This validation adds that data availability (of income and non-income variables at the village and district levels), costs in time and resources, and simplicity of application tend to play a greater role in determining the actual targeting mechanism used; it is therefore important to allocate resources to ensure that a project’s targeting mechanism has these elements. This validation adds the following lessons: (i) BRI appreciated the presence of third-party providers of intermediation services to SHGs (given BRI’s insufficient experience with non-collateralized loans). This validation notes that such intermediaries need not be government personnel because contractual field liaison officers or NGOs (with potentially better financial skills than AAHRD staff) could also perform such role without posing hidden costs to government. (ii) This validation also stresses the importance of inherent incentives in ensuring prompt repayment of non-collateralized loans from the perspectives of the subborrowers in making the payments and the conduit financial institution (the BRI in this case) in collection. (iii) This validation also emphasizes the significance of clarifying upfront how the reflows would be utilized through a sunset provision to give the bank an incentive to maximize repayment and minimize arrears. (iv) The administrative workload of implementing project activities at the district level across many provinces overwhelmed the executing agencies, resulting in delayed decision making, weak supervision of field personnel, and low sense of ownership among the beneficiaries; project activities ought to have focused on a few provinces at a time. (v) Lastly, the intensive demands of such a project on ADB supervision suggest that project management should be delegated to or shared with the Indonesia Resident Mission. Given the significant requirement for consultant inputs, ADB may facilitate the government’s engagement of consulting firms instead of individual consultants.
Rural Income Generation