities. Most activities taken up are likely to be carried out on an individual basis, with women within a group being able to opt for different activities. Some activities may however be undertaken by a number of women within or across groups, who may join together to utilize common supply, processing and/or marketing facilities. The uptake of income generating activities would be facilitated through access to credit, skill training, technology transfer, technical support and promotion of market linkages. A communications component would underpin these activities. Existing materials would be used wherever appropriate. Where gaps exist, the project would finance production of suitable booklets and pamphlets as reference material, posters, videos, audio cassettes, radio programs, plays and case studies presenting role models of women entrepreneurs who are implementing micro-enterprise activities successfully.  -18- (i) Mobilization of Investment Funds for Income Generating Activities (US$11.8 million; 23 percent of Base Cost) (Annex 7) The two main sources of investment funds for income generating activities would be members' own equity represented by their savings, and credit from lending institutions. The expertise of group members in credit management, which would determine SHGs ability to access funds from lending institutions, would be developed through a step-wise process. The first step would involve utilization of funds from members' own savings mainly for small loans to meet consumption and other social needs. This would enable the group to gain experience of managing credit, instill credit discipline, and build up a track record of sound credit management In the second stage (approximately 6-12 months after group formation), to augment funds available through the limited savings capacity of group members, SHGs would be linked with a bank to obtain a line of credit up to an agreed limit, initially equivalent to their own savings, which they can draw on as required for consumption and/or other purposes. The cash credit limit arrangement provides groups easy access to bank loans with a minimum of processing formalities and restrictions on the use of funds. Its use, in turn, allows a group to strengthen its credit history. The cash credit limit is gradually raised in line with the improving credit record of the group. In the third stage (12-24 months after formation), the SHG may obtain a group term loan from a lending institution, the ratio depending on the bank's assessment of the performance of the group in managing funds. Alternatively, the SHG may continue with the cash credit arrangement. In either case the loan would be managed by the SHG and be disbursed as individual loans to members primarily for investment in income generating activities. The project would support the provision of training to SHGs in credit management and accounts to enable them to establish their "credit rating". The credit requirements of the SHGs would be met by the lending institutions from their own funds and may be re- financed by NABARD from its own resources.5 Wherever the coverage or response of the banking system is inadequate, credit funds to SHGs could be provided by other financial institutions provided SHGs are charged market interest rates, and are free to establish the interest rate to be charged to their members. Other agencies, who channel funds to NGOs for on-lending to SHGs, include Friends of Women's World Banking (FWWB), NABARD's scheme for bulk loans to NGOs, and Rashtriya Mahila Kosh (RMK, the National Women's Credit Fund), once its lending terms are appropriate.6 In discussions with the mission, NABARD agreed to provide funds from its own resources to refinance any formal sector lending institution supporting SHGs under the project and, if necessary, to provide bulk loans to NGOs to finance SHGs. 6 The present constitution of RMK does not allow SHGs the flexibility to determine interest rates but requires RMK funds to be on-lent to the final borrower at an interest rate not exceeding 12%.  -19- (ii) Provision of Business Management and Technical Support Services to SHG Members (US$8.5 million; 17 percent of Base Cost). (a) On-farm activities (Annex 8). Investments in on-farm activities would be aimed first at consolidating the food and income base of participating women and then on embarking on a growth path through improvements in crop and animal productivity and onto diversification. Activities would begin with effortsto improve the sustainability of rainfed agriculture through the introduction of improved land and water conservation measures. Later, to assist members to optimize returns from their limited resources, extension support would be provided to introduce activities with potential for higher financial returns, such as the cultivation of herbs, spices, fruits, vegetables and flowers. To minimize risk, only known technologies, which the women and their families have been unable to access, would be promoted. Attempts would also be made to introduce the women into market processes and other activities, e.g., storage, grading and packing, that add value to the basic agricultural cycle. Livestock activities would focus on sheep and goats in small units which can be easily managed by women alongside their other work. Support would include the dissemination of improved feeding practices and greater emphasis on fodder production and animal health. Later in the project, to improve the terms on which women participate in markets, the formation of inter-SHG commodity groups/producer associations focused on the production, processing and marketing of a specific product and its by-products would be encouraged, with SHGs taking responsibility for the running costs of groups/producer associations. The project would support the transfer of technology to women through training, exposure visits and crop and livestock demonstrations. Resource persons, preferably from the SHGs, would be trained by line departments and/or NGOs to manage demonstration plots and to facilitate dissemination of information under the overall guidance of technical staff from the line departments. Some of these resource persons would be trained as para-vets. The project would promote improvements in linkages with other programs to improve access to infrastructure such as wells and soil and moisture conservation measures leading to higher productivity. The project would also finance demonstration units for technologies to reduce drudgery in agricultural tasks and domestic chores undertaken by women such as improved farm implements designed for use by women and simple domestic agro-processing equipment. (b) Non-farm activities (Annex 9). The project would support the contracting of specialized agencies to conduct market studies and techno-economic surveys at the village level to develop a menu of options for feasible, location specific, investment opportunities with market potential, based initially on local skills and resources. Thereafter, the project would assist groups to upgrade designs and production skills, standardize production techniques, and improve quality control. The project would also facilitate the marketing of finished products by linking groups with marketing agencies who can provide advice on marketing strategies and assist in establishing market linkages. The NGOs working with the SHGs would be trained in business development to improve their ability to guide women in the selection of appropriate income generating  -20- activities and to coordinate the provision of the necessary support services. To counteract the weakness of past production-led development initiatives, the identification of non- farm activities related to production, trading and service areas would be market-led. Given the weakness of the support structure for non-farm activities in most states, the project would contract agencies with recognized expertise in entrepreneurship and business development to create capacity among local agencies to transfer business, technical and marketing skills to the SHGs. This would include the identification of successful local entrepreneurs willing to assist women in the formative stages of businesses. A list of possible agencies with recognized expertise is given in Annex 9. Where suitable agencies are not available within the state, the WDCs would establish links with recognized national specialist agencies to access appropriate expertise. C. Component 3. Establish Mechanisms to Access Social Programs and Leverage Funds for Community Asset Creation (US$7.8 million; 15 percent of Base Cost) 2.20 To improve quality of women's lives and to assist in releasing time and energy spent in domestic chores for more productive purposes, the project would facilitate group access to social services and assist in leveraging funds for the provision of community assets. Health, child care, drinking water supply, sanitation and community meeting places are some of the priority areas identified through interviews with potential beneficiaries. The project would promote mechanisms to improve participation of the wider communities in accessing these benefits. This would help to promote harmonious relations between the SHGs and their communities, and enhance the status of group members in the community. All social activities would be backed up by appropriate information, education and communications support. More information on the operational modalities for the implementation of this component is given in Annex 10. Specific activities to be financed under the project are briefly described below. (i) Health Promotion. Where basic health care is expressed as a priority need, and there is a gap in services being provided by the health department, the project would assist to train a person selected by the group in consultation with the wider community (either from the group or a community member). Once trained, this person would disseminate information on health related issues and promote preventive health care; help group members and other village women to access the formal health system (the Sub-Center and the Primary Health Center (PHC)/Community Health Center (CHC)/Hospital) or private health facilities, with a focus on women and child health; and, if necessary, provide basic health care. A specialist NGO would be engaged to provide training to selected volunteers using course contents approved by the state health department. The project would also assist with refresher training and provide materials, a simple basic kit of equipment and supplies, to the trainee. The contents of the kit would be in keeping with practices approved by the state health department. As in the case of functional literacy, this provision would be available to a community only when there is demand for it and the community is willing to bear the cost of sustaining the activity after cessation of direct support under the project. A stepwise  -21- approach is envisaged with regard to the activities of the health worker whereby, after training, the focus of her work would initially be with the group. This would involve only a part-time commitment and, in the context of mutual help within the group, it is envisaged that no stipend would be necessary. As she gains in confidence and the value of her services is perceived by the wider community, her services would be extended to the community on a fee basis in response to demand. (ii) Child Care for Working Mothers. Under certain circumstances (e.g., where women are working some distance from their homes and the extended family network has broken down), and in response to demand, the project would make provision for child care facilities in order to enable women to engage in additional income generating activities. This would be done in a manner which is sustainable and does not impact negatively on the motivation and behavior of the group. First, SHGs would be encouraged to lobby for the extension of existing programs, such as the Integrated Child Development Services (ICDS) program or national/state creche programs to their village, or for their modification (e.g. in timings or location) to meet women's needs. Where an appropriate response is not forthcoming, the project provides for established SHGs (at least one year old) to receive assistance towards the honorarium of a child minder for two years on a sliding scale (90 percent in the first year and 60 percent in the second year). Thereafter, the SHG would take responsibility for financing this service. The project would also provide some initial equipment. The honoraria for the child minders would be on the scales and pattern of other schemes for creches/day care in the area. This provision would only be made available provided the SHG is willing and an agreement has been signed between the WDC and the group to meet the costs of sustaining the activity beyond the two year period. (iii) Assistance to Leverage Funds for Community Asset Creation. The project would assist communities to create needed assets such as drinking water facilities, sanitation, multipurpose halls (e.g., workshed/day care center) or acquire teaching/leaming materials for schools or pre-school groups. A fixed monetary sum of Rs. 60,000 would be provided per "natural village",7 which would be used to leverage resources in cash or kind from other development schemes as well as community contributions, so that the assets created under the project could be the nuclei of larger community development activities. This approach would avoid duplication of effort and promote convergence with on-going programs. For civil works, the project would fund 90 percent of the cost of the community project. The funds available to each village under the project may be spent on several items in small amounts, or all at once on a single major asset. Rehabilitation of a building which has been fully handed over the the women's groups by local bodies/government for their use would also qualify for project financing. A natural village is defined as a recognized, spatially distinct aggregation of households. An administrative village may comprise 2-3 natural villages.  -22- Once a community has agreed on a priority activity, a resolution would be passed by the concerned panchayats/local bodies to formalize the commitment to contribute funds and/or to assist in the creation/maintenance of asset(s) to be financed under the project. This information would be made available to the WDC for the preparation of an appropriate agreement specifying agreed arrangements for financing and operation and maintenance. Further details of the operational steps to be followed to utilize this assistance are given in Annex 10. In general, the choice and location for the asset creation activity wouuld be based on strengths of the SHGs, NGQs, and the WDC. More specific criteria to be used in allocating funds to selected activities would include: (a) SHG initiating the request to access funds has been in operation for a minimum of 12 months and is functioning harmoniously under the guidance of an experienced NGO (indicators of group viability and stability from the M&E would facilitate identification of groups which satisfy this criteria); (b) a process of consultation with the community to determine priorities for investment has been completed under the guidance of the participating NGO; (c) an agreement between SHG, Panchayat/local body Representative, District Manager/DDO/CEO, WDC and District Magistrate has been signed specifying arrangements for operation and maintenance of the asset once created to ensure funding and sustainability; (d) satisfactory arrangements for the procurement of civil works has been agreed with IDA; and (e) project supervision by IDA has indicated that WDC is performing well and without political interference. 2.21 At Negotiations, the government provided assurances that before providing assistance for social programs or for leveraging funds for community asset creation, WDCs would ensure that: (a) consultation with the community has taken place to prioritize activities to be supported under the project; (b) agreement has been reached with the community to support the health and child care programs after funding from the project has been withdrawn; and (c) an agreement has been signed specifying all sources of funding and operation and maintenance arrangements for the community asset to be created under the project. D. Component 4. Effective Project Management Systems (US$9.0 million; 17 percent of Base Cost) 2.22 The provision for project management would complement the overall institutional capacity building interventions described above and would be directed to the effective implementation of project activities with the support of a comprehensive concurrent Monitoring and Evaluation system.  -23- (i) Project Management (US$6.8 million; 13 percent of Base Cost) The project would strengthen the capability of the Department of Women and Child Development of the Ministry of Human Resource Development, Government of India (DWCD), to support the project by financing the establishment of a Central Project Support Unit (CPSU). Located within DWCD, the CPSU would comprise a Women's Development Expert, Project Implementation Expert, Finance/Monitoring Officer, two second level officers (accounts and establishment) and four support staff (two stenographers, one accounts assistant and one driver-cum-peon). Recruitment of these incremental staff would be in phases in relation to the increasing workload of the project and on such contractual terms as not to create any long-term liability on the part of GOI. The project would similarly strengthen the capabilities of the state WDCs to manage the day-to-day implementation of the project by providing support for incremental contract staff, necessary office equipment, vehicles, and incremental operating costs on a declining basis. The incremental staff would be the Project Director at the state level, and a District Project Manager and Business Development Officer in each district, together with supporting staff. In order to overcome the discontinuity in management of the WDCs which results from the high tumover of Managing Directors, the project provides for the hiring of key project staff (Project Director and District Project Managers) on an extended tenure (at least three years). To obviate delays in project start-up, recruitment of key staff for institutional strengthening and project management would be undertaken around the same time. The key staff would include: the Women's Development Expert and Project Implementation Expert for the CPSU, and the Project Directors, Training Coordinators, Finance Officer and District Project Manager for the phase I districts in the participating states. Appointment of key CPSU staff and completion of selection process for WDC staff would be completed prior to Negotiations. The WDCs would engage the Project Director as a consultant (Consultant Project Director) for the period until formalities for the longer term appointment are completed. More information on the proposed organization and management arrangements and Terms of Reference for the key staff are given in Annex 11. With the exception of appointment of the district level staff in Bihar who will be engaged by partner NGO, at Negotiations, the government provided assurances that WDCs would appoint: (a) the key staff including Project Director, District Project Manager for each Phase I district, Training Coordinator and Finance Officer, whose selection is to be completed prior to negotiations, would be confirmed in their respective positions by February 28, 1997; (b) other incremental staff comprising of Monitoring Officer, Marketing Coordinator, Communications Officer, Business Development Officer and support staff for Phase I district, would be confirmed in their respective positions by September 30, 1997; and (c) all district level staff for Phase II districts would be engaged six months prior to commencement of project activities.  -24- (ii) Concurrent Monitoring and Evaluation (US$2.2 million; 4 percent of Base Cost) Given the pilot nature of the project and the need to benefit from implementation experience, the project would finance the establishment of a system to assimilate the lessons emerging from project activities. A comprehensive Monitoring and Evaluation (M&E) system would comprise a computerized project management system (CPM), management information system (MIS), and concurrent monitoring and evaluation to assess implementation progress, quality of performance and sustainability on an on-going basis. Annual Action Plans would be developed from the CPM and these would reflect the actual status and performance of the project and lessons learnt from implementation experience. More information on the development of the CPM, MIS, and M&E systems is given in Annex 14. III. COST ESTIMATES, FINANCING AND DISBURSEMENTS A. Project Costs 3.01 Costs. Total project costs are estimated to be Rs. 2,322 million (US$53.8 million equivalent), including physical and price contingencies (US$2.5 million) and taxes and duties estimated at US$0.9 million equivalent. The direct and indirect foreign exchange cost is estimated to be US$1.6 million, or 3% of total project costs. Base costs are in June 1996 prices. Physical contingencies were applied to base costs at the rate of 10% for civil works, equipment, materials and vehicles, and 5% for training, study tours, NGO support, local consultants, contractual services, studies, surveys and workshops. The estimated costs of the project also include price contingencies8 (US$0.3 million) for expected price escalation based on a rate of 2.3% per year for foreign exchange costs, while for local costs, price contingencies were added at a rate of 7.5% for 97; 7% for 98; 6.7% for 99; 6.5% for 2000 and 6% for 2001 and'2002. Foreign exchange conversions have been calculated in accordance with World Bank guidelines, using the projections prevailing at appraisal. The project costs in the different participating states would be: Bihar - US$5.4 million; Gujarat - US$9.0 million; Haryana - US$4.9 million; Karnataka - US$9.0 million; Madhya Pradesh - US$8.5 million; Uttar Pradesh - US$14.7 million, and at the Central level would be - US$2.3 million. Details of project costs are given in Annex 1. The breakdown of project costs by components and categories of expenditures are summarized in Tables 3.1 and 3.2 below. S July 26, 1996, price contingencies provided by SA2CI were used.  -25- B. Financing 3.02 The proposed external financing for the project of US$38.7 million would comprise an IDA Credit of US$19.5 million and an IFAD loan of US$19.2 million (see Annex 1). This would finance 74 percent of the project costs net of taxes. If the institutional finance contribution to the project is excluded as it is not to be refinanced under the project, the total cost becomesUS$45.0 million, and the external assistance of US$38.7 million then represents 86 percent of the project costs. GOI would finance US$3.7 million (6.9% of project costs), including taxes of US$0.9 million. Institutional finance would cover US$8.5 million (16 percent of project costs) and beneficiaries would contribute US$2.9 million (5.4 percent of project costs). The financing plan is provided in Table 3.3. Compliance of the Borrower with all the conditions of effectiveness of the IFAD Loan agreement would be a Condition of Effectiveness of the IDA Credit. 3.03 The IDA Credit and IFAD loan would be made available on the standard terms and conditions to GOI, which would bear the foreign exchange risk. As a centrally sponsored project, the proceeds of the credit and loan would flow through MHRD/DWCD to the states as grant. Prior to Negotiations the DWCD would develop a draft memorandum of understanding specifying funds flow arrangements for the grant funds to be made available to individual participating states. At Negotiations, the government provided assurances that GOI would make part of the proceeds of the Credit available on a grant basis to WDCs under a Memorandum of Understanding, to be entered into between GOI and each WDC, which is satisfactory to IDA.  -26- Table 3.1 Rural Women's Development and Empowerment Project Project Cost Summary by Component --- Rs. USS % of - nmllion - - nillion - Base Cost Local Foreign Total Local Foreign Total Institutional Capacity Building for Women's Development EstablishmentofSelf-ReliantWomen'sGroups 317.3 1.5 318.8 9.1 0.0 9.1 18 Strengthening of Participating Agencies to Support 147.1 23.1 170.2 4.2 0.7 4.9 9 Women's Development 464.6 24.6 489.2 13.3 0.7 14.0 27 Support Mechanisms for Women Managed Income Generating Activities MobilizationofInvestmentFunds 413.7 - 413.7 11.8 - 11.8 23 Provision of Business Management & Technical 304.2 1.2 305.4 8.7 0.0 8.7 17 Support Services to SHG members 717.6 1.2 718.8 20.5 0.0 20.5 40 Mechanisms to Access Social Programs and 263.1 9.1 272.2 7.5 0.3 7.8 15 Leverage Funds for Community Assets Creation I/ Effective Project Management Systems Project Management 224.9 15.5 240.4 6.4 0.4 6.9 13 Concurrent Monitoring & Evaluation 75.5 - 75.5 2.2 - 2.2 4 300.4 15.5 315.9 8.6 0.4 9.0 17 Total Baseline Costs 1,745.7 50.4 1796.1 49.9 1.4 51.3 100 Physical Contingencies 73.0 2.8 75.7 2.1 0.1 2.2 4 Price Contingencies 435.0 15.5 450.6 0.2 0.1 0.3 1 Total Project Costs 2,253.7 68.7 2,322.4 52.2 1.6 53.8 105 1/ Only includes project contribution to cost of community assets Figures may appear not to add due to rounding  -27- Table 3.2 - Cost by Category of Expenditure (Rupee Million) (USa Million) 7. %Tota Foreign Bas Local Foreign Total Local Foreign Total Exchange Costs Investment Costs Civil Works 173.3 9.1 182.4 5.0 0.3 5.2 5 10 Equipment 27.6 4.9 32.5 0.8 0.1 0.9 15 2 Materials 131.2 - 131.2 3.7 - 3.7 - 7 Furniture 8.3 0.9 9.2 0.2 - 0.3 10 1 Vehicles 18.6 4.7 23.3 0.5 0.1 0.7 20 1 Investment funds 388.8 - 388.8 11.1 - 11.1 - 22 Training 304.9 - 304.9 8.7 - 8.7 - 17 Study Tours 38.5 17.2 55.7 1.1 0.5 1.6 31 3 NGO Services 132.0 - 132.0 3.8 - 3.8 - 7 Consultants 57.4 - 57.4 1.6 - 1.6 - 3 Contractual Services 130.1 - 130.1 3.7 - 3.7 - 7 Studies 38.7 - 38.7 1.1 - 1.1 - 2 Workshops 47.3 - 47.3 1.4 - 1.4 - 3 Reimbursement of PPF 8.8 - 8.8 0.3 - 0.3 - Total investment costs 1,505.2 43.0 1.1 4z 86 Recurrent Costs Incremental Staff Salaries 95.9 - 95.9 2.7 - 2.7 - 5 Operational Expenses 115.6 10.5 126.1 3.3 0.3 3.6 8 7 Building maintenance 7.5 - 7.5 0.2 - 0.2 - - VehicleMaintenance 11.9 2.1 14.0 0.3 - 0.4 15 1 Equipment Maintenance 9.6 1.1 10.7 0.3 - 0.3 10 1 Total Recurrent Costs 240. 17 2 0.4 7.3 5 1 Total BASELINE COSTS _ 1,736.3 50.4 1,78_ 4. 1 51.1 3 1WT Physical uontingencies 72.5 2.8 75 2 z.1 0.1 2.2 4 4 Price Contingencies 432.2 15.5 447.7 0.2 0.1 0.3 31 1 Total PROJECT COSTS 2,241.1 58.7 2,3U9.a 51.9 1.6 535 3 105 Figures may appear not to add due to rounding Table 3.3: Project Financing Plan (US$ Million) Local Foreign ital IDA 18.7 0.8 19.5 36 IFAD 18.4 0.8 19.2 36 GOI 3.7 - 3.7 7 Institutional Finance 8.5 - 8.5 16 Beneficiaries 2.9 - 2.9 5 Total financed 52.2 1.6 53.8 100  -28- 3.04 Funds would be released in advance directly to the project accounts of the state WDCs in four installments per year in accordance with the annual work plans and budgets. Upon receipt of funds from DWCD, the state governments would transfer their quarterly counterpart contributions immediately to the project accounts of the WDCs. Neither the first nor second installments transferred each year by DWCD would require utilization certificates for the prior project (or PPF) year but transfer of the third installment would be based on: (a) a careful review of project progress reports from the preceding fiscal year with a focus on consistency with project objectives and timely submission of withdrawal applications; (b) submission by the state WDCs of utilization certificates that provide evidence that previously released funds for the prior project (or PPF) fiscal year have been spent; and (c) budget outstanding adjusted to reflect project performance and unspent balances. At Negotiations, the government provided assurances that GOI would release about three months' anticipated project expenditures in advance direct to the project accounts of the WDCs (in accordance with the amounts established in the Annual Plans), with the first transfer being made within one month of project signing of the Credit/Loan; and from participating state governments upon receipt of funds from GOI, would transfer their quarterly counterpart contributions immediately to the project accounts of the WDCs. 3.05 The WDCs, as the main implementing agencies, would be responsible for developing the annual budget for all project activities in consultation with the participating agencies. The budget would be forwarded to DWCD for incorporation in MHRD's budget for the year and to the state government nodal department for inclusion of the state counterpart contribution in the state budget. Once the budget is approved, DWCD would release funds to the WDCs in a phased manner. All funds to the state level participating agencies would be routed through the WDCs, enabling the WDCs to check on the performance of each activity against the agreed work program. All participating agencies would furnish to WDCs the necessary details concerning their expenditure in an agreed format. WDCs would consolidate the information for transmission to DWCD to facilitate the preparation and submission of reimbursement claims to IDA/IFAD through the Department of Economic Affairs (DEA). C. Procurement 3.06 Procurement under the project would be undertaken by the state WDCs and, for the centrally managed activities, by the CPSU (DWCD). As a condition of Negotiations, the participating agencies would prepare a procurement plan for the first two years of the project. Many of the procurement activities under do not lend themselves well to aggregation for bidding as large single contracts. This is due to the widespread and decentralized nature of the activities that will be conducted in 35 districts of six project states throughout the five year life of the project. Table 3.4 summarizes the project items, their related cost estimates, and proposed methods of procurement. Further details of procurement arrangements are given in Annex 17. 3.07 Project-related procurement of goods would follow National Competitive Bidding (NCB) procedures acceptable to IDA using Bank approved bidding documents. Similarly National Shopping procedures acceptable to the Association would be used. Project financed consultants would be recruited according to the Guidelines on the Use of Consultants by World Bank Borrowers.  -29- Table 3.4 Procurement Arrangements (Total Costs in US$ Millions) Procurement Method National Competitive Other2 N.B.F. Total3' Bidding Civil Works" 5.8 5.8 (5.2) (5.2) Goods Equipment 0.3 0.8 1.0 (0.2) (0.7) (0.9) Furniture 0.3 0.3 (0.3) (0.3) Vehicles 0.7 0.7 (0.6) (0.6) Materials 4.1 4.1 (4.1) (4.1) Training and Consultancies Project Preparation & Implementation 6.8 6.8 (Includes Consultants, Contractual (6.8) (6.8) Services and Studies) Institutional Development 16.3 16.3 (Includes NGO Services, Training, Study (16.3) (16.3) Tours, and Workshops) Investment Funds 11.2 11.2 Miscellaneous Salaries of additional staff 2.7 2.7 (1.7) (1.7) Operational Expenditures 3.6 3.6 (2.1) (2.1) Building Maintenance 0.2 0.2 Equipment Maintenance 0.3 0.3 (0.2) (0.2) Vehicle Maintenance 0.4 0.4 (0.2) (0.2) PPF 0.3 0.3 (0.3) (0.3) TOTAL 0.3 42.1 11.4 53.8 (0.2) (38.5) (38.7) Note: Figures in parenthesis are the respective amounts financed by IDA/IFAD in the ration 50:50. Figures for civil works only represent project contribution to cost of community assets. 21"Other" methods include Force Account, Direct Contracting and Consulting Services. 3/Figures may not appear to add exactly due to rounding.  -30- 3.08 Civil Works (US$5.8 million). All the civil works would be for small and labor intensive constructions, financed under the community assets creation program. These works would be phased over the implementation period and spread over a large number of villages, scattered in 35 districts of six participating states, with an average project funding of US$1,800 per village. The works to be financed would consist of construction of either a drinking water well and/or hand-pump, community meeting place or other minor structures identified by the community based on demand. These works would be carried out using one of the following three methods: (a) community construction whereby the community would contract to undertake the work and would engage adequate technical supervision; (b) the community (or project authority where the community lacks adequate institutional capacity) would solicit quotations from at least three contractors to ensure competitive pricing since the nature of the work does not lend itself to an advertised bidding process; and (c) Force Account (this method would be limited to 10% of all civil works under the project). Designs and construction drawings for community meeting places would be prepared by qualified architects/engineers under the overall supervision of the WDCs. 3.09 Furniture (US$0.3 million) and Equipment (US$1.0 million). Furniture and equipment would be purchased on an annual basis in accordance with the phasing of project activities. Equipment consists of computers and office equipment with contract costs of less than US$10,000, and small items (other miscellaneous office equipment, agricultural tools and household level agro-processing equipment as demonstration models) with unit costs of less than US$500. Because of the phasing of project activities, only the purchase of computers and major items of office equipment (such as photocopiers) for project start-up in Year 1 would be procured through NCB (amounting to around 25% of total equipment purchases). Other equipment would be procured through national shopping with solicitation of price quotations from at least three bidders. Furniture, for which each contract is estimated to cost the equivalent of US$20,000 or less, would be procured through national shopping. 3.10 Vehicles (US$0.7 million). Procurement of vehicles would be phased on an annual basis over the first four years of the project in accordance with the requirements of project activities as additional districts are brought into the project. The majority of the costs are for jeeps to be used at the state and district headquarters. Because the project involves six states and 35 districts, no contract is expected to contain more than 5 vehicles, and the project does not lend itself to ICB or NCB. (Experience of other projects in India has shown that competitive bidding of small lots as either ICB or NCB has not yielded adequate vendor interest). However, purchases of vehicles would be bulked whenever possible and procured at the state level. The maximum size of contract is estimated to be around US$50,000. Procurement will be through national rate contracts entered into by the Directorate General of Supplies and Disposals (DGS&D) or local shopping procedures, comparing price quotations from at least three suppliers to ensure competitive prices. One of these quotations may be from the state level rate contractor. 3.11 Materials (US$4.1 million). Materials required under the project are of a diverse nature comprising a variety of different communications materials, inputs for crop demonstrations, ledgers, record books and cash/storage boxes for the establishment of the SHGs  -31- and materials requirements, e.g., books identified by communities under the community assets creation program. These materials would be purchased in small amounts throughout the life of the project. Procurement would be through local shopping procedures, comparing price quotations from at least three suppliers to ensure competitive prices, as bulking of requirements for NCB is not a practical solution. Each contract not exceeding $2,000. 3.12 Consultancies, Contractual Services and Studies (US$6.8 million). Consultancy services with consulting firms/individuals estimated at US$1.7 million and studies estimated at US$1.2 million would be contracted in accordance with the Guidelines for Use of Consultants by World Bank Borrowers. Documents used for inviting proposals, terms of reference for all consultancies and studies, and single source contracts would be subject to prior review for all contracts valued at US$100,000 or more to be awarded to firms, and at US$50,000 or more to be awarded to individuals. Contractual services estimated at US$3.9 million would comprise many small contracts awarded to individuals following state's procedures acceptable to IDA. 3.13 NGO Services, Study Tours, Study Tours and Workshops (US$16.3 million). NGO services (US$4.0 million) would be contracted in accordance with the Guidelines for Use of Consultants by World Bank Borrowers. NGOs would be selected in accordance with the criteria agreed with IDA (Annex 5). Most contracts for NGO services would be less than US$50,000. Study tours (US$1.7 million) and training and workshops (US$10.6 million) include expenses for WDC, NGO and other implementing agency staff, as well as SHG members over the life of the project. These would be procured using governmental/ administrative procedures acceptable to IDA. 3.14 Building Maintenance (US$0.2 million). Maintenance of civil works constructed under the community assets creation program would be financed by the communities. 3.15 Vehicle and Equipment Maintenance (US$0.7 million). Maintenance costs for vehicles (US$0.4 million) and equipment (US$0.3 million) estimated to cost less than US$25,000 per contract would be procured from local commercial suppliers of such services: (i) through direct contracting; or (ii) under quotations solicited from at elast three suppliers in accordance with procedures acceptable to IDA. 3.16 Other Incremental Recurrent Costs (US$6.3 million). Incremental staff (US$2.7 million) would be hired on contract and selected through open competition. Operational costs (US$3.6 million) would be incurred following standard GOS procedures. 3.17 IDA Review. All procurement for goods and works under contracts exceeding US$100,000 or more would be subject to IDA's prior review; in addition, the first three NCB contracts for goods in each state would be subject to prior review. Contracts for the hiring of consulting firms each costing US$ 100,000 equivalent or more, and contracts for hiring individual consultants each costing US$50,000 equivalent or more would be subject to prior review and  -32- approval by IDA. This would result in prior review of about 10% of all contracts. Contracts below the threshold levels would be subject to random post-review by visiting IDA missions. D. Disbursement 3.18 The IDA Credit/IFAD Loan would be disbursed in accordance with Table 3.5 below. Table 3.5 - Credit Disbursement Allocations by Category of Expenditure Category Amount of IDA Amount of IFAD Percentages of Expenditures Credit Allocated Loan Allocated to be Financed Civil Works US$2.5 million US$2.5 million 90% of costs Goods, equipment US$2.7 million US$2.7 million 100% of foreign expenditures, and vehicles 100% of local expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally Consultants, NGO US$10.9 million US$10.9 million 100% services, training and workshops, study tours, contractual services and studies Incremental staff and US$2.1 million US$ 2.1 million 90% of local expenditures for operating costs the first and second years, 70% of expenditures for the third year, and 40% of expenditures thereafter Reimbursement of US$0.3 million - 100% PPF advance Unallocated US$1.0 million US$1.0 million TOTAL US$19.5 million US$19.2 million 3.19 Disbursements are projected over a period of five years from January 1997. Proj ect completion is expected by December 31, 2001, and Credit closing by June 30, 2002 (see Annex 17). All requests for disbursements would be prepared by WDCs and reflect the implementation schedule specified in the Annual Action Plans. Incremental staff costs to be disbursed would apply to DWCD and WDCs. Disbursement for civil works packages exceeding US$ 100,000 equivalent and for expenditures on goods and equipment under contracts exceeding US$100,000 would be fully documented, as would disbursements for vehicles. For the consultants this limit would be US$100,000 for firms and US$50,000 for individuals. For all other expenditures, IDA/IFAD funds would be disbursed against statements of expenditures (SOEs) in an agreed format and in accordance with IDA's normal procedures for SOEs. SOEs would be certified by GOI as representing eligible project expenditures. Supporting documents for SOEs would be available for post-review by supervision missions and auditors, and retained  -33- by WDCs for one year after IDA/IFAD receipt of the audit report for the fiscal year in which the last withdrawal from the Credit account was made. The procedures for preparing SOEs would be: project expenses summarized monthly by WDCs and put under expense headings agreed with IDA, certified by the authorized officer and forwarded to the Controller of Aid Accounts and Audit at DEA within 30 days of each month-end. 3.20 Retroactive Financing and Special Account. To assist with project preparation activities and to expedite project start-up, IDA/IFAD would finance project costs incurred after June 30, 1996 and prior to signing of the Credit/Loan agreement up to a limit of US$2.0 million (US$ 1.0 million each from IDA and IFAD representing about 5% of the Credit/Loan), provided IDA procurement procedures were followed. The activities to be covered by retroactive financing would include: (a) purchase of foods; (b) engagement of NGOs and formation of SHGs; (c) training; and (d) incremental staff. The retroactive financing facility is being provided as the funds available under the PPF advance (para. 1.26) are inadequate to finance all pre- project activities. In order to facilitate timely payments of project expenditures, a Special Account amounting to US$2.0 million (US$1.0 million each from IDA and IFAD; equivalent to about four months expenditure) would be established by IDA in the Reserve Bank of India. The account would be replenished quarterly or when the account is drawn down to about 50 percent of the initial deposit, whichever occurs first. E. Accounts and Audits 3.21 Project expenditures incurred by each participating department and agency would be subject to normal GOI and state accounting procedures and controls. Project accounts would summarize project expenditures under categories to be agreed with IDA/IFAD showing: (a) actual versus planned expenditures for each month; (b) actual versus planned expenditures accumulated to date; and (c) how financed for the quarter and accumulated, by the Association and by the government. The summaries which would provide information for the SOEs would form part of the project accounts, including those expenditures for which reimbursement would be claimed with full documentation. The project accounts would be supported by a listing with the withdrawal applications submitted for the period. The Controller and Auditor General and his Accountant Generals at the state level would be considered acceptable auditors, and the audited project accounts and SOEs along with the auditor's reports would be submitted annually, to be received by the Association no later than six months after the end of the fiscal year. The Audit Report on SOEs would specifically comment on their usage and the controls established to ensure their accuracy. The Special Account, which would be maintained by the Department of Economic Affairs (DEA), would show all withdrawal requests disbursed, amounts advanced and reimbursed by IDA/IFAD, and balance at the end of each accounting period. The Controller and Auditor General would be acceptable auditors and reports would reflect the certification of the balance held by the Reserve Bank of India. The Audited Special Account and the auditors report thereon would be submitted annually to reach IDA/IFAD no later than six months after the end of each fiscal year. Each WDC would prepare a project report on a quarterly basis in a format to be agreed with IDA/IFAD, summarizing project progress in physical terms linked to financial terms. The financial terms would be based on the quarterly unaudited project accounts required above.  -34- IV. PROJECT IMPLEMENTATION AND MONITORING A. Organization and Management 4.01 Executing Agencies. The Department of Women and Child Development, Ministry of Human Resource Development, GOI (DWCD) would be the overall coordinating agency for the project. DWCD has obtained the necessary GOI clearances for the project to be a Centrally-sponsored project. Within the states, the nodal agency would be the Department of Women and Child Development in Madhya Pradesh, Karnataka and Uttar Pradesh; the Department of Social Welfare in Bihar and Haryana; and the Department of Industries and Mines in Gujarat. The Women's Development Corporations would be the executing agencies. In Uttar Pradesh the U.P. Land Development Corporation would be sub-contracted by the UP Women's Welfare Corporation to assist in implementation in 13 of the proposed 15 project districts. 4.02 Other Implementing Agencies. NGOs would have the major responsibility to form and sustain SHGs (see para 2.17(i)(e) and 4.08). Due to the multi-sectoral nature of the project, many of its activities would be implemented or back-stopped by cooperating institutions. In addition, private and public sector technical, design and marketing agencies would assist in the implementation of project activities, working under contractual arrangements with the WDCs. A list of agencies expected to assist with project implementation is given in Annex 8 for on-farm activities, and Annex 9 for non-farm activities. 4.03 Organizational Responsibilities. Project management would use and build upon existing government and NGO structures, modifying them where necessary to ensure adequate capacity to implement the project. Within DWCD, the lead responsibility for supporting the project would be given to an existing Joint Secretary, who would be assisted by a Central Project Support Unit (CPSU). In its role as the central coordinating agency, the CPSU would help to maintain and strengthen the decentralized nature of the project. To this end, its main functions would be to assist with capacity building in the participating states; to facilitate exchange of experience among the states and between them and relevant national and international women's programs; and to monitor performance of the project. 4.04 Within the states, the WDCs would be responsible for promoting, guiding, coordinating and monitoring project implementation. Overall responsibility for project execution would be vested in the Managing Director of the WDC. Project management would be integrated into the regular structure and functioning of the WDC, and would be modified as required to allow for the establishment of administrative, finance, marketing and training cells. WDCs would have a district implementing unit located in each project district. The only exception would be Bihar where participating NGOs would establish such units (see para. 2.2 (i)). A detailed description of the proposed staffing and functions of the CPSU and WDCs, and Terms of Reference for the key staff are given in Annex 11. 4.05 Banks would provide credit to SHGs through group loans to enable SHG members to engage in income generating activities. Private sector agencies would provide technical services  -35- (design, production technology, marketing) for the non-farm income generating activities selected and managed by the women. Line departments and other research and technology organizations would be the main source of technical advice for on-farm income generating activities, and for identifying and promoting appropriate labor saving technologies. An experienced management institute would assist in developing the conceptual framework for the M&E system, including the CPM and MIS systems. Experienced M&E agencies in each state would carry out the monitoring and evaluation and train the WDCs in the operation of the CPM and MIS. Annex 11 Attachment 2 gives more information on the specific responsibilities of the various participating agencies in relation to key project activities. 4.06 Coordination Committees. A State Project Steering Committee (SPSC) would be established, chaired by the Chief Secretary9 (or her/his nominee) and comprising experts drawn from official and non-official sources, including the partner NGOs and others with established reputations of working on women's issues or with technical expertise relevant to project implementation, e.g., micro-credit, micro-enterprise development, or appropriate rural technology. The role of the SPSC would be to provide overall guidance and support during project implementation and to enable the project to benefit from the knowledge and experience of outside experts to improve project design in the course of implementation. The SPSC would establish I0 expert groups as required to advise on specific aspects of the project e.g. the selection and capacity building of NGOs for implementation of project activities. The SPSC would be supported by a State Project Working Group (SPWG) chaired by the Secretary of the nodal department, to deal with operational details of coordination for effective project implementation. At the district level, linkages with the line departments and other support service providers would be achieved through a District Project Coordination Committee (DPCC) chaired by the District Magistrate (or her/his nominee). A Cluster Level Working Group (CLWG) would be established for a cluster of around 20 villages comprising SHG and NGO representatives, line department officials, bank managers and elected representatives. The main functions of the CLWG would be to: provide a forum for regular interaction between beneficiaries and project implementors to ensure the responsiveness of the project to the expressed needs of the beneficiaries; facilitate provision of the necessary support for the groups' economic and social activities; and establish linkages between the SHGs and the service providers required to sustain and further the development of SHG members in the long term. The SPSC, SPWG and DPCCs for the phase I districts have been established in all the states. B. Project Implementation 4.07 Project Phasing in Relation to Implementation Capacity and Performance.. Given the limited implementation capacity of WDCs and the need to orient intervenors to the project concept, pre-project activities are being undertaken during the six months prior to project effectiveness (see para 1.26). At the beginning of the main project, with the exception of districts under the management of UPLDC (para 2.07), activities in each state would be limited to one or 9 In Uttar Pradesh, the SPSC would be chaired by the Agricultural Production Commissioner. 10 Including experts from outside the state, if necessary.  -36- two districts and expanded in a phased manner in keeping with increasing implementation capacity of WDCs and NGOs. The readiness of each state to expand the program would be based on the feed-back received from the concurrent M&E processes (see also para. 4.26). The key considerations would include: (i) overall perfonnance of WDCs in coordinating project implementation; (ii) availability of trained WDC staff in new area to be brought under the project; (iii) availability of strong NGOs, and their ability to form functional SHGs using the agreed project concepts; and (iv) economic and social progress made by SHGs formed in the initial districts. At mid-term review, project funds would be reallocated from poorly performing states to those making good progress. 4.08 NGO Participation. NGOs would form SHGs and provide support to each group over a four year period. NGOs with experience of working with women's groups have already been identified to initiate the work in the pre-project and phase I districts. To ensure the selection of experienced NGOs for subsequent districts, the WDCs would be helped by experienced NGOs to identify local NGOs with the appropriate orientation to participate in project implementation. NGOs selected to work in tribal areas would be familiar with the specific tribal situations of the project districts and have prior experience of working with tribal communities. It is expected that the nature of the NGOs' involvement would change over time. Initially, an NGO would be mainly involved in SHG formation and, assist them to establish procedures for the management of group affairs, especially savings and credit operations. Thereafter, as the focus of the SHG moves to income generating activities, the role of the NGO would also change to facilitating linkages with banks and ensuring access to the necessary technical support services for these activities. If required, resource NGOs would also assist in orienting WDC, bank and line department staff to the SHG approach, and training them in participatory management practices. The WDCs have signed agreements with NGOs identified to work in the phase I districts in all states. 4.09 Strategy for Areas without NGOs. In areas without NGOs, the WDC assisted by experienced NGOs would identify socially motivated persons (e.g., field workers from the total literacy campaigns) about 6 months in advance of commencement of work. After an initial period of training, these persons would work with the experienced NGOs to gain practical field experience for about 6 months before returning to their "home" areas to start forming SHGs. During the first year of their independent operation, the experienced NGO would continue to supervise and support their work. In time, it is expected that these workers would be able to work independently like other small NGOs. An alternative approach to be piloted by the Haryana WDC would foster the formation of a registered society to be managed by selected field workers within the community. After training in the project concept and approach, the members of this society would take on the responsibility of forming SHGs, under the overall guidance of the DPCC and the WDC. It is also planned that during the later years of the project, possibly Year 4, mature SHGs (individually or through clusters/associations) would begin to take responsibility for some of the functions initially performed by NGOs and other agencies, e.g., group formation, marketing linkages (see Annex 6).  -37- C. Beneficiary Participation 4.10 Project preparation has involved a wide range of stakeholders, and the project design has been finalized after intensive consultations during pre-appraisal and appraisal. Further, given the project concept and approach, the implementation of all activities is founded on participatory processes (Annex 10). The exact contents of the project and pace of implementation of its program would be driven by SHG members and NGOs working with them. The SHG members would frame the operating procedures for the group, manage the credit operations and define the overall agenda of the group. Investments in community assets would be made on the basis of priorities identified in consultation with communities, and operationalized through the preparation of proposal by the NGO using a consultative process. SHGs would be involved in the concurrent M&E system and in the later years of the project, would get involved in the formation of new groups (Annex 6). These participatory processes would ensure that the special needs of all groups, including tribal women, are expressed and addressed by the project. D. Credit Financing and Lending Terms 4.11 Loans provided by the banks to SHGs would be based on the bank's assessment of the creditworthiness of the group and its track record of credit management. The lending institutions would be encouraged to provide cash credit arrangements for SHGs. This facility, although an established banking practice, has seldom been used to help SHGs but has been utilized successfully by a large number of groups formed under the UP Sodic Lands Reclamation Project. As the SHG progresses to more productive investments, it may request a term loan if more appropriate. SHGs would pay the prevailing inaterest rate to the lending institutions. The bank would determine the repayment period and schedule for the group loan in consultation with the SHG. Any policy changes resulting from the Bank's on-going dialogue with GOI on the Rural Financial Sector Reform Program which are relevant to this project would be made applicable to it's credit activities. Loans provided to the SHGs would be on-lent to SHG members in accordance with the rules and procedures established by the SHG members. Interest rates charged by existing SHGs are typically 2-3 percent per month. E. Training 4.12 Given the strong emphasis on capacity building, support for a comprehensive training program is a key activity under the project. The training inputs would be related to the evolution of SHGs and their activities as well as to the needs of intervenors. Early in Year 1 of the project, the WDCs would prepare an inventory of resource institutions/persons available to assist in meeting the project's training needs in their state. Networking with specialized training institutions and individuals, and the WDCs in the other participating states, would be encouraged. At the same time, the CPSU would work with the lead institution identified to organize a workshop to help the participating states to develop a training strategy and a broad plan to meet their individual needs. This training plan would identify modules for each type of training and would include information on the duration, location and agency responsible for providing the training. Based on this plan, each state WDC would prepare an annual training  -38- schedule to be updated regularly on the basis of feedback from the concurrent M&E findings. The WDC Training Coordinator would plan and coordinate the implementation of the training plan. 4.13 Based on the experience of other SHG programs, the focus during the initial 6-12 months of the project (start-up and early part of build-up phases) is expected to be on the WDC staff, NGOs and the SHGs in aspects related to SHG formation, participatory processes, thrift, credit and money management. In addition, during this period, training needs of banks and other line departments would also be supported with gender sensitization and communications modules receiving special attention. From the second to third year onwards (build-up to stabilization phases), the need for production and business development skills for SHG members to take up income generating activities would begin to emerge. The scope and intensity of the training program for these phases would be determined by the menu of options identified by the studies to be carried out under the project in support of income generation activities. (see Annexes 8 and 9). In sequencing training activities, further information on the approach and indicative areas of training for the participating agencies is given in Annex 12. Prior to Negotiations, the CPSU identified the lead training institution, viz. the National Institute of Public Cooperation and Child Development, to assist the participating states with developing a training strategy and a broad plan. F. Information, Communications and Learning from Experience 4.14 The process-oriented nature of the project calls for considerable support to be provided to its activities through information and communications efforts. Messages to be promoted would evolve in line with the progress of project implementation, focusing initially on promotion of the SHG concept and their role. A linkage would be created between the M&E system and the communications efforts so that the latter could address key issues in project implementation as they arise. The Information Officer in each WDC would take responsibility for identifying and liaising with agencies that could develop appropriate communications materials. Existing communications materials would be screened and evaluated for their suitability before new materials were commissioned. The communications strategy would encompass a range of activities and media, including production of printed material and films. The WDCs would produce a monthly newsletter focusing on issues, ideas and programs developed in each state to be distributed within the state to NGOs, SHGs and other project implementors and shared with other participating states. Further details on the information and communications strategy for the project are given in Annex 13. 4.15 Learning from Implementation Experience. The multi-state nature of the project provides the opportunity for states to share information with each other based on implementation experience. The project design allows for vigorous informal networking and inter-state workshops to be hosted by the states in rotation. Each workshop would focus on a particular theme in which the organizing state has particular expertise and/or experience to demonstrate. To benefit from the accumulated experience under the Sodic Lands Reclamation Project, the first inter-state workshop would be organized by the U.P. WWC at Lucknow, U.P. to coincide with the project launch. The theme and location of subsequent workshops would be  -39- decided by the participating agencies during inter-state meetings. Within a state, annual review workshops would be held at the state and district levels to provide for a project beneficiaries and implementors to jointly review project perfornance. G. Project Planning and Monitoring and Evaluation 4.16 An experienced lead agency would be hired by the CPSU to develop a comprehensive monitoring and evaluation system for the project, including design of the CPM and MIS, concurrent monitoring and evaluation processes, and impact evaluation. This system would be used by all the participating states who would hire an independent M&E agency initially to operate the CPMI/MIS and to undertake the concurrent monitoring and evaluation. In addition to designing the system, the lead agency would be responsible for transferring it to the project states, adapting it to their specific needs and overseeing its implementation. In addition, the lead agency would organize the base line survey and undertake the impact evaluation. The state M&E agencies would train the WDCs in the operation of the CPM and MIS systems so that they are gradually able to take over the monitoring role in support of project management. At Negotiations, the government provided assurances that DWCD would maintain policies and procedures appropriate to monitor and evaluate the implementation of the project on an on-going basis, and the achievement of its objectives in accordance with indicators agreed with IDA. 4.17 Computerized Project Management System (CPM). Given the process oriented nature of the project it would not always be possible to schedule project activities along a critical path much in advance of implementation. Nevertheless, in view of the involvement of a number of agencies in project implementation, and the need to introduce adjustments regularly based on implementation experience, the project would establish a CPM system to assist with planning and timely execution of project activities. The CPM would have a detailed work breakdown structure in which tasks would be scheduled over the life of the project and grouped according to the various participating agencies that would be responsible for implementing them. Each of these agencies would be involved in determining the likely implementation schedule. The CPM would permit milestones and targets to be established for each of the project tasks in terms of work completed, disbursements, or time expended. Real progress would be tracked against projected progress and delays and bottlenecks identified promptly. 4.18 Annual Action Plans. Action plans would be developed from the CPM. These would be adjusted as required to reflect actual field experience and progress as indicated by the concurrent monitoring and evaluation and by the proceedings of annual reviews and workshops. These plans would provide details of all the tasks to be undertaken during the year including timing, manpower and financial resources and expected outcomes. To ensure that the project remains responsive to the needs of SHG members, the Annual Action Plans would be revised in mid-year in the light of specific requests for assistance expressed by the SHGs. Prior to Negotiations, the CPSU and WDCs would prepare Action Plans for 3 months (January-March 1997) and for the Indian fiscal year 1997-98 (ending March 31, 1998). At Negotiations, the government provided assurances that starting on January 31, 1998, (a) DWCD would provide to IDA and IFAD, for review and conunent, a copy of the CPSU Annual Action Plan for the following Indian fiscal year; and (b) WDCs would provide to DWCD, IDA and IFAD for review  -40- and comments, an Annual Action Plan for the following Indian fiscal year prior to approval by the WDC Board and the nodal Department. 4.19 Management Information System (MIS). The computerised MIS would provide the data base for monitoring project performance and the essential inputs for the CPM. It will enable quick and timely identification of groups facing unsatisfactory savings, lending and repayment rates at the field level, as well as other information on group functioning and sustainability. It will also, on a regular basis, evaluate the overall financial performance of the project and monitor its evolution. In addition, it would provide information to the CPM on a continuing basis on problems in the availability of resources required to implement the project and thereby assist in avoiding significant delays in implementation. 4.20 Concurrent Monitoring & Evaluation. The prime task of the state monitoring teams would be to visit the field and interview the staff of the various implementing agencies and beneficiaries to develop an objective view of the progress that is being made, problems and constraints confronted, and whether or not the project goals are being achieved. Participatory monitoring and evaluation methods would be used so that SHG members can assess their own progress, e.g., in group functioning, in tracking the impacts of their actions in the family, group and community, and revise their strategies accordingly. The implementing NGOs would be instrumental in guiding the SHGs in these processes. Concurrent monitoring would be carried out every quarter and a monitoring report issued following every assessment. These reports would be discussed with senior WDC staff and World Bank supervision missions. The lead agency would review the monitoring reports from the participating states on a six-monthly basis to enable inter- state comparisons of project performance and to ensure consistency of measurement of the various indicators. These reports would be sent to the CPSU and shared with IDA and IFAD. Where necessary, more detailed studies on specific aspects of project implementation would also be undertaken. 4.21 Impact Evaluation. This would be undertaken by the lead agency, drawing on state level resources as required. The impact assessment exercise would involve: (a) collection of baseline data on a sample of SHG members representative of the different socio-economic and ecological situations in the states, together with collection of data on a control group; (b) development of participatory impact evaluation mechanisms involving the beneficiaries; (c) periodic field surveys to determine the impact of project activities on the beneficiaries' quality of life and their perceptions on the adequacy of project design, and the effectiveness of project implementation; (d) annual review workshops involving beneficiaries; and (e) studies on specific aspects of project impact.  -41- H. Project Performance Review 4.22 Reporting. The WDCs would be responsible for internal reporting requirements. They would submit quarterly and annual reports to DWCD and IDA and IFAD on the project's implementation progress. Similarly, CPSU (DWCD) would produce quarterly and annual progress reports on activities being coordinated directly by the center. Additionally, CPSU (DWCD) would be responsible for an annual consolidated progress report synthesizing information on the whole project, especially reports of the lead M&E agency and submit these to IDA and IFAD within thirty days of the end of the reporting period. A suggested Table of Contents for the quarterly and annual reports is given in Annex 16, Attachment 1. At Negotiations, the government provided assurances that starting from April 30, 1997: (i) quarterly and annual reports would be submitted by WDCs and CPSU to IDA and IFAD; and (ii) starting April 30, 1998, an annual reports synthesizing overall project progress would be submitted by CPSU (DWCD) to IDA and IFAD within thirty days of the end of the reporting period setting out the measures recommended to ensure efficient implementation of the project. 4.23 Mid-Term Review. By September 30, 1999, GOI, the States and IDA and IFAD would jointly carry out a detailed Mid-Term Review of the project. The review would focus on the quality of group formation; performance of SHG credit operations, particularly on repayment performance, uses of credit, linkages with lending institutions and sizes of loans received; performance of NGOs in forming and supporting the groups; uptake of income generating activities and the adequacy of support provided to the SHG members, for on-farm and non-farm activities; and progress with the social programs and community assets creation, including types of investments requested and suitability of the implementation arrangements. A detailed assessment of the performance of the project's M&E system would also be undertaken as part of the Mid-Term Review. Various studies would be undertaken prior to the Mid-Term Review to facilitate these processes. At Negotiations, the government provided assurances that by September 1999, GOI (DWCD) and state governments (WDCs) jointly with IDA and IFAD would undertake a Mid-Term Review of the project and agree on an action plan to implement its recommendations. 4.24 Completion Report. A project completion report would be prepared by the WDCs using Bank guidelines and submitted to IDA and IFAD within six months of the closing date of the IDA Credit and IFAD loan. I. Project Supervision and Performance Indicators 4.25 Project Supervision. The project supervision strategy would put strong emphasis on learning from implementation experience and, if appropriate, to modify project design/implementation approaches. This would require intensive supervision, especially during the early years of the project. Responsibility for mandatory supervision would be shared between the CPSU, WDCs and IDA. IFAD would join IDA supervision missions at regular intervals. The management and concurrent monitoring and evaluation systems, including MIS and CPM, and reviews, special studies and reporting procedures proposed for the project would  -42- provide valuable inputs for effective supervision. In addition, participating NGOs, operating at the grassroots level, would assist by providing feedback to other project implementors, especially WDCs, on the views of SHG members on the performance of project activities. The project's supervision would also benefit from interactions between IDA and the members of the UN Inter- Agency Working Group (IAWG). This group meets in Delhi regularly to coordinate activities and share experiences, and is also extended to include representatives of bilateral donors who have on-going gender related activities. DWCD and WDCs and IDA supervision missions would liaise with implementors of bilateral projects to share experiences and coordinate efforts where appropriate. More information on supervision plan is given in Annex 16. 4.26 Performance Indicators. The impact of institutional strengthening would be expressed through sustainability of SHG activities, especially those related to financial aspects and the effectiveness of the support provided by the intervenors (WDCs, NGOs and line departments). Support for women-managed income-generating activities would be expressed through credit mobilization and its utilization pattern and income/resource control by women; social investments would be expressed in percentages of members (and family members) accessing health and education services and patters of time utilization; and strengthening project management systems would be expressed in the overall performance of the project and assessment of welfare/ empowerment related outcomes for women. A detailed matrix showing expected outcomes and impacts of various inputs in relation to project objectives is given below.  -43- Summary of Key Objectives and Performance Indicators Objectives Inputs Outputs Risks and critical Outcomes and Impacts (Resources provided (Goods and services assumptions (of project activities) for project activities) produced by the (Outcome dependent US $'000 project) on..) Strengthen IDA: 5,666.9 No. of groups formed Finding adequate no. of Group level sustainability: institutional capacity IFAD: 3,777.9 Average no of NGOs with experience in * Drop out rates by State GOI: 127.9 members per group SHG formation * Volume of savings a)Establishment of * Average loan size self help groups Institution level Financial sustainability: * Repayment rates * Portfolio at risk rate * Loan loss rate * Administrative costs as % of loans disbursed b)Sensitization and IDA: 2,540.5 Appointment of: Lack of relevant Effectiveness of training: capacity building of IFAD: 1,693.7 training officers for expertise for gender * % of members maintaining all project affiliates State GOI: 688.4 gender sensitization of sensitivity training and systematic records of (WDCs, NGOs, banks and other depts effective project accounts banks, line depts, and for use of coordination * No. of groups formed by SHGs) participatory methods existing mature groups for training trainers and SHGs Support women IDA: 443.7 No. of groups linked Lack of responsiveness * Credit mobilization ratio managed income IFAD: 295.8 with banks or other of banks or other fin. * No. of SHG members generated activities Inst. fin: 8,528.8 financial institutions institutions for providing receiving loans for IGA and by a) Mobilization Benef. amt: 2,698.8 for group loans source of loan of investment funds * cash-credit limit * group term loan b)Provision of IDA: 5,387.7 % of clients linked to Lack of support from Proportion of loans used for business mgt. and IFAD: 3,591.8 extension services for technical line depts for IGA versus consumption technical assistance assistance in on farm IGA purposes to SHG members activities Lack of gender specific Increases in income from IGA. % of clients receiving components in IGA Income and resource control help for identification identification and (including time allocation for of IGA and product marketing different tasks) within the marketing Time and labor household constraints for clients Provide social IDA:4,812.4 % of groups with Lack of support from % of members investments to IFAD: 3,208.3 * access to health technical line depts * accessing health and family facilitate access to Ben. amt: 216.7 services and and/or NGOs for services for self and a)Access to social literacy provision of social children programs * child care services * sending children to school b)Leverage funds facilities * spending more time in for community asset * established production activities creation priorities for * (esp. members with young community needs children)  -44- Objectives Inputs Outputs Risks and critical Outcomes and Impacts (Resources provided (Goods and services assumptions (of project activities) for project activities) produced by the (Outcome dependent US $'000 project) on..) Project CPM-MIS IDA: 4,193.6 Design, development Insufficient capacity * % of groups with IFAD: 2,796.6 and implementation (personnel and other unsatisfactory repayment State GOI: 1,319.4 of CPM-MIS in states. inputs) to implement the rates receiving feedback GOI: 392.4 Quarterly, half-yearly CPM-MIS. and help and annual reports * Extent of integration of feedback on various components of implementation in annual action plans Impact evaluation Baseline surveys for Assessment of assessing project welfare/empowernent related impacts outcomes for clients: Follow up surveys at * Income control within the midtermn and household completion of project * Decision-making power reg. expenditures within the household * Member participation in political processes in the community V. PROJECT IMPACTS AND JUSTIFICATION A. Production and Marketing 5.01 Production. Since the project is not a conventional production oriented project, it is not possible to quantify the aggregate incremental production. However, an indication can be given of the production increases likely to accrue from some of the activities which the women are likely to take up. For typical rainfed crops, per hectare production is expected to increase from 0.48 mt to 0.8 mt for sorghum; from 0.12 mt to 0.3 mt for pulses and from 0.5 mt to 0.9 mt for chillies, whilst for irrigated crops, per hectare production is expected to increase from 1.8 mt to 3.5 mt for paddy and from 0.8 mt to 2.0 mt for wheat. 5.02 Marketing. Agricultural products would be sold principally on local markets. At present, target group households are open to exploitation by traders on whom they depend for credit. With loans available through the SHGs, women would be freed from these tied arrangements. They would also be encouraged to use loans available to delay sale of crops beyond the immediate post-harvest period when prices are depressed, and thus would benefit from the higher prices prevailing at other times. In addition, WDC district staff and NGOs would encourage women to form inter-SHG commodity groups/producers associations which would facilitate group marketing and increase their bargaining power with traders. 5.03 Marketing of the products of non-farm enterprises has posed major problems in the past. Under the project, the situation would be improved through extensive market surveys to identify those products with genuine market potential, and to identify market outlets. Marketing  -45- consultants will also be engaged to assist the women to establish linkages with the market outlets and negotiate suitable contracts. B. Project Benefits 5.04 Immediate benefits would be seen in: (a) the creation of women's self-help groups and their ability to control income and their own development; (b) enhanced involvement of women in economic activities due to improved access to funds from their own savings and integration into mainstream credit delivery mechanisms; (c) improved management and technical skills; (d) improvements in women's health and reduction of their drudgery; and (f) strengthening of key support agencies enabling them to be more effective in addressing women's needs. Longer term benefits for women would include: (i) increased self-reliance and self- confidence to address their constraints and increased ability to mobilize various public and private sector services for their benefit; and (ii) improvement in their social status in the family and community. It is estimated that the project would assist in the formation of about 7,400 groups benefiting around 130,000 women. C. Economic and Financial Analysis 5.05 Economic Analysis. Given the multi-faceted nature of the project, many of the benefits are not readily quantifiable. The quantifiable benefits relate to project support to increase women's involvement in income generating activities. However, given the flexibility in the credit mechanism and the freedom of choice to be exercised by women in the selection of economic activities, quantification of these benefits involves a high degree of approximation based on assumptions on the proportion of loans given for consumption, social or productive purposes; the rotation of investment funds; and the extent to which project loans replace existing, more expensive sources of credit from the informal sector. Data from the experience of existing SHGs have been used to derive a set of assumptions for the analysis. The analysis assumes: (a) that a range of income generating activities is likely to be taken up by women, with a mix of 85 percent on-farm and 15 percent non-farm activities; (b) the percentage of lending from the group which generates incremental economic benefits would increase from 15 to 40 percent as the group matures; and (c) the rotation of investment funds decreases from 2.0 to 1.5 times per year. All the project costs for direct support to income generating activities have been included in the analysis and it is further assumed that 50 percent of the costs of capacity building of the groups and project implementors, including project management, have a direct impact on the involvement of women in income generating activities. Other assumptions applicable to analysis are: (a) all costs and benefits are in constant June 1996 prices; (b) reference prices for main crops and fertilizers are based on estimated world reference prices adjusted to average project area farm gate values; (c) for other commodities not internationally traded financial prices are adjusted by the Standard Conversion Factor used for India of 0.9;  -46- (d) project costs and benefits streams are extended over 10 years; (e) opportunity cost of capital is 12%; and (f) project implementation is over five years. On this basis the project yields an economic rate of return of 25 percent and net present value of US$7.8 million. 5.06 Sensitivity analysis. The project is more sensitive to the performance of investment activities taken up than to variations in the overall pattern of lending, as shown by the results of the sensitivity analysis given below: EIRR (