1. Evaluation Synthesis on IFAD’s Engagement in Middle-Income Countries Learning Workshop by the Independent Office of Evaluation of IFAD Rome, 3 April 2014

2. Introduction Engagement with middle-income countries (MICs) recognised by IFAD and others as an important issue. Synthesis objectives : (i) to generate lessons and insights; and (ii) identify strategic issues for consideration. Based on a literature review; synthesis of IOE evaluations; interviews within IFAD, WB and IADB; and five country case studies. 2

3. Middle-income countries Wide diversity within MICs (US$ 1,036 – 12,615) but progressively and significantly different from low-income countries. Global poverty now concentrated in MICs. Deep pockets of sub-national poverty and high inequality. Percentage of ODA to MICs has declined and increasingly insignificant compared to other capital flows. How to reach the poor via national polices and programmes becomes more of an issue in most countries than the availability of resources. 3

4. IFAD’s engagement with MICs MICs have become the major part of IFAD’s work: 72% of its developing country members; 70% of its disbursements; and 68% of its reflows. Increasing MIC contribution to replenishment (10% for IFAD9). 2011 strategy: no single policy or approach for MICs. COSOPs are tailored to the country. 4

5. IFAD evaluation findings IFAD remains highly relevant in MICs with significant positive contributions,e.g. micro- finance, value chains and gender equality. Some evidence that performance in MICs – and in the small sample of UMICs – is not necessarily better than in LICs, and moderate overall. Non-lending activities have been the weakest area of support, but signs of improvement since 2011. Programmes will need to be more strategic, with clearer poverty targeting, in future. 5

6. Wider evaluation findings Respectable arguments for and against continued ODA for MICs. On balance there is a strong poverty case for continued support. ODA plays increasingly minor role. Bilateral grants to MICs (particularly to UMICs) are likely to shrink. Loans are set to increase. Recognition of changing demand from MICs is making IFIs adapt their products & services. Development assistance landscape has changed fundamentally. MICs now have more choice. Private sector is increasingly important. 6

7. Assessment of IFAD’s strategy and approach in MICs IFAD remains a relevant and valued partner. Its key niche (poor farmers, difficult and remote areas) remains highly relevant to ‘pockets of poverty’ and inequality in MICs. 2011 strategy (country specific approaches) was and is correct. But global context and MICs are changing fundamentally. IFAD needs to adapt. PBAS has an insufficient poverty-focus and does not meet MIC demand for loans. 7

8. Assessment (cont.) Non-financial terms and conditions of loans could be improved. MICs are increasingly discriminating and demanding. Improving non-lending performance is a priority, but will be challenging. Knowledge and policy needs to be world-class and needs to be paid for. Greater country selectivity and differentiation is needed to achieve the critical mass and quality required for scaled-up impact. 8

9. Conclusions Most of the rural poor are now in MICs. IFAD remains highly relevant. But context and demands are changing. MICs have more choice, are more demanding, and want different things (eg. more knowledge). IFIs are under pressure to adapt. Traditional bilateral donors are under pressure to reduce ODA (especially grants) to MICs (especially UMICs). Combination of these trends presents a fundamental challenge to IFAD’s model in MICs. Products and instruments need to adapt. 9

10. Strategic implications Two alternative views: Old model can more or less continue. IFAD will remain highly relevant to MICs. Good potential to work with sub-national entities and on large pockets of rural poverty. IFAD’s financial model is sustainable. Context has changed fundamentally. Old model will become increasingly ineffective and financially unsustainable. IFAD needs to gear up to do different things in MICS, more effectively, with new partners and new funding, in fewer places. 10

11. Options for discussion i. New and substantial funding sources (public and private) are required to support IFAD’s work in MICs; ii. IFAD may need a more differentiated model of engagement in a smaller number of MICs in order to provide the critical mass and quality required; iii. IFAD needs to gear up to provide the lending and non-lending partnerships/services required, and to develop the new financial models to support these; iv. IFAD needs to explore an expanded engagement with large private companies in the food and agriculture sector. 11