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AFRICAN DEVELOPMENT FUND MLW/PSWI/2001/01 Language: English Original: English APPRAISAL REPORT SKILLS DEVELOPMENT AND INCOME GENERATION PROJECT REPUBLIC OF MALAWI COUNTRY DEPARTMENT SOUTH REGION OCTOBER 2001

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Page 1: MW 2001 155 EN ADF BD WP complete-malawi-skills-de

AFRICAN DEVELOPMENT FUND MLW/PSWI/2001/01Language: EnglishOriginal: English

APPRAISAL REPORT

SKILLS DEVELOPMENT AND INCOME GENERATION PROJECT

REPUBLIC OF MALAWI

COUNTRY DEPARTMENTSOUTH REGION OCTOBER 2001

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TABLE OF CONTENTSPages

CURRENCIES, LIST OF TABLES, LIST OF ANNEXES, LIST OF i-ixABBREVIATIONS, PROJECT INFORMATION SHEET, BASICDATA SHEET, PROJECT MATRIX, EXECUTIVE SUMMARY

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ORIGIN AND HISTORY OF THE PROJECT

Origin and History of the Project

HUMAN DEVELOPMENT SECTOR

2.1 An Overview of the Situation of Women and Youth2.2 Human Development Policies2.3 Human Development and PRSP Priorities2.4 Institutional Framework for Human Development2.5 Financing of Human Development2.6 Donor Intervention in Human Development2.7 Constraints of Human Development

THE SUB-SECTORS

3.1 Functional literacy3.2 National Functional Literacy Policy3.3 Organization and Management of Functional Literacy3.4 Financing of Functional Literacy3.5 Constraints of Functional Literacy3.6 Vocational and Skills Development Training3.7 Vocational Training and Skills Development Policy3.8 Financing of Skills Development3.9 Constraints of Vocational Training and Skills Development3.10 Micro-finance3.11 Micro- Finance Policy Framework3.12 Financing of Micro-Finance Sub-Sector3.13 Constraints to Micro-Finance Development3.14 Institutional Strengthening3.15 Financing of Ministry of Gender, Youth and Community Services3.16 Constraints of Institutional Strengthening

THE PROJECT4.1 Project Concept and Rationale4.2 Project Target Areas and Target Groups4.3 Strategic Context4.4 Project Objective4.5 Project Description4.6 Detailed Description of Components and Activities4.7 Environmental Impact4.8 Project Costs

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4.9 Sources of Financing and Expenditure plan

PROJECT IMPLEMENTATION

5.1 Executing Agency5.2 Institutional Arrangements5.3 Supervision and Implementation Schedule5.4 Procurement Arrangements5.5 Disbursement Arrangements5.6 Monitoring and Evaluation5.7 Financial Reporting and Auditing5.8 Aid Coordination

PROJECT SUSTAINABILITY AND RISKS

6.1 Recurrent Costs6.2 Project Sustainability6.3 Critical Risks and Mitigating Measures

PROJECT BENEFITS

7.1 Social Impact Analysis

CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions8.2 Recommendations

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________________________________________________________________________________This report was prepared by Ms. M. Mashinkila (Socio-economist), Mr. M. Assefaw, (FinancialAnalyst) and a Micro-credit Consultant following their mission to Malawi in August/September2001. Any inquiries relating to this report may be referred to either the authors or to Ms. A. Hamer,Division Manager, OCDS.3 (EXT. 4819).

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CURRENCY EQUIVALENTS

August 2001

National Currency = MALAWI KWACHA (MK)USD 1 = MK 75.00UA 1 = MK 99.2922

FISCAL YEARAugust 1 to July 31

Units and Measures

Metric System

LIST OF TABLES Page

4.1 Summary of Project Costs by Component 264.2 Project Costs by Category of Expenditure 274.3 Project Costs by Sources of Finance 274.4 Expenditure Schedule by Component 284.5 Expenditure Schedule by Category of Expenditure and Source of Finance 285.1 Procurement Arrangements 30

LIST OF ANNEXES

I Map of Malawi and Location of Project Area 1II Organization Structure for Project Implementation 1III Detailed Project Cost Estimates 6IV Project Implementation Schedule 1V Table of Contents for Micro-finance Operations Manual 1VI List of Annexes in Project Implementation Document (PID)

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ABBREVIATIONS

ADB African Development BankADF African Development FundAELC Adult Education and Literacy CentreAIDS Acquired Immune Deficiency SyndromeAMINA ADF Micro-finance Initiate for AfricaATTIGA Appropriate Technology for Income Generation ActivitiesCBOs Community Based OrganizationsCDAs Community Development AssistantsDANIDA Danish Development AgencyDEMAT Development of Malawian Enterprise TrustDFID Department for International DevelopmentEAP Economic Activities ProgrammeEU European UnionGNP Gross National ProductGDP Gross Domestic ProductGOM Government of MalawiGPN General Procurement NoticeGTZ Deutsche Geesselleschaft fur Technische ZusammenarbeitFE Foreign ExchangeFINCA Foundation for International Community AssistanceHIV Human Immunodeficiency VirusHSAs Health Surveillance AssistantsIAPSO Inter-Agency Procurement OfficeICB International Competitive BiddingIGAs Income Generating ActivitiesIMF International Monetary FundINDEFUND Investment and Development FundJICA Japanese International Cooperation AgencyLC Local CurrencyLCA Local Currency AccountLCB Local Competitive BiddingMASAF Malawi Social Action FundM&E Monitoring and EvaluationMEDI Malawi Entrepreneurship Development InstituteMFIs Micro-finance InstitutionsMK Malawi KwachaMOAE Ministry of Agriculture and ExtensionMOGYCS Ministry of Gender, Youth and Community ServicesMOHP Ministry of Health and PopulationMOLVT Ministry of Labor and Vocational TrainingMOWD Ministry of Water DevelopmentMRFC Malawi Rural Finance CompanyMUSCCO Malawi Union of Savings and Credit CooperativeNABW National Association of Business WomenNASFAM National Small Farmers Association of MalawiNEC National Economic CouncilNB National BankNCB National Competitive Bidding

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NCLAE National Centre for Literacy and Adult EducationNGOs Non-Governmental OrganizationsNORAD Norwegian Development AgencyNS National ShoppingPAMFIN Professional Association of Micro-finance InstitutionsPID Project Implementation DocumentPIF Policy and Investment FrameworkPMU Project Management UnitPRSP Poverty Reduction Strategy PaperRFP Request for ProposalPSPD Poverty and Social Policy DivisionQPPR Quarterly Project Progress ReportSA Special AccountSACCOs Saving and Credit CooperativesSEDOM Small Enterprise Development of MalawiTAAs Traditional Authority AreasTAF Technical Assistance FundTEVET Technical Enterprise and Vocational Education TrainingTOC Technical Oversight CommitteeUA Units of AccountsUN United NationsUNCDF United Nations Capital Development FundUNICEF United Nations Children’s Emergency FundUNDP United Nations Development ProgrammeUSAID United States Agency for International DevelopmentVDC Village Development CommitteeWID Women in DevelopmentWWB Women’s World BankingWVI World Vision International

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AFRICAN DEVELOPMENT FUND01 B. P. 1387, ABIDJAN, 01Tel: (225) 20 20 444-44Fax: (225) 20 20 49 02

Telex: 23 717

PROJECT INFORMATION SHEET

Date: October 2001

The information given hereunder is intended to provide some guidance to prospectivesuppliers, contractors, consultants and all persons interested in the procurement of goods andservices approved by the Boards of Directors of the African Development Fund (ADF). Moredetailed information and guidance should be obtained from the Executing Agency of the Borrower.

1. COUNTRY : Republic of Malawi

2. NAME OF PROJECT : Skills Development and IncomeGeneration

3. LOCATION : The project will cover the Central,Southern and Northern regions

4. BORROWER : Government of Malawi

5. EXECUTING AGENCY : Ministry of Gender, Youth andCommunity ServicesPrivate Bag 330Lilongwe 3Fax: (265) 770826Telephone: (265) 770411/440/736/716

6. PROJECT DESCRIPTION : The project components are as follows:i) Functional Literacy (ii) Basic BusinessManagement; (iii) Vocational and SkillsDevelopment Training; (iv InstitutionalStrengthening; (v) Micro-finance Scheme and(vi) Project Management.

7. PROJECT COST

Foreign : UA 1.22 millionLocal : UA 9.71 millionTOTAL COST : UA 10.93 million

8. SOURCES OF FINANCE

ADF : UA 9.59 millionGOM : UA 1.34 millionTOTAL COST : UA 10.93 million

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9. DATE OF APPROVAL : December 2001

10. ESTIMATED STARTINGDATE OF PROJECT : June 2002

11. PROJECT DURATION : Five years

12. PROCURMENT : Project goods and services to be financed by theFund will be procured in accordance with theADF Rules of Procedures for the procurement ofGoods and Services using the Fund’s StandardBidding Documents. Civil Works for therenovation of multi-purpose youth centers at theNCLAE and Karonga and skills developmentcenters at ATTIGA, Neno, Liwonde andMagomero will be carried out by contractorsthrough NCB. Goods (vehicles andmotorcycles) and equipment will be procuredthrough IAPSO. Office equipment will beprocured using National Shopping (NS)procedures.

13. CONSULTANCY SERVICESREQUIRED : Consultancy Services will be procured through

competition of shortlisted consultants inaccordance with the Bank’s Rules of Procedurefor the Use of Consultants.

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MALAWICOMPARATIVE SOCIO-ECONOMIC INDICATORS

Year Malawi Africa Developing Developed

Countries Countries

Basic IndicatorsArea ( '000 Km²) 119 30,061 80,976 54,658

Total Population (millions) 1999 10.6 765.6 4,793.2 1,185.2

Urban Population (% of Total) 1999 23.8 37.1 39.4 75.8

Population Density (per Km²) 1999 89.8 25.5 59.2 21.7

GNP per Capita (US $) 1999 180 684 1,250 25,890

Labor Force Participation - Total (% ) 1999 47.6 43.3 … …

Labor Force Participation - Female (% ) 1999 46.0 35.0 … …

Gender -Related Development Index Value 1998 0.4 0.483 0.634 0.916

Human Development Index (Rank among 174 countries) 1998 163 n.a. n.a. n.a.

Population Living Below $ 1 a Day (% of Population) 1995 ... 45.0 32.2 …

Demographic IndicatorsPopulation Growth Rate - Total (% ) 1999 2.8 2.4 1.6 0.3

Population Growth Rate - Urban (% ) 1999 8.5 4.5 2.8 0.6

Population < 15 years (% ) 1999 47.3 42.7 32.8 18.5

Population >= 65 years (% ) 1999 2.7 3.2 5.0 14.0

Dependency Ratio (% ) 1999 91.9 86.1 61.0 48.6

Sex Ratio (per 100 female) 1999 98.1 99.4 103.3 94.8

Female Population 15-49 years (millions) 1999 2.3 181.1 151.8 297.2

Life Expectancy at Birth - Total (years) 1999 40.2 52.7 64.3 75.5

Life Expectancy at Birth - Female (years) 1999 40.4 53.5 66.0 79.2

Crude Birth Rate (per 1,000) 1999 46.1 36.3 23.4 10.9

Crude Death Rate (per 1,000) 1999 22.1 13.7 8.4 10.3

Infant Mortality Rate (per 1,000) 1999 128.7 76.4 57.6 8.9

Child Mortality Rate (per 1,000) 1999 191.6 116.6 79.8 10.2

Maternal Mortality Rate (per 100,000) 1990-96 620 698 491 13

Total Fertility Rate (per woman) 1999 6.3 4.8 2.8 1.6

Women Using Contraception (% ) 1990-99 21.9 … 56.0 70.0

Health & Nutrition IndicatorsPhysicians (per 100,000 people) 1992-97 2 35 78 287

Nurses (per 100,000 people) 1992-97 6 107 98 782

Births attended by Trained Health Personnel (% ) 1992-98 55 38 58 99

Access to Safe Water (% of Population) 1992-98 60 58 72 100

Access to Health Services (% of Population) 1992-98 35 64 80 100

Access to Sanitation (% of Population) 1990-97 3 58 44 100

Percentage of Adults (aged 15-49) Living with HIV/AIDS 1997 14.9 5.7 … …

Incidence of Tuberculosis (per 100,000) 1997 205 201 157 24

Child Immunization Against Tuberculosis (% ) 1997 100 72 82 93

Child Immunization Against Measles (% ) 1997 87 64 79 90

Underweight Children (% of children under 5 years) 1990-97 30 26 31 …

Daily Calorie Supply 1998 2,226 2,439 2,663 3,380

Public Expenditure on Health (as % of GDP) 1993-98 2.3 2.0 1.8 6.3

Education IndicatorsGross Enrolment Ratio (% )

Primary School - Total 1996 132.8 80.0 100.7 102.3

Primary School - Female 1996 126.3 73.4 94.5 101.9

Secondary School - Total 1996 ... 29.3 50.9 99.5

Secondary School - Female 1996 12.2 25.7 45.8 100.8

Primary School Female Teaching Staff (% of Total) 1990-97 39.0 40.9 51.0 82.0

Adult Illiteracy Rate - Total (% ) 1999 40.7 38.8 27.2 1.3

Adult Illiteracy Rate - Male (% ) 1999 26.1 30.7 19.5 0.9

Adult Illiteracy Rate - Female (% ) 1999 54.6 48.2 35.0 1.7

Percentage of GDP Spent on Education 1990-97 5.4 3.5 3.9 5.9

Environmental IndicatorsLand Use (Arable Land as % of Total Land Area) 1998 19.9 5.9 9.9 11.6

Annual Rate of Deforestation (% ) 1990-95 1.6 0.7 0.4 -0.2

Annual Rate of Reforestation (% ) 1981-90 8.0 4.0 … …

Per Capita CO2 Emissions (metric tons) 1996 0.1 1.1 2.1 12.5

Source : Compiled by the Statistics Division from ADB databases; UNAIDS; World Bank Live Database and United Nations Population Division.

Notes: n.a. Not Applicable

... Data Not Available Last update: May 2001

Population Grow th Rate (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1991 1992 1993 1994 1995 1996 1997 1998 1999

Malawi Africa

GNP Per Capita ( US $ )

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1991 1992 1993 1994 1995 1996 1997 1998 1999

Malawi Africa

Life Expectancy at Birth ( Years )

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1991 1992 1993 1994 1995 1996 1997 1998 1999

Malawi Africa

Infant Mortality Rate ( Per 000 )

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1991 1992 1993 1994 1995 1996 1997 1998 1999

Malawi Africa

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LOGICAL FRAMEWORKMALAWI: SKILLS DEVELOPMENT AND INCOME GENERATION PROJECT

Narrative Summary Measurable Performance Indicators Means of Verifications Important Assumptions

SECTOR GOALThe sector goal is to contribute tothe Government efforts to reducepoverty through humandevelopment.

1.1 Percentage increase inthe incomes among poor women andyouth by year 2005

1.1.1 Monitoring andevaluation (M & E) reportsand data of the CentralStatistics Office andMOGYACS.1.1.2 Household livelihoodand income surveys.

1.1.1.1GOMs Poverty ReductionStrategy programmes remains ontrack.

1.1.1.2 Adequate Governmentsupport for human developmentinterventions.

PROJECT OBJECTIVEThe objective of the project is toimprove the capacity of the poorto actively participate in broad-based sustainable economicactivities in Malawi.

1.1 increase in literacy rates and basicbusiness knowledge in the selecteddistricts of the target area by 2005

1.2 increase in the capacity of the targetbeneficiaries to engage in viable incomegenerating by 2003

1.3 Strengthened capacity of keygovernment agencies and partnerinstitutions by 2005.

1.4 Strengthened micro-credit deliveryfacilities and increased disbursement ofloans.

1. QuarterlyProgress ReportsAnd other project records;

1.1.2 Impact ofsample surveys onthe project and its targetgroups;1.1.3 Mid-termreview.

1.1.4 MOGYACS and keyGOM agencies statistics andPublications.1.1.5 Project completionreports.

1.1.1.1 Sustainedcommitment to development thecapacity of the poor to activelyengage in economic activities.

1.1.1.2 Sustainedcommitment to providing adequatelife skills training facilities for thepoor.

1.1.1.3 Sustained commitment toimproving the requisite skill andinstitutional facilities for keygovernment agencies.

1.1.1.4 Sustained commitment to thedevelopment of micro-credit deliveryservices for the poor.

OUTPUTSFunctional literacy

Business management

Vocational and Skillsdevelopment

Institutional strengthening ofof the executing agency and otherrelevant institution strengthened.

Micro-finance Scheme

Project Management

1. 400 literacy instructors and 60, 000beneficiaries trained.

2. 100 trainers and 20, 000 clientstrained in basic business management

3. 25 trainers and 12,000 clients trained.

4. 3 long-term undertaken byMOGYACS staff. and 8 short-termcourse workshops conducted forprofessional staff of MOGYACS (CDAsand other extension cadres).

Micro-finance revolving FundOperational and 40,000 clients providedaccess to credit.

Steering Committee restructured and60 months of technical assistanceprovided.

1.1.1 QuarterlyProgress reports.1.1.2 PMU staff Monthlyimplementation reports.1.1.3 CDA field reports.1.1.4 Literacy instructorsreports.1.1.5 implementing partnersreports.1.1.5 Bank supervisionreports.

1.1.1.1 Project target groups adoptnew knowledge promoted by theproject.1.1.1.2 Project clients utilizingvocational and appropriatetechnology skills to engage ineconomic activities.1.1.1.3 Trained local expertise andinstitutional facilities to providesupport services economic activitiesfor the poor.1.1.1.4 Delivery and support servicesfor micro-credit improved.1.1.1.5 Sustained conduciveenvironment for micro-creditoperations.1.1.1.6 Effective participation of thetarget beneficiaries in creditoperations and income generatingactivities.

ACTIVITIESA. Training of trainers/beneficiaries;A. Provision of

EquipmentB. Civil WorksC. Provision of specialized

servicesD. Establishment of a credit

fundE. Support to operating costs

Project Budget byCategory of ExpenditureA. Training UA5.44 millionB. Equipment UA0.84 millionC. Civil Works UA 0.41 millionD. Consultancy Services UA0.31 millionE. Credit Fund UA1.44 millionG. Operating Costs UA0.98 millionTotal project costs UA 10.93 million

1.1.1 QPPR

1.1.2 SupervisionReports; DisbursementRecords; Annual AuditReports; Mid-term Review

1.1.1.1Timely fulfillment ofconditions precedent to entry intoforce1.1.1.2 Timely provision ofGovernment counterpart fund1.1.1.3 Timely processing ofdisbursement requests by the Bank1.1.1.4 Strict adherence to Bankrules of procedure on implementationtargets, modalities and deadlines.

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EXECUTIVE SUMMARY

1. Project Background

The project originated from an indication of interest by the Government of Malawi to the Bankmission that visited Malawi in January 2001 for further Bank support to its Poverty ReductionStrategy process (PRSP) through the empowerment of the poor to actively engage in economicactivities. The project will contribute to the PRSP key priority of human development through theimprovement of capacity of the poor to actively engage in viable economic activities and addresstheir situation of poverty.

2. Purpose of the Loan

The ADF loan of UA 9.59 million amounting to 87.7 per cent of the total project cost will be usedto finance 94.6 per cent of the foreign exchange and 86.9 per cent of the local cost estimated at UA1.15 million and UA8.43 million, respectively.

3. Sector Goal and Project Objectives

The sector goal of the project is to contribute to Government efforts to reduce poverty throughhuman development. The objective of the project is to improve the capacity of the poor to activelyparticipate in broad-based sustainable economic activities in Malawi.

4. Brief Description of the Project and Outputs

The project components shall comprise of:

I. Functional literacyII. Basic Business ManagementIII. Vocational and Skills Development TrainingIV. Institutional StrengtheningIV. Micro-finance SchemeVI. Project Management

60,000 illiterate poor women and youth shall acquire skills in basic reading, writing and numeracy.An estimated of 40,000 of the participants of the functional literacy activities shall acquireknowledge and managerial competencies required to engage in income generation activities andvocational and appropriate technology skills for business opportunities, start and manage incomegenerating activities profitably. The project shall also provide an estimated 40,000 qualified clientsamong the graduates of the basic business management training with micro-finance. The financialservices shall complement the functional literacy and basic business management and appropriateskills development training activities of the project to achieve a holistic approach to increase ruralincomes, self-employment and the creation of income. By these means the project shall alsopromote the participation of productive poor women and unemployed youth in economic growthand diversification as envisaged by the GOM in the PRSP.

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5. Project Costs

The total project cost is estimated at 10.93 million of which UA1.22 million (11.1 per cent per cent)will be in foreign currency and UA9.71 million (88.9 per cent) will be in local currency.

6. Sources of Finance

ADF and GOM will finance the project. The total project cost is estimated as UA10.93 million,comprising an ADF loan of UA9.59 million representing 87.7 per cent of the total cost, will meet94.6 per cent of the costs in foreign exchange and 86.9 per cent of the local cost. The Governmentcontribution will be UA1.34 million, representing 12.3 per cent of the total project costs, that willbe utilized to cover UA0.07 (5.4 per cent) of the foreign cost and UA1.27 million (13.1 per cent) ofthe local costs of the project.

7. Project Implementation

The project will be implemented over a period of 60 months commencing with the fulfilment of theconditions for entry into force.

The Executing Agency of the project will be the Ministry of Gender, Youth and CommunityServices (MOGYCS). A steering committee comprised of the representatives of the keystakeholders will be established to be responsible for the overall supervision of the project. Theproject will use the Project Management Unit created for the implementation of the Women inDevelopment Project, which has gained technical, and managerial expertise in the implementationof Bank funded interventions. The expertise in the PMU will also provide technical competencies tocoordinate the implementation of the activities under the various components for the project.Consultants will also be recruited to provide specialized skills whenever necessary. An ExternalAuditor will be recruited for the annual auditing of the project’s accounts.

8. Conclusions and Recommendations

The GOM has launched its Poverty Reduction Strategy Process, which is intended to provide a blueprint for poverty reduction activities. The Project will support the operationalization of theGovernment poverty reduction strategy through the provision of functional literacy, basic businessmanagement, skills development training and improved access to micro-finance to enhance theability of groups of poor rural women and youth to engage in viable small scale income generatingactivities. This will support the GOM PRSP priority to empower the poor to be actively involved inaddressing their situation of poverty and the National Gender Policy as the project shall focus onpoor women and out of school youth.

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1. INTRODUCTION

Origin and History of the Project

1.1 The proposed project is in line with the Bank Group Strategy in Malawi (1999-2001Country Strategy Paper) which aims to support the Government development strategythrough poverty reduction. The project has also been prepared on the basis of lessons from theon-going Bank-funded Women in Development Project that was formulated in 1992 as partof the Government Women in Development Programme focusing on the economicempowerment of women. Following the outcome of the mid-term review and regional reviewmeetings attended by the technical staff of the MOGYCS, community development andintermediary extension workers, and women groups that indicated that activities of the projecthave improved the standard of living of the target communities, the Government requestedthe Bank for a follow-up intervention to reinforce the empowerment of the poor, particularlywomen and youth. The proposed project builds on the Bank’s previous experiences in thedomain.

1.2 The project will support the Government’s PRSP efforts to empower the poor toactively participate interventions to address their situation of poverty. Specifically, the projectwill contribute towards poverty reduction in Malawi, by providing a graduated response to thetraining needs of unemployed women and youth in functional literacy, basic businessmanagement, appropriate technology and vocational training for skills to enable them toengage in sustainable income generation activities. The project shall also provide micro-creditservices to enhance the start-up of IGAS by the beneficiaries. These proposed interventionsseek to facilitate the generation of sustainable sources of income through self-employment toimprove socio-economic conditions and quality of life of the poor in the target areas of theproject. In addition, the project will complement the Bank’s AMINA capacity building of thepartner micro-credit intermediaries in Malawi by reinforcing ongoing assistance to penetratedeeper into poor communities on a sustainable basis. Furthermore, the project will beimplemented parallel to the Ministry of Gender, youth and community Services EconomicActivities Programme as part of the coordination of donor activities.

2. THE HUMAN DEVELOPMENT SECTOR

2.1 An Overview of the Situation of Women and Youth

2.1.1 The term “human development” refers to the magnitude and multiple dimensions ofpoverty. Therefore, poverty from a human development perspective is not only a lack ofincome and material well being. It also involves the denial of opportunities and choices forhuman development to lead to an increased life expectancy, a healthy life and ability toactively participate in the economic, social and political life of the community. In respect ofwomen and youth, two of the poorest groups in Malawi, this view is applied to their health,education, labour and employment profile.

2.1.2 The World Human Development Report (1999) has ranked Malawi 159 among 174countries and as one of the least developed countries with a GNP per capita of US $180.00.The Human Development Report also shows that Malawi has one of the lowest lifeexpectancies in the world. About 60 per cent of the Malawi population live below a povertyline defined as US$40 per annum, with most recent survey (2000) indicating this figure maybe rising. According to the Poverty Situation Analysis (2000) over one-half of Malawi

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households (57%) currently live more than 5 km away from a health centre and do not haveclean water and adequate sanitation. An estimated 60% of the population had access to safedrinking water less than half a kilometre away and 3 in 20 Malawians (5.5%) had access toadequate sanitation facilities. Life expectancy is 40.2 years, well below the regional average(52). Infant and maternal mortality rates are among the highest in the region, 128.3 per 1,000and 620 per 100,000 respectively. The high number of AIDS cases currently estimated at225,000, and the prevalence of HIV infection, expected to rise to about 2 million by the year2000, is putting a heavy burden on the already poor health infrastructure.

2.1.3 It is estimated that about 50% of the total of the population of Malawi’s population isaged between 15 and 25 years, the group is defined as the youth by the Government ofMalawi. This age group of the population also represents the potential labour force of thecountry. However, nearly 50% of the population of this age group are out of school. This is asa result of the high drop out rates from formal education by the youth, particularly girls beforethey have acquired a significant level of education. Therefore, while there has been asubstantial share of young adults receiving formal education relative to the share of olderadults who previously attained similar levels, about one in three Malawians aged between 15and 25 years have never attended school. Furthermore, there has been poor guidance to theyouth regarding opportunities for occupations after general and academic education. Exposureand appreciation of vocational skills are hampered by emphasis on academic performance andlack of bridging mechanisms in the primary and secondary education. Nearly 86% of the outof school youth are in the rural areas mostly engaged in subsistence farming and 14% are inthe urban centres employed in the informal sector, involved in petty trading, carpentry,tailoring, motor vehicles repair and ganyu. The situation of the youth has further beenworsened by the effect of the HIV/AIDS pandemic on the population groups of 15 to 49 yearsof age. Infections in this group of human resources have resulted in a further reduction ofalready limited vocational and entrepreneurial skills. In addition, orphans are emerging to beone of the youth groups most affected by poverty. The total number of HIV/AIDS orphans isexpected to increase to 350, 000 by the end of the decade.

2.1.4 Current census figures indicate that women represent over 51 per cent of thepopulation and provide the bulk of the labour force of 60 per cent for the main stay of thecountry’s economy, rural agriculture. However, the situation analysis of Poverty in Malawi(1999) indicates that the incidence of poverty was rising among the 60 per cent of the poorrural women. Studies also show that about 70 per cent of the population engaged in theagriculture sector in both matrilineal and patrilineal societies do take full control over the useand ownership of land and have marginal access to services and inputs. Extension andtraining services favour men, due to male dominance in the profession and cultural practices.Furthermore, the health status of women is generally low as indicated by high maternalmortality rate (620/100,000). This is partly due to the fact that a high proportion of thewomen begin their reproductive life before the age of 20 years and suffer from the relatedproblems of early pregnancies and childbirth. The situation of women is further worsened bythe proportion of their time spent on household chores including carrying water over longdistances, which causes health problems of weak bones and stunted growth amongst girls andwomen. The health situation of women is exacerbated by the high prevalence of HIV/AIDS.The ratio of female to male infected by HIV is 5:1. It is indicated that more than a third of thewomen antenatal facilities in Malawi are HIV positive. The most vulnerable population groupin the HIV/AIDS, epidemic is young women that are below the age of 30 years and the age15-19 years who are among the youth. Women in Malawi are also shown to suffer from poor

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nutrition. In spite of the fact that women are the main producers and processors of food,cultural practices force them to deny themselves food in the right quantity and quality infavour of male adults and children.

2.1.5 The Situation Analysis of Poverty indicates gender disparities and unequal access tothe education facilities. In spite of a number of measures having been taken to improve girlsand women participation in the education system, net enrolment rates are still lower for girlsthan for boy and only 5% of the girls of secondary school age are enrolled at this level ofeducation compared to 7% of the boys. while approximately 1.2% of Malawian men agedbetween 18 and 23 are enrolled in tertiary institutions, only 0.55% are female. Consequently,the proportion of women that never attended school remains higher than that of men. This iscoupled by the fact that girls have less access to basic technical, entrepreneurial, vocationaleducation and training than boys due to the failure of the delivery system to take into accountthe specific needs of women and girls. Poor households are often denied the opportunities totechnical, entrepreneurial and vocational training for females. This is reflected in an unevengender distribution of the labour force in the formal and informal employment. Women onlytake up 16% of the formal wage employment. This is coupled with low representation indecision-making positions with less women parliamentarians, ministerial and key judicialofficers.

2.2 Human Development Policies

2.2.1 The Human Development Framework is a unified approach comprised of a broadrange of policy strategies that are key priority areas of the PRSP social sector interventions.Among these are: education, health, gender and youth strategies.

2.2.2 The education sector strategy is stipulated in the Policy and Investment Framework(PIF) (2000) proposes improving access to educational opportunities at all levels of theeducation system and in particular improve the equity of access and outcomes fordisadvantaged social and economic groups and regions. This was supported by theintroduction of universal primary education in 1994 which resulted in an increase in schoolenrolment from 1.4 million in 1990 to about 3 million in 2000; and an improvement in theparticipation of girls, women, disadvantaged youths and rural communities at all levels of theeducation system. The PIF also stipulates that, female participation at primary, secondary andtertiary level is to be increased to at least 50 per cent of the total enrolment at all levels of theeducation system by 2012. This is to address the continued increase in the drop out rate ofgirls and improve the retention of girls in schools; to be facilitated by an increase in the ratioof the number of female teachers relative to that of males in the education system.

2.2.3 The health sector has been identified within the PRSP as one of key sectors forpoverty reduction to be implemented through the National Health Plan (199-2004). Theoverall goal of the health sector plan is to raise the level of health status and well being of thepopulation to increase productivity. Five strategies have been adopted for the implementationof the health sector policy. These include: (i) essential health package care, (ii) Bakili MuluziHealth Initiative, (iii) sector wide approach, (iv) decentralization of the health caremanagement, and (v) cost recovery/user fees. The health sector plan also incorporates abottom-up approach to the planning of health delivery to ensure a multi-sectoral andcommunity participation in the development process. A key focus of the health plan is to alsoimprove equity in the delivery of health care regarding its impact on the status of vulnerable

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groups, particularly women and disadvantaged youth. This will include the expansion andimprovement of reproductive health facilities; strengthening advocacy on HIV/ADS throughinformation education and communication campaigns and sensitization on health relatedgender issues.

2.2.4 To incorporate the issues affecting the participation of the youth in the povertyreduction strategy the Government adopted a National Youth Development Strategy andAction Plan for a period of three years (1999-2001). The Policy aims to provide a frameworkfor a coordinated approach for the promotion of broad based sustainable livelihoods for theyouth. The policy also aims to undertake the following: expand youth employmentopportunities, focussing mainly on self-employment by increasing access to relevant training,fostering of affirmative action in the labour market and improving dissemination ofinformation on career guidance. Effort will be made to match the expansion in basiceducation with increased access to relevant and appropriate life skills training in the afterschool environment. Measures will be undertaken to put in place mechanisms for community-based programmes for young people for health, nutrition and population. Measures shall alsoinclude improvement in the provision and maintenance of social and community-basedrecreational facilities; revision of the learning approach in the educational programmes topromote innovativeness in young people in science to develop local technologies. Othermeasures include involvement of young people in preserving the environment; programmesto encourage females to participate in issues concerning the youth; the promotion of positiveattitudes towards female roles; and the promotion of the participation of the youth in thesocial and economic programs of the country.

2.2.5 The Government human development framework is also supported by the GenderEmpowerment Policy of the GOM aimed at addressing the existing gender imbalances in keyareas of education and training, reproductive health, governance and human rights as well aspoverty reduction and economic empowerment. The main objectives of the gender policy areindicated as: enhancing support to efforts for the participation in the national developmentprocess by women, girls and boys; providing guidelines for addressing gender concerns for allkey stakeholders; revision of development policies, programmes and laws to make themgender responsive; addressing the existing traditional, cultural and social attitudes that hinderparticipation of men and women in development efforts; promoting and facilitating access toand control of productive resources, services and opportunities; promoting the recognitionand value of the multiple roles and responsibilities of women; increasing the collection anduse of gender disaggregated data in the planning and implementation of poverty reductioninterventions; and putting in place an institutional framework for the coordination,implementation and evaluating gender responsiveness in national poverty strategies andprogrammes.

2.3 Human Development and PRSP Priorities

The Government of Malawi launched the Poverty Reduction Strategy Process (PRSP)to define the priority areas for intervention in its development efforts in 1999. The keyoutcome from the PRSP process is that of increased efforts to address the difficulties beingexperienced by the poor in taking effective actions to address their situation of poverty.Government policies for poverty reduction will aim towards growth in the defined prioritysectors of macroeconomic stability through improved Government fiscal discipline,decentralization to transfer functions from the central Government to the districts and the

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establishment of strategies to effectively address corruption, education, health and agriculture.The emphasis would be on the increased involvement of the poor in determining andimplementing activities that are to alleviate their state of poverty through, among otherinterventions, increased ability to acquire knowledge and information as well as increaseaccess to skills training and affordable micro-finance for the poor. This includes: putting inplace efficient legal sanctions for default, better education of the borrowers in the variouscredit approaches; improved access to information on agricultural market opportunities;improved physical infrastructure for access to markets and extension services; review of theeducation system to improve quality and enhance technical and vocational aspects includingbusiness skills (including basic business management, accounting and self employment). It isexpected that the development of skills and creation of self employment would support themobilization and organization of the target communities into functional economic groups,with the knowledge and capacity to recognize and take advantage of opportunities to fightpoverty as well as how to address capacity affecting issues of gender and HIV/AIDS.Government commitment to human development is demonstrated by the fact that nearly 60%of the 200/2001 Capital Budget is allocated to the key social sectors of education, health andcommunity services and also by its intention to use the resource realised from the HighlyIndebted Poor Countries (HIPC) of approximately MK 0.5 billion, 3.5 per cent of the GDP tofinance additional poverty priority expenditures as identified in the PRSP process.

2.4 Institutional Framework for Human Development

2.4.1 The National Coordination Unit in the Vice President’s office is responsible for thecoordination of defining of the sectoral and thematic priority areas for poverty reductioninterventions in Malawi. The National Coordination unit is supported by the variousstructures that are in place in the relevant sectoral agencies for the implementation of thepriority areas for empowerment of the poor and particularly of the women and youth. Theseinclude other line ministries and partner agencies involved in the operationalisation of thePRSP including education, and health. The MOGYCS is, through its mandate, which fostersthe empowerment of women and youth, a key institution in the implementation of humandevelopment activities under the PRSP.

2.4.2 To further focus on the requirements of distinct sectors of the Malawian population,the human development framework utilises the implementation structure for the gender policycomprised of the cabinet and parliamentary committees, responsible for advocating genderissues in parliament; advisory committee of principal secretaries, responsible for advising thecabinet and line ministries on gender issues; implementation committee of gender focal pointsin the line ministries, NGOs, parastatals and the private sector responsible for identifyingpriority gender issues, planning for relevant interventions, assessing and reviewing ofinterventions. In addition, the organizational structure for the youth policy plays a significantrole in the human development activities. This consists of: the Youth Council, responsible foroperationalizing the policies and objectives of the council; the General Assembly, responsiblefor determining priority areas and strategies for youth programs; the Department of Youth inthe Ministry of Gender, Youth and Community Services (MOGYCS), responsible forformulation of national action plan for the development of the youth; youth organizations,workers and various stakeholders; responsible for dealing with concerns of the youth atvarious local levels.

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2.5 Financing of Human Development

In view of the broad issues of access and equity that have to be addressed by thehuman development activities, the funding for its implementation is covered by regularbudgetary allocations to the relevant line ministries and agencies. The Government has alsomade the necessary arrangements for the provision of the financing human developmentprogrammes through increased budgetary allocations to the key social sector areas ofeducation, health and the mainstreaming of the main issues such as, poverty, gender andHIV/AIDS through the debt relief funding of the highly Indebted Poor Countries (HIPC)Initiative. A substantial share of the capital budget ( 60.57 pr cent), accounting for almost 3.5per cent of the GDP in the 200/2001 fiscal year was allocated to the to the social sectors.These are indicated as; water and sanitation, 18.24 per cent; education sector, 17. 63 per cent;health 16.30 per cent; and community development 8.40 per cent. Further indication ofGovernment’s strong commitment to human development is through the mobilization of US$110 million to implement the HIV/AIDs National Strategy Framework. Additional financingis also being mobilised through other arrangements with external development partnersincluding the non-governmental organisations (NGOs) and private sector investors.

2.6 Donor Intervention in Human Development

Donor assistance has a significant role in the execution of the Government HumanDevelopment Strategy. Current donor support for human development is being providedthrough a number of interventions in the various relevant sectors, including education, healthand training and technical, entrepreneurial and vocational education and training. However,the main donor intervention for the human development sector will be through the technical,material and financial assistance for the Government PRSP process. Over the next year, theinterim debt relief under HIPC of around $80 million is expected to provide additionalfunding for donor interventions in the essential sectors for human resource development.

2.7 Constraints of Human Development

The Human Development program in Malawi is affected by a number of constraints.These include: lack of clear guidelines and strategies on human resource development;inadequate coordination of the various donor, public and private entities managing the humandevelopment sectors; poor state of the existing infrastructure for human development;inaccessibility of the relevant facilities to large segments of the population; inability torespond to the needs of marginalized groups such as women, youth and rural poor; lack ofnecessary technical and skilled experts to implement the interventions in the various sectorkey to the human development strategy. Therefore, considerations of access andresponsiveness, availability of technical expertise and strengthening of the management of theimplementation of the human development strategies are essential.

3. SUB-SECTORS

3.1 Functional Literacy

The UNDP Human Development Report 2000 indicates that Malawi has a relativelylow adult literacy rate. The Household Expenditure Survey (1999) reveals that 77% percent ofthe households that were below the 40 percentile poverty line had no education or only

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attended only up to the level of standard four. The Government’s National LiteracyProgramme (NALP) under the MOGYCS Community Development Programme andcoordinated through the National Centre for Adult Literacy and Education takes measures toreduce adult illiteracy. In 1998/99, a total of 1,983 literacy classes were opened countrywide.The classes consist of about 40 participants and are undertaken within the local communitiesfor three times week. The recommended average duration of a literacy course is about tenmonths. However, the actual duration of the training is determined by the capacity of theparticipants to absorb the course material. These classes are taught by Literacy Instructorswho are often by volunteers from the local communities, most of whom are former civilservants such as teachers. They are trained and paid incentives by the MOGYCS from itsregular budget for community development services. These instructors are mainly identifiedto undertake literacy classes on the Government National Literacy Programme, which is partof the regular activities of the MOGYCS. However, a selected number of them are secondedto provide services to donor funded literacy interventions for the duration of theirimplementation. The literacy instructors are supervised and monitored by the communitydevelopment staff of MOGYCS. Government is presently increasing its efforts on therecruitment and training of adult literacy instructors, producing teaching and learningmaterials, including radio programme to enhance participation. Increased efforts are alsobeing directed to sensitization campaigns to motivate both men and women to attend literacyclasses, and in particular at educating men on the benefits of the women participating inliteracy activities. The aim of the Government literacy programme is to reach nearly 90, 000illiterate adults in 2001, 460,000 by 2003 and 600,000 by 2004.

3.2 National Functional Literacy Policy

The National Literacy Policy was launched in 1986 as a community developmentprogramme. The aim of the policy was to enable the Malawian population above 15 years ofage to: acquire the ability to read and write; acquire numeracy skills; acquire information andknowledge; and utilize literacy and numeracy skills, information and knowledge to raise theirsocio-economic well-being. In this regard, the Literacy Policy also aims to improve generalknowledge of the poor on relevant cross-cutting issues by integrating in its programmeshealth, family planning and child spacing, effective farming techniques, gendermainstreaming and HIV/AIDS preventive and community care measures.

3.3 Organization and Management of Functional Literacy

The organizational structure for the management of the national literacy programmeconsists of the National Advisory Council for Literacy and Adult Education that isresponsible for policy formulation. The council is composed of the Principal Secretaries ofthe Ministries of Gender, Youth and Community Services and Education and Culture andrepresentatives of relevant multi-sectoral institutions. The National Centre for Literacy andAdult Education and its specialized units for research, evaluation, monitoring, training,curriculum development is responsible for the implementation of the national literacy policiesat a national level. The Community Development staff, the extension cadres, of theMOGYCS implement the literacy policies at the regional and district levels. Locally recruitedliteracy instructors under the supervision of a Community Development Assistant conduct theliteracy activities at the local level. Community Literacy Committees are also instituted tofacilitate literacy courses at the area level. The literacy classes, composed of 25 to 30participants, are to be conducted twice a week in the local communities in structures that are

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constructed by the communities as part of their contribution to the project. The lessons arebased on recommended course materials prepared and distributed by the National Literacyand Adult Education Centre. The average period found to be necessary to impact functionalliteracy skills is 10 months. It is estimated that one literacy instructor will undertake about200 functional literacy classes for nearly 500 IGAs per year. The Government is alsocurrently undertaking a review of the National Literacy Policy to address several of theconstraints limiting its implementation and to also make it more responsive to the educationneeds of the poor.

3.4 Financing of Functional Literacy

The National Literacy Programme is largely funded by the Government through itsregular budgetary allocations to the MOGYCS for its community development programme.Several international agencies including UNICEF, UNCDF, UNDP, GTZ, EU, and the Bankare providing material and financial assistance for the Government’s literacy programme.Contributions are also made by non-governmental organizations such as the Action Aid andWorld Vision. Private sector companies including the Commercial Banks have also providedsome funding for the national literacy activities.

3.5 Constraints of Functional Literacy

Although, the Government has adopted the concept of functional literacy throughbasic reading, writing and numeracy as a first step to eliminating illiteracy among its adultpopulation and a basis for its human resource development strategy, the attainment of literacyskills has been very limited. The main constraints impeding the implementation of theNational Literacy Programme include: lack of advanced post literacy learning after the basicreading, writing and numeracy course; lack of consideration of the differences in needs of thevarious regions and groups in the country in the application of the literacy curriculum; lack oflinkage between functional literacy courses and the Government socio-economic andcommunity development activities; lack of reliable and permanent funding for theprogramme and supply of instructional materials; inadequate follow-up and monitoring ofthe functional literacy activities by the various providers. Other limiting factors include:inadequate integration of literacy delivery services into socio-economic activities aimed atraising the population’s quality of life; poor correlation between functional literacy andformal education; the duration of the on-going programme and inadequate follow-up onlearning and related post literacy services; and high turn over of instructors and a high dropout of 40 per cent by the participants as well as poor management due to the insufficientcapacity of the NCLAE.

3.6 Vocational and Skills Development Training

3.6.1 Recent statistics show that currently there are about 300,000 new entrants (educatedand semi-educated) in the job market per year. Moreover, there are only about 35,000 newjobs created per year. This indicates that at least 80% of the new job seekers will have to lookfor other forms of employment, particularly in the informal sector or rural non-farm activities.However, current statistics show that the majority of the poor have no access to formaltechnical vocational education and skill training. Therefore, the development of skills andcompetencies for self-employment will be an essential contribution to the empowerment ofthe Malawian population.

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3.6.2 Malawi has a variety of vocational training and skills development activities currentlybeing implemented and coordinated by the Ministries of Commerce and Industry andVocational Training and Labour. However, the skills development activities at thecommunity level are mainly being conducted as part of the Government communitydevelopment programme through the Ministry of Gender, Youth and Community Services.Among these are the community development courses being offered by the MagomeroCommunity Development Training College. These include; the certificate course inCommunity Development and Social Work for Community Development Assistants(CDAs), short courses in basic business management, appropriate technology; andcommunity leadership for CDAs and participants from local communities, particularlywomen and youth. The CDAS trained by the college are used as extension workers totransfer skills and provide technical support to the beneficiaries of Government and donorinterventions for the empowerment of the poor. Vocational and skills training activitiesdirectly related to the creation of employment for the out of school youth activities and poorwomen are also being carried out at several other MOGYCS community developmenttraining facilities. Two community training centres, Neno in the Southern Region andKaronga in the Northern Region are carrying out activities directly related to the training forself- employment and employment generation activities for the out of school youth. Theother community training centre, Liwonde in the Southern Region, provides training tovarious beneficiaries, including women and youth aimed at developing the capacity of thepoor to create employment opportunities in the formal and informal sector through access tocredit and technical support. Another related community development centre, AppropriateTechnology for Income Generation Activities (ATTIGA), in the Central Region providestraining in appropriate technology skills to support small scale income generating activitiesand specialised services related to the research, development and promotion of appropriatetechnologies as well as training of trainers. A key related activity for the communityvocational and skill development training is the production and distribution of the requiredteaching and training materials being carried out at the National Centre for Literacy andAdult Education (NCLAE), in Lilongwe.

3.6.3 Other vocational and skills development training activities are being carried out on acost sharing arrangement between the public and private sector. Among these are: the skillstraining in a range of vocational skills such as carpentry, metal works, auto repair, bakery aswell as business and entrepreneurship training packages offered by the Malawi EntrepreneurshipDevelopment Institute (MEDI); on and off campus with periodic follow-up trainingprogrammes for NGOs or other donor driven projects by MEDI; technical skills forentrepreneurship and business management training for illiterate or semi-literate beneficiaries arange of skills by Salima Rural Vocational Training College. This training involves hands-onpractical courses to prepare the participants to work in rural communities using the skills theyhave learnt to train others in the skills that they have learnt; training for rural and urban poor aswell as youth in basic business skills by Development of Malawian Enterprise Trust (DEMAT).The aim is to train target beneficiaries and to link them to micro-finance services for receivingloans. The beneficiaries are selected, trained, connected to micro-finance services and alsofollowed-up on their repayments and savings. Approximately 60% of the 2,800 beneficiariesthat benefited from the training by DEMAT in 2000 were women. The training by DEMAT alsoincludes refresher courses and following-up on the CDAs in the regional and district officesimplementing the community outreach and monitoring of community development activitiesunder the MOGYCS.

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3.7 Vocational Training and Skills Development Policy

3.7.1 To enhance the relevance of the human resource development policy to the nationalpoverty reduction strategy, the Government launched a national policy on vocational and skilldevelopment in January 1999. The policy presents the strategic plan for the implementation ofvocational training and skills development programmes with an increased focus on technical,entrepreneurial, vocational education and training to improve the quality of the workforce.The main objectives of the national vocational and skills development policy are thefollowing:

To promote an integrated, demand driven and effective technical, entreprenuerial andvocational training and skills development system;

To monitor gaps between supply and demand for skills; To promote managerial and business skill development and a spirit of entrepreneurial

culture with regard to wage and self employment; To facilitate sound and sustainable financing and funding mechanisms; and

3.7.2 The government policy for vocational training and skills development alsoencompasses a strategy for poverty reduction and other crosscutting issues of gender,HIV/AIDS and environment. The main aims of this strategy include; developing technical,entrepreneurial and vocational competencies and capacities, which are essential for socio-economic participation to contribute towards poverty reduction; increase options for a widersegment of the society for sustainable and effective economic participation and generation ofincome; developing new and appropriate technologies and related competencies that will helpthe Malawi population to engage in economic livelihoods to generate incomes outside thetraditional agriculture sector; provision of skills to the formal and informal economy tomitigate bottlenecks in skills of high labour demand; developing special support programs fordisadvantaged groups; integrating formal and non formal training modules for vocationaltraining and skills development; promotion of information sharing and dissemination;improving quantity and quality of training services; and, bridging mechanisms and creativesolutions to expose and finance necessary skills development to promote equal access totechnical and vocational programmes.

3.8 Financing of Skills Development

The most prevalent financing system for vocational training and skills development isbased on a co-sharing arrangement with the public and private sector contributingproportionally. The private sector contributes about 2% to the vocational training fund, whichcovers the cost for training staff. The Government contributes only 1% of the funding tocover the running costs of the training institutions. The responsibility for this funding isshared by the Ministries of Education, Works and Supply, Youth, sports and Culture, Industryand Commerce, and Labour and Vocational Training. The users contribute user fees and non-direct costs such as payment of boarding fees and training levy. The revenue from the traininglevy and grants is polled into the Industrial Training Fund, which is administered by theMinistry of Labour. The industrial Training fund is used to cover some of the costs for therunning of the technical colleges and training institutions. Some donors have given support totechnical vocational training and skills development programmes. These include: ADB, EU,UNDP, OXFAM and the German Government Cooperation Agency.

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3.9 Constraints of Vocational Training and Skills Development

The main activities of vocational training and skills development are designed for thetarget beneficiaries and are aimed at linking them to employment creation systems to enablethem to engage in sustainable livelihoods. However, the training institutions often select thepotential beneficiaries to be trained with little consultation with the institutions that wouldgrant the trainees access to employment creating facilities to enable them to start incomegenerating activities. There is also an inadequate mechanism for a follow up on thebeneficiaries thereafter. Previously all courses were offered free of charge and thus many ofpeople benefited from the training. However, more recently, due to budget cuts, fees arecharged for courses offered. Due to this the number of people trained has reduced ascompared to the numbers trained under the earlier systems. For instance, DEMAT, one of themain training agency for micro-credit activities, that has a strong role in retraining andfollowing-up on the CDAs under the Ministry of Gender, Youth and Community Services,has suspended most of its training activities due to lack of funding. A number of other similarvocational training and skill development institutions suffer from multiple obstacles such as:inadequate physical and technical infrastructure, lack of updated training for staff, andinadequate promotion support from the Government. Pledges of support have been receivedfrom several donors such as the EU and UNDP to address some of the constraints affectingthe delivery of vocational training and skills development in Malawi. The support of thedonors will enable DEMAT for example to expand its training activities that are critical to thedevelopment of the credit industry in Malawi.

3.10 Micro-finance

3.10.1 The Government strategy (PRSP) for poverty reduction has identified theimprovement of access to micro-finance facilities expanding the financial sector to assist thepoor to diversify their sources of income as an important means for attaining an equitabledistribution of income and a basic ingredient to economic growth. To be responsive to thischallenge, the Micro-finance Institutions (MFIs) in Malawi have organized themselves andformed a network called Professional Association of Micro-finance Institutions Network(PAMFIN). This network is to serve as an umbrella organization to coordinate the necessaryguidance and regulatory mechanisms for efficient micro-finance service delivery and capacitybuilding activities in Malawi. The network is also to engage in continuing dialogue with theGOM to provide a conducive environment for micro-finance delivery and coverage.

3.10.2 The micro-finance sector in Malawi is comprised of a range of institutions,programmes and schemes providing loans to low income clients. These micro-financeInstitutions MFIs in Malawi may be classified under three categories: i) Savings and CreditCooperatives/Banks; ii) Joint Credit and Savings (Grameen Bank-type) schemes; and, iii)Direct Credit Schemes. The MFIs currently also range from institutions that provide financialassistance to medium-scale enterprises, able to provide conventional collateral to small and/orunsustainable organizations. Specialized organizations have been created that deliver micro-finance as well as providing micro-enterprise training.

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Savings and Credit Cooperatives/Banks

3.10.3 Savings cooperatives and ‘mutualist’ credit organizations insist on preliminarysavings, or shares, before they will grant any credit. The main source of this type of micro-finance in Malawi is through the Savings and Credit Cooperatives (SACCOs) of the MalawiUnion of Savings and Credit Cooperatives (MUSCCO). Self-forming cooperatives, SACCOscan be created by a minimum of 500 persons who must deposit a minimum of Mkw 500,000to be recognized by MUSCCO, the central coordinating body. Membership of a SACCO isopen to all, hinging only on the ability to save and the common bond constituted by thesavings pool. There are 110 SACCOs, 65 of which are urban, and 45 rural. Over the past 5years, member loans have increased eightfold and the total number of members has doubled(currently estimated at 50,000), 32% of whom are women. To belong to a SACCO, apotential member must buy a minimum of number of shares and, most of the time, must haveinitial savings in order to be eligible for a loan. Loans granted may reach up to 200% of totalSACCO assets, although each SACCO is free to set its own loan conditions. However, theoperational capacity of each SACCO varies although each office is supposed to have at least amanager and a bookkeeper. SACCOs are self financing although they can also draw a line ofcredit from MUSCCO. The bulk of their finances come from interest rate margins, loanapplication fees or the CSC/SACCO and the ADB/WID programmes. There appears to befinancial gaps in individual SACCOs. Most important: every SACCO has its own ruleaccording to interest rates for loans and savings even if a margin of 20% minimum isrecommended by MUSCCO. MUSCCO also raises its own resources from annual dues fromSACCOs (1% of SACCO's total assets), interest margins on borrowers, and interest chargedon loans provided by the Christian Service Committee (CSC) or the ADB (WID Project).

Joint Credit

3.10.4 This is credit provided by a third party, and not necessarily from members’ savings, toindividuals who are bound by the guarantee provided by the group. There are many suchsystems, the largest of which is the Malawi Mudzi Fund being operated by the Malawi RuralFinance Corporation (MRFC). This focuses on resource-poor families with less than 0,4 ha ofland and assets equivalent to less than 5 bags of maize. The Fund targets women anddisadvantaged groups, with a large effort on group formation and training prior to anylending. The operation is very successful with good repayment rates and a significant impacton household income and food security. The other joint credit system is operated by theFoundation for International Community Assistance (FINCA) functions on the GrameenBank principle, lending to small groups that have a joint and several guarantees. No priorsavings are necessary to join. However, loans depend on mandatory savings of 20% of theloan value. FINCA schemes target the poorest 20% of the population, mainly in urban areas,but also in rural Malawi. FINCA primarily targets women, in the belief that, unlike men, theyinvest their profits and generate a surplus that has a positive effect on the entire family.Women are initially given a small loan mainly for commerce. The actual loan amountdepends on the amount of savings accumulated. Maximum repayment period is 4 monthswith no grace period allowed. A flat interest rate of 48% is charged on the basis of weeklyrepayments. Recipients have to save a mandatory 20% of the loan value before the loan isextended to them. The actual loan depends on the amount of savings. Recipients also have toundergo training before they receive credit. Twenty to 40 members form a village bank thatelects a Board of Directors which changes with every loan cycle.

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Direct Credit

3.10.5 This scheme provided loans to groups that are self-selecting, mainly women (70%) inthe rural areas, and encouraged to have cash as a guarantee of about 20% of the loan. No priorsavings are required for credit that comes from an external revolving fund. Interest rates ofabout 30% are charged on the loans to generate income for the MFIs to cover operationalcosts.

Non Governmental Organizations (NGOs)

3.10.6 There are also a number of organizations that support the delivery of micro-finance inMalawi. These include: Plan Malawi, OXFAM, Save the Children, Africare and ChristianServices Committee. For example, Christian Service Committee (CSC) is working incollaboration with MUSCCO, with whom it established a revolving fund under sub-contractarrangements. CSC enables the women to join a SACCO by buying shares for them and tothem obtain loans directly from CSC for use in nutrition-related income generating activities(food processing, grain mills). The profit is expected to be used to improve the nutritionstatus of the families. CSC relies on the extension officers of the Ministry Agriculture(MOAE) and MOGYACS for group formation, training and other advisory requirements.CSC also operates a nutrition credit scheme in a number of districts in the Southern Region.PLAN micro-finance operations provided credit to farmers in the form of agricultural inputs.Farmers are required to organize themselves into farmer groups of 25 members each. PLANaims ideally at 50% of the group members being women. Each farmer received an averageMkw 4,500 with the actual loan size depending on the size of the farm. PLAN provides theloan as a one-off grant to the group, which is expected to pay back into a community accountat a SACCO from which funds can later be used to finance other members of the farmingcommunity. When giving out the loans PLAN lends to about 70% of the group while the restobtain the 30% left only when the members have repaid the first 70% of the loan. Severalclubs representing clients from 150 villages in Kasungu have accessed loans from thisscheme. PLAN also has a micro-finance scheme for non-farm activities that provides trainingand loans with the assistance of DEMAT. The clients are also organized into groups of 5members each, and are provided with loans on group basis.

3.10.7 There are several donor micro-finance interventions for the poor in Malawi. Theseinclude: the World Bank-funded Rural Financial Services Project that provided the line ofcredit for the creation of the Malawi Rural Finance Company Limited (MRFC); IFAD US $12 million credit line under the Mudzi Financial Services Project (the Mudzi window ofMRFC). These credit lines are channelled through the Reserve Bank of Malawi and providedto MRFC at market rates for seasonal agricultural loans, small business loans, and savingsfacilities in the rural areas. The micro-finance provided on the basis of acceptable collateraland group pressure as the main security. The maximum, loan size is equivalent to US $ 500for any one borrower. The target under this ‘poverty alleviation window’ was 80,000resource-poor households, and micro-entrepreneurs in groups of 20 – 30 individuals. USAIDalso provides training and credit to cooperatives. The Bank’s also has several interventionsextending credit services to the poor in Malawi. These include; the Rural IncomeEnhancement Project providing agricultural inputs, training and infrastructure to smallholdersand poor women farmers; the Women in Development Project engaged in skills training andloans for small scale income generating activities and the Poverty Reduction Project financingcommunity based IGAs through the micro-finance window of the District Development Fund.

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3.10.8 The general observation is that the implementation of micro-finance operations ismore efficient when left to professional Micro-finance Institutions (MFIs). This approach isless costly, strengthens long-term finance procedures, benefits from national systems and, insome cases, regional networks, and applies a financial technology that ensures highreimbursement rates. The most sustainable projects were the ones that mobilized the projectclients and built upon traditional practices (a bottom-up approach). Lessons learned from MFIuse may be summarized as follows: (i) projects should not interfere with the regulations ofMFIs that have succeeded in obtaining high recovery rates through applying very strict rules;(ii) a better understanding of the problems of target groups improves MFI action in the field;(iii) revolving funds require close monitoring; (iv) recurrent cost considerations must bebudgeted for at least two (2) years where new outreach facilities are to be created; (v) micro-finance operations require intensive appraisals, at least six (6) months training for clients, andconstant follow-up.

3.11 Micro-Finance Policy Framework

In line with PRSP, the Government proposes to develop a sound integrated financialsector by 2005 that can effectively deepen emerging micro-finance outreach and appropriateproducts in productive poor communities to improve the economic productivity of thesecommunities. The specific policy strategies for this proposal are articulated in the draftMicro-finance Policy and Action Plan. The purpose of this policy document is to promote thedevelopment of a sustainable micro-finance industry, which provides credit and savingsopportunities and other financial services to low-income people to create income and wealthin Malawi. To achieve this objective the GOM is creating an enabling legal and regulatoryenvironment and economic policies conducive to the development of micro-finance inMalawi. In this regard, the Government is preparing a policy and regulatory framework forthe micro-finance industry as part of the PRSP process. Government also intends to improvethe capacity of implementing institutions and other key actors. In addition, Government isdetermined to promote best practices in the industry and increase the co-ordination among thevarious actors in the micro-finance sector.

3.12 Financing of Micro-Finance Sub-Sector

3.12.1 Donor interventions in the micro-finance industry in Malawi have become veryimportant for poverty reduction especially for the rural poor. Most of the donor funds aregiven to support on-lending and institutional and capacity building for the implementingagency. Nevertheless, recent estimates suggest that only 11% of the existing demand formicro-finance has been covered, indicating that there are large sections of the rural poor whostill have no access to credit funds.

3.12.2 Key donor programmes include DANIDA’s support to FINCA for expansion to thenorthern region and for staff training. Also support has been given to the Malawi Union ofSavings and Credit Cooperative (MUSCCO) for rural Savings and Credit Cooperatives(SACCOs) and linking them with National Small Farmers Association of Malawi(NASFAM). INDEFUND has also been supported through a Credit Guarantee facility forNASFAM to access export financing and / or venture capital for agriculture equipment.NASFAM receives support under the Crop Financing Programme. National Association ofBusiness Women (NABW) has received support for capacity building and Micro-Finance

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System set up, Paprika Association capacity building and marketing support. DFID hasprovided support to the Opportunity International - Usiwa Watha Credit Trust Fund, FINCAfor loan fund and expansion, Concern-Universal under Dedza Sustainable Livelihood projectloan fund for overhead costs for micro-finance component, and to the EAP. European Unionhas provided support to NABW under the Modest Credit Facility for revolving fund foragricultural credit-in-kind, Micro Projects for loan fund for micro-interventions. GTZprovides support to SEDOM for administration of loan funds for the Border Zone Project.The EAP also receives support from GTZ. Japanese International Cooperation Agency (JICA)has given support to SEDOM for technical expertise and computer equipment. UnitedNations Capital Development Fund (UNCDF) has established a Credit Guarantee Fund withDEMAT, Commercial Bank of Malawi and National Bank of Malawi for implementation andadministration and has granted operational and loan funds to Pride Malawi. UNDP alsosupports DEMAT, Commercial Bank of Malawi and National Bank of Malawi withoperational funds. USAID is providing support to MUSCCO for SACCO financialmanagement strengthening and rural SACCO expansion. In addition MUSCCO has receivedsupport for a loan fund and institutional strengthening. The World Bank has previouslyprovided loans through the GOM for on lending to MRFC and to SEDOM. The Bank’sAMINA programme has also provided capacity building support in the form of managementtraining and computer equipment to SEDOM, DEMAT, World Vision, MUSCCO andPAMFIN.

3.13 Constraints to Micro-Finance Development

The potential of the micro-finance system is faced with numerous problems that makecredit inaccessible to a large segment of the poor. Available information indicates that in spiteof the increase in the number of institutions offering micro-finance, there still remains a gapin coverage of the poorest of the poor. The main constraint is the high interest rates in thecountry due to GOM excessive borrowing from the domestic market (in 2000 this amountedto 3.7% of GDP). This is even more restrictive for MFIs who usually charge even higher ratesto cover their costs and risks. The second constraint is the high inflation rates, which restrictslong-term lending. The effects of high interest and inflation rates make it difficult for therural poor to make savings after borrowing funds for business activities. This contributes toweakening the rural poor’s purchasing power and thereby intensifying their poverty status.Another constraint to the micro-finance sector is the direct involvement of the Government insome lending institutions, which leads to mixing of grants and loans and the politicisation ofmicro-finance. Also, the absence of a tougher and more efficient legal system and sanctionsalso encourage loan default, which has created a bad portfolio for a number of MFIs. This isworsened by inadequate coordination between micro-finance service providers to ensureeffective networking to achieve best-practice standards.

3.14 Institutional Strengthening

3.14.1 Given its prominent role in the implementation of the PRSP main priority area of theempowerment of the poor through its mandates for community services, gender and youthdevelopment, MOGYCS was restructured to focus on gender issues relating to women andyouth. The role of the MOGYCS is now to create awareness and increase the activeparticipation of poor communities in the country’s overall development, with a specialemphasis on women and youth.

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3.14.2 A structure has been put in place to facilitate the MOGYCS functions to formulate,implement, and monitor the women and youth programmes. At the central level, theMOGYCS comprises five departments. These are the Department of Planning andAdministration, Department of Gender, Department of Youth, Department of Youth andDepartment of Community Services. These departments include divisions, sections and /oractivities. For example the Department of Gender comprises of a section for Women Affairsthat includes the Women’s Welfare and Protection Section. Under this department is also theEconomic Activities Programme (EAP) unit. The main function of the EAP unit is to providethe technical support to address the different requirements of the development andmanagement for the Government interventions for economic activities for the poor. Thisincludes the coordination of all the Government and donor economic activities interventionsfor poverty reduction. The other function of the EAP unit is to integrate all donor fundedprojects on economic activities into the EAP framework under the MOGYCS after theircompletion to ensure their sustainability. A decentralized net work of extension officers, theCommunity Development staff, is attached to the three regional offices and twenty-six districtoffices for the implementation of it community development programme, particularly thepromotion of non-farm income generation activities (IGAS). MOGYCS is represented in eachof the twenty-six districts in the country by a district office. Various extension services to thewomen and youth are provided by the Community Development Assistants (CDAS), andcommunity workers from other relevant line ministries such as the Primary EducationAdvisors Health Surveillance Workers (HSW) and Agricultural, Fisheries and VeterinaryExtension Workers. These extension workers are trained by the respective line ministries butemployed by the local district Assemblies. The CDAs and other extension workers provide avital means for MOGYCS to undertake its functions at the community level. However,MOGYCS needs to provide further training to the CDAs and other extension staff to meet itnew focus on gender issues and the socio-economic empowerment of women.

3.14. 3 The MOGYCS, through its National Centre for Literacy and adult Education(NCLAE) is responsible for the implementation of the Functional Literacy Programme. TheNCLAE organizes functional literacy at the community level, and is responsible for thetraining of functional Literacy Instructors. However, due to insufficient teaching and learningmaterials, insufficient transport facilities, and also lack of incentives, the performance of theFunctional literacy Programme is below expectations.

3.14.4 The MOGYCS is also managing several multi-purpose training facilities that arebeing used for the capacity building activities at two levels. These include: Magomero,ATTIGA, Neno and Karonga Community Development Training Centre. The first level ofactivities focuses on the training of the staff of the MOGYCS and other relevant agencies,particularly the credit officers, functional literacy resource material production experts andextension workers such as the community development cadres and literacy instructors. Thesecond level of training is directed at the improvement of the ability of the poor andvulnerable groups, particularly women and youth to undertake economic empoweringactivities through functional literacy, basic business management and skill development.

3.15 Financing of the MOGYCS

Presently, the funding of the MOGYCS is through the regular Government budgetallocation for recurrent costs to cover the staff salaries and its running costs. The Governmentis also providing the funding for the credit guarantee fund being managed by the National

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Commercial Bank for the provision of credit to the beneficiaries of the EAP trainingactivities. However, the financing of its various programmes is mainly through donorassistance. For instance the EAP under the Department of Gender is being finance by DFIDand GTZ support to the capacity building activities to prepare the potential beneficiaries ofthe micro-credit under the Government credit guarantee fund for the poor. Donor funding hasalso been provided for the improvement of the training facilities for the capacity building forthe AEP that are under the MOGYCS. For example, the ADB and World Bank have fundedthe rehabilitation of the structures and provision of equipment at Magomero CommunityDevelopment College.

3.16 Constraints of Institutional Strengthening

There is lack of institutional coordination between the MOGYCS and other relevantagencies that results in lack of collaboration in the implementation of its programmes. Theestablishment of the AEP unit in the MOGYCS is addressing the need for improvedcoordination between funding agencies and implementing partners of interventions for theempowerment of the poor. However, the capacity EAP unit itself needs to be furtherstrengthened. For example, the nine technical staff presently managing the EAP requirefurther training to reinforce their competencies to implement and monitor a communityeconomic activities programme. This should also include the development of requisite skillsin the unit to effectively integrate the donor funded activities into the Government the EAP.The institutional capacity of MOGYCS to execute its activities for the empowerment for thepoor is also being affected by the inadequate budgetary allocations by the MOGYCS for theexecution of the function of the EAP programme including training of the staff to build-uptheir levels of competence to effectively manage the EAP and inadequate training facilities atMagomero, ATTIGA, Liwonde, Karonga, Magomero and Neno community training centres.The existing physical infrastructure such as classrooms and workshops are dilapidated andlack the required furniture and equipment.

4. THE PROJECT

4.1 The Project Concept and Rationale

4.1.1 The project will support the implementation of the Government Poverty ReductionStrategy Process in the priority area of human development. The project will enable theachievement of this objective by improving the life skills of the poor through functionalliteracy, basic business management, vocational and appropriate technology skillsdevelopment and access to micro-credit facilities.

4.1.2 The conception of the project was based on consultation with various stakeholders.These included: regional review workshops for potential beneficiaries of women groups,community development staff and implementing partners; meetings with relevantGovernment agencies including the MOGYCS, Youth Council and the National Centre forLiteracy and Adult Education (NCLAE) as well as participation of various stakeholdergroups. This included meetings with relevant Government and donor agencies, NGOs andother potential intermediary groups, as well as the beneficiary groups. Further beneficiaryparticipation included meetings with selected area and village development committees,

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women and youth and relevant implementing partners to seek inputs on the feasibility of theproposed project operations and technical details such as the timing and logistics of the coreactivities of the project.

4.1.3 Lessons from the on-going Bank interventions and other similar donor-fundedinterventions have been taken into consideration in the formulation of the project. Withregard to the functional literacy activities, the project will address the problem of the highdrop out rate and low attendance of the beneficiaries during the agricultural season byconducting the literacy classes from March to October to coincide with the non-farmingperiod in Malawi. In spite of this, an estimated 445 women’s groups representing 4,341women satisfactorily completed the literacy classes. 231 of these groups have were trained inbasic business management and appropriate technology skills. On the problem of high turnover of literacy instructors due to poor conditions of service, the project will also need toobtain evidence of resource allocations by the MOGYCS for regular and timely payment ofthe incentives of the literacy instructors prior to the commencement of the literacy classes.The micro-finance component suffered from a lack of guidelines for the implementation ofthe credit operations due to non-completion of the operations manual by the creditintermediary and inadequate capacity of the extension staff to monitor and provide thenecessary technical support for the beneficiaries’ income generation activities. However, 222groups, representing 82% of the 2,845 women that were trained in basic businessmanagement were provided with loans. The loans given to these women’s groups account for53% of the allocated resources under this component of the WID project. A draft manual forthe operational guidelines was prepared during the appraisal of the project and will be part ofthe Project Implementation Document (PID). The PMU staff will provide the requiredexpertise for the technical back-up and coordination for the implementation of the variouscomponent activities of the project. The PMU staff will also closely monitor and evaluate theextension community development staff and provide them with refreshers courses at givenintervals.

4.1.4 Several other lessons of the previous interventions are also part of the design of theproject. Under the functional literacy component, it was indicated that periodic review of thecurriculum and resources materials for the functional literacy was necessary to make themrelevant to the skills requirements of the target groups. The mid-term review of the WIDproject revealed that the provision of basic management training given to the target groupsbefore they access the credit provided them with the requisite skills for the management ofthe subsequent IGAS and improved the performance of the project credit operations. Theproposed project will also build its activities on the self forming target groups that aredefining their requirements and presenting themselves to the project for training and access tocredit. In addition, the project will capitalise on the entrepreneurial spirit existing in the localcommunities to further reinforce the declining local income-generating activities.Furthermore, the project will utilise the accumulated skills, experience and back-up trainingmaterials

4.1.5 The project has also adopted a bottom-up approach to ensure community participationat all levels in the implementation process. The project will create a synergy between the coreactivities (i.e. training for functional literacy, basic business management, skills developmentand access to the credit facility) and community participation in a demand-driven projectapproach. This will entail the target groups determining the income-generating activities to beundertaken and the diverse related skills training activities provided through the project

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activities. However, through the provision of technical support on a regular basis by theCDAs, it will be ensured that the target groups businesses are determined on the basis of theireconomic viability and also that the related skills training does not result in an excess ofpeople trained in any given area. The project will facilitate self-help groupings by thebeneficiaries into IGA groups to build community level social capital for the creation ofincomes and wealth in the project target areas and in Malawi in general. These strategies areto be achieved through a close interfacing of the front-line staff of the project with the entiretraditional authorities through meetings, advisory services, sensitisation and mobilisationprogrammes and other core activities, which the project offers.

4.2 The Project Target Areas and Target Groups

4.2.1 The project will serve poor communities in ten selected districts in the three regions ofMalawi. The are; Dowa, Ntchisi, Ntcheu and Salima, (Central region); Balaka, Machinga,Chikwawa and Mwanza, (Southern region); and Chitipa and Karonga, (Northern region) asindicated in Annex 1. These districts have been selected because the data poverty variationsin districts indicate that they are amongst the poorest in the country with the highestpopulation with incomes below the poverty line of 40th percentile. They are also not supportedby donor activities of a similar nature and will logistically enable the expansion andreinforcement of the ongoing Women in Development project activities.

4.2.2 The poverty profile indicates that a key factor of poverty in Malawi is that of genderdisparities. Women constitute 52 per cent of the total population and are disproportionallypoorly affected by the poverty situation. Households headed by women are disproportionalpoor, especially in the rural areas. Approximately half of the population of Malawi of the age15 to 25 years, which constitutes the youth, continues to be vulnerable due to inappropriatebasic education and training, and lack of employment. As noted above, these difficulties areparticularly worse for female youth. Figures on education indicate that net enrolment rates forfemales are still lower than for the male youth and only 5% of the them of secondary schoolage are enrolled at this level of education compared to 7% of the young males. In addition,while approximately 1.2% of Malawian men aged between 18 and 23 are enrolled in tertiaryinstitutions, only 0.55% of women of the same age are. This is coupled by the fact that youngwomen have less access to basic technical, entrepreneurial, vocational education and trainingthan men and are less likely to be engaged in formal employment. The project will focus onproviding the poor rural women and the youth with greater access to services to enhance theircapacities and opportunities to actively participate in economic activities. Therefore, 70 percent of the project resources will be allocated to the empower women to address the existingsocio-economic disparities between the female and male population of Malawi. They will beprovided with functional literacy, basic business management, skills development trainingand access to micro-credit to enable them to engage in income-generating activities.

4.2.3 On the basis of the above, the project will target out female and male out of schooland unemployed youth including AIDS orphans that have no skills and opportunities toengage in income generating activities. Provision will be made under the project for the youthfor functional literacy and other requisite skills to generate self-employment and sustainablesources of income.

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4.3 Strategic Context

The process of democratization and increased broad participation of the population ingovernance and national development in Malawi needs to be supported through concertedefforts for poverty reduction. The PRSP framework provides a new approach to povertyreduction that would address the difficulties being experienced in taking effective actions toaddress the situation of poverty, and improving the ability to determine and implementinterventions that are to alleviate the state of poverty. In particular, support needs to be providedfor the Poverty Reduction Strategy Paper to reinforce the Government’s efforts to evaluate itspolicy measures and methodological approaches to the reduction of poverty to highlight the keyand priority areas which are to be the focus of the Government’s development efforts. Theproject provides a catalyst for this approach by focussing on a significant priority area of humandevelopment through functional literacy, vocational training, skills development to engage inthe small-scale economic activities sectors. This will entail the provision of vocational lifeskills, including business skills for self-employment and increased access to affordable micro-credit for the poor. In line with the country’s gender policy the proposed project will seek toaddress the gaps in access to resources and income and reduce the feminized nature of povertyin Malawi through the economic empowerment of women and youth and the improvement oftheir access to production resources and appropriate technology. Furthermore, the project isbased on the Country Strategy context that proposes that the Bank continue to support theGovernment to achieve its medium term strategy, which seek to alleviate poverty throughincrease allocations for interventions in the social sector.

4.4 Project Objective

The sector goal of the project is to contribute to the Government efforts to reducepoverty through human development. The objective of the project is to improve the capacityof the poor to actively participate in broad-based sustainable economic activities in Malawi.

4.5 Project Description

The project will be implemented over a period of 60 months to provide a graduatedresponse to the life skill requirements of poor rural women and out of school unemployedyouth in functional literacy, basic business management and appropriate technology skills toengage in IGAs. The project shall also improve access to micro-credit services to enable thebeneficiaries to utilize the acquired life skills to engage in income generation activities.Furthermore, support will be provided for the institutional strengthening of the Governmentagencies relevant for the execution of the project and that of the project’s managementfacility. Activities on crosscutting issues, including HIV/AIDS, gender, environment,reproductive health and nutrition, which contribute to human development and productivity inMalawi shall be mainstreamed across all the components activities. The project shall,therefore, comprise the following components: I. Functional literacy; II. Basic BusinessManagement; III. Vocational and Skills Development Training; IV. InstitutionalStrengthening; V. Micro-finance Scheme and VI. Project Management

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4.6 Detailed description of Components and Activities

Component I: Functional Literacy Training

4.6.1 This component will provide further support to efforts by the Government to eradicateilliteracy in Malawi through the national literacy programmes under the Ministry of Gender,Youth and Community Services, coordinated by the National Centre for Literacy and AdultEducation. The component activities will train 400 instructors who shall in turn train 60,000illiterate marginalized women and the youth in basic reading, writing and numeracy todevelop their human resource capacity, as a critical step in the development of life skills toincrease productive capacity. The estimated beneficiaries to benefit from the project’sfunctional literacy will constitute about 15% of the 600,000 projected coverage of theNational Adult Literacy Programme by 2004/2005. The component also aims to support themainstreaming of the critical crosscutting issues of gender, environmental protection,HIV/AIDS, reproductive health and nutrition as part of the curricula for the literacy classes.

4.6.2 Two broad activities have been planned under this component, a) direct training ofbeneficiaries, b) interventions to strengthen the functional literacy programme itself throughtraining of trainers to create a pool of requisite skills for the training of the beneficiaries.

A. Training

(i) Training of Target Groups

4.6.3 Functional literacy activities shall be implemented through classes conducted by theliteracy instructors at the community level in all the ten (10) districts to be covered by theproject to benefit 60,000 participants. This will include: (i) approximately 85 visitsundertaken by Community Development Assistants to rural communities to mobilizefunctional literacy participants; (ii) basic functional literacy classes organized for all the60,000 participants in classes of 40 for an average period of 10 months per class in adecentralized manner in all participating districts (iii) production and distribution of 10different post literacy booklets of different titles for the graduates from the literacy classes tomaintain their literacy retention capacities and (iv) 50 supervision and monitoring visits bythe Community Development Assistants (CDAs), district and regional officers to assess theeffectiveness of the functional literacy activities; their effects on the intended participants,and the modifications required for improving effectiveness.

(ii) Training of Trainers

4.6.4 The project shall also strengthen the quality of 400 literacy instructors and 100 CDAsat the district levels in order to improve the delivery of the functional literacy courses. 20training of trainers’ refresher courses have been planned for 100 CDAs that shall be involvedin the project at this level. 10 training of trainers’ and refresher courses have also beenplanned for all 400 the literacy instructors.

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(D) Consultancy Services

4.6.5 To strengthen the implementation of the functional literacy consultancy services shallbe procured for one and half person months to prepare an action plan to alleviate the lowattendance of learners and the high drop out rate of instructors during the farming season. Aconsultant shall also be hired for one and half person months to conduct a study into thetraining requirements of the functional literacy instructors. Additional services will beprocured to develop 234 radio teaching programmes and broadcasting of audio teachingmaterials at least once a year for three person months for the duration of the project. Serviceswill also be procured for one and half person months to review of the functional literacycurriculum to take into consideration some critical emerging crosscutting issues includinggender, environmental protection, HIV/AIDS, nutrition and reproductive health shall also beundertaken. The terms of reference of the consultants appear in Annexes of the PID.

(B) Equipment

4.6.6 Provision will be made for equipment to support the implementation of the functionalliteracy activities. 400 bicycles will be procured for the literacy instructors. Productionequipment including: a laminator, stitcher, scanner, image setter, film processor andaudiovisual machines shall also be financed under the project.

Component II: Training in Basic Business Management

4.6.7 The activities under this component will link the functional literacy training to theacquisition of knowledge and managerial competencies required to manage IGAs efficiently andprofitably. The key elements of the component activities shall be a social intermediationprocess, which will involve building up the community level capacity of the marginalizedwomen and the unemployed youth among the graduates of the functional literacy trainingactivities of the project. This will aim to provide the graduates of the project functional literacywith opportunities to increase their self-reliance, and also prepare them to engage in formalfinancial intermediation and IGAs. This shall be done by reinforcing the local communitygroups of participants and the provision of training to develop knowledge in financial andbusiness management. The outputs of the component activities shall be the transformation of theproject ‘target groups’ into ‘clients’ or ‘customers’ of financial intermediaries and/or IGApotential entrepreneurs.

A. Training

4.6.8 Recognizing the fact that effective implementation of the micro-finance operations isgreatly dependent on the level of participation by the target groups , the project will providecourses in basic business management for approximately nearly 50, 000 of poor women andyouth with the selected districts of the project. It is expected that about 70 per cent of theparticipants of the basic management courses shall be graduates of the functional literacyprogramme and 30 per cent literate poor women and unemployed youth in the targetcommunities that need to acquire requisite knowledge and skill to engage in incomegenerating activities. The project intends to build on the positive experiences and gains of thefunctional literacy classes in terms of response and impact in working with marginalised poorrural women. At the same time it intends to build the responsiveness of the unemployed youthto the project’s proposed income generation and self-employment initiatives and strategies.

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4.6.9 The training in basic business management is aimed at improving the target groups’comprehension, their participation and understanding of their obligations in the micro-financeoperations. The training will comprise the orientation sessions divided into two parts. Theinitial part will focus on participatory group formation and dynamics and the main features ofthe micro-credit activities under the project. This introductory training session will also coverareas of roles and responsibilities of target groups and intermediary staff, discipline and trust,guarantee systems and peer pressure. The follow-up orientation session will focus on theintroduction to the micro-finance operations, conditions and procedures of the credit underthe project as well as the obligations and responsibilities specific to the project credit funds.The proposed training programme and will cover topics as follows: orientation, backgroundand objectives of the credit scheme; credit operations obligations and responsibilities, basicmanagement for small businesses and basic credit principles. The basic business managementtraining will be for two weeks spread for a period of ten months to allow for the adoption ofknowledge by practical learning through participation in group businesses.

4.6.10 As a prerequisite to the Income, Generation Activities (IGAs) courses, 50 visits shallbe undertaken by CDAs, DCDOs, CDOs to rural communities to sensitise the potential targetgroups participating in the functional literacy training activities of the project; as well asunemployed literate youth and women onto the village level business management trainingprogramme. The Community Development staff will make further visits of 183 man-days peryear to the target communities to screen the participants of the business management trainingfor the intensive 10 day residential training programme. In addition to the basic IGA courses,480 advanced business management courses of 10 days duration each, per a class of 40participants shall be organised. The course content as outlined in the ‘Training Manual forTraining Entrepreneurs in Group Organisation, Business and Credit Management’ issummarised in the PID. Given the varying levels of the target groups, 80 refresher courses inadvanced business management for selected target groups on an as needed basis, determinedduring supervision visits to business groups, to be organised.

4.6.11 The project will also finance IGAs support services for the IGAs of the project targetgroups. These will include: 10,000 supervision and business advisory services visitsundertaken by all 100 CDAs to nearly all 2,000 business groups in the duration of the project.During the project period 8 study tours to best practice women groups operating similarbusinesses shall also be organised for selected IGAs groups to observe and exchange ideas.The project will also finance the production of training materials to for the above-notedactivities.

Components III: Vocational and Skills Development Training

4.6.12 The component activities outlined below seek to reinforce the functional literacy andbasic business management training. Provision has been made for demand-driven trainingprogrammes for the development of the skills required for self-employment and incomegeneration.

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A. Training

(i) Training of Target Groups

4.6.13 It is assumed that not all the target groups trained in basic business management willrequired vocational and development training. Subsequently, training shall be funded for12,000 participants under this component to provide the requisite skills required for thebeneficiary youth and women to engage in income generating activities. Based on the lessonsfrom donor-funded interventions, including the ADF WID project, the training for the targetgroups will cover the following broad indicative areas: animal husbandry, bamboo crafts,mushroom cultivation, wild fruits processing, bakery and brewing. A comprehensiveprogramme of activities for the vocational training and appropriate technology skillsdevelopment will be prepared and submitted by the Government for approval by the Bankafter the commencement of the project. This programme of activities shall also include theoperations of the proposed mobile skills training unit of the MOGYCS.

(ii) Training of Trainers

4.6.14 The vocational and skills development activities will also include training for selectedgroups of Community Development staff and other relevant extension personnel, to increase thepool of experts under the MOGYCS as trainers for transfer of skills to target groups.

Component IV: Institutional Strengthening

4.6.15 This component will strengthen the Ministry of Gender, Youth Affairs andCommunity Services (MOGYSC) and other relevant government agencies in their functionsand responsibilities to develop and implement an effective community-based economicactivities programme for marginalized groups of the Malawian population. The project shallsupport long and short-term training, completion and rehabilitation of community trainingcentres as well as the provision of office equipment, vehicles and furniture. The details of theinstitutional strengthening activities are as follows:

A. Training

4.6.16 Provision has been made for study fellowships in response to the Executing Agency’srequest for human resource capacity building for the management of the GOM’s EconomicActivities Programme (EAP). Three long-term study fellowships will be provided to staff ofthe MOGYCS in relevant areas for the development of skills for the management andmonitoring of the EAP. Eight short-term fellowships have been planned for the training ofMOGYCS staff, including extension cadres, the CDAs. The proposed courses forfellowships to be provided under the project are include: participatory methodologies foreconomic empowerment, economic empowerment and HIV/AIDS, gender analysis amnd Theproject will work out the arrangements with the community training centres under theMOGYCS for the provision of short-term courses. Details of the requirements of trainingincluding: areas to be covered, duration, costs and number of participants the shall besubmitted as part of a comprehensive training programme for the institutional strengtheningof the MOGYCS and related institutions to the Bank for approval.

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B. Equipment and Vehicles

4.6.17 In addition to the training activities outlined above, the MOGYCS shall be providedwith office equipment and means of transportation. The office equipment shall include: 15desktop computers with modem and UPS, 15 laser jet printers, 10 photocopiers, two PABXtelephone systems; 10 desk calculators, 18 lots of classroom, residential facilities, diningroom and kitchen furniture. The transport facilities will include; 3 four wheel and 3 twin cabpick-up vehicles, 100 motor cycles and 100 crush helmets. The provision of the six vehiclesunder the project is justified on the basis of lessons learnt from previous Bank interventionsof a similar nature for the need for intensive supervision and monitoring of the training andmicro-finance operations. Furthermore the poor state of the roads and the long distances thatthe project and extension staff have to travel to reach the target groups require that they areprovided with durable means of mobility. Therefore, the six (6) vehicles to be provided to theMOGYSC are to be used by the regional and district staff of the MOGYCS for supervision ofthe functional literacy and business management training programmes as well as group IGAs.The motorcycles and helmets shall also be provided to the CDAs in the project districts toenhance their operational, supervisory and monitoring effectiveness at the local communitylevel. The furniture to be procured will be distributed to the six multi-purpose training centresto be rehabilitated under the project. This is essential for the effective functioning of all theclassrooms, kitchens, dining halls and trainees’ residential facilities of all the proposed multi-purpose training centres at ATTIGA, Liwonde, Karonga, Magomero, NCLAE and Neno.

C. Civil Works

4.6.18 Provision has also been made for civil works involved in the completion, extensionand rehabilitation of present facilities at Liwonde and Karonga. Rehabilitation of the trainingfacilities at ATTIGA, Liwonde, Karonga, Magomero, NCLAE and Neno shall also be carriedout to bring all six facilities up to a multi-purpose community training centres that arepresently now dilapidated. The detailed cost estimates for the planned civil works under theproject were prepared by the Government.

D. Professional Services

4.6.19 The project will fund the recruitment a Consultancy services for an assessment of thehuman resource development needs of the MOGYCS as a basis for the development of acomprehensive training programme for the MOGYCS. Consultancy services shall also berecruited to provide full architectural and quantity surveying services as well as tenderdocumentation and general supervision services in accordance with the Ministry of Worksperformance specifications and standards for the works at the six multi-purpose trainingfacilities.

Component V: Micro-finance Scheme

4.6.20 The Micro-finance component shall provide financial services to enable the clients toutilize the knowledge and skills acquired under the functional literacy and basic businessmanagement and appropriate skills development activities of the project to undertake small-scale income generating activities. It is expected that this would promote the creation of self-employment, increasing rural incomes and the participation of poor rural women andunemployed youth in the diversification and growth of the national economy. The component

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will also support the developing sustainable and self-sufficient financial intermediaries thatcan effectively increase outreach to marginalized communities to increase their economicproductivity. This will be undertaken by entering into collaborative agreements with aselected number of financial intermediaries. The project will promote further the synergiesand networking linkages with the Bank’s AMINA Programme and other stakeholder micro-credit partners by selecting financial intermediaries that are participating in the AMINAcapacity building programme and are also members of the Professional Association of Micro-finance network (PAMFIN). The AMINA Unit will also provide the technical support for themonitoring of the project micro-finance operations by through its experts participating in thesupervision mission of the project as well as the review of progress reports and other relateddocuments. In view of the difficulty existing environment for micro-finance operations inMalawi, the micro-finance operations of the project will only commence after the Governmentfinalize the draft policy and regulatory framework for the micro-finance industry.

E. Micro-finance Fund

4.6.21 Provision has been made for the creation of a revolving credit fund of US$2000,000.00 for on lending by the project’s partner MFIs to the graduates of the businessmanagement training component. It is recommended that the project utilizes theintermediaries that have benefited from the Bank’s AMINA programme to administer thecredit scheme. These MFIs will be selected on the basis of the outcome of the MFIinstitutional assessment study to be conducted before the start of the project credit schemeoperations as well as the proposals submitted by MFIs and specialized NGOs that have thebest financial results (high recovery rates), are sustainable, with the required outreach andtechnical capacity. The eligibility criteria for the selection of the MFIs will be outlined in themanual of operational guidelines in the PID. A main condition will be that each of theintermediaries will be contracted to administer credit operations for an initial period of oneyear. These contractual arrangements will be renewed on the basis of the performance ofeach individual intermediary. The MFIS will deliver the project credit fund through arevolving fund to be created prior to the start of the credit activities. The size of the revolvingfunds to be created will depend on the size of operations of individual intermediaries. TheMFIs will be expected to reimburse the PMU, with interest, on terms specified in the protocolof agreement between the PIM and each MFI. On project completion, revolving funds willremain with the MFIs to increase their capacity and outreach, if they are being managedaccording to viable financial criteria, and contribute to project sustainability. As MFIs aredesigned to operate on a cost recovery basis, they will, for the most part, charge marketinterest rates as well as a range of administrative fees. In addition, most of them will mobilizesavings from the clients as a way of creating a pool of funds for on-lending and reducing theirdependence on external funding as well as for use as collateral. Funding under thiscomponent will also cover operational expenses of the proposed partner institutions. It isenvisaged that the loans given under the project will fund income generating activitiesranging from trading to manufacturing and agro-businesses to services.

4.6.22 It is expected that nearly two thirds of the women and youth, approximately 40,000,that will undergo the functional literacy and will graduate from the business managementtraining programme would benefit from the micro-finance operations. However, as the creditwill be demand-driven, only the groups of clients that have identified a viable incomegenerating activity and met the selection criteria of the MFIs will access to micro-finance.Therefore, the amounts of loans to be disbursed during each year of the project micro-finance

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operations will be based on the actual need expressed by the clients. The credit revolvingfund will provide the project clients with an average loan size of $500 per group for anestimated repayment period of 12-18 months and maximum repeat loans of 2 times to 50 percent of a particular year’s first time borrowers. The assumptions underlying the size of thecredit fund for the project are summarized in the PID document. The initial IGAs be givenloans by the project will be to groups of up to ten clients undertaking a common businessactivity. This will mitigate against the risk of giving loans to clients without collateral andexperience in managing credit through group solidarity, group pressure and group liability.The second loans would, in addition, to the inclusion of new groups into the project creditoperations, increasingly focus more on individual members of groups that have re-paid theirloans to the project. However, provision of individual loans would be determined by theevolution of loan amounts re-paid and income realized as well as the experience gained andlessons learnt from the start-up activities and the fact that the clients have acquired adequateexperience to manage an IGA independently.

4.6.23 As noted above, the modalities of implementation of the main activities of themicro-finance scheme have been detailed in the manual of operations guidelines for theProject Management Unit/TOC for the execution of the micro-finance scheme appearing inPID. The Operations Guidelines feature: (i) general policy framework for administering theFund: the options for the general administration of the fund, selection of the partner MFIs,disbursement of the Fund to partner MFIs, eligible uses of the fund by the partner MFIs,allocation of operational areas to the partner MFIs etc (ii) organisation and management ofthe Fund: the setting up of a Technical Oversight Committee (TOC) to administer the Fund,loan terms, eligibility criteria for accessing micro-credit loans by IGAs, capacity building ofpartner MFIs and beneficiaries and the organisational structure of the Fund. (iii) operationalmodalities of the Fund: responsibilities for loan screening, application and processing ofapplications, disbursement to IGAs, loan monitoring, reporting, recovery and auditing of themicro-credit scheme. The manual of operations guidelines are to be reviewed by the AMINAunit of the Bank before they are given to the selected MFIs for the administration of theproject credit operations.

C. Consultancy Services

4.6.24 This component will also finance one and half person months of consultancy servicesfor a micro-finance baseline study of the selected districts of the project area. This baselinestudy shall also be used to define the baseline monitoring indicators for the impact of the micro-finance scheme on the target groups in the project districts. The study will also carry out an in-depth institutional audit and capacity assessment of all the AMINA partner institutions,including the ranking of the institution in terms of best-practice standards. Recommendationsare to be made by the consultant to the TOC for review and decisions, to shortlist threeinstitutions initially, or as may be determined to be necessary for further shortlisting. The termsof reference of the categories consultant appear the PID.

Component VI: Project Management

4.6.25 Given that the MOGYCS does not presently have adequate capacity to implement itseconomic activity programmes, the project shall use the existing Project Management Unit(PMU) of the Women in Development (WID) Project. This is to ensure the effective use ofexpertise, experience and institutional memory accumulated in the implementation of the

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WID project by the PMU staff. The project will finance the following staff of the ProjectManagement Unit: Project Manager, Accountant, 3 Credit and 3 Training Officer. Provisionwill also be made for the following support: secretary, clerk, 3 drivers, telephone operatorand messenger.

A. Training

4.6.26 The project shall pay the expenses on training of the PMU staff to improve thecomputer skills and other related areas aimed at improving the management andimplementation of the project.

B. Equipment

4.6.27 Office equipment will be procured to cater for the increased functions and staffing ofthe PMU, and the establishment of an integrated information management system to beextended to the regional and district community development offices. The MIS is expected toreinforce the monitoring, reporting and record-keeping mechanisms between the MPU andthe field operations of the project Office equipment will consist of: 5 desk top computers withaccessories and software, 3 laser jet printers, 1 file server, 1 lot audio equipment, 2 faxmachines, 1 telephone system, 12 filing cabinets and 12 guests.

D. Consultancy Services

4.6.28 The PMU will recruit consultants to assist in the delivery of specialized services. Aninformation technology (IT) expert shall be recruited on monthly basis for 10 person monthsto advise, develop, set-up, train and implement a new MIS (including a loan portfoliomanagement system) to facilitate quick and ready access to information, structured reporting,effective implementation and operations performance and impact monitoring. Specialisedservices shall also be procured for the following indicative areas: animal husbandry, bambooand leather crafts, mushroom and wild fruit experts to provide the needed appropriatetechnology services for the IGAs on the basis of arising needs.

F. Operating Costs

4.6.29 Provision has also been made for the project operating costs. These will include: theremuneration of the Project Manager, Accountant, three Training Officers, three CreditOfficers and support staff, as well as office supplies, communications, maintenance andproject audits.

4.7 Environmental Impact

The project has been classified in Category III, in accordance to the Bankenvironmental guidelines. The project activities are not expected to have no negative impacton the environment. However, the mitigating measures may have to be taken in considerationof the civil works that are to be undertaken to rehabilitate some of the selected multi-purposetraining centres under the MOGYCS. Therefore, the project management and the ExecutingAgency will be required to consult with the Department of Environment and obtain thenecessary approvals to ensure that government guidelines are incorporated into thepreparations of the designs of the civil works to be undertaken, before sending the draft plans

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are transmitted to the ADF for approval. The required ADF approvals for the designs andplans of the civil works for the six training centres will also assist with monitoring thepossible environmental issues. During execution of the civil works, supervision by projectstaff, with the professional services hired will guard against any soil erosion or otherenvironmental issues at the centres.

4.8 Project Costs

The project cost estimate is prepared based on year 2001 price level. The total projectcost, including physical contingency of 10% and price contingency of 3% per annum, but netof taxes and duties, is estimated at UA 10.93 million of which UA 1.22 million is in foreigncurrency and UA 9.71 million in local currency. Annex III shows the detailed cost estimatesof the project. Tables 4.1 and 4.2 below give the summary breakdown of the cost estimates bycomponent and by category of expenditure.

Table 4.1Summary of Project Costs by Component

US $ (Million) U A (Million) % of

Component Foreign Local Total Foreign Local Total Total

1 – Functional Literacy 0.02 0.93 0.94 0.01 0.74 0.75 6.9%

2 – Basic Business Management - 4.58 4.58 - 3.64 3.64 33.3%

3 – Skills Development & Vocational Training - 1.09 1.09 - 0.87 0.87 7.9%

4 – Institutional Strengthening 1.20 0.67 1.87 0.95 0.53 1.48 13.6%

5 – Micro Credit Scheme - 1.85 1.85 - 1.47 1.47 13.4%

6 – Project Management 0.16 1.38 1.54 0.13 1.09 1.22 11.2%

Total Base Cost 1.38 10.49 11.87 1.10 8.33 9.43 86.3%

Physical Contingency (10%) 0.14 1.05 1.19 0.11 0.83 0.94 8.6%

Subtotal 1.52 11.54 13.06 1.21 9.17 10.37 95.0%

Price Contingency (3% per year) 0.01 0.68 0.69 0.01 0.54 0.55 5.0%

Total 1.53 12.22 13.75 1.22 9.71 10.93 100.0%

11.1% 88.9% 11.1% 88.9%

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Table 4.2Summary of Project Costs by Category of Expenditure

US $ (Million) U A (Million) % of

Category of Expenditure Foreign Local Total Foreign Local Total Total

A – Training 0.20 6.64 6.85 0.16 5.28 5.44 49.8%

B – Equipment 0.83 0.23 1.06 0.66 0.18 0.84 7.7%

C – Civil Works 0.26 0.26 0.52 0.21 0.21 0.41 3.8%

D – Consultancy/Professional Services - 0.40 0.40 - 0.31 0.31 2.9%

E – Micro Credit Fund - 1.82 1.82 - 1.44 1.44 13.2%

F – Operating Costs 0.09 1.14 1.23 0.07 0.91 0.98 8.9%

Total Base Cost 1.38 10.49 11.87 1.10 8.33 9.43 86.3%

Physical Contingency (10%) 0.14 1.05 1.19 0.11 0.83 0.94 8.6%

Subtotal 1.52 11.54 13.06 1.21 9.17 10.37 95.0%

Price Contingency (3% per year) 0.01 0.68 0.69 0.01 0.54 0.55 5.0%

Total 1.53 12.22 13.75 1.22 9.71 10.93 100.0%

11.1% 88.9% 11.1% 88.9%

4.9 Sources of Financing and Expenditure

4.9.1 The project will be financed by the ADF (87.7 per cent) and the Government ofMalawi (GOM) (12.3 per cent) as shown in Table 4.3. The ADF’s contribution, of a loan ofUA9.59 million, will meet 94.6 per cent of the foreign exchange and 86.9 per cent of localcosts. The Government will finance 5.4 per cent of the foreign exchange and 13.1 per cent of thelocal costs, which represents 12.3 per cent of the total costs.

Table 4.3Source of Finance (UA Million)

Source Foreign % Local % Total %

ADF 1.15 94.6% 8.43 86.9% 9.59 87.7%

GOM 0.07 5.4% 1.27 13.1% 1.34 12.3%

Total 1.22 100.0% 9.71 100.0% 10.93 100.0%

11.1% 88.9% 100.0%

4.9.2 The ADF will contribute UA8.43 million (86.9 per cent) of the project cost to meetpart of the local cost of the project. The use of the foreign exchange to meet local costs isjustified by the fact that: (i) Malawi is making a determined effort towards nationaldevelopment and towards mobilizing internal and external resources to the requirements of itsincreased budgetary allocations to the social sector as reflected in its PRSP process; locallymobilized savings are not enough to meet the financial requirement of the project and (iii) thebulk of the requirements for the implementation of the project can be procured locally. TheGovernment will finance the entire cost for the procurement of vehicles for the supervisionand monitoring of the project activities in the field. This is in spite of limited availability offoreign currency due to balance of payments constraints further justifies ADF financing ofpart of the local costs.

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4.9.3 Tables 4.4 and 4.5 below give the financing plan for the project by component, as wellas the financing plan by category of expenditure and the source of financing respectively.

Table 4.4Expenditure Schedule by Component (UA Million

Component 2,002 2,003 2,004 2,005 2,006 Total

1 – Functional Literacy 0.20 0.24 0.19 0.12 0.12 0.87

2 – Basic Business Management 0.39 0.96 1.02 1.05 0.86 4.28

3 – Skills Development & Vocational Training 0.17 0.21 0.26 0.23 0.15 1.01

4 – Institutional Strengthening 1.52 0.06 0.03 0.03 - 1.64

5 – Micro Credit Scheme 0.34 0.33 0.34 0.35 0.36 1.71

6 – Project Management 0.34 0.25 0.28 0.26 0.29 1.42

Total 2.96 2.04 2.10 2.03 1.78 10.93

27.1% 18.7% 19.2% 18.6% 16.3% 100.0%

Table 4.5Expenditure Schedule by Category of Expenditure and Source of Finance (UA Million)

Category of Expenditure 2,002 2,003 2,004 2,005 2,006 Total

ADF – Financing

A – Training 0.69 1.27 1.33 1.25 0.96 5.50

B – Equipment 0.86 - - - - 0.86

C – Civil Works 0.46 - - - - 0.46

D – Consultancy/Professional Services 0.18 0.04 0.04 0.02 0.04 0.31

E – Micro Credit Fund 0.32 0.33 0.34 0.35 0.36 1.69

F – Operating Costs 0.15 0.15 0.15 0.16 0.16 0.77

Sub total 2.65 1.79 1.86 1.78 1.52 9.59

27.6% 18.7% 19.3% 18.5% 15.8% 100.0%

Government Financing

A – Training 0.18 0.17 0.17 0.17 0.18 0.86

B – Equipment 0.07 - - - - 0.07

C – Civil Works - - - - - -

D – Consultancy/Professional Services 0.01 0.01 0.01 0.01 0.01 0.05

E – Micro Credit Fund - - - - - -

F – Operating Costs 0.07 0.07 0.07 0.08 0.08 0.37

Subtotal 0.32 0.25 0.25 0.26 0.26 1.34

23.8% 18.7% 18.5% 19.4% 19.7% 100.0%

Total

A – Training 0.86 1.44 1.49 1.43 1.14 6.36

B – Equipment 0.93 - - - - 0.93

C – Civil Works 0.46 - - - - 0.46

D – Consultancy/Professional Services 0.19 0.05 0.04 0.03 0.05 0.36

E – Micro Credit Fund 0.32 0.33 0.34 0.35 0.36 1.69

F – Operating Costs 0.21 0.22 0.23 0.23 0.24 1.14

Total 2.96 2.04 2.10 2.03 1.78 10.93

27.1% 18.7% 19.2% 18.6% 16.3% 100.0%

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5. PROJECT IMPLEMENTATION

5.1 Executing Agency

The MOGYCS will be the executing agency for the Project. The Department ofGender of MOGYCS shall be responsible for the programming, coordination and supervisionof the Project. The existing PMU currently responsible for the implementation of the on-going WID Project will be retained and strengthened to implement the day to day activities ofthe project.

5.2 Institutional Arrangements

5.2.1 The Executing Agency of the project will be the Ministry of Gender, Youth andCommunity Services (MOGYCS). The existing Steering Committee of the EconomicActivities Programme under the MOGYCS will be responsible for the overall oversight of theproject following re-composition to make it responsive to the needs of the project. The re-structured Steering Committee will be composed of the relevant technical officials of theMOGYCS, Ministry of Labour and Vocational Training, Youth Council, NCLAE, PAMFINand relevant NGOs. The Steering Committee will undertake the following functions: Providepolicy and operational guidance; quarterly reviews of project progress; and review andapproval of PMU annual work programmes and operating budgets. The project will use theProject Management Unit (PMU) created for the implementation of the Women inDevelopment Project. This is will enable the use of the competencies and experience thatMalawi has gained in the implementation of activities to empower the vulnerable segments ofthe population. In addition, this will reinforce the on-going activities under the WID Projectthat are enabling poor rural women to engage in income-generating activities. The PMU willreport directly to the Director of Gender in the MOGYCS. The use of the WID project facilityis also aimed at minimising the cost of the implementation of the project by using the existingoffice accommodation, equipment and technical assistance. The Project Management Unit isstaffed with a Project Manager, Accountant, Procurement Officer, two Credit Officers andTraining Officer. Given the increased scope of the worked compared to the ongoing WIDproject, provisional will be for the recruitment of two additional Training Officers and CreditOfficers, respectively. However, in view of the low level of procurement to be undertaken onthe project, the Procurement Officer will not be required. The services of all PMU staff willbe procured on a shortlist basis as will the services of the consultants to assist in the deliveryof specialised including that of civil works design and tender documents, and constructionsupervision. The project will use the services of the Government Auditor General’s office toaudit the project accounts yearly.

5.2.2 The PMU will engage the services of consulting engineers to design and supervise allcivil works. The Project Manager will be responsible for the management of the day-to-dayactivities of the project. The technical staff of the PMU, the Training and Credit Officers willbe responsible for the implementation of component activities for functional literacy,vocational training and skills development and micro-credit scheme. The Accountant willmanage all disbursements and financial aspects of the Project. Detailed Job Descriptions forall these staff members will be outlined in the PID. Basic office equipment, vehicles forsupervision and necessary funds for the activities related to implementation of the ADFProject will be provided.

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5.3 Supervision and Implementation schedules

The Project will be implemented over a period of 5 years (60 months) fromeffectiveness of the loan, assumed to be in the second quarter of 2002. The duration of theproject is expected to provide sufficient time to develop the necessary competence by theMOGYCS to management the activities of the project after its completion Theimplementation schedule is presented in Annexe VI. The technical staff in the PMU willmonitor and coordinate the activities of the various components related to their areas ofexpertise. Expertise of micro-finance consultants or the Bank AMINA staff will be used tostrengthen the supervision of the project.

5.4 Procurement Arrangements

5.4.1 Procurement arrangements are summarized in Table 5.1 below. All procurements ofgoods and services financed by the Bank will be in accordance with the Bank’s Rules ofProcedures for use of Consultants, using the relevant Bank Standards Documents.

Table 5.1Procurement Arrangement (In million UA)

Categories ICB NCB Shortlist* Other**Non Bank

Funded Total

A) Civil Works:

Rehabilitation of Training & Youth Centres 0.46 (0.46 0.46 (0.46)

B) Goods:

Office Equipment 0.12 (0.12) 0.12 (0.12)

Equipment and Bicycles 0.02 (0.02) 0.02 (0.02)

Furniture - Training Centres 0.39 (0.39) 0.39 (0.39)

Vehicles, Motorcycles 0.40 (0.33) 0.40 (0.33)

C) Services Contracts:

Design & Supervision of Civil Works 0.05 (0.05) 0.05 (0.05)

Studies 0.17 (0.17) 0.17 (0.17)

Professional consultancy services 0.08 (0.08) 0.08 (0.08)

Auditing0.05

0.05

D) Training:

Training 6.36 (5.5) 6.36 (5.5)

E) Miscellaneous: -

Micro Credit Scheme 1.69 (1.69) 1.69 (1.69)

Operating Costs 1.14 (0.77) 1.14 (0.77)

Total 2.53 (2.53) 6.67 (5.81) 1.72 (1.25) 0.05 10.93 (9.59)

* Shortlist applies to the use of consulting services. ** Other may be LIC, International or National Shopping orDirect Purchase. Figures in brackets are the amounts financed by ADF.

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Civil works5.4.2 Procurement of civil works will be carried out under National Competitive Bidding(NCB) procedures. Contracts will be awarded for the construction, extension andrehabilitation of the ATTIGA, Liwonde, Magomero, NCLAE Neno and Karonga trainingcentres for an estimated total of UA 0.46 million including physical and price contingencies.

Goods5.4.3 Vehicles, motor cycles and bicycles under Institutional Strengthening will be procuredthrough the United Nations Inter-Agency Procurement Services Office (IAPSO). This willalso apply for the procurement of Computer and office equipment including photocopiers andfax machines. These have all been valued at UA0.54 million.

Services5.4.4 Procurement of Professional Services for design and supervision of civil works will beundertaken through short-listing. Recruitment of consultants to conduct the studies andprovide other specialised services to the project as well as the PMU staff will also be throughshort-listing.

5.4.5 Audiovisual programmes will be produced by Malawi Broadcasting Services jointlywith the National Centre for Literacy and Adult Education using DirectNegotiation/Contracting Procurement Method.

Training

5.4.6 Services for community based training, seminars and workshops will be procuredthrough single source contracting on the basis of good local knowledge. Training Institutionsfor fellowships will be prepared by the Government.

Miscellaneous

5.4.7 The Micro Finance Institution (MFI) to manage the micro-finance scheme will berecruited on the basis of NCB procedures. Besides, all items under operational costs includingrecruitment of additional staff for the PMU will be acquired on competitive basis throughshortlisting. Malawi had just revised its procurement policy and procedures and the newprocedures have been determined to be acceptable. The MFIs to manage the micro-financefund will be selected on the basis of NCB.

5.4.8 The PMU will be responsible for all the procurement functions. The PMU hascapacity to adequately carry out the procurement effectively.

5.4.9 The text for a General Procurement Notice (GPN) has been discussed with theexisting PMU and will be finalised at negotiations. The Bank will publish it in the UNDevelopment Business magazine, upon approval of the loan.

5.4.10 The following documents are subject to review and approval by the Bank beforepromulgation:

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Specific Procurement Notices; Either shortlists and Requests for proposals (RFP) for services and training

institutions; Shortlists and Requests for Proposals (RFP) for project accounts auditors; Lists, Designs, Specifications, Tender Documents, with Draft Contract Agreements

for Civil Works, Furniture and Equipment; Tender Evaluation Reports, or Reports on Evaluation of Consultants’ Proposals,

including Recommendations for Contract Award; Draft Procurement Contracts for consultancy services and training and Draft TORs.

5.5 Disbursement Arrangements

5.5.1 To ensure transparency of resource utilization and quick disbursement of funds toapproved activities, the Project Management Unit (PMU) will open and maintain two interestbearing Special Account (SA) in foreign currency and one Local Currency Account (LCA) atbanks acceptable to ADF. The first SA will be used to deposit part of loan resources tofinance civil works and training. The second SA will be used to deposit the allocatedresources for the credit fund. Thereafter, funds will be withdrawn from the SA to be depositedin the LCA opened for civil works, operating costs, local training and office supplies. A localaccount will also be established for the deposit of the repayments on the principle and interestrepayments by the MFIs administering the project micro-finance scheme. The ADF willreplenish the SA after the PMU has provided valid justification for the use of at least fiftypercent of the previous deposit. The opening of the accounts will be a condition precedent tofirst disbursement.

5.6 Monitoring and Evaluation

5.6.1 The Project Management Unit will submit to ADF quarterly project progress reports(QPPRs) in accordance with established format covering all aspects of the project within 30days following the end of each quarter. The Project Management Unit will also prepare andsubmit a Project Completion Report in accordance with the format recommended by ADF.Additional reports and clarifications will be submitted to the fund as required.

5.6.2 On the basis of a critical self evaluation through the studies to be carried out in thefirst year, mid-term, and period regional and district review meetings adjustments will bemade to the activities and implementation schedule of the project. The studies will beconducted in a participatory manner to obtain the views of the key stakeholders including thebeneficiaries. In addition, a working committee comprising the MOGYCS, PMU, TreasuryDepartment of the Ministry of Finance, beneficiary groups and relevant implementingpartners will be constituted to evaluate the project execution periodically and adjust theimplementation schedule of activities accordingly.

5.7 Financial Reporting and Auditing

The Project Management Unit will maintain separate project accounts to ensureefficient monitoring of the project finances. Detailed accounts concerning expenditure fromADF and Government should allow identification of expenditure by project components,category of expenditure and source of finance. Project accounts will be audited by the

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Government Accountant General’s office on an annual basis and will be presented to ADFwithin six months following the end of each financial year.

5.8 Aid Coordination

Aid Coordination will be guided by the PRSP, which prioritizes all activities of GOMand its partners in poverty reduction. The Ministry of Gender, Youth and CommunityServices is presently implementing an Economic Activities Programme that was designed totake over all the donor-funded interventions for the economic empowerment of the poor aftercompletion, to ensure their sustainability. The EAP is also now been turned into a pilotscheme for the development of an effective mechanism for the coordination of donorintervention, including the Bank funded Women in Development project and the GermanTechnical Cooperation agency (GTZ)/British Department for International Development(DFID) business training intervention. The Executing Agency is also presently preparing amechanism to harmonise the approaches for the various economic activities interventions forthe poor under its responsibilities in readiness for their inclusion into the EAP.

6. Project Sustainability and Risks

6.1 Recurrent Costs

Since the project will make use of existing staff at regional, district and communitylevels, it is expected that the project recurrent costs will be reasonably small and manageable.Moreover, these costs will be in line with GOM increased allocation to poverty reductionefforts, which the project is going to be part of. It is expected that the benefits of theGovernment budget through the debt relief initiative, will support the movement of financialresources to increase budgetary allocation to cover recurrent costs of the project, includingsalaries and maintenance of utilities.

6.2 Project Sustainability

To ensure long term sustainability of the project, emphasis will be put on buildingcapacities at both target beneficiaries and operational staff levels. Literacy skills will beimparted to the target group to enable them to recognise and take advantage of opportunitiesto fight poverty. The target group will also be adequately trained in the whole cycle fromcommunity organisation to business and credit management, to ensure that they are selfsustaining and can initiate IGAs on their own. The target group will be organised into smallassociations for purposes of sustained long-term production and marketing. Communityleaders will also be effectively sensitized in their roles as long term supporters and owners ofthe project activities. Staff of MOGYCS at all levels will also be trained in relevant areas ofliteracy, business reviews and counselling and other important issues such as HIV/AIDS sothat they will continue to respond effectively to the delivery of their services to the targetgroup even after the project period. Credit intermediaries will also be strengthened throughstaff training and capitalisation to increase their capacity to deepen their operations to achievelong-term sustainability. The national umbrella association for micro-finance (PAMFIN) will,through the support of the Bank’s AMINA unit, facilitate the development of the nationalmicro-finance policy to address the difficult environment for small scale credit operations inMalawi.

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6.3 Critical Risks and Mitigating Measures

6.3.1 The complexity of the project and the fact that it is composed of several diversecomponents and sub-components may subject the project to risk in terms of coordination ofimplementation activities. However, the existing PMU has acquired extensive experience andexpertise in managing an intervention with deverse but complementary components similarto the proposed project. It is also expected that the strengthening of the PMU by theproviding additional staff with requisite expertise will ensure that the relevant competenciesorchestrate the activities under the various components of the project.

6.3.2 A second risk is attributable to inflation and other external forces or misadventures,for example some of the micro-finance loans may not be repaid in part or in whole. Closemonitoring at all levels to be jointly undertaken by community leaders, credit intermediaries,community development field staff and PMU should reduce this category of risk to amanageable level.

6.3.3 A third risk is the possibility of social tensions arising as a result of the disturbance ofthe social status quo through the creation of a new income elite at both household as well ascommunity levels. The project has made provision to counter this risk through itsparticipatory approach and extensive sensetization activities involving community andtraditional leaders, spouses and the youth.

7. Project Benefits

7.1 Social Impact Analysis

7.1.1 The standards of living of the target group will be improved by the acquisition ofrelevant life skills through functional literacy activities, vocational training and skillsdevelopment, and improved access to micro-credit facilities to be provided under the project.Sixty thousand (60,000) illiterate poor women and youth will have developed skills in basicreading, writing and numeracy. Of this number, an estimated number of twenty thousand(20,000) shall have acquired knowledge and managerial competencies required for owningand managing IGAs efficiently and profitably. In addition, twelve thousand (12,000) poorwomen and youth will have acquired vocational and appropriate technology skills to enablethem identify business opportunities, start IGAs and manage the IGAS profitably. The projectshall also provide access nearly all the projected twenty thousand (20,000) graduates of thebasic business management training to micro-finance. The financial services shall seek tocomplement the functional literacy and basic business management and appropriate skillsdevelopment training activities of the project to achieve a holistic process of increasing ruralincomes through training into self-employment and the creation of wealth. This way theproject shall also promote the participation of the productive poor women and unemployedyouth in economic growth and diversification as envisaged by the GOM in the PRSP. TheProject will also impact positively on human development of the target group through theacquisition of life long skills for sustainable livelihoods.

7.1.2 The reduced rate of illiteracy among the target group through attendance of literacyclasses and active participation in IGAs will subsequently encourage them to activelyparticipate in decision making in their own households, development of local institutions andservices and attaining gender balance in the project areas. Family ties will also be reinforced,

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38

as individuals will be able to contribute to the family’s income. Mostly the female spouseswill gain more respect from their male counterpart as has been experienced already fromprevious WID project.

7.1.3 Overall the project will have a great contribution on the country’s development intotality as it will impact positively on the whole life of the target group so that individualsbecome more productive. The provision of relevant community education will equip the targetgroup with necessary instructions in areas of reproductive health, nutrition, HIV/AIDS andthe environment that are essential for economic progress.

7.1.4 Through provision of technical assistance, consultancy services, special trainingcourses and study tours, the capacity of the executing Ministry of Gender, Youth andCommunity Services including its counterparts in the implementation of skills developmentand economic activities programs, will be strengthened. The renovations and constructions ofinfrastructure of the Ministry and its partners will also strengthen their capacity, as thesefacilities will become more suitable for the different purposes including training of both thestaff and target groups.

8. Conclusion and Recommendations

8.1 Conclusion

The GOM launched the Poverty Reduction Strategy Process, which is intended toprovide a blue print for poverty reduction activities. The project will support theoperationalization of the Government poverty reduction strategy through the provisionfunctional literacy, basic business management, skills development training and improvedaccess to micro-finance to enhance the ability of groups of poor rural women and youth toengage in viable small scale income generating activities. This will support the GOM PRSPpriority to empower the poor to be actively involved in addressing their situation of povertyand to operationalize the National Gender Policy, as the project shall focus on women andyouth.

8.2 Recommendations

8.2.1 It is recommended that an ADF loan, not exceeding UA9.59 million be granted to theGovernment of Malawi for the purpose of implementing the Project described herein.

A. Conditions Precedent to First Disbursement of the Loan

8.2.2 The obligations of the Fund (ADF) to make the first disbursement of the loan shall beconditional upon the entry into force of the Loan Agreement and the Guarantee Agreement,and the fulfillment of the following project specific conditions:

B. Conditions Precedent to First Disbursement

8.2.3 The obligations of the Fund to make the first disbursement of the loan shall beconditional upon the entry into force of the Loan Agreement as provided in “A” above andthe fulfilment by the Borrower of the following conditions: -

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39

The Borrower shall have:

(i) provided evidence of the opening of a special account in foreign currency in acommercial bank acceptable to the Fund, into which the proceeds of the loanshall be deposited and thereafter managed on conditions acceptable to theFund;

(ii) provided evidence that a project account has been opened in a commercialbank and on terms and conditions acceptable to the Fund, into which Fundsfrom the Special Account shall be deposited as required;

(iii) provided evidence that a project account has been opened in a commercial bank,into which the GOM counterpart funds shall be deposited.

(iv) submitted to the Fund evidence of the re-composition of a SteeringCommittee. This should include the nomination of representative(s) from thenational NGO umbrella organization, women’s and youth groups and relevantDonor Agencies such as DFID and GTZ;

(v) provided to the Fund evidence of the deployment of the communitydevelopment staff and literacy instructors at the regional, district andcommunity levels;

(vi) submitted to the Fund the title deeds of the land of the skill training centres atKaronga and Neno that are to be rehabilitated by the Project

(vii) submitted an undertaking to the Fund that the recurrent budget allocationsshall be made for the payment of the GOM’s contribution of counterpart fundsto cover the operating costs of the Project.

C. Other Conditions

The Borrower shall:

(i) provide within three months from the signature of the Loan and GrantAgreements, comprehensive programmes for the implementation of thefunctional literacy, vocational training and skills development activities;

(ii) provide within three months of the signature of the Loan and GrantAgreements a comprehensive training programme for the institutionalstrengthening of the MOGYCS and related institution;

(iii) Provide documentary evidence, not later than three months of each of thefinancial year for the provisioning for the timely payment of the allowances forthe community development staff and literacy instructors.

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ANNEX 1REPUBLIC OF MALAWI

PROJECT LOCATION MAPSKILLS DEVELOPMENT AND INCOME GENERATION

PHALOMBE

NORTHERN REGION

1. Chitipa2. Karonga

EAST REGION

3. Salima4. Ntchisi5. Dowa

SOUTH EAST REGION6. Machinga7. Balaka

WEST REGION

8. Ntcheu

SOUTH WEST REGION

9. Mwanga

10. Chikwawa

SHIRE HIGHLANDS- Phalombe- Mulanje- Thyolo- Chiradzulu

Project Area

THE SELECTED PROJECT DISTRICTS

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which it is attached. Thenames used and the borders shown do not imply on the part of the Bank and its members any judgement concerning the legal statusof aterritory nor any approval or acceptance of these borders.

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ANNEX IIMALAWI: SKILLS DEVELOPMENT AND INCOME GENERATION PROJECT

PROJECT MANAGEMENT ORGANIZATIONAL CHART

EXECUTING AGENCY(MOGYCS)

PROJECTSTEERING

COMMITTEE

PROJECT MANAGER

ECONOMICACTIVITIES

PROGRAMME

PROJECT TARGET GROUPS

DEPARTMENT OFGENDER

TRAININGOFFICERS

CREDITOFFICERS

PROJECTACCOUNTANT

SUPPORTSTAFF

COMMUNITYDEVELOPMENT

STAFF

LITERACYINSTRUCTORS

MICRO-CREDITINTERMEDIARIES

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ANNEX IIIPage 1 of 6

PROJECT COST ESTIMATE

Unit Nos Unit Cost Base Cost 2002 2003 2004 2005 2006 Total

1.00 COMPONENT I

FUNCTIONAL LITERACY

A 1.10 TRAININGTraining of Trainers @ US$2,000/ course (100 participants) 20 2,000 40,000 40,000 40,000

Basic Training of 40 instructors 14 days @ US$ 15/day(400ptns)

10 11,000 110,000 110,000 110,000

Development of Post Literacy material @US$13,000/w/shop 4 13,000 52,000 52,000 52,000

Review of functional literacy classes 50 2,860 143,000 28,600 28,600 28,600 28,600 28,600 143,000

Printing of Literacy material @ US$28,000 per lot (40000books)

2 28,000 56,000 28,000 28,000 56,000

Distribution of literacy material @ US$675 per trip 7 675 4,725 675 1,350 1,350 1,350 4,725

Development of 234 Radio teaching Programmes@US$6,520/programme

9 6,520 58,680 6,520 13,040 13,040 13,040 13,040 58,680

Broadcasting of audio teaching material @US$6300/year (Airtime)

5 6,300 31,500 6,300 6,300 6,300 6,300 6,300 31,500

Mobilization of learners @US$1,000 per trip (68 CDAs) 85 1,000 85,000 17,000 17,000 17,000 17,000 17,000 85,000

Supervision of literacy classes @ US$2860 per trip to reach all thetargets (20 trip per year)

100 2,860 286,000 57,200 57,200 57,200 57,200 57,200 286,000

Sub-total 866,905 183,620 232,815 203,490 123,490 123,490 866,905

C 1.20 CONSULTANCY SERVICESReview of National literacy policy 1 30,000 30,000 30,000 30,000

Curriculum development activities (Post Literacy) 1 30,000 30,000 30,000 30,000

Sub-total 60,000 30,000 30,000 0 0 0 60,000

D 1.30 EquipmentBicycles 400 30 12,000 12,000 12,000

Laminator 1 1,000 1,000 1,000 1,000

Stitcher 1 2,000 2,000 2,000 2,000

Scanner 1 1,000 1,000 1,000 1,000

Image Setter 1 1,000 1,000 1,000 1,000

Film Processor 1 1,000 1,000 1,000 1,000

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ANNEX IIIPage 2 of 6

Sub-total 18,000 18,000 0 0 0 0 18,000

Unit Nos Unit Cost Base Cost 2002 2003 2004 2005 2006 Total

COMPONENT II

A 2.00 BASIC BUSINESS TRAININGSensitization and Mobilization of beneficiaries (@2860 trip)(10 rounds per year)

50 2,860 143,000 28,600 28,600 28,600 28,600 28,600 143,000

Basic Business Management Training (at villages @ 2860 trip) (20rounds yearly)

100 2,860 286,000 57,200 57,200 57,200 57,200 57,200 286,000

Screen groups for intensive training at US6270/trip (yearly) 5 6,270 31,350 6,270 6,270 6,270 6,270 6,270 31,350

BM/CM Course (Residential) at US$ 6,650/course (40particpants 10 days)

480 6,650 3,192,000 266,000 731,500 764,750 764,750 665,000 3,192,000

Conduct Refresher courses at US$4,400/ course 80 4,400 352,000 117,333 117,333 117,333 352,000

Supervise business groups @US$ 2860 per trip - 20 visits peryear

100 2,860 286,000 57,200 57,200 57,200 57,200 57,200 286,000

Conduct local study tours for target groups - 2 times/year 8 15,000 120,000 30,000 30,000 30,000 30,000 120,000

Production of training materials(video tapes/cards, etc)3times/year

15 11,500 172,500 34,500 34,500 34,500 34,500 34,500 172,500

Sub Total 4,582,850 449,770 1,062,603 1,095,853 1,095,853 878,770 4,582,850

COMPONENT III

A 3.00 SKILLS DEVELOPMENT & VOCATIONAL TRAININGTraining of Trainers for CDAs/Field staffs/ATTIGA/Youth Centers(500/training)

25 500 12,500 6,500 6,000 12,500

Training of Beneficiaries - Appropriate Technology Skills 1,200 400 480,000 76,800 105,600 129,600 110,400 57,600 480,000

Follow-up training 1,200 200 240,000 38,400 52,800 64,800 55,200 28,800 240,000

Mobile Training Unit Operations @ US$37 per show 1,920 37 71,040 11,366 15,629 19,181 16,339 8,525 71,040

Supervise business groups @US$ 2860 per trip - 20 visits peryear

100 2,860 286,000 57,200 57,200 57,200 57,200 57,200 286,000

Sub Total 1,089,540 190,266 231,229 276,781 239,139 152,125 1,089,540

COMPONENT IV4.00 INSTITUTIONAL STRENGTHENING

A 4.10 TrainingLong term trainings 3 22,000 66,000 44,000 22,000 66,000

Short term Regional courses 8 15,000 120,000 30,000 30,000 30,000 30,000 120,000

Business Management for 120 field staff 2 30,000 60,000 60,000 60,000

Motor Riding courses for 60 field staff- 30 per course 2 10,000 20,000 10,000 10,000 20,000

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ANNEX IIIPage 3 of 6

Printing operations courses for 10 printing staff 2 5,000 10,000 5,000 5,000 10,000

Sub Total 276,000 144,000 67,000 30,000 35,000 0 276,000

E 4.20 Civil WorksMagomero 1 130,000 130,000 130,000 130,000

ATTIGA 1 86,000 86,000 86,000 86,000

NCLAE 1 30,000 30,000 30,000 30,000

Liwonde Training Centre 1 75,000 75,000 75,000 75,000

Neno Youth Centre 1 100,000 100,000 100,000 100,000

Karonga Training Centre 1 100,000 100,000 100,000 100,000

Sub Total 521,000 521,000 0 0 0 0 521,000

F 4.30 Professional ServicesDesign and Supervision 1 62,520 62,520 62,520 62,520

Review of National Youth Policy 1 20,000 20,000 20,000 20,000

Human Resources Needs Assessment 1 10,000 10,000 10,000 10,000

Sub Total 92,520 92,520 0 0 0 0 92,520

D 4.40 Equipment and VehiclesDesk top Computer with Modem and UPS 15 2,200 33,000 33,000 33,000

Laser Jet Printer 15 800 12,000 12,000 12,000

Photocopiers 10 2,000 20,000 20,000 20,000

Fax Machines 9 500 4,500 4,500 4,500

PABX Switchboard 2 3,000 6,000 6,000 6,000

Desk Calculators 10 60 600 600 600

Furniture - Classroom 6 4,900 29,400 29,400 29,400

Furniture - Kitchen 6 44,500 267,000 267,000 267,000

Furniture - Dining 6 18,900 113,400 113,400 113,400

Furniture - Bedroom 6 6,120 36,720 36,720 36,720

Vehicles - 4 wheel 8-10 seater 3 25,000 75,000 75,000 75,000

Twincab Pick-up vehicles 3 25,000 75,000 75,000 75,000

Motor Cycles - 125cc 100 3,000 300,000 300,000 300,000

Crash Helmets 100 60 6,000 6,000 6,000

Sub Total 978,620 978,620 0 0 0 0 978,620

Unit Nos Unit Cost Base Cost 2002 2003 2004 2005 2006 Total

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ANNEX IIIPage 4 of 6

5.00 COMPONENT VG 5.10 Credit Fund

Credit Fund 5 363,636 1,818,182 363,636 363,636 363,636 363,636 363,636 1,818,182

Sub Total 1,818,182 363,636 363,636 363,636 363,636 363,636 1,818,182

C 5.20 ConsultanciesMicro-Credit Baseline & Institutional Study 1 30,000 30,000 30,000 30,000

Sub Total 30,000 30,000 0 0 0 0 30,000

6.00 COMPONENT VI - PROJECT MANAGEMENT UNIT

C 6.10 ConsultanciesInstallation of MIS/Portfolio Management System 1 20,000 20,000 20,000 20,000

Mid Term Review 1 20,000 20,000 20,000 20,000

Specialised services - IT Expert (monthly contracts) 10 3,000 30,000 6,000 6,000 6,000 6,000 6,000 30,000

Specialised services - Animal Hasbundary (monthly contracts) 5 3,000 15,000 3,000 3,000 3,000 3,000 3,000 15,000

Specialised services - Audio Visual 5 3,000 15,000 3,000 3,000 3,000 3,000 3,000 15,000

Specialised services - Bamboo craft/Leather/Mashroom/Wild Fruit(alternaltely)

10 3,000 30,000 6,000 6,000 6,000 6,000 6,000 30,000

Workshop - Project Launching 1 20,000 12,500 12,500 12,500

Workshop - Project Assessment 1 20,000 20,000 20,000 20,000

Sub Total 162,500 50,500 18,000 38,000 18,000 38,000 162,500

A 6.20 TrainingBasic Computer Skills Courses for PMU and field Supervisors 2 5,000 10,000 5,000 5,000 10,000

Refreshing training courses in areas related to the project 3 7,500 22,500 15,000 7,500 22,500

Sub Total 32,500 20,000 7,500 5,000 0 0 32,500

D 6.30 Equipment and VehiclesDesktop Computer with Modem and UPS 8 2,200 17,600 17,600 17,600

Laser Jet Printer 4 800 3,200 3,200 3,200

Software and Accessories 1 5,000 5,000 5,000 5,000

File Server 1 3,000 3,000 3,000 3,000

Unit Nos Unit Cost Base Cost 2002 2003 2004 2005 2006 TotalAudio Visual Equipment 1 26,000 26,000 26,000 26,000

Fax Machine 2 500 1,000 1,000 1,000

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ANNEX IIIPage 5 of 6

Telephone System 1 3,500 3,500 3,500 3,500

Filing Cabinets (Four Drawer) 15 250 3,750 3,750 3,750

Guest Chairs 15 100 1,500 1,500 1,500

Sub Total 64,550 64,550 0 0 0 0 64,550

H 6.40 Operating Costs6.41 Remunerations

Project Manager 60 2,000 120,000 24,000 24,000 24,000 24,000 24,000 120,000

Project Accountant 60 1,500 90,000 18,000 18,000 18,000 18,000 18,000 90,000

Training Officer (3) 180 1,000 180,000 36,000 36,000 36,000 36,000 36,000 180,000

Credit Officers (3) 180 1,000 180,000 36,000 36,000 36,000 36,000 36,000 180,000

Administrative Secretary 60 600 36,000 7,200 7,200 7,200 7,200 7,200 36,000

Clerck 60 400 24,000 4,800 4,800 4,800 4,800 4,800 24,000

Drivers (3) 180 200 36,000 7,200 7,200 7,200 7,200 7,200 36,000

Messenger 60 150 9,000 1,800 1,800 1,800 1,800 1,800 9,000

Telephone Operator 60 225 13,500 2,700 2,700 2,700 2,700 2,700 13,500

Sub Total 688,500 137,700 137,700 137,700 137,700 137,700 688,500

6.42 Other PIU running costsStationery 5 9,000 45,000 9,000 9,000 9,000 9,000 9,000 45,000

Sundries/incidentals/supplies 5 3600 18,000 3,600 3,600 3,600 3,600 3,600 18,000

Office (Refurbishing/Rentals) 5 32,000 160,000 32,000 32,000 32,000 32,000 32,000 160,000

Utilities (Telecommunication/Electricity/Water) 5 8,000 40,000 8,000 8,000 8,000 8,000 8,000 40,000

Vehicle running costs 5 18,000 90,000 18,000 18,000 18,000 18,000 18,000 90,000

Insurance 5 17,500 87,500 17,500 17,500 17,500 17,500 17,500 87,500

Local Travel/Subsistence - Supervisory visits by PMU 5 20,000 100,000 20,000 20,000 20,000 20,000 20,000 100,000

Sub Total 540,500 108,100 108,100 108,100 108,100 108,100 540,500

6.43 Auditing

Project Account Auditing (5 years) 5 10,000 50,000 10,000 10,000 10,000 10,000 10,000 50,000

Sub Total 50,000 10,000 10,000 10,000 10,000 10,000 50,000

TOTAL Base Cost 11,872,167 3,392,283 2,268,583 2,268,560 2,130,919 1,811,821 11,872,167

Physical Cont at 10% 8.63% 1,187,217 339,228 226,858 226,856 213,092 181,182 1,187,217

Subtotal 94.95% 13,059,384 3,731,511 2,495,442 2,495,417 2,344,011 1,993,003 13,059,384

Price Contingency at 3% 5.05% 694,327 0 74,863 151,971 217,353 250,139 694,327

Total 100.00% 13,753,710 3,731,511 2,570,305 2,647,387 2,561,364 2,243,143 13,753,710

27.13% 18.69% 19.25% 18.62% 16.31% 100.00%

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ANNEX IIIPage 6 of 6

Summarised Project cost by Component

Summary

Functional Literacy 7.93% 1,091,345 254,782 297,769 237,471 148,435 152,888 1,091,345

Basic Business Management 39.14% 5,382,712 494,747 1,203,930 1,278,850 1,317,215 1,087,970 5,382,712

Skills Development & Vocational Training 9.23% 1,270,061 209,293 261,982 323,000 287,445 188,340 1,270,061

Institutional Strengthening 15.00% 2,062,745 1,909,754 75,911 35,010 42,070 0 2,062,745

Micro Credit Scheme 15.68% 2,156,654 433,000 412,000 424,360 437,091 450,204 2,156,654

Project Management 13.02% 1,790,194 429,935 318,713 348,697 329,108 363,742 1,790,194

Total 100.00% 13,753,710 3,731,511 2,570,305 2,647,387 2,561,364 2,243,143 13,753,710

27.13% 18.69% 19.25% 18.62% 16.31% 100.00%

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ANNEX IV

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ANNEX VMALAWI: SKILLS DEVELOPMENT AND INCOME GENERATION PROJECT

MANUAL OF OPERATIONS GUIDELINES FOR MICRO-FINANCETABLE OF CONTENTS

I. INTRODUCTION

Background to the ProjectNature and Purpose of the Operations Manual

II. THE MICRO-FINANCE FUND

ObjectivesDetailed DescriptionFinancingBenefitsImpact on the Poor

III. POLICY FRAMEWORK

General Administration of the FundLending OptionsAdvantages of the Disbursement to Partner MFIsEligible Uses of the Fund by MFIsFinancial ChargesOperational Areas of the FundAllocation of Operational Areas to the Partner MFIs

IV. ORGANIZATION AND MANAGEMENT OF THE FUND

Setting of a Technical Oversight CommitteeOrganization Structure of the Micro-finance SchemeSelection of Partner MFIs

V. MICRO-FINANCE DELIVERY

Estimated Number of ClientsEligibility Criteria and Eligible Use of CreditCredit Ceilings and Loan TenureCapacity Building for Clients

VI. OPERATIONAL MODALITIES

Screening of Loan applicationsLoan ProcessingApproval of LoansLoan DisbursementLoan Monitoring and Follow-upLoan recoveryMicro-finance RisksAccounting and Auditing

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ANNEX VI

LIST OF ANNEXES IN THE PROJECT IMPLEMENTATION DOCUMENT (PID)

Job Descriptions of Project Management Unit StaffTerms of Reference for Baseline StudyManual of Operations Guidelines for Micro-finance