Annual report 2016 program division chief moti sharma

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Annual Report 2016
Poverty Alleviation Fund (PAF) Nepal

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Foreword
Poverty Alleviation Fund (PAF) was established in 2004 by the Government of Nepal with the goal of
reducing extreme forms of poverty. PAF-Nepal uses a community-driven development approach that
supports the formation of community organizations (Cos). I am pleased to inform that PAF has already
covered over 8, 25,765 poor HHs as CO member beneficiaries, among which majority are hard core poor,
women, Dalits and indigenous communities. Despite difficulties, PAF has been able to register a 65 percent
overall progress in its annual target in the reporting year.
Currently, more than 397 partner organizations are working with PAF to facilitate community organizations
in carrying out social mobilization, providing technical support for need identification, prioritization,
preparation, and implementation of community sub-projects, among others. Out of 40 districts with more
than 5 years of implementation experience, PAF is planning to reduce the number of Partner Organization
(POs) in 32 districts from the beginning of the fiscal year 2073/74 and remaining 8 districts from the
beginning of fiscal year 2074/75.
Community institutionalization process is also emerging in some of the districts where communities felt need
to federate themselves for certain function. A total of 196 multi-purpose co-operatives and 397 federation of
COs are formed as per communities' need. Similarly, informal networks of COs are being formed in each
VDC, showing significant progress toward the process of institutionalization of COs.
An independent assessment of performance of Revolving Fund carried out by Micro-Credit Ratings
International Limited, India shows that most of the members of the COs have got their share of loans from
the RF and it has given preference to the poorest of the poor. The same study shows that 3% of the COs,
more than 75 per cent of COs members had outstanding loans and the composition of COs indicates high
poverty and gender focus.
As part of our decentralization effort, the district Portfolio are now placed in the district headquarters in
coordination with concerned district Development Committees as per the MOU signed between Ministry of
Federal Affairs & Local Development (MoFALD) and PAF. District Poverty Alleviation Coordination
Committee (DPACC) has been as an important forum for the effective synergies and convergences for
poverty alleviation schemes at the local level. Major recent initiatives including Knowledge Management
(KM) component, JSDF, Peri-Urban and Earthquake Response Programme are fully operational and taking
pace while 30 Pocket Area Development schemes are now funded. Also, PAF conducted three thematic
studies that PAF has conducted relating to livestock, earthquake response and CO study are completed and
we are now analyzing these reports PAF’s policy feedbacks.
PAF has a target of developing 110 pocket areas across its programme districts with at least two pockets per
district though PAF is still putting efforts to improve the pocket area location and operation model to ensure
effective result in future.
PAF needs to look beyond 2017 when the World Bank finanical assistance would come to an end. For this,
PAF has commissined a study to suggest what model should be adopted. We are now in consultations with
the government, donors, parliamentarians and other stakeholders to finalize a future strategy for PAF.
As this will be the last annual report in my tenure as a vice chairman, I would like to thank all staffs, POs
that worked honestly with PAF and also the existing and former chairmen and board members of PAF for
their support during my tenure. I wish for the further success of PAF to alleviate poverty of Nepal.
Thank You
Mr Yuba Raj Pandey, Vice Chairperson, December 2016

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Table of Contents
Executive Summary ............................................................................................................ 1
CO Graduation Strategy .................................................................................................... 6
Networks and LRPs........................................................................................................... 7
Pocket Area Development................................................................................................. 7
RF Study........................................................................................................................... 7
Environmental Studies ...................................................................................................... 7
Budget Expenditure........................................................................................................... 8
Financial progress Status................................................................................................... 8
chapter 1: INtroduction and Progress updates.................................................................. 9
1.1 Annual achievements against targets....................................................................... 9
1.2 Component-wise progress status ............................................................................. 9
1.2.1 Social Mobilization.......................................................................................... 9
1.2.4 Community Institutional Building....................................................................... 14
1.2.6 Capacity Development................................................................................... 15
1.2.7 Community Infrastructure.............................................................................. 19
1.2.8 Future Plan ......................................................................................................... 22
CHAPTER 2: INFORMATION, MONITORING AND GRIEVANCE HANDLING... 24
2.1 Monitoring and Evaluation.................................................................................... 24
2.3. Revolving Fund........................................................................................................ 24
2.4 CO Graduation Assessment and CO Graduation Strategy .......................................... 24
2.5 PO Performance Evaluation....................................................................................... 25
2.5.1. PAF Environment Safeguard Programme, Environmental Framework and Monitoring 25
2.6. Grievances Handling Mechanism ............................................................................. 26
2.7. Social Accountability and Transparency................................................................... 27
2.8. Gender Equality and Social Inclusion (GESI):.......................................................... 27
CHAPTER 3: THE OUTCOME AND RESULTS .......................................................... 28
3.1 Review of Performance of Revolving Fund ............................................................... 28
3.2 Learning from Livestock Investment from PAF Communities ................................... 28
3.3 Social Mobilization Composition and Performance of CO: A Case Study.................. 29
3.4 An Empirical Study on Impact of 2015 Earthquake on PAF Communities................. 29
3.5 Environmental Studies:.............................................................................................. 29
CHAPTER 4: PARTNERSHIP AND COLLABORATION. Error! Bookmark not defined.
4.1 Ministry of Federal Affairs and Local Development (MoFALD) and Ministry of Agriculture

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Development and Ministry of Livestock Development .................................................... 15
4.2 World Food Programme (WFP)................................... Error! Bookmark not defined.
4.6 Practical Action, Heifer International and Helvetas...... Error! Bookmark not defined.
4.9 PROCASUR on Knowledge Management................... Error! Bookmark not defined.
4.10 Partnership with other Major Institutions and Programme........................................ 16
CHAPTER 6: FINANCIAL MANAGEMENT................................................................ 31
6.1 Financial Planning and Management ......................................................................... 31
6.2 Budget Expenditure................................................................................................... 31
6.3Financial progress Status ........................................................................................... 32
6.4 Disbursement to Community Organizations............................................................... 33
6.5 Disbursement to Partner Organizations...................................................................... 34
Annexes.................................................................................... Error! Bookmark not defined.
Annex 2. List of Cooperatives formed through CO’s initiatives in DistrictsError! Bookmark
not defined.
Annex 3: Coordination and Collaboration with different agencies and programme at the local
level.......................................................................................... Error! Bookmark not defined.
Annex: Details of CO Registered with PAF and agreement AmountError! Bookmark not
defined.
Annex: Details of …………..................................................... Error! Bookmark not defined.

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EXECUTIVE SUMMARY
By the end of the reporting period, a total of 33,124 community organizations (COs) of the poor
are registered with PAF. Out of total, agreements have been signed with 29,671 COs to carry out
income generation(IG) and commuity infrastructure related activities at the community level. Over
the period, a total of 825,765 households are benefitted with the PAF programme.
Of the registered COs, 548 are implementing infrastructure programmes and 25,716 are benefiting
from Income Generation activities. Likewise, as many as 3,407 COs are benefitting with the both
infrastructures and Income Generation (IG) activities.
Community institutions like federation, networks, cooperatives and pocket areas have been formed.
Similarly, a total of 1,645 infrastructure schemes related federations have been formed in PAF
programme districts.During the reporting year, agreements ammounting to Rs 1.74 billion were
signed with3,521 COs to implement 3,521 sub-projects that includes 3,280 income generation and
332 infrastructure schemes.
In cumulative terms, a total of 25,716 IG and 5693 infrastructure sub-projects were implemented
through 31,417 COs and their federations ammounting Rs. 17.64 billion, of which Rs 1.56
billionhas been already disbursed to the communities during the reporting year.
Community infrastructure and income-generation activities are two major demand driven sub
projects of PAF. IG activities are related to agriculture, cropping, livestock, micro-enterprises and
cottage industries, trade and skill based services while infrastructures are related to micro-irrigation,
trails, link road, culvert, bridge, rope way, electricity and micro-hydro, water mill, water supply,
sanitation, and community building such as school, health post and clinics, storage, market centres.
PAF has taken major policy decisions during the reporting year. A MoU has been signed with
Ministry of Federal Affairs and Local Development (MoFALD) to establish an office within the
District Development Committee (DDC) offices in the respective distircts. PAF has estbalished its
contact offices in every programme districts and Portfolio Managers are now stationed in districts.
PAF has adopted various models of institututional development to capacitate COs. Among them,
Pocket Area Development programmes, co-operatives, COnetworks and COfederations have been
established and functioining as per community demands.
For the reporting year, PAF has achieved 110 percentphysical target and 65 percent on financial
target of the programme for the FY 2072/73.Partner Organizations (POs) selected by PAF are
facilitating Community Organisations (COs) of poor. Currently, 397 Partner Organizations (POs)
are working with communities facilitating PAF programme in 2,208VDCs in 55 regular and 3
innovative districts.
CO Graduation Strategy
The objective of CO graduation strategy the strategy paper is to promote institutional sustainability
and self reliance of COs and formation of higher level of organization with the support of PAF. In
addition to the broad objective, the strategy paper aims at equipping the COs and other PAF
supported institution with the capacity to manage their own organization and activities and making
them capable to provide services to the members for poverty alleviation and livelihood
improvement on sustainable basis. Cooperatives, Pocket area, CO federations, CO Networks are
examples of expansion of COs to their higher level in different PAF districts formed for gathering,
learning and innovating at community level.
The CO graduation strategy has defined cooperatives as the best model to manage production and
market. According to the strategy paper, business development support will be provided for
institutionalization of cooperatives formed as an entry point to the higher level institution. PAF will
also start providing operational support of Micro Finance Institutions (MFIs) to expand their
geographical coverage and to make financial service available to Commodity Groups(CGs). To
strengthen the activities of cooperatives, PAF has envisaged strategy to work with banks to develop

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customized financial products and provide training to COs and CGs to enable them in selecting and
accessing the most suitable financial services. As many as 290 cooperatives mostly saving and
credit cooperative are formed by CO members. Similarly, CO network, a body including
representatives of all COs in a given VDC is another form of organization which is considered as an
entry point to new organizational forms where COs are part of.
Networks and LRPs
A total of 1,300 CO networks have been formed so far. In addition, alliances of members around
certain farm products or livelihood activities are in the process of forming.
Similarly, a total of 1,901 CO federations have been formed so far. These federations are
performing as dynamic local level institutions serving to improve their knowledge and resource
base for their sustainable livelihood. CO Federations are linked to PAF-supported infrastructures
activities.
Local Resource Persons (LRPs) are also mobilized in various PAF programme districts for the
improved performance of COs’ financial management and revolving fund management. LRPs are
assigned to provide expert support in revolving fund management, accounting and book keeping,
para-vet services and social mobilization. They also facilitate COs in other areas such as enterprise
development, building linkages, CO auditing and document best practices and also role-play as an
advisor of agricultural and livestock management issues.
Thus, building capacity of such self-help local organizations is a kick start of institutional
development. Formation of higher level institutions through capacity enhancement of COs, Product
Groups (PGs), federations, networks and cooperatives is geared up by PAF for the institutional
building of PAF interventions.
Pocket Area Development
PAF has a target of developing 110 pocket areas across its programme districts with at least two
pockets in each district. During the reporting year, PAF has identified 38 pocket products and 29
business groups. Production, processing and marketing of Allo, mandarin orange, potato, pig, goat,
poultry, vegetables, spice crops (ginger and turmeric), banana, sugarcane and sugarcane products,
bee and honey production, riverbank vegetable cultivation, and medicinal herbs were major areas of
PAF support to the business groups under pocket area development program in the fiscal year
2072/073.
RF Study
During the reporting year, an independent study was conducted by the international consultant M-
CRIL on Revolving Fund (RF) data of 57 COs and 36 POs covering 11 districts. The study was
mainly focused on assessing the performance of COs mainly governance process, management of
RF, standard of book keeping and monitoring capacity of POs, COs and PAF.The evaluation team
has documented mixed results and made some recommendations to further intensify the efficiency
of the RF and its process.
Environmental Studies
PAF has carried out environmental studies on “Relationship between Climate Change and Poverty”
and “Impact of Natural Disaster on PAF Projects”in the five districts -- Rasuwa, Nuwakot,
Kapilbastu, Dhading and Myagdi. These studies showed that some of the PAF projects are
vulnerable to climate change effects. The study on impact of natural disaster on PAF projects is
mainly focused on some areas such as flood, landslide, forest fire and drought. The study has
showed possible impact of the natural disasters on the PAF projects and provided cases of impact
on past projects.

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Budget Expenditure
The total expenditure from Fiscal year 2060/61 (2003-04) to Fiscal year 2072/73 (2015-16) has
remained at Rs. 5.78m, Rs. 247.32m, Rs. 493.50m, Rs 1,210.30m, NRs. 1,875.48m, 1,647.20m,
2,481.5m, 2601.28m, 2998.69m, 2343.03m, 2322.02m, 2030.67m &2322.16m respectively.
Total expenditure of PAF till the end of the fiscal year 2072/73 (2015-16) stood at Rs. 19,513.12
million. Out of the total, 94 percent was spent on programme implementation through COs and
POs (CO-74 percent & PO- 20 percent), one percent in monitoring, training, studies and workshop,
0.32 percent in capital investment, 0.01 percent in ID card distribution to poor households and 4
percent in PAF operation/ recurrent cost.
Out of the total PAF expenditure up to FY 2072/73 (2015/16), 95.39 percent is from IDA
(International Development Agency- the World Bank) grant, 1.55 percent from Trust Fund and the
rest 3.06 per cent from the government source.
Financial progress Status
In FY- 2015/16 (2072/73), total PAF expenditure has remained at Rs. 2,322,159,159.67 (65.07
percent of the allocated budget) as compared to Rs. 2,030,272,093.20 (56.18 percent of the
allocated budget) in the FY- 2013/14 (2070/71).
Out of the total PAF expenditure of Rs. 2322.16 million for the reporting year, 94 percent was for
programme implementation through COs and POs, one per cent was for monitoring, training and
workshop, 0.32 percent in capital investment for PAF and 4 percent in PAF operation/recurrent
cost.

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CHAPTER 1: INTRODUCTION AND PROGRESS UPDATES
Poverty Alleviation Fund is a community-driven development programme directly supporting 14th
periodic plan of the government. It provides resources directly to the poor, and thereby expects to
bring efficiency and transparency of the work, and ensure community ownership in its development
activities. This section gives the overview of the annual achievements against the target and overall
implementation status of the different programme components during the reporting period as well
as cumulative achievements.
1.1 Annual achievements against targets
As part of its annual planning, PAF had set a definite target in its key components--social
mobilization, income generation, community infrastructure, capacity building and innovative sub-
projects. The table below summarizes the achievements of the reporting year against the annual
targets.
Table 1 Annual Achievements against targets for Fiscal year 2015-16
Description Annual Target Physical Progress Progress %
Income Generation Sub Projects 3029 3391 112
Infrastructure Sub Projects
including federation
621 330 53
Innovative Sub-Projects 43 12 28
Total Sub-Projects 3693 3733 101
Beneficiary HHs (including Infra
sub-projects)
60,000 68804
Programme Funding Status for the
reporting year Rs. 2325700000 Rs. 1606682948 69
For the reporting year 2015/16, the achievement in income generations sub projects was far above
the target, i.e., 112 percent while for infrastructure related projects the achievement was 53 percent.
In case of innovative sub-projects, PAF had set an annual outputs of 216 sub-projects, while the
achievements has stood at only 28 percent. Similarly in case of PAF expenditure for the reporting
year, the achievement was 69 percent against the project expenditure target of Rs. 2,325,700,000.00
1.2 Component-wise progress status
1.2.1 Social Mobilization
The objective of the social mobilization is to build up capacity of communities for preparation,
design, implementation, operation and management of community sub-projects to enhance their
livelihoods.
1.2.1.1 Community Organizations, Sub-projects and Investments
A total of 33,124 community organizations (COs) were registered with PAF (6,516 in Mountain,
14,509 in Hilly and 11,632 in Terai districts and 467 through Innovative Window Programme
Districts till the end of the reporting year.
Of the total registered COs, PAF contracted with 31,417 COs (6,268 in Mountain, 13,676 in Hilly
region and 11,054 in Terai districts and remaining 419 in Innovative Window Programme Districts)
to carry out different IG and community infrastructures related sub-projects.

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Table 1: CO Registration, Sub-project Agreements
Categories FY 2015/16 Cumulative
No. of
Regd.
Cos/Fed
Agreement No. of
Regd.
Cos/Fed
Agreement
No. of
Cos/Fed
No. Of
Agreement
No. of
Cos/Fed
No. Of
Agreement
Mountain 225 268 269 6,516 6,268 7,319
Hill 2029 2115 2147 14,509 13,676 15,017
Terai 1339 1308 1316 11,632 11054 11475
Innovative
Districts 2 12 12 467 419 528
Grand total 3,595 3,703 3,744 33,124 31,417 34,339
In the area of income generation, the most demanded activities from the community are related to
agriculture, livestock, cottage industries, trade and skill based services. Similarly infrastructure sub
projects are related to micro-irrigation, link road, culvert/bridge, rope way, electricity/micro-hydro,
water mill, water supply, sanitation, school and health post building, among others.
Table 2: PAF Investment to the Community Sub projects
Categories FY 2072/73 (Million Rs.) Cumulative (Million Rs.)
IG Infra Total IG Infra Total
Mountain 74.03 111.71 185.74 2,406.61 1892.32 4298.93
Hill 705.29 273.66 978.95 5,172.92 2,342.06 7514.98
Terai 503.49 64.58 568.07 4795.44 1072.62 5868.06
Innovative
Districts 3.43 5.60 9.03 102.171 119.152 221.323
Grand
total
1286.2
4
455.55 1741.79 12477.141 5426.152 17,903.29
Till the end of reporting year FY
2015/16, agreements were made with
29,671 COs amounting to Rs.
17,903.29m while additional 3703 COs
signed agreements, amounting to
1,741.79m during the reporting year
alone. Therefore in cumulative terms,
agreements were made with 31,417
Cos/Fed amounting Rs. 17,903.29 m till the
end of reporting year i.e. fiscal year
2015/16.
1.2.1.2 Programme Cost Sharing (investment—IG Vs Infra, PAF Vs Community)
PAF has invested Rs. 12, 86.24 million in IG activities during the reporting year against the total
cumulative investment of Rs.12, 477.14 million till the end of the reporting year. Similarly, PAF
invested Rs 455.55m during the reporting year on infra schemes while cumulative investment
remained at Rs.5426.152 m.
Figure 2: PAF’s investment ratio on IG and
infra

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In overall scenerio, out of the total PAF investments, 70 per cent has been made in income
generating sub-projects and 30 per
cent has been funneled in
infrastructure-related sub-
projects.
In terms of region-wise
investment, PAF has invested the
highest amount for IG sub-
projects in hilly region, followed by
Terai, mountain and innovative
districts. Similar investment
trends is maintained in infra sub-
projects as well (See the chart
below).
In cumulative scenerio, average
community sharing is 16 percent (6
percent in cash and 10 percent in kind) of the total sub-project cost whereas VDCs and DDCs and
other development partners are sharing 5 per cent of the total sub-project cost. In total, PAF has
invested 79 per cent of the community sub projects cost.
In the case of income generating sub projects, community has shared 9 per cent in cash and 2 per
cent in kind. However, this has remained 2 percent in cash and 21 percent in kind in infrastructure
sub-projects. The DDC and VDC contribution remained significant with 4 per cent when it comes
to infra sub projects. It may be noted that other organizations also contributed 13 per cent of total
cost for infra sub-projects.
1.2.1.3 Facilitation of community through POs
PAF’s Partner Organizations (POs) facilitatesCommunity Organizations of the poor. POs facilitate
various activities including but not limited to enhance Cos' capacity development on planning, carry
out detailed feasibility study, survey design and estimates, proposal preparation, and provide
technical assistance and monitoring and supervision during implementation phase.
As of now, 391 Partner Organizations (POs) are working with communities in 55 programme
districts. Further, six POs are working for Innovative Programmes.
Figure 3: Geographical disbursement of PAF’s
investment

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Table 3: Details of POs Status
Description No. of POs working No. of VDCs covered
Regular 55 Districts 391 2,148
Innovative Program 6 60
Total 397 2208
Till the end of the reporting year, the POs are involved in facilitation works in total 2,158 VDCs
and Community Organizations of Poor (COs) are working in those VDCs.
1.2.2 Reaching out to the Poor and Social Inclusion
PAF has taken the strategy to support the idea that poor community should be organized themselves
to prepare, implement and manage their programme and they should be in the driving seat, with
decision making authority.
Participatory social assessment and community well-being ranking process identified the poor
community members as primary
beneficiaries at the settlement level. They are
organized into community organizations to plan,
implement and manage their sub-projects. As entry
point of PAF program at settlement level,
social mapping and participatory social
assessment is the primary social mobilization step.
The settelmenet level social assessment has
revealed that the 65.8 per cent of the HHs are poor,
and thus included as CO members in PAF
programme.
1.2.2.1 CO Members
During the reporting year, PAF was able to reach out to 89,880 poor HHs and organize them as CO
members to carry out different activities aimed at improving their livelihood. Till the end of the
reporting year, a total of 825,765 CO members households were benefited from PAF assistance.
Table 4 CO member-Beneficiaries
Programme Areas FY 2072/73 Cumulative
Mountain 4188 181881
Hill 51480 356737
Terai 33589 274528
Innovative District 623 12619
Total 898, 80 825, 765
Of the total 825, 765 CO members till the end of the reporting year, a total of 89,880 CO members
were covered during the reporting year alone. The coverage ratio is highest in hilly region.When
comparing the region-wise break down of the CO members, Hilly region holds the highest share
with 43 per cent, followed by Terai and Mountain region with 33 and 22 per cent respectively,
while innovative districts have a meager share of 2 per cent.

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1.2.2.2 CO Members by Poverty Ranking
Among beneficiaries members in Community
Organizations (COs) of Poor, 64 percent members fall
under the hardcore poor (Ka) category (food sufficiency
less than 3 months among criteria fixed by community),
26 percent members fall under medium poor (Kha)
category (food sufficiency more than 3 months but less
than 6 months among other criteria set by the
community itself), 9 percent members fall under poor
(Ga) category (food sufficiency more than 6 months but
less than a year among other criteria set by the
community itself and a very small fraction of
percentage members falls under marginal Non-poor
(Gha) Category.
In terms of distribution of members by programme area, Terai region has the highest number of
hardcore poor with 72 percent, followed by Mountain with 65 and Hill region with 59 per cent.
1.2.2.3 CO members by Caste and Ethnicity, Gender
Out of the total 825, 765 CO members’ households till the end of the reporting year, CO member
households constitutes 27 percent Dalit, 30 percent
Janjati, 3 percent Muslim, 5 percent Brahmin, 24
percent Chhetri and 11 percent other ethnicity.
Caste and ethnicity wise distribution of CO
members in terms of region shows that Dalit
dominates in the Terai region and Janajati in
hilly and chetri in mountain regions. (see
diagram).
Female CO members have the lion’s share with 78
percent. They are highest in hillly region and
followed by by Terai region and mountain region
(See Pie Chart and Diagram).
a. CO Members by Key Position
Holders
The president, treasurer and secretary are
considered as key positions in every individual
COs. The gender wise break down and ethnicity
wise breakdown of key position holder are
presented in following charts.
Of the total key position holders in PAF
supported COs, 68 per cent are female, in
Figure 1 Region wise no. of beneficiaries based on
gender

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accordance with PAF's affirmative approach for the empowerment of the poor women.Caste and
ethnic representations in key positions shows that 30 per cent are Janajati, followed by 28 per cent
of Dalits and 28 per cent of Brahmin/Chhetri, 3 per cent of Muslim and 11 per cent other ethnicity.
At the regional level, Dalits dominates in key position holders in Terai and Chhetris dominates in
hilly districts. Janajati dominates in mountain region and innovative districts.
1.2.4 Community Institutional Building
Community institutionalization process is also emerging in some of the districts where community
felt need to federate themselves for certain function. 240 Multi-purposes co-operatives and 1,645
federation of COs are formed as per communities' felt need. Informal networks of COs are being
formed in each VDC, in the process of institutionalization. Based on the experience from the
ground, PAF is working on formulating the strategies for sustainable institutional development of
comunity organizations.
During the reporting year, PO evalatutions criteria has been revised to make it simpleand a CO
graduation assessment guideline has been approved. Equally important documents are draft for
pocket area (activity based ) develpoment: implementation guidelines, and concept paper for
cooperatives develpoment, among others.
1.2.5 PAF supporting rural artisans
To attain the objective of reducing abject poverty, Japan Social Development Fund (JSDF) has
provided $2.7 million grant to enhance the quality of life of the poor people who are engaged in
artisanship and cultural industries. The project funded by JSDF aims to support artisanship in
various ways to extricate from daily woes.
The project is now implemented in eight districts namely Terahthum, Dhanusha, Lalitpur, Gorkha,
Myagdi, Rupandehi/Kapilbastu, Dailekh and Dang. Except Lalitpur district, all the JSDF project
districts fall in PAF district. PAF is going to mobilize existing POs for social mobilization and
institutional development of artisans.To ensure effective project implementation, PAF is
collaborating with two partner organizations.The overall program technical PO is the New Delhi-
based Asian Heritage Foundation (AHF). This technical PO brings international-level expertise in
skills development on various arts and crafts, technology transfer including evolving traditional
works with a contemporary finish, and marketing via linkages and exhibitions.
POs in the target districts are establishing artisan-based clusters, with a specal focus on the

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clusters’ institutional development. With a combination of scoping visit, skills identified, and
trainings delivered the program has been active across the targeted districts.
Following the capacity build and trainings availed after scoping visits and skills identification is
complete, PAF then supports the various PGs by linking them to financial institutions.
The PGs are given opportunity to increase their access to financial resources through the traditional
PAF model of organizing a Revolving Fund (RF). PAF offers 90 per cent of the funds, while the PG
members are to produce the 10 per cent collectively so that they acquire a sense of commitment to
the RF. This fund is managed by the social mobilization PO, which also establishes a sub-
committee comprised of PG members. As per the terms and conditions of the loan members will be
given access to launch their own businesses. This start-up fund revolves as members repay their
loan in future monthly meetings.
Box
Pocket Area Development by PAF
PAF has introduced pocket area development programme for further commercialization of
IG activities, improve the production, food security and income of the producers, increase
employment of the poor and disadvantaged through scientific methods of production, product
processing, labeling, advertisement, market and financial linkages,
Organizations having commercialized products can apply for products proposal. Independent
expert team evaluates proposals. PM or concerned person from the centre verify it. Finally,
technical advisory committee of PAF further evaluates and recommend to and Executive
Director (ED) of PAF for approval and executive director approves the product.
PAF partner organization mobilizes groups, form business groups. Technical advisory
committee capacities the groups for business planning, scientific production, product
processing, market linkages with regional, national marketing institutions, groups and even
individuals and financial linkages with other financial institutions for profit maximization and
sustainability of the business. Business group prepares business proposals and submit to PAF,
independent experts evaluate proposals and final evaluation is done by TAC.
PAF has target of developing 110 pocket areas across its programme districts with at least
two pockets per district. During the reporting year, PAF identified 38 pocket products and 29
business groups. Production, processing and marketing of Allo, mandarin orange, potato, pig,
goat, Poultry, vegetables, spice crops (ginger and turmeric), banana, sugarcane and sugarcane
products, Bee and honey production, riverbank vegetable cultivation, and medicinal herbs
were major areas of PAF support to the business groups under pocket area development
program in the fiscal year 2072/073.
1.2.6 Partnership and Collaboration
Poverty Alleviation Fund always envisions possibilities for partnership and collaboration with communities,
local and national organizations and government agencies, national and international non government
organizations and other development partners.
1.2.6.1 Partnership with MoFALD and Ministry of Agriculture Development and Ministry of
Livestock Development
A Memorandum of Understanding (MoU) was signed on 12 August 2015 between MoFALD and PAF to
establish the PAF office within the District Development Committee (DDC) offices at district level. As per

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the MoU, PAF establishes its district offices at the premises of DDC and Portfolio Managers (PM) are now
stationed at the districts. This has been a significant step toward strengthening partnership as the MoU is
expected to increase coordination and linkages between PAF and local bodies in designing, planning,
implementation, monitoring and reviewing of PAF activities at the local level.As per the agreement, PAF’s
programmess shall be presented at the VDC Council. Then, the list of activities gets endorsed by District
Social Mobilization Committee (DSMC) and District Council.
Earlier in June 2007 and October 2010, PAF and DDCs had signed MoUs for a strategic alliance to alleviate
poverty through synergic efforts between the two institutions.
Also, PAF has signed a MoU was signed with the Ministry of Agriculture Development (MoAD) on 30
January 2013 to enhance the partnership for a strategic alliance to alleviate poverty through technical
backstopping on agriculture and livestock extension services. It has been advantageous to the beneficiaries
opting livestock farming for income generation in majority of the programme districts. Among the PAF
programmme districts, Pyuthan, Dadheldhura, Rasuwa, Ramechhap, Sindhuli and Doti have mostly
benefitted from the collaboration with DLDO.
1.2.6.2 Partnership with other Major Institutions and Programme
The WFP and PAF signed a MOU on August 2010 and agreed on strategic alliance to alleviate poverty and
food insecurity in mid and far western regions. Soon after the MoU was signed, some specific projects such
as small scale irrigation, water harvest tank, cellar store, cash crop plantation, micro hydro and rural
agriculture road and enhanced farming techniques and poultry farming were jointly commissioned. Under
this, CO members in Dailekh, Panchthar, Dolpa, Mahottari and Bajura districts are being supported by WFP.
In regards to infrastructures schemes, as many as 23 small infrastructure schemes had been completed in
Achham, Dailekh, Humla, Jumla, Bajhang and Mugu districts until 2015.
Similarly, PAF and PROCSUR have signed a MoU on 25June 2016. As agreed, PROCASUR will provide
the technical support and training for strengthening the capacity of PAF and its target communities to
manage and share knowledge over a period of a year. PAF is implementing an in-country learning route
methodology by engaging the services of PROCASUR, a not-for-profit and non-governmental organization
working on Knowledge Management and Capacity Building activities in the developing countries
On 29 July, 2011, PAF and Practical Action Nepal signed an agreement that envisioned establishing
synergies in poverty alleviation efforts at the grass roots level and ensuring increased opportunities for the
poor and underprivileged. As part of the understanding with Practical Action, both parties have been
working together to improve communities’ access to services by supporting them to choose and adopt
convenient mode of transport.
Also, PAF and Heifer International signed a MoU on 29 July, 2011. As per agreement, both parties
enhance collaboration in the effort of income generation, improving nutrition, safeguarding environment and
social mobilization activities. It has also been helpful in capacitating the poor and disadvantaged in Rautahat,
Sarlahi and Sindhuli districts among others.
Similarly, a MoU was reached between PAF and Helvetas-Nepal on 7 February 2011 agreeing to work
together to facilitate access to common land resources for land poor and landless in addition to disseminating
appropriate technologies for the promotion of commercial farming of vegetables
PAF has signed a MoU in 2011 with Leasehold Forestry and Livestock Programme (LFLP) under
Department of Forest under Ministry of Forest and Soil Conservation. The COs affiliated to PAF are having
easy access to leasehold forestry while leasehold forestry groups are facilitated and encouraged to enter in
COs formed under the aegis of PAF. LFLP is helping PAF to capacitate the CO members with forestry
techniques in Baitadi and Sindhupalchowk districts.
PAF and Alternative Energy Promotion Centre (AEPC) have so far worked together in 336 micro hydro
sub-projects in 31 districts. After signing the agreement, PAF and AEPC have accomplished a total of 20

17
micro-hydro sub-projects in Achham, 13 in Bajhang, 11 and 10 in Baitadi and Bajura, respectively. MoU
was signed with AEPC on August 10, 2007 for mutual collaboration between PAF and AEPC program areas
to enable poor’s access to micro-hydro and other alternative energy projects.
PAF has also forged collaborations with other institutions and programmes such Rural Energy Development
Programme (REDP), Cottage & Small Industry, Micro-Enterprise Development Programme (MEDEP), and
Sustainable Soil Management Programme (SSMP) among others.
Apart from the central-level initiatives for collaboration and partnership, PAF is working closely with other
development actors at the local level for better synergy and effectiveness. A number of activities are under
implementation in collaboration with other developmental organizations such as VDC, Biogas support
Programme, District Women and Children Development Offices and District Education Office, KISAN and
other national and international NGOs, among others.
1.2.7 Capacity Development
This component includes i) capacity development of COs: social mobilization of community
groups; with particular attention to the needs of marginalized groups, ii) capacity development of
POs, iii) capacity building for local bodies, focusing mostly on capacity building to help VDCs,
DDCs, iv) capacity building of target groups engaged in income generating activities focusing on
organizing special training and related activities to enhance to skills of target beneficiaries on their
chosen areas of activity, v) support to rural and community finance and , vi) information,
monitoring and Evaluation System for self-learning.
1.2.7.1. Capacity Development of Community Organizations
PAF is providing grants to COs to launch various income generating and infrastructural activities.
Community Revolving Fund is created from the grant provided for income generating activities.
Hence, institutional strengthening of COs is imperative for sustainable management and utilization
of community revolving fund. Apart from income generating training, PAF is also supporting
institutional development related trainings such as leadership and group management training to
enhance skills of the CO members to lead and manage their organizations, training on account
keeping to enhance the capacity to keep the up to date book keeping of the organization, training on
revolving fund to manage the revolving fund effectively. Similarly, PAF is also providing training
on entrepreneurial skill enhancement and training on technical skill enhancement to transfer the
skills and technology to individual members to carry their business/activities effectively. Further,
various exposure visits are managed by PAF to share the successful and innovative approaches
taken by members of COs.
Table 5: Community Organization (COs) Capacity Building FY 2072-73
SN Name of training event
No of
events Male Female Total
1
Account Management/Book
keeping/Revolving Fund
management
Training/Enterprise
development/IGA
Orientation 257 2250 6750 9000
2 Leadership Development 123 615 1845 2460
Comment [D1]:

18
3
Livestock Insurance
Orientation 49 368 1103 1471
Total 429 3233 9698 12, 931
1.2.7.2. Capacity Development of POs
PAF is providing institutional development related Training of Trainers (TOT), refresher training,
and orientation to POs to make them enable to impart trainings to COs. PAF provides trainings on
various issues such as social mobilization, leadership development, group management, account,
revolving fund and saving-credit management, /Livestock Insurance,CO graduation training,social
audit and institutional model development, i.e., cooperative education, cooperative creation and
cooperative business plan preparation.
The following table shows the cumulative progress until the end of the reporting fiscal year.
of FY 2072-73
Table 6 PartnerOrganization (POs) Capacity Building during FY 2072-73
SN Name of training event No of events Male Female Total
1
Training on social
mobilization/Leadership,
Account mgt & Revolving Fund
management training 49 705 765 1470
2
Pocket Area Development
orientation 18 220 309 529
3
Co-operative Orientation
Training 12 220 170 390
4 CO Graduation Orientation 42 0
5
Earthquake Damage Assessment
orientation 17 550 650 1200
Total 138 1695 1894 3589
1.2.7.3. Capacity Development of Local Bodies
During the reporting year, the following activities were carried out:
• Trimester-wise DPACC meeting was held in all Programme districts.
• VDC secretaries and line agencies partnership meetings.
• Co-ordination meeting with different stakeholders/programs is carried out for possible
linkages.
• Monthly District-Level POs co-ordination meeting are continued in 55 districts.
1.2.7.4. Capacity Development of PAF Secretariat
PAF has carried outvarious organizing capacity development initiatives to empower PAF staffs.
PAF organized three-day training on public procurement process to portfolio-managers, officers
and assistants. The training was facilitated by the resource persons from Public Procurement
Monitoring Office. Assistant staffs from finance, M&E, and programme divisions
participatedinadvance excel training. Similarly, advance secretarial training was provided to the
receptionist and language skill training was provided to the drivers and messenger. An
exposure/study visit was organisedwith the participation of employees from OPMCM,MOCPA,
MOF and PAF to study Jeevika livelihood program in Bihar, India.
Formatted: Normal, Justified

19
1.2.7.5. In-house Workshop and Meetings
In order to review and strengthen PAF programme in the districts, PAF organized a two-day review
programmesat PAF Secretariat in each trimester. In the review meeting, Portfolio Managers had
participated and presented the progress as well as shared the lesson learnt and challenges they faced
in the districts. Further, two institutional review workshopswere conducted for PAF staffs in
Nepalgunj and Biratnagar to provide knowledge on pocket area development and environmental
safeguard. A total of 75 PAF staffs participated in these workshops.
1.2.8 Community Infrastructure
Till the end of the reporting year, a total of 5,693 infrastructures related sub-projects were supported
under PAF programmes. During the fiscal year 2072/73 (2015/16) alone, as many as 352 sub-
projects had been carried out with support from the PAF.
Regarding distribution of schemes by sector during the reporting year, drinking water supply &
sanitation sub-projects--numbering 177 – stood at the top followed by 116 small irrigation related
sub-projects and 27 community buildings sub-projects. Similarly, a total of 24 sub-projects were
related to rural access, i.e., transportation while 7 sub-projects were related to rural energy.
By the end of fiscal year 2015/16, a total of 2,151 activities were carried out under supply &
sanitation projects. Similarly, 1,181 irrigation activities, 688 community building sub-projects
and530 rural access sub-projects. Also, a total of 398 rural energy related sub-projects were
constructed in cumulative and against 742 various activities including Ghatta, construction of
drainage, improved stove, river training, rice mills, among others.
Table 7: Distribution of Infrastructure by type
1.2.8.1 Benefited Households
The infrastructure sub projects has benefited over 276,595 beneficiaries so far. Maximum demand
were made for water supply related activities during the reporting year as well as in overall
scenerio.
Table 8 Infrastructure Activities and Benefited Households
SN Infrastructure Activity Sub-projects wise Beneficiaries
Households
FY 2072/73 Cumulative
1 Rural Access 1,913 55.505
2 Community Building 3,145 57,100
3 Rural Energy 977 44,237
4 Small Irrigation 5,246 39,810
5 Water Supply &
Sanitation 9,394 74,647
6 Miscellaneous 25 5,295
Total 20,700 276,594
Infrastructure Activity Total Number of Sub-projects Cum. HHs
BenefitedFY 2072/073 Cumulative
Rural Access 530 55,505
Community Building 27 688 57,100
Rural Energy 7 398 44,237
Small Irrigation 116 1181 39,810
Water Supply & Sanitation 177 2154 74,647
Miscellaneous 1 742 5,295
Total Sub-Projects 352 5,693 276,594

20
1.2.8.2 PAF Investment in Community Infrastructure
A total of 24 number of community buildings were completed during the reporting year and Rs
32.20 million (9.07 per cent of PAF investment in infrastructure) has been invested for these
building while Rs. 212.01 milloin (45.49 per cent of PAF investment in infrastructure) has been
invested for 177 schemes related to water supply &sanitation.
Similarly, in cumulative scenerio, a total of Rs 1,184.40 million (14.84 per cent of PAF
investment) were investedfor water supply and sanitation which is higher than other investment
made in other categories of infrastructures. This is mainly due to the higer number of water suppy
related scheme in cumulative terms.
Table 9: PAF investment in different Infrastructure Scheme in millions
SN
Category of Infrastructures
PAF Investment (in Millions)
1 Rural Access 32.20 566.23
2 Community Building 42.25 670.64
3 Rural Energy 18.01 683.13
4 Small Irrigation 161.22 652.93
5 Water Supply & Sanitation 212.01 1184.40
6 Miscellanies 0.35 59.25
Total: 466.04 3816.58
1.2.8.3 Community's contribution in Infrastructure related investment
Various communities have also made contribution to carry out infrastructure projects. They have
made either cash or in-kind contribution. Local communities largely contributed in collecting local
materials while executing community infrastructure projects. So, there is a variation in community
contribution between different types of infrastructures. Water supply schemes completed during the
reporting year have the highest contribution from communities. They contributed Rs 72.44 million
in water supply projects, which is 45.66 per cent of total cost. It is followed by Small Irrigation sub-
projects having 37.78 per cent (Round figure) contributions while Ghatta (Miscellaneous) has
attracted the least contribution of 0.22 per cent. In average, there is 25 per cent contribution has
been made by community in this fiscal year 2072/073.Similarly in cumulative scenario, Water
supply related infrastructures have maximum contribution (29 per cent) from the communities. It is
followed by rural energy with 25.81 per cent. In total, 23.51 per cent contribution has been made by
the community for community infrastructure cumulative up to F/Y 2072/073.
Table 10 Community Contribution in Infrastructure schemes
SN
Category of Infrastructures
Investment of community
Amount
(million)
%(Round
figure)
Amount
(million)
%
(Round
figure)
1 Rural Access 7.34 4.63 216.33 14.88
2 Community Building 14.28 9.00 204.24 14.04
3 Rural Energy 4.45 2.80 375.27 25.81
4 Small Irrigation 59.93 37.78 222.98 15.33
5 Water Supply &
Sanitation 72.44 45.66 421.01 28.95
6 Miscellaneous 0.19 0.12 14.26 0.98

21
total 158.64 25.12 1,454.10 23.52
1.2.8.4 Contribution from Local bodies
DDC and VDC are also contributing in PAF supported community infrastructure sub-projects.
These institutions have contributed a total of Rs 2.89 million for the reporting year alone. The
cumulative sum of their contribution stands at Rs. 239.80 millions. Their contribution in small
irrigation is at the top followed by community building in the FY 2015/16. This clearly shows that
PAF’s infrastructure related projects are owned by local bodies as they are interested in rural energy
and rural access. There is no any contribution by local bodies in Rural Access and Rural Energy in
the reporting fiscal year. The contribution of local bodies, however, has declined to Rs 234.02
million in the reporting fiscal year comparison with the previous year.
Table 11 Contribution from Local bodies in different schemes
S.N.
Category of
Infrastructures
Investment of Local Bodies
Amount
(million) %
Amount
(million) %
1
Rural Access 0.00 0 33.91 14.14
2 Community Building 0.81 28 8.29 3.46
3 Rural Energy 0.00 0 184.94 77.12
4 Small Irrigation 1.39 48.09 6.33 2.64
5 Water Supply &
Sanitation 0.69 23.87 6.31 2.63
6 miscellaneous 0.00 0 0.02 0.01
Total 2.89 0.45% 239.80 3.88 %
1.2.8.5 Investment from other sources
Besides DDCs and VDCs, other donor and line agencies including Alternative Energy Promotion
Centre, Rural Energy Development Programme, District Education Office and others have also
invested in PAF supported infrastructures schemes. They have invested Rs 672.76 million in
cumulative and Rs 4.29 million in the reporting year for Infrastructure works. They, however, have
invested only in Water supply and sanitation works.
1.2.8.6 Ratio of investment by different agencies
In cumulative, Local bodies as well as other developing agencies are more interested for
coordination in rural energy. They are contributing 10.10 per cent and 32.06 per cent of total cost of
Rural energy infrastructure respectively. Contribution from PAF side is highest with 79.65 per cent
for Miscellaneous category of sub-projects- that includes includes Ghatta, Pounds,Chilling VAT etc
and lowest for rural energy, where PAF's contribution is only 37.32 per cent of the total
cost.Percentage of Community contribution is highest (25.63 per cent) for Water Supply and least
(19.17 per cent) for Miscellaneous type sub-projects. In an average, PAF has contributed 61.72 per
cent of total cost ,whereas CO's contribution is 23.52 per cent , DDC and VDC's contribution is
3.88 per cent and other’s contribution is 10.88 per cent .
For infrastructure completed during the reporting year, PAF, Community ,DDC/VDC and other line
agencies have contributed 73.76, 25.11, 0.46 and 0.68 per cent of total cost of infrastruture
respectively. Contribution from PAF is highest (81.44 per cent) for Rural Access and lowest for
Miscellaneous type sub project, where PAF's contribution is only 64.62 per cent of the total cost.
Percentage of Community contribution is highest (35.38per cent) for Miscellaneous and lowest
(19.81 per cent) for rural energy type sub-projects.

22
Table 12 Ratio of investment by different agencies for PAF community infrastructure
(Cumulative)
S.N. Category of Infrastructure
PAF in
%
CO
Cash
in %
Co
Kind in
%
CO
total in
%
DDC/VDC
in %
Others
in %
1 Rural Access 67.97 0.86 25.11 25.97 4.07 1.98
2 Community Buildings 74.91 0.22 22.59 22.81 0.93 1.35
3 Rural Energy 37.32 4.40 16.10 20.50 10.10 32.06
4 Small Irrigation 71.91 0.42 24.14 24.56 0.70 2.83
5
Water Supply and
Sanitation 72.11 0.23 25.40 25.63 0.38 1.87
6 Miscellaneous 79.65 3.43 15.74 19.17 0.03 1.14
Total 61.72 1.60 21.92 23.52 3.88 10.88
1.2.9 Future Plan
PAF has supported 5, 693 numbers of infra sub projects by FY 2072/73. Out of which 4,700 are
completed and 993 sub projects are ongoing. Regarding ongoing projects some are pending since
long time (before FY 2069/70). Such infra subprojects are on high priority to complete by the next
fiscal year. Based on demand from community organization immediate arrangement of monitoring
has been made for those projects by using in-house engineer and engineer from roster.
Since the life of this programme phase is about one year, another important plan is to focus on the
sustainability of the infra-sub projects. As guided by operation and maintenance sub guidelines
2073 PAF is emphasizingon the establishment of maintenance mechanism of completed as well as
ongoing infra sub projects.
In case of new infra subprojects priority would be given for simple and innovative type of sub
projects so that they can be completed on time and better in perspective of sustainability.

23
Earthquake Response component
Two major earthquakes hit parts of Nepal on April 25th
and May 12th
, severely affecting the
Central and Western Development Regions. The quake and a series of aftershocks delivered a
severe blow, causing widespread damage in infrastructure and loss of life across the country.
Approximately 9,000 people lost their lives and more than 22,000 people were injured.
PAF is working in the 14 earthquake affected districts as a support mechanism to the
government for its rehabilitation and rehabilitation programme. PAF has mandated its POs to
carry out programme intervention, damage and needs assessment conduct training and
facilitate the affected population to reconstruct their houses in accordance with the
construction guidelines provided by the government. Partner Organizations are also mandated
to rehabilitate affected Infrastructure schemes funded by PAF and revitalization of PAF
supported Revolving Fund.
Earthquake response Programme has targeted 14districts and the target populations for PAF’s
earthquake response component are the poor rural and urban communities with special
emphasis on women, Dalits and other ethnic minorities and vulnerable groups in the
earthquake affected areas.
The PAF’s proposed intervention on post-earthquake response will comprise the following
components:
1) The component one is Infrastructure Rehabilitation for existing COs, which seeks to
rehabilitate totally and partially damaged infrastructures built using PAF support.
2) The component two is related to the revitalization of economic activity which aims to
enable affected COs to resume RF services by reinstating the RF’s operations to the
pre-earthquake level. Earthquake effects on the RFs include: (i) damages to members’
assets financed by RF with a high likelihood of inability for the borrowers to repay
according to the schedule; and (ii) damages to cash if kept where physical damages
were sustained. There may also be cases of losses and damages of RF records and
documents.
3) The third Component is Revitalization of Community through Social Mobilization
which seeks to address immediate resource constraints to re-commencing the Social
Mobilization processes, the base of community driven development.
4) The fourth component is Skill Enhancement for Disaster Recovery and Livelihoods
seeks to enhance skills of the labourers to construct earthquake resistant housing and
infrastructure.

24
CHAPTER 2: INFORMATION, MONITORING AND GRIEVANCE
HANDLING
2.1 Monitoring and Evaluation
PAF seeks to upgrade its MIS to web interfaces and online services in order to accelerate business
process by enabling access to remote portfolio managers and partner organizations. As portfolio
managers are already decentralized to districts headquarters, MIS was designed to incorporate
current needs for proper data flow. Decision making and information sharing for feedback and
control mechanism has been facilitated in new MIS. Web MIS was implemented in PAF since fiscal
year 2073/74. The trainings have been scheduled for different types of users. PAF plans to launch
web MIS in November, 2016.
2.3. Revolving Fund
PAF has provided financial support to more than 29,671 COs to implement their subprojects-
income generating and/or small scale community infrastructure subprojects to improve their
livelihoods. The grants provided to COs for income generating activities/subprojects are established
as Revolving Fund (RF) at the CO level. The Revolving Funds have provided an opportunity to the
poor to access funds, otherwise inaccessible through formal financial institutions, to initiate income
generation activities. Community organizations are managing and operating these funds by
themselves and are responsible for setting interest rates and loan pay conditions.
Till the end of the reporting FY, PAF has provided about 1,300 million Rupees to COs to establish
Revolving Fund and PAF has been monitoring the status of this fund in periodic basis through
analyzing the collected data from the COs. The field visit monitoring has also found that the RF
loan mechanism has performed well in the areas of social inclusion, financial access and asset
creation, with all the CO members’ accessing RF loans at least once. COs have leveraged the initial
RF capital for income generating activities, and a few also mobilized savings for internal lending
activities.
2.4 CO Graduation Assessment and CO Graduation Strategy
PAF is conducting CO maturity assessment of COs with more than three years of age. PAF
conducted the assessment in FY
2072/73 in 43 regular program
districtswith an objective to assess the
maturity status of COs and
categorize them into four grading
based on indicators specified in CO
Maturity Assessment Guideline of
PAF.
The result showed that 12 per cent of
COs can sustain by themselves and
hence are mature, 21per cent of
COs can be upgraded to A on
minimum support, 31per cent of
COs need more support and
capacity building activities and the
poorest COs shall be further categorized into delisting criteria and potential and probable COs can
be pulled into category C for support.
Figure 2: COs maturity assessment 2016

25
In order to upgrade COs into higher level institutions, CO graduation strategy has been prepared
and come into effect. The objective of the strategy paper is to promote institutional sustainability
and self reliance of COs and other types of organization created with the support of PAF. In
addition to the broad objective this strategy paper aims at equipping the COs and other PAF
supported institution by the end of PAF II Closure with the capacity to manage their own
organization and activities and making them capable to provide services to the members for poverty
alleviation and livelihood improvement on the sustainable basis.
The Strategy Paper comprises Four Pillars:
Pillar 1: Development of Commodity Groups and Business Support
Pillar 2: Support to Social Enterprise Development for the Poor
Pillar 3: Targeted Support to COs to Sustainable Income Generation and Management
Pillar 4: Support for Integration with Interventions under the relevant line Ministries
2.5 PO Performance Evaluation
Facilitation and technical support is being provided to the Community Organizations by more than
394 POs for fiscal years 2070/2071 and 2071/2072. PAF conducts performance evaluation of such
POs in annual basis with objectives to make the evaluation process of PAF effective, to identify gap
of PO’s capacity, to strengthen the COs in Monitoring and Evaluation process and to promote the
work completion monitoring system with the involvement of beneficiary group. For the
continuation of the process, PO performance Evaluation 2072 was carried out in all POs of 14
selected districts of which 11 were regular programme districts and 3 innovative programme
districts namely; Taplejung, Terhathum, Udayapur, Sindhupalchok, Dhading, Khotang,
Okhaldhunga, Panchthar, Salyan, Solukhumbu, Bardiya, Makwanpur, Kanchanpur and Chitwan.
The entire evaluation process was based on indictors identified by PO performance evaluation
manual, 2067 (revised 2069). The evaluation was carried out in two different aspects: POs
performance evaluation by PAF and the PO performance Evaluation by COs for which two sets of
questionnaires were developed, data was collected, entered in the MIS module and the final report
was generated. Of all POs evaluated, no negative issues and grievances were received from the
community Organizations regarding the performance of POs in supporting the COs.A total of 74
POs working for the reporting year were evaluated, of which 70 were from regular and four POs
were from innovative programme districts. Majority of POs ranked in B with 53 per cent, second
major group ranked in A with 35 percent and third group ranked in C with 12 per cent.
Based on the PO performance Evaluation Manual (2069), POs ranked in category A were
awarded with one per cent increase in the overhead cost and POs ranked in category C were
warned by deducting 1per cent in their overhead cost. All the POs were informed with their
obtained score and ranked along with the suggestion for the better performance in the next year.
2.5.1. PAF Environment Safeguard Programme, Environmental Framework and Monitoring
PAF considers environmental aspect as a cross cutting issue and is an important principle of
development programs run by PAF. Therefore, PAF have developed its own Environment
Management Framework (EMF) guideline to deal with the environment issues and provide the
mitigation measures to the environmental consequences of development activities. The proposals
from COs for IG and Infra activities are screened and judged based on environmental assessment
checklist, the template of which is as shown in Table 30.

26
Table 13 PAF Environment Assessment Checklist
SN Possible
Negative
Impacts
Activities that
cause negative
impact
Solution for
minimizing the
negative impact
Necessary Budget for
minimizing the Negative
impacts
1.
PAF has revised EMF guideline to make it systematic and simple. This revised guideline has
categorized the environmental issues under three environment components i.e. physical
environment, biological environment and socio-economic environment. Further, it has made the
checklist easy to use and understand the environment issues.
Orientation Training on the revised EMF guideline to all the portfolio managers, engineers and
other PAF staffs was provided to make them familiar with the reformed guideline. Similarly, we
have carried out orientation training for Partner organization (POs) in the selected district
(Sindhupalchowk, Parsa, Saptari, Dhanusa,Bardiya, Panchthar and Okhaldunga) to make them
aware on the revised EMF guideline.
All these activities of the PAF are not only helping to improve the environment but also support to
sustaining the development works done in PAF project area. In addition, PAF is planning to
improve the environment activities through disseminating the environment information and
awareness to further strengthen the environment works aiming to promote the sustainable
development works, basically for the benefit to poor.
2.6. Grievances Handling Mechanism
With an aim of listening voices of citizen including beneficiaries and stakeholders and to address
and incorporate their received aspirations, suggestions, complaints and feedbacks, PAF has
institutionalized its formal channel of Grievances Handling Mechanism (GHM, 2016).
PAF GHM guideline envisages streamlining the process of receiving grievances, proper recording
and addressing the received complaints. Primarily, PAF GHM is a window opportunity to raise
concerns and problems on various issues about operation and implementation of the programme,
occupational health and safety, complaints concerning payments, financial frauds, and activities
related with discrimination, and harassments.
At VDC level PAF has formed Community and VDC-level GHM Subcommittee, which looks up,
administers, and addresses grievances at local issues via DPACC. Issues that come beyond the
capacity of sub-committee is transferred and administered by DPACC. Any types of grievances and
feedbacks from local to district level are documented to PAF Grievance Handling Unit for the
recording and necessary follow-ups.
Complaints and grievances are registered in a standard compliant form, which has been massively
distributed at the local level. Grievances received are sent to PAF GHU for recording and are
administered locally by sub-committees, DPACC and PAF GHU mutually.
Similarly PAF GHU functions On-Track System i.e., E-Chautari wherein, beneficiaries report
stories, provide suggestions and report specific issues
via web in www.ontrack.pafnepal.org.np, Toll Free
number, SMS and voice messages. Currently PAF
GHU is piloting on-track system in Kapilvastu
district.
During the reporting year, PAF GHU received 134
cases of grievances of which 101 were received from
SMS, 63 from voice messages and 2 from web. Of
the total, seven grievances were related to the
Total Issues
SN Issues through Number of
Messages
1 Web 2
2 SMS 101
3 Voice message 63
Total 166

27
installment payment of COs that were addressed properly after recording and rests of them were
irrelevant to PAF activities. The percentage of total grievances handled therefore is seen 4.21 per
cent.
2.7. Social Accountability and Transparency
The Poverty Alleviation Fund has initiated Public Audit and public hearing to each in COs/infra
sub-projects focusing on accountability and transparency as factors for successful implementation
of the project. The programme builds a mechanism in which the participating stakeholders via
community institutions, POs and sub-project facilitators have downward accountability of service
delivery. It builds community people’s capability and equips them with the appropriate tools so that
they can contribute in all stages of the project cycle, including budgeting and performance
evaluation of the service deliverers.
2.8. Gender Equality and Social Inclusion (GESI):
The Poverty Alleviation Fund has special focus on empowering and providing opportunities to
women, pro-poor and excluded so on. GESI is mainstreamed in the project cycle and all project
activities. Representation of target groups is ensured in the user community organizations, and even
in PO staff composition. Women are encouraged to take advantage of the livelihood activities and
thus they are empowered.
Box
Knowledge Management and Communications in PAF
PAF has begun a couple of activities related to Knowledge Management (KM) during the
reporting year. PAF is distributing CO Innovation Awards in all programme districts. So far
during the reporting year, five districts have implemented these awards. Also, agreements
have been made with local FM radios in all the 55 districts. PAF radio programmes are
broadcasted in from more than 100 FM radios. A joint committee comprising of Local
Development Officer (LDO), President of Federation of Nepalese Journalists (FNJ) - District
Chapter, a representative from CO Network and PAF Portfolio Managers, is entrusted to
select FM Radios and ensure the quality Radio programme. Besides, PAF radio programme
at the central level is produced and broadcasted from Radio Nepal - a government owned
entity - which has excellent coverage across the country. So far, 26 episodes have been
already broadcasted during the reporting year. For TV programme, PAF has signed an
agreement with Nepal Television—the state entity, to produce and broadcast weekly TV
programme from Nepal Television. As per the agreement a 25 minutes programme is being
broadcasted every Tuesday at 7:25 pm. NTV is also producing 4 documentaries in different
themes. PAF also signed a MoU with PROCASUR on implementation of Learning Routes
Methodology. PAF and PROCASUR are expected to work jointly to plan and executive
learning routes activities.
Also, PAF has conducted and completed three case studies relating to livestock, Earthquake
response study and the CO study. Separate brochures about these studies have been prepared.
Training for PAF Staffs on KM: PAF Portfolio Managers were briefed on KM activities on
17th
June and 6th
July. Discussions were held on how the PMs could contribute to PAF KM
from the districts and what could be the best approaches to meet the objectives of KM. Short
orientation on technical aspects of blog writing, audio-visual sharing and social media was
also held.
Under the KM component, other tasks completed during the reporting year include:
documentary Productions, compilation of success stories, publication of annual reports,
newsletters, district annual reports and newsletters, among others.

28
CHAPTER 3: THE OUTCOME AND RESULTS
In addition to the monitoring and intermediate impacts assessments, PAF programme has been
evaluated/assessed through various independent studies. This chapter discusses the outcome of the
some of major studies relating to PAF programmes.
3.1 Review of Performance of Revolving Fund
An independent review was conducted by Micro-Credit Ratings International Limited, M-CRIL
with 57 COs and 36 POs that covered 11 districts in 5 regions, with mixed method approach. The
evaluation has documented the impressionistic understanding on the performance of COs mainly
governance process (how they are governed), management (how the revolving fund is managed),
the quality standard of bookkeeping and monitoring and capacity of POs, COs including PAF. The
report has made critical review on the performance of RF managed by COs in sampled district,
assessing the financial soundness with recommendations to improve the monitoring and efficiency
of the fund. The study comes up with the validating findings that 68 per cent of CO members are
hardcore poor, 31 percent Dalits, 45 percent Janajati, 16 per cent Muslim, and eight per cent
representing other caste categories. Likewise, the study evaluates that women’s participation was
80per cent in 67per cent of the COs studied. It appraises the direct transfer method of RF fund to
the bank accounts of COs and argues that the RF has been successful in greater extent. Likewise
the study found mixed results for financial portfolio quality of COs on loan repayment. However,
average loan size has been found to be increased by 40 percent and 40 percent of COs had no
overdue loans. But 5 per cent of COs were found to have major problems with quality portfolio
with PAR<10 percent and a quarter of the total have had the entire portfolio at risk.
3.2 Learning from Livestock Investment from PAF Communities
An independent study was conducted on Learning from Livestock Investment in PAF Community
to understand the contribution made and draw lessons and make recommendations for future
strategies. The study explored the status, views and opinions of community organizations (COs)
including services they received and understanding about earning from livestock commodities.
Using participatory methods and approaches the study was carried out in four sample districts,
namely Jumla, Pyuthan, Parsa and Bara covering the COs, POs and stakeholders. A total of 13
Focused Group Discussions (FGD), 15 key informants Interviews (KIIs) and 9 In-Depth Interviews
(IDI) was carried out. Similarly, other participatory tools, i.e., group discussion, transect walk and
workshops were used in the study.
Respondent perceived that livestock activities have improved their social and economic status by
contributing in household income, family ties and social relations. Majority of the respondents
uttered reason for opting livestock farming as Quick economic return , manageable as they
have been involved traditionally , low risk business with small investment , availability of
market , high return , source of food, nutrition, and for manure and fuel. The respondents also
cited locally availability of forage/fodder and grazing area, existing/local knowledge and
experiences on livestock rearing, useful to Garjo tarna (managing emergency need) as reasons for
choosing livestock. They also said it could be used as an ‘ATM’ (Automated Teller Machine)
particularly goat, and for self-employment.
Study revealed the preferences of animals were directly related with the ecology, location, market,
tradition/culture, prior experiences, resources, capacity and family member. Study indicated that
goat rearing practice is preferred at the most , followed by buffalo , dairy cow and other, Although
this components has been well performing but it existed with traditional form without any practices
of value added enterprise though there are good market and self-employment opportunities. The

29
study recommends effective policy implementation for upgrading the Cos to adopt commercial
enterprise; Skill oriented trainings to CO members, PAF to adopt better market linkages for the
production and the effective implementation of livestock insurance.
3.3 Social Mobilization Composition and Performance of CO: A CaseStudy
An independent study was conducted in three districts Namely Humla, Saptari and Ramechhap with
the thrust to research the performance of the community organizations. The study pointed out that
social mobilizer remains key bridge between CO, POs and PAF. Study reveals that mobilization
prior to CO formation was inadequate and CO remained misinformed that they were getting free
money from the government and study also pointed lack of clarity on the rules and regulations of
managing PAF funds. Composition of COs has its own unique challenges and benefits. Dalit COs
tend to be homogenous as structurally their settlements usually lie in the periphery of a village and
they tend to live together.
Advantages of heterogeneous groups include: diversity in opinions, check-balance and larger
knowledge pool and networks. However, their disadvantage is that members from marginalized
communities in that group may be sidelined. Advantages of homogenous groups include: fewer
conflicts because of similar lifestyle and culture. Its disadvantage is that the CO as a whole may
have limited social network. Qualitative data indicates that there is a relationship between
composition and performance. However, quantitative data is limited to provide definite assertions.
Poor, marginalized and homogenous groups have problems utilizing the funds, repaying loans and
forming federations or cooperatives.
Lack of guidance and interactions has led uncertainty and the study recommends engaging more
interactions with the communities through trainings, visits and larger profile for the social
mobilizations. There is a risk that vulnerable communities’, particularly Dalits’, hardships might
increase if coercive measures are taken to recover the loans. Composition does play a role in CO’s
performance, which needs to be emphasized during future PAF activities. The study recommends
further research on this topic to develop further strategy.
3.4 An Empirical Study on Impact of 2015 Earthquake on PAFCommunities
Nepal was struck by a devastating earthquake with a magnitude of 7.6 on the Richter scale on 25
April 2015. With 8,790 dead, 8 million people affected, given the above context, PAF decided to
conduct a study on the Impact of 2015 earthquakes on PAF Communities with the sole objectives to
document how PAF communities have responded to the earthquake and also to highlight the key
Lessons for PAF Nepal to inform future activities and investments.
Three PAF districts Sindhuli, Sindhupalchowk and Rasuwa that were hard hit by 2015 earthquakes
were selected for the study. Based on PAF identification, at least three Community Organizations
(COs) from each district were selected for detailed inquiry. Both primary and secondary sources of
information were used for this study.
The study found that PAF supported community members were the first respondents after 2015
earthquakes in their community without any technical skills/ knowledge and resources.
Respondents informed that without any technical knowhow, they rescued several people from
debris, recovered properties of their own and their neighbor’s from debris and provided first aid
services. All CO members opined that poverty and disaster are inter-related, one causes the other or
vice versa. According to them, without managing the local disaster, poverty reduction is impossible.
Majority of the CO members were better off with the PAF support for last 10 years, but 2015
earthquakes destroyed their very source of livelihood and they are back to extreme poverty now.
3.5 Environmental Studies:
PAF has carried out some of the environmental studies under the consultancy services in the five

30
districts namely Rasuwa, Nuwakot, Kapilbastu, Dhading and Myagdi. The studies were on
“Relationship between climate change and poverty” and “Impact of natural disaster on PAF
projects”. These studies show that some of the PAF projects are vulnerable towards the climate
change effects. It has suggested the key area where PAF need to focus to mitigate climate change
impacts on its projects. Similarly, study on natural disaster impact on PAF projects mainly focused
on flood, landslide, forest fire and drought.
PAF projects from the impacts of climate change and it’s induced natural disasters.
Monitoring and evaluation (M & E) of 228 COs subproject of 17 PAF districts(Bajura, Bara,
Bardiya, Dhading, Doti, Kalikot, Mugu, Panchthar, Parsa, Rukum, Salyan, Saptari, Sarlahi,
Sindhupalchowk, Taplejung, Teherathum, Udayapur) were done. M & E observed the
implementation of environment management framework guideline in ground level. The
summarized version of the M & E is computerized through feeding, maintaining and organizing key
environmental information in database of MIS. The MIS information would support to improve
environment work in future development activities particularly for the benefit of poor.

31
CHAPTER 6: FINANCIAL MANAGEMENT
6.1 Financial Planning and Management
PAF Financial Management System consists of three pillars namely Financial Planning, Financial
Management and Financial Reporting. Financial Management is directed by Applicable Accounting
Standards which is accepted both by Government of Nepal and the World Bank. It also fulfills the
requirements of partner organizations (POs). Financial Management System of PAF is governed by
Financial Management Manual of PAF.
PAF practices the cash basis accounting system by maintaining all books of accounts relating to
receipts and expenditures. PAF has been maintaining its books of account electronically on Fin App
3.0, a Computerized Accounting Software.
For effective implementation of PAF activities and monitoring of documents, regular auditing is
done by internal and external auditors as per the PAF rules.
The funds flow modality of PAF with community organization is as follows:
Figure 4: PAF Funds Flow Modality
PAF prepares Implementation Progress Report (IPR) on a trimester basis for the purpose of review
by internal management and reporting to the World Bank. The report is comprised of different
sections including brief description of progress on project activities. The IPR is the comprehensive
report that includes various reporting formats, which cover financial, physical progress, contract
expenditure and procurement information. The report 2A discloses the information on sources and
uses of funds. Likewise, 2B is for reconciliation statement of Designated account and the projection
for the forthcoming trimester.
6.2 Budget Expenditure
PAF
Main A/C
PAF
Program A/C
PAF
Operating A/C
Community
Operating A/C
Community
Contribution
Partner Organization (PO)
provide Technical Assistance
to Community Organization
(CO)
PAF
Level
(Centre)
CO
Level
(District)

32
The total expenditure for the reporting year was 2322.16mwhile the cumulative expenditure of PAF
till the end of the Fiscal year 2072/73 (2015-16) stands at Rs. 19,513.12m.
Out of the total PAF expenditure of Rs. 19513.12 m for Fiscal year 2072/73 (2015/16), 94% per
cent is in Programme Implementation through CO & PO (CO-74 per cent & PO- 20 per cent), 1 per
cent per cent in Monitoring, Training, Studies and Workshop, 0.32 per cent in capital investment
for PAF, 0.01 per cent in ID card distribution cost and 4 per cent in PAF operation/ recurrent cost.
Out of the total PAF expenditure up to FY 2072/73 (2015/16), 95.39 per cent is from IDA
(International Development Agency- the World Bank) grant, 1.55 per cent from Trust Fund and the
rest 3.06 per cent from the government source.
6.3Financial progress Status
In Fiscal Year 2015/16 (2072/73), total PAF expenditure has remained at Rs. 2,322,159,159.67
(65.07 percent of the allocated budget) as compared to FY- 2013/14 (2070/71), where total
expenditure has remained at Rs. 2.030,272,093.20 which was 56.18 percent of the allocated
budget.
Out of the total PAF expenditure of Rs. 2322.16 mfor the reporting year, 94 per cent was for
programme implementation through CO and PO, one per cent was from monitoring, training and
workshop, 0.32 percent in capital investment for PAF and 4 percent in PAF operation/recurrent
cost.

33
Table 14: Statement of expenditure of FY 2015/016
Details FY-2072/73 Expenditure %
Total Community Organization 1,561,399,146.66 67.24
Partner Organization 585,371,961.72 25.21
CO/PO 2,146,771,108.38 92.45
Monitoring, Training/Workshop & Program
Supervision Cost, Consultancy
77,447,170.83 3.34
Capital Cost 9,785,243.76 0.42
Recurrent Cost 88,155,636.70 3.80
Total (A+B+C+D+E) 2,322,159,159.67 100.00
6.4 Disbursement to Community Organizations
Fund Disbursement has to be made against contracts (sub-project agreements) with Community
Organization (CO) in two or more trenches while it needs to maintain controlling mechanism based
on agreed upon milestones.
Table 15 Disbursement Expenditure to COs
District
CO Registered
w/ PAF (No.)
Agreement
Total Amount
Released (NRs.)With CO No.
Amount
(NRs.)
Hill Total 2029 2117 2149 1,253,620,000 868,334,946.71
Mountain Total 225 268 269 339,500,000 160,074,105.61
Terai Total 1349 1308 1316 777,330,000 490,022,759.89
JSDF 20,000,000 19,812,654.00
PD &ML
innovative
156,750,000 37,121,010.20
Total 3603 3693 3734 2,547,200,000 1,575,365,476.41
Based on the community demand, several activities related to income generation and small

34
infrastructure sub-projects are being implemented. In the FY 2015/16 (2072/73) PAF has disbursed
NRs 1575.36 m directly to community account. The region wise distribution of disbursement shows
that the hilly region has the highest share followed by Terai and Mountain regions.
6.5 Disbursement to Partner Organizations
During the reporting year, altogether 397 Partner Organizations (POs) have been working with PAF
to facilitate and provide the necessary technical supports to the COs in the PAF districts for which
PAF has disbursed Rs. 592 m. On the basis of the expenditure on PO, the hilly region has the
highest share with 43.63 per cent and then Terai and Mountain regions with 32.99 per cent and
20.69 per cent respectively. Likewise, under the JSDF and innovative innovative program districts
with the share of 1.61 and 1.68 per cent of the total expenditure.
Table 16: Disbursement Expenditure to POs
S.
N.
Districts
Disbursed in FY-
2071/72
%
Disbursed in
FY-2070/71
%
A Mountain 152,694,361.62 29.04 122,576,370.04 20.69
B Hill 130,633,020.15 24.85 258,539,898.94 43.63
C Terai 200,227,312.75 38.08 191,940,842.34 32.39
D
Japanese Social
Development Fund
(JSDF)
9,770,000.00 1.86 9,535,108.04 1.61
E
Subtotal PD &ML
innovative challenge
fund
32,420,000.00 6.17 9,936,468.70 1.68
Grand Total 525,744,694.52 91.98 592,528,688.06 100.00

Annual report 2016 program division chief moti sharma

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