1. Introduction to the Performance Based Allocation System Smallholder Agriculture as a Business: Legal Dimensions of Building Inclusive Value Chains April 2011

2. PBAS: Objectives  to have a transparent rules-based approach to resource allocation;  to provide a performance incentive for member countries, particularly in regard to the quality of policies and institutions in the rural sector; and,  to allocate resources according to need when countries perform equally well.

3. Decisions Taken and Progress Made  Feb 2003: Governing Council approves the Consultation Report including the establishment of PBAS;  Sep 2003: EB approves the operational framework);  April 2005: EB approves first set of loans and country grants developed under PBAS;  Feb 2006: Governing Council approves Consultation Report for the uniform system of allocation across the lending programme beginning with the 2007 programme of work;  April 2006: EB approves modification in weight given to population and introduction of rural population; and,  April 2007: EB approves introduction of Debt Sustainability Framework (DSF).

4. Countries Included in Allocation Periods  2005-07: 119 countries (36 minimum allocation);  2007-09: 90 countries ( 9 minimum allocation); “Active” countries: where IFAD expected to have new lending or DSF grant operations in 2007-2009; PBAS 3 year allocation period aligned to Replenishment period;  2010-12: 115 countries (26 minimum allocation): Use of country-specific grants for knowledge management;  Portfolio: 240 ongoing projects under implementation in 93 member recipients.

5. Allocation Process and Variables  IFAD similar to best practices in other IFIs and Funds that use a performance-based allocation system.  Variables that are common to almost all IFI formulae Needs variables Performance variables  Each year country scores updated and allocations revised;  October 2010: analysis for the calculation of 2010 country scores and the allocations for 2011, 2010 allocations frozen, 2012, indicative;  Applied to all lending programmes, DSF eligible countries and all country-specific grants.

6. Application of PBAS formula  PBAS derivation of country scores  PBAS allocation process Allocations take into account DSF.

7. Evolving practices of other IFIs  Introduction of new countries: final year of the allocation period; limited number;  Set-asides: the need for financing for fragile states;  Minimum and maximum allocations: review the levels of the annual minimum and maximum allocations; and,  Reallocation: examine the modalities for reallocation of unused funds in the final year of the allocation period.

8. Rural Sector Performance Score: Process  Common scoring form used in rating performance: Analyze country-level information on the five topics covered Measure significant changes from year to year Establish a score for each indicator  Indicators scored on 6 point scale (6 as highest).  RSP Score equals un-weighted average of the average rating for each of the 12 indicators (three or four sub-indicators for each indicator).  Individual country ratings reviewed by the regional division to ensure consistency of results and process employed.  IFAD-wide review of scores based on statistical analysis undertaken to identify outliers, anomalies and promote uniformity across countries.

9. Rural Sector Clusters and Indicators A. Strengthening the capacity of the rural poor and their organizations (i) Policy and legal framework for rural organizations (ii) Dialogue between government and rural organizations B. Improving equitable access to productive natural resources and technology (i) Access to land (ii) Access to water for agriculture (iii) Access to agricultural research and extension services C. Increasing access to financial services and markets (i) Enabling conditions for rural financial services development (ii) Investment climate for rural businesses (iii) Access to agricultural input and produce markets D. Gender issues (i) Access to education in rural areas (ii) Representation E. Public resource management and accountability (i) Allocation and management of public resources for rural development (ii) Accountability, transparency and corruption in rural areas