Sectorwide Approaches SWAps

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Sectorwide Approaches (SWAps)
Salient Features, Implementation Issues and
Challenges

• Tanzania, November 2004

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Overview

• Traditional Project Approach Limitations
• SWAps Key Features and Experiences
• Pooling, Earmarked and Non-Pooled Funds
• Drawing Board to Implementation
• Fiduciary Processes
• Salient Challenges and Expected Benefits
• Useful References

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Traditional Project Approach Limitations

• Fragmentation duplication
• Lack of coherent policy prioritization
• Project-driven agenda resource allocation
• Inadequate attention to strategic/systemic
  issues
  
• Parallel systems failing to address local
  capacity
  
• High transaction costs
• Weak or little long-term impact

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WHAT Are SWAps?

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SWAp - an Approach
A sector-wide approach is an approach to sup
port a country-led program for a coherent sector
in a comprehensive and coordinated manner. N
.B. A SWAp is NOT a lending instrument nor
a particular financing modality
N.B.2 Other terms used Sector Approach,
Sector Program, Sector Support
Chiyo Kanda
can be called a program-based approach (PBA)
when applied to a small sub-sector,
multi-sectors, or a program rather than to a w
hole sector (SWAp-like)
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Key Elements of SWAps Intent and Directions,
not Pre-requisites
Harmonized Implementation Mechanisms
Increased Use of Country Systems
Coordination/alignment of (all) resources
Common Sector Program/Expenditure Framework
with Pooling of Funds
Agreed Sector Policy Framework/Strategies
based on Shared Vision Priorities
Partnership with Development Partners
Government Ownership Leadership
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Qualifying as a Sector Program Criteria(Sector
Program Tracking Report, SPA, 2003)

• the existence of a comprehensive sector policy
  strategy
  
• the existence of an annual sector expenditure
  program or medium term sectoral expenditure
  framework (MTEF)
  
• donor coordination is government-led
• major donors provide support within the agreed
  sector program framework (either directly or
  through delegation to another donor)

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Sector Program Tracking Report 2003 (SPA)(Africa
Region 37 SPs in 15 countries)
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Some Specific Examples

• Health Ghana, Tanzania, Uganda, Brazil,
  Bangladesh
  
• Education Zambia, Tanzania, Burkina Faso, Nepal,
  Bangladesh, Nicaragua, India (SSA), Morocco,
  Bolivia, Ecuador
  
• Agriculture Mozambique (PROAGRI), Zambia
• Infrastructure Poland, Mexico, Uganda
• Water Uganda, India
• HIV/AIDS Malawi
• Public Sector Reform Tanzania, Ethiopia (PSCAP)

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Growing Interest in SWAps (1)
. we simply must do a better job in aligning
our processes with the development priorities and
institutions of our borrower countries. SWAps
will help us to do this.
In LICs, SWAps present tough questions with
respect to the risks posed by weak institutions. 
But the right answer is to address these concerns
head-on, rather than avoiding them through the
creation of parallel institutional arrangements,
as has been the response of donors all-too-often
in the past.
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Growing Interest in SWAps (2)
GROWING INTEREST IN SWAps
They give us the opportunity to respond to
client demand, to align our processes with
country institutions, and by broadening our focus
to whole sector programs, to scale up the impact
of our work. 
SWAps can help us build country systems, and
address the hassle factor associated with donor
procedures.
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Experiences with SWAps (1)

• 50 operations in 30 countries over the past
  decade, but the number is growing rapidly
  
• Evolved in LICs in AFR/SAR, recently being
  adopted to MICs in LAC/ECA
  
• Mostly in social sectors but some in transport,
  water agriculture
  
• Predominantly IL instruments (SIL, APL, SIM) used
  to support SWAps
  
• Mostly traditional disbursement, but increasing
  use of pooled financing over last 4 years

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Experiences with SWAps (2)

• Defining a Sector
• Financing Arrangements

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Defining a Sector How Large or Small

• Conventional Sector
• Health including population nutrition (Ghana,
  Uganda, Tanzania, Bangladesh, Nepal)
  
• Agriculture (Zambia, Mozambique)
• Roads (Tanzania, Uganda)
• Large Sub-sector
• Primary Education (Zambia, Nepal, Bangladesh)
• Rural Water Sanitation (Uganda)
• Multi-sector, cross-cutting issue or a program
• Multi-sectoral AIDS program (Malawi)
• Public Sector Reform Program (Tanzania,
  Ethiopia)
  
• India SSA (National Elementary Education Program)

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Financing ArrangementsFlow of Funds

• Parallel financing
• Joint financing (earmarked to sector)
• Against part of the sector or entire sector
  budget
  
• Through one partner agency or directly
• Note A mix of more than one of the above may be
  used

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Parallel Financing(coordinated under common
program)

• Most of the SWAps in mid- to late1990s
• Buying-in sector strategy expenditure program
  but no pooling of funds
  
• Each donor/financier make separate project
  agreements with government to finance specific
  component/activities within the program, with
  some flexibility
• Strong coordination, joint monitoring, collective
  policy dialogue mechanisms
  
• FM/Disbursement/Procurement rules usually
  conventional (separate), but some effort to
  harmonize to the extent possible and divide
  responsibilities

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Joint Financing (earmarked to sector)

• Pooling partners disburse against entire sector
  budget or program - India Education (SSA)
  
• Common disbursement, procurement, reporting
  auditing mechanisms for pooled funds
  
• Pooled funds channeled through one partner or
  directly to the government
  
• Sometimes complemented by parallel financing
  projects i.e. earmarked funding by some donors
  
• Monitor performance of entire sector/program

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Example Ghana/Tanzania HealthJoint Financing
Earmarked to Sector

• Two cycles of evolving SWAp processes (since 1998
  for Ghana and since 1999 for Tanzania)
  
• Comprehensive sector strategy/program buy-in by
  all donors
  
• Multi-donor pooled financing through a common
  account plus parallel project financing
  
• Quarterly disbursement against of total
  expenditures through a common account directly to
  the sector (Ghana) or channeled through Treasury
  (Tanzania)) certain expenditures excluded (e.g.
  salaries)
• Single disbursement procurement mechanisms
  (incl. ICB prior reviewed by WB) for pooled
  funds
  
• Joint ME and reporting with joint reviews
  aligned to governments budgeting cycles

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What is Pooling?

• Non-pooled funds (traditional approach)
• Individual transactions identified
• Transactions are co-financed or financed in
  parallel.
  
• Each item of expenditures is (theoretically)
  attributable to a financing source.
  
• Pooled Funds
• Funds from participating donors are pooled with
  those of government in a single account in
  support of an agreed expenditure program.
  
• Stakeholders finance agreed proportions of the
  expenditure program.
  
• There is no attribution of expenditures to any
  particular stakeholder.
  
• Earmarked Funds
• Contributions (to the agreed expenditure program)
  from donors not participating in the pool i.e.
  following the dollar.

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Overall Expenditure Program Pooled/Earmarked
Funds
Agreed Overall expenditure Program (1 billi
on)
Pooled Funds (800 million) Contributed into a
Single Account by IBRD, ADB, EU, DFID Govern
ment
Earmarked Funds (200 million) Other participat
ing
Donors
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Benefits of Pooling

• Single procurement, financial management and
  disbursement system, significantly reducing
  borrower transaction costs
  
• Enhances government fiduciary capacity, country
  ownership, and program sustainability
  
• Donor fiduciary procedures aligned with, and
  supportive of, borrower systems
  
• Donor assurance enhanced by extending oversight
  to all sector funds
  

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SWApsDrawing Board to Implementation

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Fiduciary Processes in SWAps (1)

• Joint ex ante capacity assessments and risk
  mitigation arrangements
  
• assessment of procurement and financial
  management rules, procedures and practices for
  sector institutions, taking into account CFAA,
  CPAR and PER
• government and donors agree measures to
  strengthen capacity and mitigate identified
  risks
  
• Not all SWAp loan proceeds are necessarily
  pooled.

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Fiduciary Processes in SWAps (2)

• For pooled funds, agree specific financial
  management and procurement procedures
  
• based on the results of the capacity assessments
• reflected in a joint Memorandum of Understanding,
  including a Manual of FM and Procurement
  procedures
  
• Government and donors agree
• common financial monitoring reports
• joint audit of consolidated financial statements,
  and follow up arrangements
  
• periodic reporting of procurement actions
• post review of procurement actions plus technical
  and procurement audits
  

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Fiduciary Processes in SWAps (3)

• Ex post reconciliation to confirm that amount of
  eligible expenditure in pool exceeds Bank
  contribution
  
• Banks remedies for misprocurement will be
  applied to an amount equal to the value of the
  contract multiplied by the proportion of the pool
  financed by the Bank

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Fiduciary Processes in SWAps (4)

• Banks remedies for ineligible expenditure will
  apply
  
• in the event that the amount of the Banks
  contribution to the pool exceeds the amount of
  expenditure from the pool that is eligible for
  Bank financing, or
• proportionately to its contribution to the pool,
  where expenditure not approved in the agreed
  expenditure program is incurred.
  

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Poverty Reduction Global Partnership

• Working for a world free of poverty

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Memorandum of Understanding

• Needed because legal agreements are bilateral
  between government and each participating donor.
  
• No mandatory format but sets out agreed
  procedures to be adopted under the program e.g.
  
  
• Institutional arrangements
• Procurement arrangements
• Financial Management (including Disbursements)
• Interim and annual reporting arrangements
• Annual audit arrangements, including TORs and
  follow-up mechanisms
  
• Consultation, Information, Monitoring
  Evaluation (joint reviews)
  
• Draft should normally be agreed by all partners
  no later than appraisal. FM staff should ensure
  timely consultation with PR, LEG and LOA.
  

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Salient Challenges

• One-size does not fit all
• - Need for country-tailored design and
  implementation
  
• - Key is a common strategy and action plan
  aligned with national development strategy

• Weak capacity by itself not a constraint
• - Key is to strengthen capacity as
  implementation unfolds

• Use of country systems increasing over time
• - Identifying and building-in capacity
  strengthening when needed

• Time and resources needed
• - Securing agreement among stakeholders (MOU)
• - Timely monitoring/evaluation of performance
  and resolution of identified differences
  during implementation

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Summary Expected Benefits

• Enhanced development impact through
• Stronger country ownership leadership
• Coordinated open policy dialogue for the entire
  program (beyond a ring-fenced project)
  Genuine partnerships
  
• Scaling-up benefits by focusing on the entire
  program and applying common fiduciary/safeguard
  standards
  
• More rational efficient resource allocation
• Strengthening of countrys capacity, systems
  institutions at a feasible pace and phasing
  
• Reduced fragmentation/duplication (reporting
  transactions)
  
• Greater focus on results (rather than on inputs
  or transaction controls)

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Useful References

• CIDA Primer on Program-Based Approaches, 2003
• DANIDA Sector Support Guidelines, 2003
• Guidelines for EC Support to Sector Programs,
  2003
  
• Guidelines for Norway (NORAD, 2003)
• Synthesis Report on Development Agency Policy and
  Perspectives on Program-Based Approaches (LENPA,
  2002)
  
• Sector Program Tracking Report (SPA), 2003
• Fiduciary Arrangements for SWAps, OPCS, April
  2002.
  
• Fiduciary Arrangements for SWAps, Interim
  Guidelines for Staff FM and Procurement Sector
  Boards, Nov, 2002.
  
• Memoranda of Understanding Ghana Health, Malawi
  MAP (HIV/AIDS), India Elementary Education (SSA),
  Mozambique PROAGRI
  

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