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World Bank Experience with Rural Development: A long-term evaluation highlights strengths and weaknesses

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
December 1988
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Julian Blackwood

The rural development strategy pursued by the Bank over the past 15 years emerged out of a combination of changes in development thinking, based on experiences of the previous 25 years. The severe food shortages in South Asia in the mid-1960s had drawn attention to the fact that food production needed more concerted attention. It seemed clear that any long-term solutions to food shortages in countries with rapidly growing populations would require substantial increases in the productivity of smallholders, who controlled a large part of the arable land in most developing countries. It was also argued that to make development more equitable would require direct investments to increase the productivity of poorer groups in society.

At about this time the Green Revolution technology, based on high yielding varieties of grain, became available. This not only had the potential for increasing food production and farm incomes, but could also be used almost equally efficiently on small and large farms. Thus it became possible to envisage a production-led rural development strategy affecting millions of small farmers and serving the aims both of economic growth and of equity.

Given the pervasiveness of poverty and hunger, it was widely advocated that health, nutrition, education, shelter, and related services should be provided for in development programs, both because beneficiaries had a right to them, and as a means of helping beneficiaries contribute to the productive economy and thus raise their incomes.

All of these factors caused the Bank, like other development agencies, to reconsider its policies. Selecting from and building on the experiences of governments, bilateral aid agencies, and nongovernmental organizations in village development and rural reconstruction, the Bank formally adopted its “rural development strategy” in 1973.

In retrospect, the strategy was a broad enabling mandate, rather than a structured, selective, and differentiated set of policies and priorities. Nonetheless, rural development differed from the Bank’s traditional approach to purely agricultural development in two distinct ways. First, it aimed to initiate rural change in a more explicit and comprehensive way, with a broad package of components providing new inputs and services at the farm level. Second, the assistance was directed explicitly to the poor (see box). Rural development operations were defined as those agricultural sector projects in which at least half of the direct benefits went to the poor.

Results

The strategy had a major influence on the Bank’s lending program and operational policies. Both in volume and in coverage the Bank became preeminent among development agencies seeking to improve rural living standards. Between FY1974 and FY1986 it lent $38.5 billion worldwide for 943 agricultural projects, with estimated total project costs of $104 billion. (For a description of the Bank’s whole agricultural lending program, see Montague Yudelman, “Agricultural Lending by the Bank,” Finance & Development, December 1984.) Half of the agricultural lending, channeled through 498 projects, was for rural development projects with estimated total project costs of $50 billion.

The strategy was successful in several important respects, especially in the widespread adoption, by the Bank and other agencies, of the focus on small farmers and in the amount of lending achieved. About two thirds of the rural development projects audited on completion by the Bank’s Operations Evaluation Department were expected to achieve satisfactory economic rates of return. Millions of the rural poor benefited from project facilities to provide social services and investments to improve the quality of rural life, and especially from infrastructure to which the poorest have access.

The main production goal of the strategy—to increase smallholder productivity by 5 percent a year, or double the historical growth rate—was more elusive. Of the rural development projects designed to raise food production that were audited on completion, only a third seemed likely to meet their production targets. (Other Bank-assisted agricultural programs to increase food production, especially in South and Southeast Asia, have been dramatically successful. Examples are wheat production in India and Bangladesh, and rice production in Indonesia.)

Furthermore, project failure rates were unacceptably high in some cases, even for such an innovative program, particularly in Sub-Saharan Africa, where area development projects were concentrated and where barely one in three were successful. This high failure rate partly reflects internal and external factors constraining African development in general.

This article draws on a study by the World Bank’s Operations Evaluation Department, Rural Development, World Bank Experience, 1965–86 (World Bank, 1988). Operations evaluation in the Bank aims to provide a systematic, comprehensive, and independent review of the Bank’s development experience. The Director General, Operations Evaluation has overall responsibility for evaluation. He reports directly to the Bank’s Board of Executive Directors, with an administrative link to the President. While preserving their statutory and professional independence, staff of the Operations Evaluation Department (OED) work with Bank staff and country officials so that all views are adequately reflected in OED reports.

Despite some unmistakable successes, some observers feel that the rural development strategy has been at best a mixed blessing. The Bank emphasized from the outset that experimentation would be needed, and adjustments and corrections have been made as the program has evolved. But in general, rural development problems have been more difficult to solve and progress has taken longer to achieve than was expected or the Bank’s standard procedures could readily accommodate. The review by the Operations Evaluation Department on which this article draws (see box) emphasizes how important it is to ensure that the lessons of experience are shared and acted upon. The problems of rural poverty are still too pressing to ignore them.

Need for clear goals

The rural development strategy did not have the redistribution of wealth as a main objective, but it did seek to ensure that the incremental benefits from Bank investments would accrue disproportionately to the rural poor. In principle, it was recognized that to achieve this goal would require, first, strong commitment to rural development by national governments, and second, favorable macroeconomic policies. At the project level, a large number of governments were willing to experiment; between FY1974 and FY1985, the Bank supported poverty-oriented rural development projects in some 66 countries. But with hindsight it is clear that although the strategy was project-based, more attention should have been given to the policy environment in which the projects were undertaken.

Within projects, experience has now shown the need to be clear about what are long-term and what are intermediate goals. Though the strategy centered on increasing agricultural production, its success depended on the introduction of new social organizations and institutional arrangements. Too little time was allowed for such fundamental changes to occur. Both to meet the growth targets the Bank had set for itself and to show that poverty-oriented rural development was justified by its economic returns, the early projects were designed to produce results quickly. Many were scheduled to increase agricultural output by their second or third year, and to be completed within five, or at most six, years. Few of them in fact met these targets.

Recent experience in Northern Pakistan (see “Community Participation in Northern Pakistan,” Finance & Development, December 1987) illustrates how sustainable production growth follows and depends on the development of institutions and human resources, in contrast with the Bank’s implicit assumption that these changes would occur virtually concurrently.

Experience has also shown that it is risky to allow social and welfare components of rural development projects, though worthwhile in themselves, to overshadow the improvements in human resources and institutions that are essential precursors of production growth. Generally, social or basic needs components of projects will work best where production expansion has already begun to provide extra income. The reverse order of priorities has often compromised the success of projects.

Lessons for project design

Adequacy of technology. A cornerstone of the rural development strategy was the belief that yield-increasing technology was available or could be developed. The Green Revolution in irrigated areas of South Asia and elsewhere provided both an inspiration and a model; the lack of comparable technology for rainfed areas, especially in Africa, was not fully appreciated until the strategy was well under way.

Where yield-increasing technology was available, it was not always successfully transferred to farmers. Many of the earlier rural development projects provided single-crop technical packages which farmers were reluctant to adopt, finding them in conflict with traditional multi-cropping systems and too risky.

Labor supply proved to be a major factor in determining farmers’ acceptance or rejection of technological change. The farm family’s ability to adapt its supply of labor to the demands of new methods and new crops depends on its size and structure, and on complementary off-farm or nonagricultural production activities. While labor-intensive farm technologies appear to have brought benefits in heavily populated areas where there is not much alternative employment, they have not been so gladly accepted in much of Africa or in new settlement areas elsewhere.

Where yield-increasing technology was not available, projects contained components either to adapt technology from elsewhere or to develop new technology. Not enough attention was given to improvements using existing local technology. Adaptation often proved less easy and took longer than anticipated. In much of Africa, where sorghum and millet are staple foods, technical packages acceptable to farmers have been especially hard to find.

In low-income countries, in particular, the institutional capacity for agricultural research is weak. Similarly, in some countries the extension services needed to assist the spread of technology are weak or virtually non-existent. The Bank’s regional lending strategies and programs are now putting strong emphasis on building up permanent national capabilities for agricultural research.

Identifying the target group

In defining the income threshold below which it considered people poor, and hence in the target group for its rural development lending, the Bank initially used concepts of both absolute and relative poverty. Absolute poverty was defined as including those 85 percent of the estimated 750 million poor (urban and rural) in member countries of the Bank who had per capita incomes of less than $50 a year (in 1969 dollars): this was a level of income considered insufficient to provide for a minimally adequate living. Relative poverty, covering the remaining 15 percent, referred to people whose incomes were above $50 a year but still were below one third of the country’s national per capita income.

Some 80 percent of the 750 million poor were estimated to live in rural areas, with 70 percent of the total in the developing countries of Asia, and 22 percent and 8 percent in Africa and Latin America respectively.

The rural development strategy, centered as it was on improved farm technology, could be successfully targeted toward smallholders, since they owned land. Typically, however, smallholders are not the poorest of the poor. Developing programs that directly benefit rural people who lack productive assets, as do landless farm laborers, is still a difficult challenge in the Bank’s work.

Scale. Early initiatives undertaken by developing countries with the help of nongovernmental and bilateral agencies developed approaches which the Bank could expand and replicate, but as the Bank’s scale of operations and volume of funds expanded, it began to initiate and fund its own projects in new untested environments. Experimental concepts and small-scale operations were quite quickly expanded, especially in Africa, into full-fledged investment projects and programs, often before the lessons of experience could be fed back into design and implementation. The negative impact of the pressure to lend is now apparent.

Recent operations have tended to take a more cautious experimental approach. Pilot projects are used when appropriate, but they can often fail to reveal the difficulties of implementing full-scale projects. In some cases, a longer-term approach is being taken, whereby operations are implemented in phases over time, allowing adjustments as experience accumulates.

Integrated rural development. Its multiplicity of ends and means seemed to imply that rural development could only be pursued effectively if various production- and consumption-oriented services were introduced concurrently and in an integrated fashion. As the Bank’s project portfolio grew, area development came to be seen as the archetypal rural development project. To promote increased production, a large number of inputs were introduced simultaneously—improved seeds, livestock breeds, irrigation facilities, fertilizers and chemicals, credit, storage, transport and marketing services, and pricing arrangements. Many of these projects also contained provisions for education, health, and other social services. Though the Bank did not formally adopt the term “integrated rural development,” the area development projects took on all the characteristics of the integrated approach.

Conceptually the area development project was attractive to other donors as well as the Bank because it enabled project designers to focus on pockets of regional poverty previously not covered under agricultural projects, and it helped different donors to identify their programs with specific geographic areas. Some borrowers also favored it as a convenient way of managing several donors interested in rural development. At the same time, however, this focus on area-based projects sometimes resulted in contradictory approaches being followed within the same country. It also made it easier to neglect national services and important general issues, including the macroeconomic policy setting.

Integrated rural development projects often did not perform well. They were apt to be costly and administratively complex. Especially in Latin America and Africa, governments were frequently unable to implement such complex projects effectively. Many projects were so large they could only be managed at the central government level. This did not favor the strengthening of local government or the mobilization of resources of local communities for development. That local people participated very little in project identification and design was partly because the preparation, appraisal, and implementation phases were compressed into too short a time to accommodate such participation readily.

Integrated rural development remains a valid approach under certain circumstances (for example, it remains a significant part of the present portfolio in Brazil and China). But the Bank has in general tended to reduce the scale and scope of integrated projects, focusing more on activities designed to raise productivity and agricultural output and less on providing a wide range of services.

Institution building. Many projects relied on autonomous or semi-autonomous project management units outside the regular administrative structure. In borrower countries with weak institutions such units may provide much better implementation capacity (especially for large infrastructure components), but they usually do not provide a sound basis for institutional development and for continuing project activities after donors’ disbursements are completed. This places long-run benefits in jeopardy.

The trend toward simpler projects, pursued over a longer period, should reduce the temptation to set up such enclave arrangements. Such a change, however, increases the need for effective training components and perhaps for closer Bank supervision. The Bank is now relying more and more for implementation on line ministries and other agencies which have long-term responsibility for rural development.

Information on beneficiaries. One of the most common reasons for poor results was inappropriate project design, often resulting from a lack of information on the intended beneficiaries. Problems arose where projects disregarded ethnic diversity among new settlement populations, imbalances in political and economic power among beneficiaries of irrigation projects (which allow larger farmers effectively to control the water supply and commandeer the project benefits), or off-farm activities that competed for the beneficiaries’ time and interest.

In many cases lack of information and focus on women farmers had serious consequences. In many developing countries, more than half the agricultural work on small farms is done by women. Even though about one rural development project in three included activities designed for women, these activities typically did not recognize women’s role as farmers but concentrated more on their roles as mothers and homemakers. Women farmers have often had difficulty in gaining access to improved technology, not only because of their position in society but because of inadvertent aspects of project design which favor men’s access to credit, extension, and inputs. For example, in two West African rural development projects, credit was channeled through cooperatives in which women could not become members.

The Bank has greatly stepped up its efforts to take account of the role and needs of women in development, but more generally it has not yet fully come to terms with the implications of involving beneficiaries closely in its operations.

Macro issues

The Bank’s pursuit of a project-based rural development strategy in the midst of unfavorable macroeconomic policies led to many difficulties. In particular, the roles of prices and exchange rates, in relation to production incentives and in determining rural terms of trade, were not recognized early enough for their potential to undermine the rural development strategy (see articles by Ajay Chhibber and Omotunde Johnson, Finance and Development, June 1988).

Pricing. Among the most common pricing issues that arose in the Bank’s rural development lending was that of low agricultural producer prices. In a cocoa project in Ghana, for example, low producer prices for cocoa, both absolutely and relative to prices of competing crops, resulted in low rates of farmer participation and high outmigration of labor, which caused labor shortages for cocoa maintenance and harvesting. In two irrigation rehabilitation projects in Mexico, the government price policy favored basic grain production and as a result the project’s planned diversification into high-value crops was not achieved.

Marketing. Inadeqate marketing arrangements can severely hamper rural development efforts. Often the Bank gave too little attention to this issue. A rice production project in Cameroon faced substantial marketing-related problems. Partly for reasons of self-sufficiency, Government supported substantial rice production in the north, whereas the major market for rice was in the south, Inefficient marketing meant that the rice from the project that reached the southern market was sometimes too costly to compete with other domestic and imported rice.

Though some production projects established appropriate market infrastructure along side the introduction of new production technology, major marketing deficiencies have often been found to require separate projects or other initiatives pursued through policy-based lending.

Land tenure. For most farmers, land ownership is the key for obtaining credit and provides the incentive to invest. In certain irrigation and area development projects, such as those in Northeast Brazil, for example, farmers were reluctant to invest in improving farms they did not own; sometimes they even refused to fertilize such plots. This example highlights the issue of whether the technical packages proposed in Bank-assisted projects can benefit landless or tenant farmers, who tend to be poorer than smallholders. Although the Bank has increasingly recognized the importance of land tenure issues, it has not often been involved directly in what are usually highly sensitive matters.

Understanding of the interrelations between macro policies and agricultural sector performance has improved, and so has the Bank’s analytical work in preparing for policy dialogues with borrower governments. However, experience has shown that where government policies are not supportive, donor agencies should not lend for rural development projects in the hope of thereby influencing policy change.

In conclusion …

The Bank has shared the lessons from its evaluation of the rural development program with other donors in the international community, many of which have had similar experiences. The various approaches adopted under the program have been refined as experience has grown and the evaluation process has begun to accumulate a set of lessons. The portfolio of projects now addressing rural poverty differs from that of earlier years in some important ways. First, many of the Bank’s recent projects are less complex. They are often designed to tackle specific subsectoral issues, require less interagency coordination in the borrowing countries, and rely less on enclave management arrangements. Second, institutional development activities are gaining in importance. Free-standing nation-wide projects for the development of agricultural research and extension are one example of this shift; reform of delivery systems for services, especially in the public sector, is another. Third, greater attention is now given to early and continued contact with the intended beneficiaries. Fourth, the policy environment in borrowing countries is now reviewed more carefully than previously, and macroeconomic and sectoral policy issues relating to rural poverty alleviation are addressed through structural and sectoral adjustment lending.

Rural poverty alleviation remains a major tenet of Bank policy. In response to the OED review, the Bank’s management has reasserted the importance of rural development lending and is developing new guidelines for staff working on rural development. The approaches that will work are now better understood and, given that the need for rural poverty alleviation remains undiminished, there will be no reduction in the level of lending, but there is every reason to aim for less ambitious project designs. While many of the lessons documented by evaluation have already been acted upon in recent programs, the Bank has committed itself to addressing the outstanding issues in new policy, strategy, and operational work.

Completely updated

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