1. Community Driven Development: The Experience of PNPM When unleashing the power of communities, what happens next?

2. Community Driven Development: The Experience of PNPM When unleashing the power of communities, what happens next? Jan Weetjens Social Development Sector Coordinator Indonesia February 25, 2011, 12:00 PM Knowledge Series – Emerging Indonesia MC3-101 The World Bank, Washington DC

3. The Central Idea Empowering communities to…  Determine their own development priorities  Provide resources directly for community decision and control  Take charge of implementation  Hold authorities accountable to ensure better development results

4. Key Premises  To the extent communities are well informed, they are best placed to determine their development priorities  For those areas that have sufficient capacity, communities are best placed to implement  Direct control of communities over resources contributes to better governance  Those who deliver services perform best when they are (also) accountable to beneficiaries  But don’t underestimate the need for information  But don’t underestimate the extent of the capacity of many communities  But don’t underestimate challenge of capture by local elites  But don’t underestimate the challenge of realigning incentives for service providers

5. Cluster of PNPM Programs PNPM Mandiri SPADA US$ 104 m PNPM Urban US$ 915 m Pilots: Generasi (3 MDGs) Green R2PN Local and Other Programs: RESPEK (Papua) BKPG (Aceh) Justice for Poor PNPM* Rural US$ 3.1 b RIS US$ 134.2 m RISE US$ 252.2 m SPADA: Support for Poor and Disadvantaged Areas RIS: Rural Infrastructure Support RISE: Regional Infrastructure for Social and Econ. Dev R2PN: Rehabilitation & Reconstruction Program in Nias *PNPM-Rural now covers 75% (5000) of total sub-districts covered by PNPN (6600). 80% of the total PNPM budget is for PNPM-Rural.

6. Key Features of PNPM-Rural The program provides an unearmarked budget - an annual Block Grant to sub-districts (kecamatan) for “open menu” use (except for items on a small “negative list”); The Block Grant can disburse when villages agree on priorities for funding (against village proposals); There is a direct transfer of funds from the government treasury account to the community organization account at the sub-district level (UPK); UPK channels the fund to village implementation committee based on the work plan and progress; Accountability procedures are set and agreed upon; The local gov’t contribution to the Block Grant budget is a requirement but completely up to them… they have the autonomy to refuse to participate in PNPM.

7. How PNPM-Rural Works Agree on 3 proposals (2 from women) to be brought to the inter-village forum meeting Agree on 6 village reps (3 women), proposal writing team & candidate for UPK (FM/implementation committee) staff Agree to provide opportunity for women to express needs through specific women's forum and agree on gender balance for facilitators Village Meetings Village proposals discussed and ranked after “verification” I-V Forum Head & Secretary elected UPK management staff (re) elected Using standard templates and local unit cost surveys, detailed (engineering) designs and cost estimates prepared Villagers involved in the process consult and approve Final decision made on funding/amounts for prioritized proposal I-V Forum meeting reps elected for Kabupaten Planning Forum or Musrenbang deliberation. Implementation begins Inter-Village Priority Meetings Design & Cost Write-up Inter-Village funding Decision

8. How PNPM-Rural Works Design & Cost Write-up Poor villagers must directly benefit as labors/suppliers Transfer of funds from UPK to TPK in accordance with work progress. Facilitators must supervise. Implementati on of Sub- projects Cost survey of materials and equipment (min. 3 sources) Conduct village bidding for procurement of materials above Rp.15 million. Wholesale contracting is not allowed. Village Accountability Meeting (2X) Establish O&M team. Villagers agree on operation and maintenance (estimated) budget and SOP Formation, Operation & Maintenance Team

9. Expenditure & progress Report Withdrawal Request & Financial Statement 3 stages: 40%-40%- 20% Workplan & progress based Replenishement How Funds Flow in PNPM-Rural

10. Transparency and Accountability A collaborative program with 149 community radio stations is aimed at providing a two-way communication channel among community and PNPM implementers. People are encouraged to voice their opinions and complaints, as well as report corruption cases. After a physical project is fully constructed, a community meeting is organized to hand over the project. This picture shows such a meeting that handed over a completed bridge constructed between villages

11. Anti-Corruption Efforts Local control of funds Competition Social controls Code of Ethics Complaint handling Media and NGOs Audits Sanctions Use of formal judicial system The key features of anti-corruption efforts and fiduciary control mechanisms in PNPM-Rural result from ten years of “learning by doing” and build on the results of specific research and evaluations conducted as part of the program:

12. PNPM as part of the GOI’s Poverty Strategy Cluster I: Social Safety Net and Social Protection. Programs: Rice for the Poor (Raskin), School Operation Support (BOS), Health Security for the Poor, Cash Transfers, and other social programs (for post-disaster & marginalized groups) Cluster II: Community Empowerment = PNPM Mandiri Cluster III: Strengthening small and micro enterprises - Kredit Usaha Rakyat (KUR), Pengembangan Usaha Agribisnis Perdesaan (PUAP)

13. Growth of PNPM-Rural Admin. Level19981999-20032004-2008200920102011 District105348335342390391 Sub-District5012,6682,2303,9054,7356,020 Village3,52542,31934,03250,20160,45862,937 Total figures above include special program such as RESPEK for Papua and Papua Barat Provinces and R2PN for Nias Island, as well as other supporting programs within PNPM-Rural. Source: PNPM-Rural Annual Report 2009 and GOI Book for Location and Allocation 2010, 2011.

14. Growth and Scope In late-2006 the GOI decided to integrate a nationwide CDD program into its poverty reduction strategy based on the KDP/UPP model. A massive scale-up ensued and PNPM now encompasses: 60,000+ villages; 11,000+ facilitators and consultants from sub-district to national levels; 100,400 village community empowerment cadres (village facilitators); US$2 billion disbursed each year from all sources; 50,000 sub-projects implemented yearly by local communities; US$25 million spent each year for community training activites. Budget allocation in Medium-Term Expenditure Framework through 2014.

15. PNPM Support Facility (PSF) Objective and activities The PSF assists the GOI in providing effective leadership and management of PNPM by: Ensuring better coordination among development partners and across grants supporting PNPM; Developing capacity at all levels to plan, manage, and improve poverty reduction programs; Reducing poverty through government and civil society partnerships, and through innovative pilot programs that address emerging needs; Supporting high quality supervision and M&E efforts. Strong donor support (total pledges of US$187.8 million) Netherlands Denmarks Australia United Kingdom USAID Additional support: CIDA IDB ADB JICA

16. PSF Structure

17. PSF Model Analytical work Design Test Measure Bring to scale (e.g. Generasi, J4P) Policy Dialogue (e.g. Local Government) Spin Off (e.g. Aceh CPDA, ViCIS) Discontinue (e.g. SADI) Implementation Support

18. PNPM: Outputs (1998-2009) Infrastucture 53,271 km of roads built or upgraded 11,324 bridges built or reconstructed 17,972 clean water supply systems built 10,184 sanitation units built 12,770 km of irrigation systems constructed 1,759 public markets built or repaired 1,693 rural village electrification activities funded 6,896 village health centers supported 10,717 schools built or reconstructed 118,791 scholarships sponsored Revolving Funds 2,255,607 loan recipients Repayment rate of savings and loan groups is above 90 percent Employment and other Benefits to over 35 million villagers 87.06 million workdays generated from infrastructure projects 7.8 million people employed through sub-projects Female participation rate is 47 percent, above target of 40 percent

19. The Last Bridge Standing In the affected area where all houses were destroyed because of the earthquake that hit Padang on September 30, 2010, bridges built under PNPM-Rural survived the disaster. PNPM-Rural has supported the building or reconstruction of more than 11,000 bridges by communities.

20. Enabling School Attendance In East Sumba, PNPM Generasi funds enabled the purchase of boats, allowing the children to attend school and the midwife to make regular visits to outlying hamlets. Previously the children swam to school every day or had their parents swim them across on their backs. In PNPM Generasi the size of Block Grants is determined by communities’ results on health and education indicators.

21. Electricity for Remote Villages PNPM-Rural has funded 1,693 rural village electrification activities. “We have asked for an electricity network so many times to the state-owned electric company but they always answer with ‘later, later and later.’ They built electricity poles in the 80s, but the electricity never comes. Luckily, there is Rural PNPM Mandiri which helps us to build a micro hydro electricity supply in our village.” - Gafar Kahar, Village Head of Balayon, Liang Sub-district, Luwuk, Central Sulawesi

22. While 80% of PNPM funds are used for infrastructure development, groups of women in East Java, most of whom are illiterate, proposed using funds for conducting PAP SMEAR check-ups. A community meeting at the sub-district level approved the proposal that allowed 79 women to get check-ups. The check-ups detected infections and followed up with consultations at the nearest hospital. More than 6,700 activities funded by PNPM are related to health and almost all of them were proposed by women. Medical Check-Ups

23. Papua & West Papua (PNPM-RESPEK) Local Government Initiatives Aceh (PNPM-BKPG) Local governments use their own resources to complement PNPM block grants: Papua and West Papua: US$39.2 m Aceh: US$96.2 m

24. Adiya Kashtsetseg, Project Director of Sustainable Livelihood Project (SLP) in Mongolia: "We are interested to study National Program of Community Empowerment (PNPM) Mandiri in Indonesia. We want to study budget decentralization as it has been implemented in Indonesia." Sharing Lessons with Other Countries … with Mongolia, Kenya, Haiti, Timor Leste, etc. Delegation leader Jean Alix Nicolas from Haiti’s Bureau of Monetization of Development Assistance Programs: “We would like to learn from all of you (Government of Indonesia), how your country recovered from the disaster and how you rebuilt damaged houses in a very short period of time.”

25. PNPM Generasi Incentivized block grant program targeting 3 MDGs lagging in Indonesia: 1.Reducing child mortality 2.Reducing maternal mortality, and 3.Ensuring universal coverage of basic education Communities and local service providers target demand and small supply-side constraints to improve access to and use of health and education services. Block grant funds earmarked to target poor and marginalized who do not use health and education services. The main long-term impact was a decrease in malnutrition (12 percent reduction from baseline levels); Performance incentive improved program effectiveness in health, but not in education; Increased community efforts at health service provision and community participation in education and health programs.

26. Green PNPM Five-year (2008 – 2012) pilot project of PNPM-Rural designed to further integrate environmental issues in the CDD planning and implementation processes; Supplemental block grant funds are disbursed to target locations specifically earmarked for community investments in ‘green sub-projects’ focused on natural resource management (NRM), environmental conservation, and renewable energy (RE); TA delivered to communities through the pilot-project’s support of local and international NGOs in target locations on Sulawesi and Sumatra Islands; Block grants have funded over 1,500 ‘green sub-projects’ – including 86 decentralized micro-hydro power (MHP) facilities which will provide electricity to 10,000+ households.

27. Justice for the Poor Legal education highlighted needs for improved legal identity (e.g., marriage, divorce, birth certificates) to allow female headed households, often among the poorest, to access state resources such as cash transfer schemes and free health care for the poor. One-third of women surveyed who were living below the poverty line could not access one or both of the above state services. This recognition led (with AusAID support) to targeted advocacy and improved service delivery from the Supreme Court, which revised its national policy to increase circuit courts and funding for need-based legal aid.

28. Addressing and Preventing Conflict After the signing of the peace agreement in Aceh, the PNPM’s facilitators network was used to conduct an assessment of post-conflict reconstruction needs. PNPM helped the Aceh Reintegration Board in delivering US$20.4 million in assistance to over 230,000 conflict victims in one-third of Aceh’s villages (BRA-KDP). This was the first attempt at testing the suitability of PNPM as a delivery channel for post-conflict recovery assistance. Support to Bappenas in the formulation of its Grand Strategy for Conflict Prevention and Peaceful Development 2010-2014. The Violent Conflict in Indonesia Study (ViCIS) is building the most comprehensive database on violent incidents in Indonesia to date (150 newspapers; 1998-2008; six provinces completed and 10 more ongoing) to inform policymaking.

29. Revolving Loan Fund (RLF) Only 11 % of poor household have access to credit from formal financial institutions. >50% have no access to credit from any kind of financial services; PNPM helps the poor by providing non-physical collateral loans to small business who otherwise un-able to access credit from formal financial sector; Over the past 10 years, the RLFs operating under PNPM, have grown to reach an estimated 2,535 RLFs with accumulated assets of IDR 1.72 trillion (US$191 million); The RLFs serves almost 190.000 groups (majority is women) which has reached at least 1,3 million individual borrowers. Moving forward Developing a clear policy and strategy by supporting the transition of the RLFs from being a government-backed scheme to becoming operationally and financially independent microfinance institutions to ensure access to financial services for unbanked populations; Long term sustainability of RLFs operations through capacity building and stronger linkage with commercial financial sector

30. Other PNPM Programs Ongoing Pilots and Supporting Programs PNPM Peduli: to be launched on Mar 2011 R2PN (Rehab. & Reconstruction Program in Nias): Feb 2007-June 2011 PAWE (Papuan Women Empowerment Project): May 2009-May 2013 PEKKA (Women Headed Household Program): since 2000 Empowering Women Overseas Migrant Workers Project: Apr 2010-Dec 2012 Local Government - Pro Poor Planning and Budgeting Scaling Up Plan: Jul 2010- Jun 2011 P2SP (Participatory Development System Program): since 2006 PNPM Post-Disaster (special activity) Completed Creative Communities: May 2008-Feb 2010 PNPM SADI (Small Agribusiness Development Initiative): Dec 2008-Dec 2009

31. Impacts and Lessons Learned Infrastructure Delivery, Economic Welfare and Access to Services 1. PNPM is an effective infrastructure delivery mechanism produces high quality, cost-effective village-level sub-projects: Economic rates of return average ~52% Cost of construction 55% of standard contracted budget 94% of sub-projects fully functional after construction 2. PNPM increases household welfare and moves households out of poverty: Consumption gains 5-7 percentage points higher and probability of transitioning out of poverty higher in PNPM areas 3. Impacts are strongest in poor and remote areas: The largest gains in terms of EIRR, household welfare and transition out of poverty occur among poor households and in poor and remote areas. 4. Poor and marginalized groups (e.g., female-headed households, households with low levels of education) do not see significant benefits from the project.

32. Impacts and Lessons Learned Access to Services and Employment Opportunities No impact on access to education (enrollment and drop out rates) Significant impact on access to outpatient health services Smaller impact on reducing unemployment Social Capital and Governance 1.PNPM has created strong culture of participation, transparency and accountability within the PNPM program: Participation of women and the poor ~45% High satisfaction from project beneficiaries ~95% 2. Beyond PNPM, higher degree of participation and peaceful problem solving. However: PNPM approach/procedures do not spill over into planning and implementation of other village and LG development activities.

33. Impacts and Lessons Learned 3. Community Perception of PNPM not pro-poor targeted: In contrast to household-targeted programs (BLT, RASKIN, etc.) PNPM-Rural is not viewed as a poverty program, but one designed for the entire community; Projects selected by the community are not always in line with needs of poor households, particularly in areas with good existing infrastructure; PNPM is most likely effective in areas where existing infrastructure is inadequate, leading to closer alignment between interests of the poor and the overall community (e.g. road/bridge enabling quicker access to local markets, irrigation). Broader Impacts Rural PNPM forums reduce conflict; No serious environmental impact or safeguards issues; PNPM-Rural serves as an effective for responding to economic crisis and natural disasters.

34. Main Challenges Weak institutional capacity at the central level Private sector staff to deliver program on the ground Fiduciary aspects Key actions to strengthen controls and systems to detect and act on fraud and corruption Reaching most vulnerable and marginal groups Working through Civil Society Organizations Multiple PNPM Programs Clarify integration agenda: what does is mean for facilitators, participation process, block grants?

35. Future Strategic Directions The five main strategic issues that have emerged include: 1.Integrating the GOI’s various CDD programs within “Cluster 2”; 2.Adjusting the core PNPM model to different kinds of poverty (e.g., female- headed households, within wealthier areas, etc.) across Indonesia’s diverse regions; 3.Achieving great efficiency gains through enhanced management, supervision, and monitoring systems; 4.Using the social capital and community planning processes created through PNPM to strengthen the downward accountability of local government; 5.Strengthening the collaborative “handshake” between PNPM and sector service delivery that can result from identifying and aggregating community priorities within specific sectors.

36. PNPM website www.pnpm-mandiri.org Thank you for your interest! Terima kasih!