The primary role played by international financing institutions

The primary role played by international financing institutions

Introduction

The primary role played by international financing institutions is to provide liquidity to the economy of their beneficiaries and thus allow economic growth and activity that could otherwise be impossible. World Bank, an international financing institution, has immensely contributed to economic up thrust in many less developed countries (LDCs) across the globe. The institution provides grants and loans through the governments of the LDCs with the intent of capital project pursuits.

World Bank has two organizations that work in synch to achieve its overall objectives. These organizations are the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA). Both organizations operate to support the devastated middle income and low-income countries and are organized under the same leadership. The impact of the World Bank is much felt in most of the low income and middle-income countries through sustainable capital projects financed by the institution. For instance, World Bank-financed the Social and Economic Inclusion Project in Kenya. This African region had a total financing cost of $250 million, and both IBRD and IDA played a vital role in project funding.

Pre-project analysis

The Republic of Kenya is a country in the East African region with a total of 47 semiautonomous counties that are governed by elected governors. The state is bordered by Uganda, Somalia, Ethiopia, Tanzania, and the Indian Ocean to the southeast. Kenyan republic has a population of about 47 billion and a population density of about 94 per m². It shares 0.69 % of the world’s population. Through population density, the Republic of Kenya is categorized as a high dependent country. The country has a GDP of $87.9 million. Kenya is a middle-income country with less developed infrastructure, technology, and health systems. The country’s main economic activities are agriculture, mining, fishing, transport, energy, and tourism. It has a liberalized market system with a few state-owned enterprises. Statistics show that many households in the Republic of Kenya are living below the poverty line, with conditions characterized by lack of social amenities, unfortunate economic activities that, of course, result in little or no income.

 Figure A: Showing the map of the Republic of Kenya. The parts that are not shaded show the marginalized geographical locations in the country.

Kenya continues to face severe challenges in the social and economic sectors. The country’s GDP grows a much slower rate throughout, with and without draught. Many people are living below the poverty line. These people have little or no access to social and economic avenues for livelihood, and individual and community developed. The indigenous people who live in the geographically marginalized area are the most affected. The country’s GDP growth is, therefore, much slowed down by such serious threats facing the country to a rate of 1% with or without draught.

Figure B: Shows the annual GDP growth of the Republic of Kenya. The country has been experiencing slow growth of GDP at the rates as slow as 1% during drought and when there is no draught. Source: GoK, (2012) Kenya Post- Disaster Needs Assessment

The Social and Economic Inclusion project that was fully sponsored by the World Bank was targeting to promote access to economic and social facilities for vulnerable, marginalized groups and households in the country. Some of the interventions were conducted at a state level, while others remained specific to the target counties. In-depth research must be performed before project execution to provide project managers, financiers, and other stakeholders with the necessary information and helps in clarification of project scope and the context in which the project will be executed. Of importance to pre-project analysis is to specify resource allocation and potential risks and challenges that can arise within the project time. A real review of all facets of the project is critical in devising solutions, thus planning ahead of time.

Table A: Shows how different counties that were selected with vulnerable and marginalized groups were expected to benefit from various project interventions. These counties are classified according to the needs present in the county.

In the Social and Economic Inclusion Project, an assessment was carried out with respect to the proposed project. The project will be implemented in places where indigenous people reside in the country. As a result, the safeguarding policy of the World Bank OP/BP 4.0 is triggered and thus necessitates the need for deeper analysis as a component of project preparation. The project has a high likelihood of yielding positive impacts at different spheres of human interaction, i.e., the individual, the community, and the national levels. The activities of the project are obviously expected to lead to robust social protection delivery systems at the national level. These systems include a more rational and extended system of targeting the beneficiary that sails beyond mere cash transfer programs, therefore providing better scope for the vulnerable and poor groups to be included.  Additionally, through an advanced system of Grievance and Case Management (G&CM), there are accrued benefits of better citizen engagement in the social program sector thus strengthening payments to secure choice and flexibility in cash transfers and to generally bring about improvements on to the entire program management through capacity building continued monitoring and evaluation.

The project is also anticipated to have impacts at the individual and community levels. The benefits include a new integrated Social Program services for the vulnerable groups. These entail investing in nutrition-sensitive safety net services availed through grants in cash and nutrition education programs, modeling, and testing activities of economic inclusion to establish the best approach. Other individual-level benefits included universal health coverage linked with the National Hospital Insurance Fund (NHIF) and Arid and Semi-Arid Lands (ASALs) expansion of standard cash transfers as well as emergency cash transfers.

The identified Vulnerable and Marginalized groups (VMAs) are characterized by the difficulties in assessing social and economic benefits that other counties that are better placed enjoy from the government. These groups often face challenges such as nutrition and food insecurity, poorly developed infrastructure, limited access to primary social services, and poor livelihood economics. To make ends meet, the VMGs engage some economic activities such as traditional farming, fishing, hunting, and gathering, which is not yielding to their basic needs. These groups are often cut off from benefiting government projects due to their geographic marginalization, making them become forgotten or ununderstood.

As stated earlier, Kenya is a densely populated country with compromised economic and social systems. In order to assess the efficacy of the Social and Economic Inclusion Project in alleviating the situation in the affected counties, a real assessment was carried out in all the counties. Three counties, Kwale, Makueni, and West Pokot, were sampled out for the assessment. The main aim of the assessment was to examine the real situation on the ground, and access potential risks that may hamper the project during its execution phase. The following were the potential risks that could directly affect project execution.

1. Risk of overlooking of VMGs due to their marginalization
2. Lack of representation of VMG in the oversight structures and management at the community level

• Project activities that can interfere with cultural heritage

1. Poor participation of women and youth

The management of these risks was based on the proper employment of risk mitigation mechanisms as well as diverse awareness of the project by the members of the staff.

Project execution

Project funding and financial report

The Social and Economic Inclusion project was fully funded by the World Bank organization with IDA accounting for the total financing of the project. The project was launched in the year 2018 and is projected to continue for several couples of years. Financial management is critical for any successful project. This calls for broad research and basic financial knowledge on the allocation of finances on such a project. The World Bank has a plausible financial management system that is basically constrained with accountability and responsibility. The Kenya Social and Economic Project projected to cost a total of $250 Million.

Total Project Financing (US$ Millions)

Figure C: Shows total project financing by the World Bank. Source: World Bank documents (2018)

Projects often have different facets. Social and Economic inclusion project focused on three main areas entangled with the social and economic vulnerability of the affected population groups. The first component, Strengthening Social Protection Delivery Systems aimed at supporting the improvement of the existing Social Protection delivery systems established under the ongoing National Safety Net Program (NSNP) and will seek to promote strengthening the Consolidated Cash Transfer Program (CCTP) 25 under the State Department of Social Protection (SDSP),  and Hunger Safety Net Programme (HSNP) under the National Drought Management Authority (NDMA), within a steady and sound delivery system.

The second component is the increment of  Access to Social and Economic Inclusion Interventions will contribute to the Government of Kenya‘s goal of universal health coverage through establishing and sustaining a functional means for a referral to better NSNP beneficiaries access to the National Hospital Insurance Fund (NHIF) and enlarge nutrition-sensitive safety net services to additional counties. The last but not least component is to improve the Shock Responsiveness of Safety Net System to support the NDMA to expand HSNP coverage and enhance the shock responsiveness of the safety net system. These include financial arrangements for timely support to vulnerable households affected by risks associated with climatic fluctuations. At each phase of project implementation, a critical financial analysis was done to ensure that the project runs without much halts and difficulties. The specific commercial activities of the project by the main financiers were all recorded to ascertain the credibility and more accessible management and also to curb any misappropriation of the funds. Through the recording of the financial activities, the project stands a chance to appraise, and also any necessary adjustments can be easily effected. The table below will provide a detailed summary of the key financial activities, which include disbursement of the finances by IDA for project execution.

Detailed Financial Activity as of April 30, 2020

Table B: Shows detailed financial activities   

There is recommendable transparency shown for every financial handling at all stages of the project implementation. This was facilitated by record-keeping for all transactions that were carried out throughout the execution of the project. The additional cost that arose due to discrepancies between project planning and execution were also well detailed and documented.  The money allotted for the project was channeled to different project executing agencies with clear communication to the management and all stakeholders. Such an organization of finances enabled the project to be conducted without many difficulties and to bring into realization its benefits to the targeted vulnerable groups.

Financing strategies used and their efficacy

For a faultless implementation of the project, systematic research and project planning is indispensable, as it was evidenced in the whole process by the project implementers. Project planning is central and immensely contributes to successful project implementation, leading to the realization of its intended outcomes. In other words, this means that the success or failure of a project is solely dependent on the planning strategies put in place. In regard to this, this section will elucidate the financial and other planning strategies employed during the execution of the Social and Economic Inclusion Project in the Republic of Kenya.

First, this Social and Economic Inclusion project was planned on a situational basis. Project feat may be broad and haul on for more extended periods than the anticipated pace if left unmonitored. The most probable reason for this is its complexity in nature and the integration of many activities that, at some point, maybe overwhelming. Additionally, the project may be sequential. If much concentration is availed for one task, the other activities of the project will definitely suffer, and the project will lie unaccomplished at the stipulated time. Therefore, this necessitates the need for commendable planning. In the case of Social and Economic Inclusion Project, in-depth research was first conducted in the targeted areas and was approved by the top management of the project. The study helped the project planners to keep on track with the critical objectives and goals. Measurable objectives were developed as a result, which helped to shape the direction of the project. Significant milestones for monitoring and evaluation of the project were also set, and therefore it will be easy to keep track of the progress. The process involved rigorous project plan writing and consequent plunging. The approval of the finances to run the project was only granted after the board of management was satisfied with an effective plan delivered. In other words, this was a repetitive process conducted to curb all the errors that could otherwise impact the whole process of project implementation. The project plan is incorporated with all economic sectors that are expected to be affected by the project. The combination of the different aspects of the project plan provides influence and consequent collaboration of the segments such as economic, social, health, and cultural as they affect humanity. Therefore, the planning of the Social and Economic Inclusion project in Kenya provides a more accurate account of how the plan can impact a project and its forensic reporting.

Another strategy employed in the project second to planning is the incorporation of different experts for project execution. The team set up for a project that significantly influences the project outcomes and efficacy. The use of an inexperienced and incompetent team in project implementation and in all phases of a project will guarantee project failure. Such a mistake not has an impact on the project itself but also has an economic implication. Losses suffered from failed projects are undoubtedly tremendous and bring about a stall on the economic progress. The existence of a variety of experts in the team in charge of the project execution process takes into consideration the risks that may arise during the execution, necessary changes in planning, and regular monitoring of the entire project. Various experts were on the ground planning and documenting the plan for the implementation of the project. It is accurate to, therefore, conclude that there would be no much better option to consider other than having a team experts take the roll and manage the entire process.

For instance, the financial experts in the project team took care of the financial projections needed for the execution of the plans. As it was stated earlier, there was a need for additional finances that arose from the differences in real project execution and planning on the paper. The requirements were due to unanticipated challenges with accessibility to the communities in the remote areas during community assessment. The financial analysts, therefore, accounted for such fluctuations on the budget and made probable adjustments where need be. This provided ease of detecting any fiscal deficit and anticipating hurdles that could arise from the same, and also provided a more defined approach to request for additional finances. The experts also extrapolated the budget, and thus the project will be accomplished within the anticipated range. The timely realization helped to maintain the integrity of the plan within the stipulated timelines allowing the stakeholders to operate within the project limits.

Figure D: showing financial allocation for the objective of the project; to strengthen delivery systems for enhanced access to social and economic inclusion services and shock- responsive safety nets for poor and vulnerable households

Risk analysis is an essential aspect of successful project implementation. It clearly uncovers the pitfalls that could otherwise hinder the progress should there be no analysis done. Risks are well correlated with the use of resources in that for every chance identifiable in a project execution plan; there must be resources allocated to curb the threat. According to Lipovetsky, 2009, the higher the risks, the more the resources required to take care of it. In regard to this, the project team categorized and isolated the risks associated with project implementation at phases and facets of the project.  This was a credible idea since the step was significant to devise the means that jeopardized the efforts put in place.  The figure below illustrates the risk categorization of the Social and Economic Inclusion Project in Kenya.

Table C: Showing the analysis and categorization of the risks. Various potential risks were analyzed through thorough research conducted. The results of the assessment immensely contributed to the planning and devising ways to avoid the anticipated risks.

Post- project analysis

The post-project analysis is undertaken to establish the effectiveness of the project already carried. It provides the project managers a chance to check through the project at all phases of execution, to ascertain that it was conducted as per the plans laid.  All the facets of the project are analyzed and the exactitude with which they were performed. The Social and Economic Inclusion Project is analyzed based on the predetermined criteria by the World Bank. The three facets of the project are censored based on their manner of conduction. The whole process must be reviewed, and a report provided for the efficacy of the project. Should there be any out liars, then the effectiveness is doubtable, and that means the project was not completed.

First,  a set of predetermined objectives and goals must be met for a project to be termed as efficient. These objectives indicate the milestones the project has to pass a particular point in time. In the ongoing project, there are certain milestones achieved as reported by the target, and their analysis is thus vital to evaluate the projected efficacy.

Impact of the international footprint on the contract

International contracts and offers are subject to contract law and other predetermined guidelines in the privacy laws. For a contract to be legally binding, it must necessarily have an offer and acceptance. The terms of the agreement must also be stipulated. In this case, the Social and Economic Inclusion Project met the entire required criterion and thus can be enforced in a court of law should there be a breach of the contract.