Project Appraisal Document (PAD) - World Bank...2019/04/09 · The Recipient, through SSIS shall...

FOR OFFICIAL USE ONLY Report No: PAD3153

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF

US$30 MILLION

TO THE

REPUBLIC OF HONDURAS

FOR A

SOCIAL PROTECTION INTEGRATION PROJECT

April 9, 2019

Social Protection and Jobs Global Practice Latin America and Caribbean Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective February 25, 2019)

Currency Unit = Honduran Lempira (HNL)

HNL 24.43 = US$1

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

ALMP Active Labor Market Policy

BANADESA National Bank for Agricultural Development (Banco Nacional de Desarrollo Agrícola)

BANPROVI Honduran Bank for Production and Housing (Banco Hondureño para la Producción y la Vivienda)

BCH Central Bank of Honduras (Banco Central de Honduras)

BRAC Bangladesh Rural Advancement Committee

BVM Grants for a Better Life (Bono Vida Mejor)

CCT Conditional Cash Transfer

CEDLAS Center of Distributive, Labor and Social Studies

CENISS National Center for Information on the Social Sector (Centro Nacional de Información del Sector Social)

CEPROBAN Inter-Bank Processing Center (Centro de Procesamiento Interbancario)

CERC Contingency Emergency Response Component

CPF Country Partnership Framework

ENEE State-owned Electricity Company (Empresa Nacional de Energía Eléctrica)

EPHPM National Household Survey (Encuesta Permanente de Hogares de Propósitos Múltiples)

EU European Union

FAO Food and Agriculture Organization of the United Nations

FGT Foster–Greer–Thorbecke

FM Financial Management

FSPSRP Solidarity and Social Protection Fund for the Reduction of Extreme Poverty (Fondo De Solidaridad y Protección Social Para la Reducción de la Pobreza Extrema)

GDP Gross Domestic Product

GIS Geographic Information System

GoH Government of Honduras

GRM Grievance Redress Mechanism

IADB Inter-American Development Bank

IPP Indigenous and Afro-Honduran Peoples Plan

IMF International Monetary Fund

INE National Statistics Institute (Instituto Nacional de Estadística)

INFOP National Institute for Professional Skills Formation (Instituto Nacional de Formación Profesional)

IT Information Technology

LAC Latin America and the Caribbean

LFP Labor Force Participation

M&E Monitoring and Evaluation

MIS Management Information System

NEET Not in Education, Employment, or Training

NGO Nongovernmental Organization

PDO Project Development Objective

PMT Proxy Means Test

PPSD Project Procurement Strategy for Development

ROI Registry of Institutional Services (Registro de Oferta Institucional)

RUP Unique Registry of Participants (Registro Único de Participantes)

SACE Administrative System for Educational Centers (Sistema de Administración de Centros Educativos)

SCGG Secretariat of General Coordination of the Government (Secretaría de Cordinación General del Gobierno)

SEDIS Secretariat of Development and Social Inclusion (Secretaría de Desarrollo e Inclusión Social)

SEDLAC Socio-Economic Database for Latin America and the Caribbean

SEDUC Secretariat of Education (Secretaría de Educación)

SEFIN Secretariat of Finance (Secretaría de Finanzas)

SENAEH National Employment Services of Honduras (Servicio Nacional de Empleo de Honduras)

SEP Stakeholder Engagement Plan

SIAFI Integrated Financial Management System (Sistema Integrado de Administración de Finanzas, SIAFI)

SIG Management Information System (Sistema de Información Gerencial)

SP Social Protection

SPD Standard Procurement Document

SSIS Sub Secretariat of Social Integration (Sub Secretaría de Integración Social)

TA Technical Assistance

UCP Technical Coordination Unit (Unidad Cordinadora del Proyecto)

UEPEX SIAFI Module for management of external resources (Unidades Ejecutoras de Proyectos con Recursos Externos, UEPEX)

UPEG Planning and Management Unit (Unidad de Planeamiento y Evaluación de la Gestíon)

US United States

USAID United States Agency for International Development

WAP Working-age Population

Regional Vice President: Axel van Trotsenburg

Country Director: Yaye Seynabou Sakho

Senior Global Practice Director: Michal J. Rutkowski

Practice Manager: Pablo Gottret

Task Team Leader(s): Junko Onishi, Miriam Matilde Montenegro Lazo

The World Bank Social Protection Integration (P152057)

TABLE OF CONTENTS

DATASHEET ............................................................................................................................ 1

I. STRATEGIC CONTEXT ...................................................................................................... 9

A. Country Context................................................................................................................................ 9

B. Sectoral and Institutional Context .................................................................................................. 11

C. Relevance to Higher Level Objectives ............................................................................................. 14

II. PROJECT DESCRIPTION .................................................................................................. 15

A. Project Development Objective ..................................................................................................... 15

B. Project Components ....................................................................................................................... 16

C. Project Beneficiaries ....................................................................................................................... 19

D. Results Chain .................................................................................................................................. 20

E. Rationale for Bank Involvement and Role of Partners ................................................................... 21

III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 22

A. Institutional and Implementation Arrangements ....................................................................... 22

B. Results Monitoring and Evaluation Arrangements......................................................................... 23

C. Sustainability ................................................................................................................................... 23

IV. PROJECT APPRAISAL SUMMARY ................................................................................... 24

A. Technical, Economic and Financial Analysis (if applicable) ............................................................ 24

B. Fiduciary .......................................................................................................................................... 25

C. Safeguards ...................................................................................................................................... 26

I. KEY RISKS ..................................................................................................................... 27

II. RESULTS FRAMEWORK AND MONITORING ................................................................... 30

ANNEX 1: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN ................................... 39

ANNEX 2: ECONOMIC ANALYSIS ........................................................................................... 44

ANNEX 3: PROCUREMENT .................................................................................................... 54

ANNEX 4: FM ASSESSMENT .................................................................................................. 56


Page 1 of 60

DATASHEET

BASIC INFORMATION BASIC_INFO_TABLE

Country(ies) Project Name

Honduras Social Protection Integration

Project ID Financing Instrument Environmental Assessment Category

P152057 Investment Project Financing

B-Partial Assessment

Financing & Implementation Modalities

[ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC)

[ ] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster

[ ] Alternate Procurement Arrangements (APA)

Expected Approval Date Expected Closing Date

30-Apr-2019 30-Jun-2023

Bank/IFC Collaboration

No

Proposed Development Objective(s)

The objectives of the Project are to improve the outcomes of the urban component of the CCT Program and to strengthen the integration of the social protection system for the extreme poor.


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Components

Component Name Cost (US$, millions)

Strengthening of the Urban Conditional Cash Transfer Program and Implementation of the Integrated Transition Strategy

22.60

Institutional strengthening for the CCT Program and Integration of the Social Protection System

5.56

Project Management 1.84

Contingency Emergency Response 0.00

Organizations

Borrower: Republic of Honduras

Implementing Agency: Secretariat of Development and Social Inclusion

PROJECT FINANCING DATA (US$, Millions)

SUMMARY-NewFin1

Total Project Cost 30.00

Total Financing 30.00

of which IBRD/IDA 30.00

Financing Gap 0.00

DETAILS-NewFinEnh1

World Bank Group Financing

International Development Association (IDA) 30.00

IDA Credit 30.00

IDA Resources (in US$, Millions)

Credit Amount Grant Amount Guarantee Amount Total Amount

National PBA 30.00 0.00 0.00 30.00


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Total 30.00 0.00 0.00 30.00

Expected Disbursements (in US$, Millions)

WB Fiscal Year 2019 2020 2021 2022 2023

Annual 0.00 9.18 10.30 6.55 3.96

Cumulative 0.00 9.18 19.48 26.04 30.00

INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas

Social Protection & Labor

Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks

Gender Tag

Does the project plan to undertake any of the following?

a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF

Yes

b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment

Yes

c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating

1. Political and Governance ⚫ Substantial

2. Macroeconomic ⚫ Substantial

3. Sector Strategies and Policies ⚫ Moderate

4. Technical Design of Project or Program ⚫ Substantial


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5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial

6. Fiduciary ⚫ High

7. Environment and Social ⚫ Moderate

8. Stakeholders ⚫ Moderate

9. Other

10. Overall ⚫ Substantial

COMPLIANCE

Policy Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [✓] No

Does the project require any waivers of Bank policies?

[ ] Yes [✓] No

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 ✔

Performance Standards for Private Sector Activities OP/BP 4.03 ✔

Natural Habitats OP/BP 4.04 ✔

Forests OP/BP 4.36 ✔

Pest Management OP 4.09 ✔

Physical Cultural Resources OP/BP 4.11 ✔

Indigenous Peoples OP/BP 4.10 ✔

Involuntary Resettlement OP/BP 4.12 ✔

Safety of Dams OP/BP 4.37 ✔

Projects on International Waterways OP/BP 7.50 ✔

Projects in Disputed Areas OP/BP 7.60 ✔

Legal Covenants


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Sections and Description Safeguards: SCHEDULE 2, Section I., E.1 The Recipient, through SSIS shall carry out, and cause the pertinent Financial Institutions to carry out, the Project all in accordance with the Safeguard Instruments.

Sections and Description Safeguards: SCHEDULE 2, Section I., E.2 (a) The Recipient, through SSIS, shall ensure that: (a) all consultancies related to technical assistance, design and capacity building under the Project, the application of whose results could have environmental, social and health and safety implications, shall only be undertaken pursuant to terms of reference reviewed and found satisfactory by the Bank; and

Sections and Description Safeguards: SCHEDULE 2, Section I., E.2(b) (b) such terms of reference shall require the technical assistance, design and capacity building activities to take into account the requirements of the applicable Association Safeguards Policies.

Sections and Description Compliance Reviews: SCHEDULE 2, Section IV., 1 (a) Without limitation to the provisions of Section 5.09 of the General Conditions, and pursuant to terms of reference previously agreed with the Association, including inter alia, the scope of the Compliance Reviews to be conducted and furnished to the Association, and as further specified in the Project Operational Manual, the Recipient shall, through SSIS: (a) not later than three (3) months from the Effective Date, hire independent auditors or a firm, with experience and qualifications acceptable to the Association, and under terms of reference acceptable to the Association, for purposes of carrying out the Compliance Reviews;

Sections and Description Compliance Reviews: SCHEDULE 2, Section IV., 1(b) (b) ensure that the independent auditors or firm referred to in Section IV.1(a) of the Financing Agreement carry out each Compliance Review every six (6) months from the Effective Date and throughout the execution of the Project,


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or any other period agreed by the Association; and

Sections and Description Compliance Reviews: SCHEDULE 2, Section IV., 1 (c) (c) not later than ninety (90) days after the end of the period covered by each such Compliance Review, prepare and furnish to the Association, a report of such scope and in such detail as the Association shall reasonably request concerning the result of the pertinent Compliance Review.

Sections and Description Hiring of a technical specialist: SCHEDULE 2, Section IV., 2 (a) The Recipient, through SSIS shall: (a) no later than one (1) month after the Effective Date hire a technical specialist, under terms and reference acceptable to the Association to facilitate the overall technical implementation of the Project, in accordance with the Operational Manual;

Sections and Description Evaluation of the SIG Platform: SCHEDULE 2, Section IV., 2 (b) (b) no later than five (5) months after the Effective Date, hire an external consultant under terms of reference acceptable to the Association to carry out an evaluation of the SIG Platform in a manner satisfactory to the Association; and

Sections and Description Evaluation of the SIG Platform: SCHEDULE 2, Section IV., 2 (c) (c) no later than twelve (12) months after the Effective Date: (i) carry out the evaluation referred to in paragraph (b) above, in a manner acceptable to the Association and as set forth in the Operational Manual; and (ii) prepare and furnish to the Association, a report of such scope and such detail as the Association shall reasonably request concerning the results of said evaluation.

Conditions


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Type Description

Effectiveness ARTICLE V.; 5.01

The Additional Condition of Effectiveness consist of the following namely that, the Recipient,

through SSIS, has updated and adopted the Project Operational Manual, in form and

substance satisfactory to the Association. Type Description

Disbursement SECTION III, B. 1(a)

Notwithstanding the provisions of Part A of the Financing Agreement, no withdrawal shall be

made:

(a) For payments made prior to the Signature Date of the Project's Financing Agreement,

except that withdrawals up to an aggregate amount not to exceed $6,000,000 may be made

for payments made prior to this date but on or after twelve (12) months prior to the

Signature Date, for Eligible Expenditures under Categories (1) and (2).

Type Description

Disbursement SECTION III, B. 1 (b)

(b) For payments under Category (2), unless and until the Recipient has:

(i) entered into at least one Financial Institution Agreement, under terms and conditions

acceptable to the Association; and

Type Description

Disbursement SECTION III, B. 1(b)

(ii) the Recipient, through SSIS, has provided evidence satisfactory to the Association that

the SIG Platform has been updated to allow processing and monitoring of the urban

component of the CCT Program, in a manner acceptable to the Association. Type Description

Disbursement SECTION III, B. 1(c)

(c) For payments under Category (3), for Emergency Expenditures under Part 4 of the

Financing Agreement for the Project, unless and until the Association is satisfied, and has

notified the Recipient of its satisfaction, that all of the following conditions have been me tin

respect of said Emergency Expenditures:


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(i) the Recipient has determined that an Eligible Emergency has occurred, has furnished

to the Association a request to include said Eligible Emergency under Part 4 of the Financing

Agreement for the Project in order to respond to said Eligible Emergency, and the

Association has agreed with such determination, accepted said request and notified the

Recipient thereof;

Type Description

Disbursement SECTION III, B. 1 (c)

(ii) the Recipient has prepared and disclosed all safeguards instruments required for said

Eligible Emergency, and the Recipient has implemented any actions which are required to be

taken under said instruments, all in accordance with the provisions of Section I.D of Schedule

2 of the Financing Agreement;

Type Description

Disbursement SECTION III, B. 1 (c)

(iii) the Coordinating Authority has adequate staff and resources, in accordance with the

provisions of Section I.D of Schedule 2 of the Financing Agreement, for the purposes of said

activities; and

Type Description

Disbursement SECTION III, B. 1(c)

(iv) the Recipient has adopted the Emergency Response Operations Manual in form,

substance and manner acceptable to the Association and the provisions of the Emergency

Response Operations Manual are fully current in accordance with the provisions of Section

I.D of Schedule 2 of the Financing Agreement, so as to be appropriate for the inclusion and

implementation of Part 4 of Financing Agreement of the Project


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I. STRATEGIC CONTEXT

A. Country Context 1. Over the past 40 years, Honduras has experienced modest economic growth rates which have not kept pace with the country’s high population growth, resulting in high poverty rates relative to other countries in the Latin America and the Caribbean (LAC) region. With 31.6 percent of its population living in moderate poverty (less than purchasing power parity US$3.20 per day in 2017) and 17.2 percent living in extreme poverty (purchasing power parity US$1.90 per day), Honduras has the second highest extreme poverty rate in the LAC region and double the average moderate poverty rate among Central American countries. Honduras also reports persistently high inequality, among the highest in the LAC region. Between 1996 and 2016, the income shares of the bottom 40 percent of the population have shown little change (at 10 percent), and the Gini coefficient was estimated at 50.5 in 2015.1 The economic situation is further strained by extreme weather events caused by climate change, including a drought in 2005 that affected 195,000 people and a damaging flood in 2008, disproportionally affecting the poor.

2. Low per capita growth (averaging 1.2 percent over the last decade2) and the lack of correlation between growth and poverty reduction suggest that growth has not been sufficiently labor intensive, with limited job generation, resulting in poor employment outcomes, especially among women. This is despite Honduras’ rising working-age population (WAP) and improved access to education which create opportunities to accelerate gross domestic product (GDP) growth and poverty reduction. To achieve growth and poverty reduction, the labor force participation (LFP) rate must be accompanied with improved average quality of jobs. The growth of the labor force has been driven solely by the increase in the size of the WAP, as LFP rates stagnated at 65 percent of WAP, with unequal participation rates for men (at 85 percent) and women (47 percent). The low female LFP rate reflects an imbalance between the potential labor supply and available jobs, which plays out in the form of ‘NEETs’ (Not in Education, Employment, or Training). In 2016, 25 percent of the Honduran WAP were NEETs, and 88 percent of those NEETs were women. Despite girls’ greater educational attainment than boys’, girls still do not have better opportunities in the urban or rural labor markets. Thus, increasing Honduras’ LFP rate will require, above all, more opportunities for women in the labor force.

3. Honduras’ high level of informality3 (58 percent in 2016) is characterized by low-productivity jobs resulting in low earnings, which prevents workers from moving out of poverty. High levels of informality persist across all sectors (agriculture, industry, and services) and in both urban and rural settings. Informality is not limited to jobs in self-employment and household enterprises—41 percent of wage jobs are also informal, and informal workers tend to be poor. Nevertheless, all informal jobs are not alike. Earnings from informal wage jobs and from self-employment in household enterprises are generally superior to those from self-employment in agriculture. To complement the expansion of general education, Honduras also needs to strengthen training programs for work-specific skills. The externalities linked to training mean that the market will undersupply such services: firms and families will spend less than is socially optimal, so there is a strong case for public funding. This is particularly important for youth from poor families, whose lack of work experience and family connections make it hard for them to

1 http://www.worldbank.org/en/topic/poverty/lac-equity-lab1/poverty (accessed February 21, 2019). 2 https://databank.worldbank.org/data/source/world-development-indicators# 3 Informality is defined as those in low-productivity, unskilled, marginal jobs, including (a) self-employed without a tertiary or higher education, (b) salaried workers in private firms with five or fewer permanent workers, and (c) zero-income workers.

https://databank.worldbank.org/data/source/world-development-indicators


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compete for jobs in a market that is characterized by an oversupply of the general educational qualifications needed for better jobs (relative to the number of jobs available). As a result, they can never get work-specific skills needed by formal firms and are forced toward informal jobs.

4. Variation in education quality exacerbates informality. While significant progress was made in expanding access to primary education, serious challenges in education quality and enrollment rates in secondary (7th to 12th grades) and tertiary schools remain. Overall, in 2016, the net secondary school enrollment rate was 45 percent (42 percent for boys and 49 percent for girls) and enrollment in tertiary education was low at 20 percent in 2015.4 Among the extreme poor,5 net school enrollment rates of primary school age children is also high, at above 90 percent; however, this drops sharply starting at age 12. School enrollment among the economically vulnerable group is only 52 percent for 15-year-olds. According to the Human Opportunity Index, the key factors influencing secondary school enrollment are the education of the head of household, the per capita income of the household, and the households’ rural or urban location.6 While compulsory education is up to 9th grade, the Government of Honduras (GoH) has made significant efforts to reduce child labor, setting the minimum age for employment at 16 years. The reality is, however, that with just over half the youth (59 percent) in urban areas enrolled in school at age 16, the remainder are at risk of becoming NEETs, or worse, becoming candidates for recruitment into local gangs. Teenage pregnancy is also high with adolescent birth rates for 15 to 19-year-olds between 2006 and 2017 estimated as 103 per 1,000 in Honduras, compared to 62 in the LAC region.7

5. The low levels of schooling at the secondary and tertiary levels result in a limited supply of adequately trained labor force participants. The average Honduran over the age of 15 has only 6.2 years of schooling, considerably lower than the LAC average of 8.4 years, and lower than most Central American countries.8 While LAC countries have seen large increases in educational attainment over the last two decades, the educational attainment of the labor force in Honduras has increased by only 1.3 years of schooling. This has resulted in a larger lag in human capital development between Honduras and LAC countries, with the gap in years of education of 1.7 years in 1990 widening to 2.2 years in 2010.9

6. Crime and violence, mostly in specific urban neighborhoods, have been a significant hindrance to economic growth and poverty reduction, even though the overall crime and violence rate is falling sharply. Homicides have declined from a peak of 89 homicides per 100,000 people in 2011 to 43 in 2017. Nevertheless, over the last two decades, the combination of insecurity and lack of job opportunities have driven a large wave of out-migration from Honduras, largely to the United States (US). In parallel, with the tightening of U.S. immigration policies, a larger number of migrants are returning to Honduras, further exacerbating the urgent need to create good economic opportunities.

4 http://datatopics.worldbank.org/education/country/honduras 5 In line with the GoH’s definition of extreme poverty, those who live in households with income below the basic food basket. 6 World Bank. 2014. Social Gains in the Balance: A Fiscal Policy Challenge for Latin America and the Caribbean. Washington, DC. World Bank. Link: https://openknowledge.worldbank.org/handle/10986/17198 7 United Nations Population Fund, State of World Population 2018, The Power of Choice. https://www.unfpa.org/sites/default/files/pub-pdf/UNFPA_PUB_2018_EN_SWP.pdf 8 Levels are also the lower than in most Central American countries: Panama (9.3 years), Costa Rica (8 years), El Salvador (7.8 years), and Nicaragua (6.6 years) (EdStats using Barro and Lee Dataset). 9 World Bank. 2015. Honduras - Unlocking Economic Potential for Greater Opportunities: Systematic Country Diagnostic. Washington, D.C.: World Bank Group.

http://datatopics.worldbank.org/education/country/honduras


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7. Lastly, a large proportion of Hondurans are exposed to climate-related shocks, including hurricanes, floods, and droughts, that destroy agricultural crops, livelihoods, and other assets further exacerbating poverty. The climate vulnerability profile of the poor is particularly high because of nutritional challenges for the extreme poor, and involves higher risk because of food price shocks, the susceptibility to floods for the urban poor, and the income shocks of extreme weather events for the rural poor.

B. Sectoral and Institutional Context 8. The Government of Honduras (GoH) has made great strides in establishing the foundation of the Social Protection (SP) system.10 In 2015, Congress approved the Social Protection Law, legislating the SP system and the social security reform,11 although the implementation of the law has been stalled.12 The law, with the objective of reaching universal coverage, seeks to extend the coverage of the contributory public pensions, institutes personal retirement accounts for those who earn at least twice the minimum wage, and establishes the noncontributory Social Assistance Platform (Plataforma de Asistencia Social Vida Mejor). The Vida Mejor platform aims to reinforce the social policy framework by prioritizing the extreme poor13 and places the Grants for a Better Life (Bono Vida Mejor, BVM, formerly Bono 10,000) Conditional Cash Transfer (CCT) Program as the country’s cornerstone program, managed by the Sub Secretariat of Social Integration (Sub Secretaria de Integración Social, SSIS) under the Secretariat of Development and Social Inclusion (Secretaria de Desarrollo e Inclusión Social, SEDIS).

9. In 2013, the GoH created the Solidarity and Social Protection Fund for the Reduction of Extreme Poverty (Fondo de Solidaridad y Protección Social Para La Reducción de la Pobreza Extrema, FSPSRP) to finance the operationalization of this platform. The objective of the FSPSRP was to ensure expansion of the CCT Program (then known as Bono 10,000) and other GoH programs. The FSPSRP is an important financing source for social assistance: the 2018 national budget allocated HNL 1,434 million (approximately US$60 million) for the SEDIS and financed HNL 5,544 million (approximately US$230 million) for social assistance programs in 2017. Although the FSPSRP was established to finance the overall CCT Program, until 2017 the rural CCT Program relied almost exclusively on external funds from the World Bank and Inter-American Development Bank (IADB). However, in 2018, partly because of the decreasing external financing of the CCT Program, the GoH took a bold step and committed to financing about one-third of the annual cost of the cash transfers with a budget of HNL 558 million (approximately US$23.3 million) through the FSPSRP. Furthermore, in November 2018, the GoH issued an executive decree committing to annually allocate ten percent of the FSPSRP to the CCT Program,14 which is expected to

10 SP System refers to the set of public interventions aimed at supporting the poorer and more vulnerable members of society, as well as helping individuals, families, and communities manage risk. SP includes non-contributory social assistance, and contributory social insurance, as well as labor market policies, social funds, and social services. 11 The law establishes a multi-pillar system that consists of: Social Protection Floor system, Social Security system, Health Insurance system, Occupational Accident Insurance system and Workers' Compensation Insurance system. 12 Although accompanying legislation to implement the Social Protection Law was supposed to be passed within 18 months after the law’s effectiveness, none has been passed to date. 13 In this document the extreme poor are defined by the Proxy Means Test (PMT) run on the Unique Registry of Participants (Registro Único de Participantes, RUP) database applying the Government’s official poverty lines, unless otherwise stated. The PMT formulas are different for urban and rural areas, as are the national poverty lines. 14 Executive decree 021-2018, published in the Gaceta on November 6, 2018.


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cover approximately one-third of the cash transfers for the CCT Program annually. The GoH expects that the rest of the cash transfers will continue to be financed by external sources, through the IADB15 and World Bank financing (under this project).

10. One of the most significant achievements in SP in Honduras has been the establishment of the social registry managed by the National Center for Information on the Social Sector (Centro Nacional de Información del Sector Social, CENISS), consisting of the Unique Registry of Participants (Registro Único de Participantes, RUP) and the Registry of Institutional Services (Registro de Oferta Institucional, ROI). The RUP and ROI combined, financed by the World Bank under the now closed Social Protection Project (Report No. 54132-HN), provide a robust foundation for the SP System. At the end of 2018, the RUP contained socioeconomic information of 4.2 million individuals, about 45 percent of the population. By applying the PMT, the RUP identifies extremely poor, moderately poor, and non-poor households throughout the country, and is mandated by the Presidential Decree issued in 2014 as the targeting instrument for all social interventions. The instrument allows the GoH to identify all the recipients of social programs, and further enhance efficiencies in its provision of social services.

11. The rural CCT Program is effective and well targeted. In 2015, over 80 percent of the program beneficiaries belonged to the lower five income deciles and over 90 percent of the grantees were women. A second impact evaluation of the rural CCT Program completed in 2018 confirmed the positive impacts on extreme poverty and health and education indicators such as school enrollment and attendance, and incidence of acute diarrhea. The key challenge of the CCT Program, however, is its low coverage. In 2017, the CCT Program covered just over one-third of the 681,500 extremely poor households identified by the RUP. The GoH aims to maintain the coverage of the CCT Program to 245,000 households with 208,000 of those in the rural areas and 37,000 households in the urban areas, while reforming the urban program to align its operation with the rural program. Although the GoH’s intention is to maintain the coverage of the CCT Program given the fiscal constraints, greater increased Program coverage is recommended to achieve greater poverty impact.

12. The urban and rural CCT Programs are not operationally aligned, leading to inefficiencies. The urban CCT Program follows its own operational manual, beneficiary data for each program are managed separately, although in the field the two Programs are managed by the same staff. The urban CCT incentivizes school enrollment by providing CCT benefits to children in 1st through 9th grades living in extremely poor households.16 Mainly because of the uncertainties related to availability of funds, coverage of the urban CCT has fluctuated over the years, with unpredictable payment cycles. The urban program is also targeted using the RUP, but its effectiveness is not yet clear.17 An estimated 47 percent of urban CCT beneficiaries were within the four deciles in income distribution in 2015, according to the EPHPM 2014 and 2015, indicating the need for improvements. The CCT payment mechanism requires enhancements to allow for a more efficient and accountable system.

15 The IADB is preparing a new concessional lending operation in SP of US$40 million for their approval in January of 2020. 16 The urban CCT Program only had education co-responsibilities and not health co-responsibilities. Poor child health indicators such as stunting are more prevalent in the rural areas. According to the Demographic and Health Survey 2011–2012, stunting in rural children under five was double that of the urban children (29 percent and 15 percent, respectively). 17 Identifying urban extremely poor households through the application of the PMT is more challenging due to the small sample size used by EPHPM which is not representative of the beneficiary population.


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13. The GoH is committed to improving the effectiveness of the urban CCT Program by reforming its incentive structure and harmonizing the rural and urban CCT Program operation and management. Reforming the urban CCT Program is critical because establishing a single CCT Program will enable the GoH to more efficiently and effectively operate this core poverty reduction program nationwide. The project’s focus on the urban CCT Program will allow strong complementarity with the investments made in the rural CCT Program by the GoH and the IADB, while potentially making a large and sustained impact in the urban areas with a relatively small-size project. Reforms in the urban program will include:

• Changing the incentive structure of the urban CCT. The CCT will: (a) be reduced for primary school (1st to 6th grades), while new enrollment will only be for children starting 7th grade. This change will address the two largest drops in school transition that occur from 6th to 7th grade and from 9th to 10th grade. The CCT amounts will be restructured to reflect the higher direct and indirect costs of attending secondary education, while maintaining cost neutrality; (b) extend benefits to 11th and 12th grades to increase the youth prospects for better economic opportunities and keep them out of crime, violence, and teenage pregnancies; and (c) reinforce school enrollment and attendance compliance verification at regular day schools, alternative schools, and vocational schools such as the National Institute for Professional Skills Formation (Instituto Nacional de Formación Profesional, INFOP) or other training provider institutions.18

• Standardization of rural and urban CCT Program operation and management. Currently, the beneficiary database of the urban CCT Program is managed by CENISS, as opposed to the management information system (Sistema de Informacion Gerencial, SIG) platform. The project will support the migration of the urban CCT Program’s beneficiary database to the SIG Platform, and its targeting, enrollment, compliance verification, payment, and grievance redress, will be aligned with the rural program.

14. As the CCT Program has become firmly established, the GoH has shifted its attention to preparing a transition strategy for the CCT beneficiaries. Because of fiscal constraints, the GoH plans to keep the CCT Program coverage stable and increase the effectiveness of the program by establishing a transition strategy. The transition strategy will ensure that the positive impacts of the CCT Program are sustained by enabling beneficiary youth to better prepare themselves for adulthood. The transition will involve attaining higher education, socio-emotional skills training, and access to short-term vocational skills development and micro-credit programs. The first phase of the urban transition strategy will be implemented in the three prioritized urban municipalities of Central District of Tegucigalpa, Choloma, and San Pedro Sula, to be scaled up upon assessing the impact of the strategy.19

15. The project will finance the integration of the SP system, through the alignment of programs and delivery instruments. The role of Secretariat of General Coordination of the Government (Secretaria

18 The urban CCT Program, in principle, honors school enrollment at alternative schools (which include night schools and distance schools) and vocational schools, although this has not been operationalized. 19 These municipalities were selected based on the following characteristics: (a) high concentration of urban CCT beneficiaries, (b) availability of alternative secondary education modalities in most areas ready for expansion to accommodate a potential influx of new enrollments, and (c) availability of ALMPs already being implemented. There are approximately 19,000 CCT beneficiary households projected to receive urban CCT in 2019 in these three municipalities and thus account for about half of the total urban CCT households.


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de Cordinación General del Gobierno, SCGG) is key in implementing these reforms. An executive decree20 issued in 2018 established the Social Cabinet to oversee the social policies, and to make social spending more efficient by redirecting the use of the FSPSRP resources to benefit those living in extreme poverty.

16. With regard to employment generation, in 2016 the GoH launched an ambitious National Program for Job Creation and Economic Growth, or ‘Plan 20/20’. The Plan 20/20 sets out to attract US$13 billion in investments, raise annual exports from US$9 billion to US$18 billion, and generate 600,000 jobs, by 2020. Aligned with the plan, the INFOP is undergoing a much-needed reform to provide technical training for youth and workers seeking to upgrade their skills as required by the labor market, a reform in which the World Bank could more actively engage. In parallel, the microcredit program Crédito Solidario under the SEDIS, creates entrepreneurship opportunities for less skilled workers in the urban and peri-rural areas.21 Nevertheless, to date these programs have not catered to youth coming from challenging socioeconomic circumstances, although the GoH is keen to ensure that an increased number of the CCT Program beneficiaries as well as other poor and extreme poor, also benefit from these existing programs.

C. Relevance to Higher Level Objectives 17. The proposed Social Protection Integration Project is aligned with the GoH’s priorities as outlined in the long-term Vision of the Nation 2010–2038 and the Plan of the Nation 2010–2022. Both documents place protection of the poor and the vulnerable, improving employability, and job creation at the core of their objectives, as well as improved coverage of secondary education (7th to 12th grades). The Plan of the Nation 2010–2022 envisions 80 percent enrollment rate for 7th to 9th grades and 70 percent for 10th to 12th grades in 2022 from 39.7 percent and 24.2 percent, respectively in 2009. Eradicating extreme poverty,22 reducing the incidence of poverty to below 15 percent, and increasing the average number of years of schooling to nine years are among the 20 priority targets of the GoH by 2038.

18. This project is fully aligned with the Human Capital Project, as it places strong emphasis on building human capital through investments in the accumulation of knowledge, skills, and health among the extremely poor families, enabling them to realize their potential as productive members of society. It is estimated that a child born today in Honduras will achieve less than half of his/her full potential productivity, according to the Human Capital Index (HCI), to which education is an important component. With the human capital index of 0.49, Honduras is ranked 103 of 147 countries and is among the lowest-ranked LAC countries, only trailed by Haiti and Guatemala.

19. This project is similarly aligned with the Fostering Inclusion Pillar (Pillar 1) and the Reducing Vulnerabilities Pillar (Pillar 3) of the World Bank Group’s Country Partnership Framework (CPF) for the Republic of Honduras for FY16–FY20 (Report Number 98367-HN), which states that fostering inclusion in Honduras requires the extreme poor and most vulnerable to have access to critical social programs. The CPF confirms the World Bank’s commitment to build on the previous Social Protection Project by preparing a new operation that would provide links between CCT beneficiaries and productive inclusion interventions. The project supports the World Bank Group’s Twin Goals of ending extreme poverty and

20 Executive decree PCM-009-2018. 21 ALMPs including Con Chamba Vivis Mejor, Crédito Solidario, and INFOP are being assessed under the Strengthening Productive Inclusion for Sustainable Social Safety Nets (P166705), financed by the Rapid Social Response Trust Fund. 22 According to the GoH’s definition of extreme poverty.


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boosting shared prosperity to the extent that it will support households in the bottom two quintiles of the income distribution, including households with children living in extreme poverty in urban areas.

20. The project aims at strengthening the GoH’s targeting system to also identify the poor and vulnerable groups most at risk from climate change events. Specifically, the project will finance: (i) materials for the school curriculum “vocational skills training (soft skills for life and jobs)” with a climate informed focus to reinforce livelihood diversification, sanitary and health practices, and nutrition awareness that would help increase climate resilience; (ii) activities to enhance the CCT program payment mechanism which can be used as a response mechanism in case of a natural disaster; and (iii) activities to strengthen the RUP which will include the Geographic Information System (GIS) coordinates supporting the climate vulnerability index that will facilitate the identification and location of vulnerable households to allow for improved emergency responses in case of a natural disasters.

21. The project will strengthen female participation by mainstreaming gender-sensitive approaches. To empower girls and women and to address low female LFP, the communication campaign will emphasize messages on the importance of female participation in program activities, and the vocational training materials targeting 9th to 11th graders will emphasize the importance of female labor participation and potential economic and job opportunities for girls. The efforts for financial inclusion will target CCT grantees, over 90 percent of whom are women. The project’s intermediate results indicators will measure the effectiveness of the gender sensitive messages in the communication and vocational training materials, and the level of participation of female beneficiaries in financial inclusion orientations.

22. The project will also support citizen engagement through the reinforcement of the beneficiary care system, which includes a Grievance Redress Mechanism (GRM), and a national communication campaign. The Stakeholder Engagement Plan (SEP) provides guidance for stakeholder engagement during project implementation; laying the foundation to strengthen and maintain relationships with all stakeholders. Technical Coordination Unit (Unidad Cordinadora del Proyecto, UCP) will be responsible for implementing the SEP. Consultations were carried out with potential beneficiaries of the project on the reform of the urban CCT Program and the transition strategy design. To ensure effective citizen engagement, the project will finance a national communication campaign to raise awareness on changes to the urban CCT Program and widely disseminate CCT program results, and activities to strengthen the beneficiary care system in the three prioritized municipalities and support improvements in the GRM nationwide. The project will measure the effectiveness of the GRM by assessing the level of satisfaction with the responses received on grievances that were filed in the system. Separately, the SEP will monitor beneficiary satisfaction with project outcomes and their participation in the decision-making process.

PDO Statement

23. The project development objectives (PDOs) are to improve the outcomes of the urban component of the CCT program and to strengthen the integration of the social protection system for the extreme poor.

II. PROJECT DESCRIPTION

A. Project Development Objective


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24. The project defines integration as better coordination and organization of the key functions of the SP system. The SP system in the context of this project includes: the SP policy framework, identification of the poor, monitoring and evaluation (M&E) of SP programs, as well as the delivery mechanisms of the CCT program.

PDO Level Indicators23

• Percent of urban CCT beneficiaries who are in the bottom two quintiles of the income distribution

• Number of urban CCT beneficiaries in the three prioritized municipalities of the project who complete upper secondary school (11th grade or 12th grade)

o Number of female urban CCT beneficiaries in the three prioritized municipalities of the project who complete upper secondary school (11th grade or 12th grade)

• Percent of CCT beneficiary households receiving the cash benefits via an alternative payment mechanism

• Certification of the RUP to ensure the quality of the targeting system

B. Project Components

25. The project will finance the implementation of a reformed urban CCT and pilot an urban transition strategy in selected urban municipalities, while the rural transition strategy will be designed under this project but not implemented. The reform of the urban CCT Program will be applied nationwide and financed by the national funds.

Component 1: Strengthening of the Urban Conditional Cash Transfer Program and Implementation of the Integrated Transition Strategy (US$22.6 million)

26. This component will finance cash transfers for the reformed urban CCT Program and the design and implementation of the urban transition strategy in the three pilot municipalities.

Sub-component 1.1 Urban CCT Program reform and financing of cash transfers

27. The reform of the urban CCT Program will focus on the: (a) redesign of the incentives structure of the urban CCT Program and extension of the education grants to 10th, 11th, and 12th grades; (b) standardization of the operational management of the urban and rural CCT Programs; (c) TA to support the operation of SEDUC’s MIS (Sistema de Administración de Centros Educativos, SACE) to strengthen the verification of education co-responsibility; and (d) financing of the cash transfers and associated bank transfer fees. Financing for cash transfers will cover the national level but will be limited to those in urban areas, prioritizing the three municipalities where the transition strategy is implemented.

23 Unless specified as ‘in the three municipalities prioritized by the project’ the indicator measures the result nationwide.


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Sub-component 1.2 First Phase Implementation of the Urban Transition Strategy

28. This sub-component will support the design and pilot implementation of the urban model of the transition strategy in the three prioritized municipalities. Activities include the following:

• Expansion of the provision of 10th to 12th grades through alternative education. Given the lack of access to secondary education in some areas, expansion of alternative modalities of education is necessary. This is key to ensure that CCT beneficiary youth, who have already dropped out of school or live in areas where there is inadequate supply of 10th to 12th grade schooling, have access to these alternative modalities of education.

• Materials and teacher training for the school curriculum “soft skills for life and jobs” and provision of short-term vocational skills development. Materials will be developed and distributed to targeted schools24 in the three selected municipalities, targeting 9th through 11th graders, thus reaching all children and not just the CCT beneficiaries. The materials will be gender sensitive, ensuring inclusion of messages to encourage female participation in society and in the labor market; and will be climate-informed, to reinforce livelihood diversification, sanitary and health practices, and nutrition awareness that increases climate resilience. The short-term vocational skills development entails financing of the local market studies, design and printing of entrepreneurship training materials for vulnerable households, and implementation of short-term skills development training. The local market studies and micro-credit programs will be informed by the vulnerability context to ensure that investments in entrepreneurships are not made in disaster-prone or high-risk locations.

• Design and piloting of referrals to entrepreneurship training and assistance for the application to the Credito Solidario micro credit program: this activity entails operational costs for the entrepreneurship training and TA for the application to micro credit programs. The Credito Solidario Program will finance the funds for micro credits from the national budget. Participation in entrepreneurship for CCT Program beneficiaries are optional and are not designed as a co-responsibility.

Component 2: Institutional Strengthening for the CCT Program and Integration of the Social Protection System (US$5.56 million)

Sub-component 2.1 Reinforcement of the CCT Program Delivery System

29. Building on the existing CCT Program delivery system, this sub-component will support further strengthening of the operation of the CCT Program nationwide, specifically through the following:

• Establishment of effective and transparent payment mechanisms. The CCT Program is in the process of exploring the use of the Inter-Bank Processing Center (CEPROBAN) platform through the Honduras Central Bank (Banco Central de Honduras, BCH), for geographical areas with access to banks that offer basic bank accounts.25 The CEPROBAN platform can make

24 Targeted schools include schools, in the three selected municipalities, with high concentration of CCT beneficiaries. 25 For about 40 percent of the CCT beneficiary households, among them, approximately 6,650 beneficiary households already have basic bank accounts.


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transfers to individual bank accounts in private banks of the beneficiaries’ choice. For the remaining 60 percent of beneficiaries with no access to banks providing basic bank accounts, a more comprehensive, inclusive strategy will be sought for an improved payment modality. The project will finance the scaling up of financial inclusion orientation for beneficiaries to open bank accounts. An improved payment mechanism will enhance the CCT Programs use as a response mechanism in case of a natural disaster or other emergencies. A Bank-Executed TA will ensure global experiences are reflected in this design.

• Reinforcements of the Beneficiary Care System and the GRM. The reinforcements to the GRM will support the system nationwide, while support to the beneficiary care system will focus in the three prioritized municipalities. Incorporating lessons learned from the previous SP Project, the project will ensure effective use of mobile equipment for GRM by field level Program staff to facilitate access to reports and timely response to grievances.

• Diagnostics, reinforcement and upgrading of the SIG Platform to strengthen data security and accountability, and to create urban CCT payrolls based on compliance verification. This includes adding capabilities for data exchange with the information systems of vocational training centers, monitoring the implementation of the urban transition strategy, and processing payments through the alternative payment mechanism. The diagnostics will review data security as well as system recovery procedures in case of physical damages.

• Design and implementation of a communication strategy and campaign to inform beneficiaries and non-beneficiaries of changes in the urban CCT Program, as well as to widely disseminate CCT program results to civil society and academia. The campaign messages will be gender sensitive and ensure emphasis on female participation in Program activities.

• Design of the rural transition strategy. Pilot initiatives by SSIS as well as other programs will be analyzed to incorporate lessons learned into the design of the rural transition strategy.

• Monitoring of the CCT Program and impact evaluation of the urban transition model. The project will conduct a process evaluation which will include the assessment of beneficiary targeting and two rounds of beneficiary satisfaction surveys. The urban CCT Program and the transition strategy will be rigorously evaluated through an impact evaluation.

Sub-component 2.2 Institutional Strengthening for the Integration of the Social Protection System

30. This sub-component will be led by the SCGG and finance the TA to update the Social Protection Policy framework, which includes conducting M&E of the Social Protection Policy and developing a strategy for financial inclusion.

31. The sub-component will also build on the previous investments made in CENISS by financing: (a) an international quality certification of the RUP and strengthening data management of the RUP and upkeep of the RUP and the ROI, and (b) strengthening institutional capacity building of CENISS to process and analyze the information to ensure better alignment across programs; and (c) updating the PMT once


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the revised national poverty lines are made available.26 The RUP, which includes household socioeconomic information and the GIS coordinates, is a robust instrument that will generate a climate vulnerability index by overlaying household information on data on the areas and zones of high risk to natural disasters,27 thus allowing the GoH to identify and locate vulnerable households in case of a natural disaster.

Component 3: Project Management (US$1.84 million)

32. This component will support the UCP by financing key staff including: one project technical specialist, one dedicated procurement specialist; two procurement assistants; one financial management; one disbursement specialist; one accountant; and one monitoring specialist. The project will finance the operational cost for the management and planning of the project activities, as well as the external audit for the project.

Component 4: Contingency Emergency Response (US$0.0)

33. Reflecting the strategic approach taken in Honduras across the World Bank’s portfolio, this component will finance immediate response to eligible emergencies. As such, in the event of such an eligible emergency, this component would finance emergency activities and expenditures through the reallocation of funds from the project that meet conditions detailed in the Financing Agreement and Project Operations Manual for the project.

Project Cost and Financing

34. The proposed project would be financed through an IDA credit in the amount of US$30 million; eligible expenditures incurred up to 12 months prior to the project signature date, not to exceed US$6 million would be eligible for retroactive financing.

C. Project Beneficiaries 35. The direct beneficiaries of the project will vary by activity. This includes approximately 40,000 urban CCT beneficiaries from extremely poor households28 selected by the PMT and by categorical criteria such as geographical location of residence and having children and youth enrolled in school. The beneficiaries of the urban transition strategy will be current and former CCT beneficiaries in the three pilot municipalities, prioritizing youth and women. Beneficiaries of the soft skills training are youth attending 9th through 11th grades enrolled in targeted schools and alternative education. Financial inclusion efforts will target urban CCT beneficiaries in the three municipalities. An additional 200,000 households living in extreme poverty in rural areas are expected to indirectly benefit from the project through improved operation of the overall CCT program.

26 This includes workshops on the new PMT formula and impact on program eligibility, and revision and field testing of the Unique Socioeconomic Forms to reflect new variables. 27 CENISS has a municipal risk index called the Index for Risk Management (INFORM) identifying risks, threats, vulnerable and response capacities, considering three risk dimensions: hazard and exposure, vulnerability and lack of coping capacity. 28 Cash transfers for all 40,000 urban CCT households will be financed by the Project in the first year, with progressively more households financed by the GoH each year of the Project.


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D. Results Chain 36. The project’s Theory of Change is to address the inefficiencies in the urban CCT Program which incentivizes already high attendance in primary schools, and duplicates efforts in the management of the urban and the rural CCT Programs. Further strengthening of the key delivery systems of the CCT Program will improve Program effectiveness in poverty alleviation. The urban and rural transition strategies will help CCT beneficiaries better prepare to exit the CCT Program and sustain the positive impacts of the Program. Efficiency and effectiveness of SP spending will be improved through the harmonized CCT Program and better coordinated and aligned SP programs and their delivery systems.

Table 1. Results Chain

Ou

tco

me

PDO: To improve the outcomes of the urban Component of the CCT Program and to strengthen the integration of the social protection system for the extreme poor.

• Urban CCT targeting improved

• More children complete 11th or 12th grade

• More CCT beneficiaries receive payments via improved payment mechanisms

• International certification of the targeting system (RUP)

Ou

tpu

ts/

Inte

rme

dia

te O

utc

om

es

Output of the CCT Program

• More beneficiaries of Social Safety Nets

• Increased transition from 9th to 10th grade Output of Transition Strategy

• More vocational and soft skills training

• More beneficiaries receive micro-credit

• Rural strategy designed

• Impact evaluation for transition strategy conducted

Outputs of Improved CCT operation

• Beneficiaries receive 3 CCTs a year

• Grievances responded in time

• CCT beneficiaries satisfied with grievance response

• Unification of urban and rural CCTs

• Gender sensitive training and communication materials

• Beneficiaries oriented on financial inclusion Outputs of the institutional strengthening of the SP system

• Coverage of the financial inclusion orientation

• SP Policy updated

Inte

rve

nti

on

s

Financing of the Urban CCT

• Financing of the urban CCT Urban Transition Strategy

• Expansion of alternative education (10th–12th grades)

• Effective co-responsibility verification of 10th–12th grades

• Strengthen provision of vocational education (soft skills)

• Referrals to short-term skills training and micro-credit

• Designing of the rural transition strategy

• M&E and impact evaluation of the transition strategy

Strengthening of CCT Program instruments:

• Payment mechanism

• Beneficiary care System and the GRM

• SIG Platform

• Communication strategy

• Financial inclusion orientation Institutional strengthening for the integration of the SP System

• Updating of the Social Protection Policy

• TA on the financial inclusion strategy

• M&E of SP policies and programs

• Updating of the PMT

• Strengthening of the RUP data quality

Co

mp

on

en

ts

Component 1: Strengthening of the Urban CCT Program and Implementation of the Integrated Transition

Component 2: Institutional Strengthening for the CCT Program and Integration of the SP System

Cri

tica

l

Ass

um

pti

on

s

• Strengthening the targeting system will improve urban CCT targeting to the extreme poor.

• Incentives through the urban CCT and expansion of alternative education will increase school enrollment, attendance, and completion for 10th to 12th graders.

• Vocational education is made available to beneficiary youth.

• Effective payment providers are available and willing to serve the project beneficiary population.

• Qualified consultants are available to review the quality of the RUP and certification provided.

Issu

es

Fiscal constraints limiting the coverage of the CCT Program to the extreme poor households. Beneficiary youth are unable to sustain positive impacts of the program once they exit the program at 9th grade as they are not well prepared to become productive members of the society. The urban CCT Program is incentivizing primary school enrollment when children already attend without being incentivized. The CCT Program delivery system needs strengthening to improve transparency and accountability. Lack of economic inclusion programs addressing the needs of the extreme poor. Weak interinstitutional coordination mechanisms.


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E. Rationale for Bank Involvement and Role of Partners

37. Building on the global, regional and country-specific technical expertise in CCTs and in building delivery systems for social safety net programs, the World Bank has supported the establishment of the Honduras’ CCT Program and its targeting system. The Bank’s support prior to this proposed project was limited to the rural CCT Program, and this is the first time the World Bank will support the urban Program. The experience gained in establishing the rural CCT Program could be applied to the improvement of the urban CCT Program. Supporting the urban CCT Program is critical because unifying the urban and rural CCT Programs will ensure a more effective overall CCT program, as well as addressing the specific needs of urban beneficiaries. Extremely poor urban households may physically be near sites where social services are provided and where opportunities for economic integration exist, yet they face urban vulnerabilities such as crime and violence. Given the World Bank’s experience supporting the rural CCT, it is a natural partner for this effort.

38. The World Bank has closely collaborated with development partners in SP in Honduras and is expected to continue under the new project. The IADB has been financing the rural CCT Program as well as a SP-focused budget support program, with an emphasis on supporting the health and education services. The World Bank and IADB have had strong collaboration, conducting joint supervision missions, aligning key messages, and distributing TA tasks between the two organizations. The World Bank has also collaborated closely with the Food and Agriculture Organization (FAO) on the productive inclusion pilot initiative under the SP Project, since FAO provides TA to SSIS on the School Feeding Program. Japan International Cooperation Agency (JICA) also supports SSIS through its Proyecto Activo, supporting financial inclusion of poor households by working with local governments. Continued collaboration with these agencies is expected, and particularly with IADB on all aspects of project implementation.

39. Continued collaboration will be sought with donors working on ALMPs such as the United States Agency for International Development (USAID), the International Labor Organization (ILO), and the German Technical Cooperation Agency (GTZ) through participating in the regular meetings by the donor group on employment. The EU, through the project Euro Labor, supports improved employment services provided by the National Employment Services of Honduras (SENAEH) and is testing mobile SENAEHs in cities including Choloma. USAID supports vocational skills development for the NEETs as well as TA to the reform of INFOP. IADB finances a new education project (Proyecto Joven) that supports soft skills training and apprenticeships at lower secondary schools (7th to 9th grades). All these initiatives are relevant to the project and synergies will be sought through regular participation in the donor group meetings.

F. Lessons Learned and Reflected in the Project Design 40. The proposed project builds on experiences of SP projects globally, as well as past projects in the SP sector in Honduras. The World Bank has deep experience designing and implementing CCTs throughout the world, as well as in Honduras. The proposed project draws on experiences from Mexico, Peru, Brazil, and Colombia in LAC, as well as the Philippines in Southeast Asia. Bank expertise will inform the re-design of the urban delivery system including the MIS and the GRM. Transferring regular cash benefits to poor household beneficiaries in an accountable manner is key to smooth consumption and to invest in human capital of their children. Institutional strengthening and investments in delivery systems is essential for an effective CCT Program. Lessons learned from the pilot initiatives of the alternative


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payment mechanisms including the need for strong awareness building campaigns to the CCT beneficiaries and close collaboration with private banks have informed the project design. 41. The findings of the Honduras Jobs Diagnostics Report and the experiences of similar programs in other countries have informed the design of the urban transition strategies. However, the implementation of the strategy will adopt a ‘learn-by-doing’ approach piloting prior to scaling up. The focus of the rural and urban transition strategies will place emphasis on youth between 16 and 30 years old and with special emphasis on women, given the low LFP rates revealed by the Honduras Jobs Diagnostics. The implementation of the urban transition strategy will be on a pilot basis in three selected municipalities to generate lessons learned. Findings from the pilot implementation and the impact evaluation will be incorporated into the operations manual prior to its scaling up.

III. IMPLEMENTATION ARRANGEMENTS

A. Institutional and Implementation Arrangements

42. The proposed project will be implemented by the SSIS at SEDIS, in line with the institutional arrangements established by the GoH to implement the Bono Vida Mejor CCT Program. Procurement of all goods, non-consultant services and consultancies will be conducted by UCP under SSIS. The Technical Committee will continue to oversee the implementation of the harmonized CCT Program. 43. Under Sub-Component 1.1, SSIS will transfer the CCTs to beneficiaries through a payment agency pursuant to the provisions of Financial Institution Agreements signed between SSIS and relevant Financial Institutions. Currently, the SSIS is exploring engaging the BCH to channel cash transfers through their Automatic Clearance House “ACH Pronto,” linked to the CEPROBAN. During implementation, other alternative payment agents may be identified and streamlined into the payment mechanism for the Program to undertake payments in geographic areas in cases where beneficiary households do not have access to private banks. 44. Sub-component 1.2 will involve collaboration with multiple agencies including SEDUC, Program Credito Solidario, and implementors of ALMPs. An inter-agency agreement will be signed with SEDUC and Credito Solidario to establish their roles and responsibilities. SEDUC will continue to strengthen and operate the SACE to verify compliance with the education co-responsibility. In addition, SEDUC will oversee the designing of the materials and piloting of the vocational training in schools and supervise the provider of alternative education. Credito Solidario will provide the Program-specific training, take in applications for its micro credit scheme, and finance the micro credit and the facilitators to oversee the management of the micro credit scheme. A training provider will be contracted for alternative education in the three municipalities. As a provider of ALMPs, SSIS is exploring a potential partnership with INFOP. In parallel, potential partnerships with other providers of ALMPs may be sought during the first year of the project.

45. Sub-component 2.1 will support investments to improve service delivery of the CCT Program managed by SSIS, including reinforcements to the Program’s MIS, the communication strategy, M&E including an impact evaluation, and strengthening of the GRM. All these systems will be implemented by SSIS as part of the operation of the CCT Program.


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46. Sub-Component 2.2 will support activities led by SCGG and CENISS, in line with their institutional mandates. SCGG will lead the activities related to the implementation of the SP Policy and the Vida Mejor Platform. CENISS will continue to ensure the effective poverty targeting of social programs. Inter-agency agreements will be signed with SCGG and CENISS.

47. Component 3 will finance the UCP and its operational costs to run the operation of the project. The UCP is housed in SSIS and will be responsible for implementing accountability mechanisms for the CCT Program and for administering the institutional procedures for inter-institutional coordination and monitoring and evaluating the overall implementation. Although the UCP will continue to execute the procurement and financial management functions for the project, the SEDIS has recently completed a reform to centralize the administrative functions such as procurement and financial management into the Planning and Management Unit (UPEG) under the newly established Sub-secretariat of Administration. The UPEG will coordinate and oversee the budgeting and management of Program funds, requiring close coordination between the UCP and the UPEG. Once the UPEG is well-established, UPEG will be assessed on whether they could absorb certain project fiduciary functions.

B. Results Monitoring and Evaluation Arrangements

48. SSIS will continue to lead the M&E of project activities. Project outcomes and results will be assessed using a M&E system established through the now closed Social Protection Project (Report No. 54132-HN), to track progress on the indicators specified in the results framework. The system draws information from multiple sources of information including: (i) the SIG Platform; (ii) targeting and coverage assessments based on the EPHPM analyzed by the SCGG; (iii) impact evaluation of the transition strategy; (iv) program process and implementation assessments financed under the project; and (vii) the project Progress Reports.

C. Sustainability

49. There are three aspects to the sustainability of the proposed project: political, institutional, and fiscal. The political commitment to “a Honduras without extreme poverty, educated and healthy with consolidated provision of social services” is manifested in the National Plan 2010 – 2022. The Vida Mejor Platform is the embodiment of the GoH’s Social Protection Policy and the Framework Law of Social Policy. The CCT Program is the principal instrument for poverty reduction and is an integral component of the Vida Mejor Platform, which prioritizes human capital development, reduction of inequality and protection of the vulnerable population. The CCT Program has endured changes in administrations and is expected to remain the key poverty reduction program of the GoH.

50. The Social Protection Law passed in 2015, places the CCT Program as the key program for the non-contributory, basic floor for Social Protection. The institutional arrangements have changed over the years from the Program being managed under the Ministry of the Presidency, to the then new SEDIS in 2014. Since then, SEDIS has established itself as the leading agency in social programs. Institutionally, given its mandate to execute poverty reduction programs and ensuring inclusion of vulnerable population, SEDIS is the appropriate agency to house the CCT Program. The project will continue supporting institutional strengthening of SSIS at SEDIS as well as strengthen inter-agency coordination by working with SCGG.


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51. Fiscal sustainability has been the most critical challenge over the years since the rural CCT Program was predominantly financed by external funds through the IDA and IADB credits. However, with the GoH committing to finance HNL 558 million (approx. US$23.3 million) through the FSPSR in 2018, this was the first time the GoH financed the rural CCT Program from its own funds. This covered approximately one-third of the annual financing needs for the Program in 2018. In November 2018, the GoH issued an executive decree committing to annually allocate 10 percent of the FSPSRP to the CCT Program.29 This also is approximately one-third of the annual budget for the CCT Program, rural and urban areas combined.

IV. PROJECT APPRAISAL SUMMARY

A. Technical, Economic and Financial Analysis (if applicable)

52. Strategic Relevance. The GoH is committed to harmonizing the urban and rural CCTs and ensuring a more effective urban CCT Program to a Government facing fiscal constraints. This will bring rigor to the urban component of the Program, and efficiency to the CCT Program as a whole. Although the GoH is committed to maintaining the coverage of the CCT Program, with the improved effectiveness and efficiency through this project, the World Bank will continue to recommend that the GoH expands the Program coverage in the medium to longer term to ensure stronger poverty impact.

53. Technical soundness. The project builds on achievements to date and proposes to further reinforce the robustness of the CCT Program and for the effective delivery of ALMPs for the extreme poor. The project design has incorporated international experiences in the design of the transition strategy.

54. The proposed project will alleviate poverty by supporting consumption through regular CCTs to promote the accumulation of human capital among children and youth. Based on the urban CCT Program’s current schedule of payments, the maximum amount for which a family is eligible is 9,960 Lempiras per year, or HNL 830 per month per household (about US$34). Based on current demographics, the median and mean monthly transfer amounts would be approximately US$22 and US$26, respectively, with the median benefit amount representing about 12 percent of median household monthly income of the urban extreme poor (US$175).30 The Program will continue to fund transfers to approximately 50,000 extremely poor households in urban areas. In total, the urban CCT Program will benefit approximately six percent of extremely poor Honduran households and 16.2 percent of the urban extreme poor.31 The expected impacts are as follows:

• The urban CCT Program is expected to demonstrate positive impacts on poverty reduction, and education. Impact Evaluations of the rural CCT Program show a decrease in the poverty headcount and gap, increased school attendance, and improved health outcomes. These positive impacts are suggestive that the urban CCT could demonstrate similar positive impacts.

29 To further improve fiscal sustainability of the program, a reform of the FSPSRP that would consolidate the programs that it finances and folding its funding into the national budget is critical. The IADB through its SP-focused budget support operation has included some of these reform elements of the CCT Program and the management of the FSPSRP. 30 According to the GOH definitions. 31 Based on 2017 EPHPM, there are 834,186 and 308,263 extremely poor households nationally and in urban areas, respectively.


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• In the short-term, transfers will contribute to 0.2 and 0.3 percent reductions in the total and urban extreme poverty headcounts, respectively, with 0.2 and 0.3 percent reductions in the total and urban extreme poverty gap.32

• With respect to the long-term impacts associated with increased education, significant benefits are expected from completing nine years of education with monthly wage premiums of 74.8 and 53.2 percent in the formal and informal sectors, respectively.

• Evidence suggests that graduation strategies such as the one supported by the project can be effective at helping the poor establish sustainable self-employment and generate lasting improvements in well-being (i.e., consumption, food security, income, savings, health).

55. The CCT Program represents a significant expense, and, as a result, its fiscal sustainability has been carefully analyzed by the GoH. With an average benefit level of US$26 per month per household, the total cost of transfers paid to the 50,000 urban beneficiary households would represent approximately 0.06 percent of GDP 2020, declining over time, assuming no increase in benefit levels nor the number of beneficiary households (Table 2). The GoH has a financing plan that includes both national and external financing with domestic sources as a percentage of total Program spending increasing over time. The GoH is fully aware of the financing needs that will result from this Program. Nonetheless, given the positive impacts demonstrated by the Program and an understanding that domestic sources of funding are necessary to ensure its long-term sustainability, through the FSPSRP, the Project is deemed economically sound.

Table 2: Estimated cost of the CCT Program33 (Dollar amounts in millions of US$)

Year Number of

Beneficiaries Total cost GDP

Total cost as Share of GDP, %

2019 50,000 15.6 25,841.4 0.060

2020 50,000 15.6 28,059.9 0.056

2021 50,000 15.6 30,469.9 0.051

2022 50,000 15.6 33,066.6 0.047

2023 50,000 15.6 35,884.6 0.043

B. Fiduciary

(i) Financial Management

56. Financial Management. The Bank carried out a financial management assessment of the SSIS and its capacity for the implementation of this project. The assessment was conducted in accordance with the Bank Policy for Investment Project Financing and the FM manual (see Annex 4).

32 Based on the 2016 National Household Survey. 33 Total cost estimated by multiplying the average transfer amount per household (as estimated based on demographic data from the 2016 EPHPM and poverty estimates from SEDLAC (CEDLAS and the World Bank); GDP are most recent IMF estimates.


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57. The project will be implemented by the SSIS, with the support of the UCP led by a General Coordinator and four managers responsible for the fiduciary, formulation and monitoring functions of the program, and approximately 25 supporting staff. The project will finance key staff to conduct technical fiduciary responsibilities for the project (see Component 3).

(ii) Procurement

58. SSIS through the UCP will be responsible for the implementation of the project. A detailed Procurement Capacity Assessment of the Implementing Agency has been carried out during preparation phase. SSIS has experience in working with projects financed by the Association and will establish its UCP with procurement qualified staff according to the complexity of the procurement activities. Technical aspects of envisaged procurement activities will require an appropriate coordination amongst technical and procurement specialists. Procurement will be carried out according to the World Bank Procurement Regulations for IPF Borrowers, dated July 2016 and revised in November 2017 and August 2018. The Project Procurement and Strategy for Development (PPSD), and a procurement plan covering at least the first 18 months of project implementation was prepared by the Borrower, which was agreed with the Bank.

C. Safeguards (i) Environmental Safeguards

59. This is a category B project with a Moderate risk rating for Environment and Social. This risk rating is mainly due to social risks. Environmental risk rating is Low as no environmental safeguard impacts are anticipated. Consequently, no environmental assessment is required.

(ii) Social Safeguards

60. The social risk rating of this project is Moderate. This is the third in a series of SP CCT projects (since 2010), which triggers the OP/BP 4.10 on Indigenous Peoples. The social protection integration finances the cash transfers in the urban areas as well as the urban transition strategy and the strengthening of the CCT Program delivery systems that affect the CCT Program operation in both rural and urban areas. The social assessment has identified the presence of Indigenous/Afro-Honduran communities in the area of influence of the project, specifically the Garífuna colony Alfonso Lacayo, in the Rivera Hernández sector of San Pedro Sula. Therefore, the Indigenous Peoples and Afro-Honduran Communities Plan (IPP) used for the Social Protection Project (Report No. 54132-HN) has been updated for urban CCT and the urban transition strategy. The updated IPP includes an assessment of the performance of the previous rural IPP lessons learned and implementation challenges of the rural and urban CCT Programs for Indigenous and Afro-Honduran peoples. The difficulties related to the lack of national IDs identified in the last Social Protection Project in remote rural communities are not expected to be a significant issue in the context of this new operation, since the cash transfers financed by the project will be only in urban areas. The project will not require any land acquisition nor involuntary resettlement.

61. The safeguards performance in the last project was Moderately Satisfactory, given the difficulties encountered with the National Registry to provide identification documents to potential beneficiaries, as required by the Vida Mejor Program and Platform, and the fact that municipal identifications (IDs) stopped


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being recognized in 2017. While there were approximately 1,487 cases of indigenous people in the Department of Gracias a Dios who were unable to access the program’s benefits because of lack of IDs, these people are expected to become beneficiaries of the program with funds from the FSPSRP.34

62. As part of the preparation of a social assessment, the updated IPP was consulted in November and December 2018 in five urban centers of Honduras with the presence of 6th and 9th grade students receiving the urban CCT: Tegucigalpa, Comayagua, Comayaguela, San Pedro Sula, and Choloma. The objective of these consultations was to assess social risks (due to the social context), challenges, and opportunities offered by the project to youth benefiting from the CCT Program, with an emphasis on identifying potentially vulnerable or disadvantaged groups. One of the main social risks identified was the risk of exclusion from project benefits. The assessment was led by the social team of the SSIS and carried out by an inter-institutional team conformed by central and regional staff of the SSIS, INFOP, and Crédito Solidario Program. Based on the assessment, a Stakeholder Consultation Plan was drafted for the preparation and the implementation of the project. Other aspects of the social assessment include the gender strategy and the GRM.

63. In January 2019, a workshop was carried out by the SSIS on the results of the social assessment and to present how these results inform project design. The IPP Social Assessment and Stakeholder Engagement Plan were published on February 28, 2019, in the web pages of the SEDIS,35 INFOP, Crédito Solidario, and the external web page of the World Bank, and disseminated by distributing printed copies through local offices.

(iii) Grievance Redress Service

64. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.

I. KEY RISKS

65. The overall risk rating for this proposed project is Substantial. Four risks categories are identified as substantial and one as high.

34 Although improving the services provided by the National Registry is beyond the scope of this project, there is a separate World Bank-executed TA ‘Improving Service Delivery through Enhanced Identification’ (P168618) that would address this issue. 35 https://sedis.gob.hn/node/1715

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.inspectionpanel.org/

https://sedis.gob.hn/node/1715


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66. Political and Governance risks are Substantial. Political polarization has continued to deepen against the backdrop of unresolved issues from the 2009 political crisis. Emerging political fragmentation may further diminish efforts to facilitate enhanced spaces for political dialogue; and recent public corruption scandals highlight the country’s continued governance and institutional weaknesses. Although the governing party has a majority in Congress, this polarization may delay approvals of World Bank investment projects or move the focus and/or funds from the implementation of World Bank’s projects. To mitigate this risk, the World Bank will continue to focus on areas of critical importance for the country’s development including this proposed project and will seek to support dialogue with all stakeholders based on shared development objectives. In addition, to mitigate political risks and to ensure political sustainability of the CCT Program, the communication campaign supported by the project will widely disseminate the CCT Program’s results to the civil society, donors, and the academia.

67. Macroeconomic risks are Substantial, and stem from both external and domestic factors. On the external side, faster-than-expected normalization of the monetary stance in the United States may affect capital inflows. Tighter immigration policy in the United States may reduce family remittances inflows and domestic consumption, while increasing local labor market pressures. Further, there is increased uncertainty related to the trade outlook as the United States considers modifying trade agreements. In addition, adverse weather conditions and lower international prices for key agriculture products (for example, coffee) may strongly affect Honduras leading to large agricultural losses and lower exports. Agricultural output is especially vulnerable to both market volatility and exogenous shocks, as the sector focuses on a narrow range of primary commodities with limited technological support. These risks are expected to disproportionately affect poor households should they materialize. Domestically, the persistent deficit of the state-owned electricity company (Empresa Nacional de Energía Eléctrica, ENEE) threatens Honduras’ fiscal position, while prolongation of tax amnesty (including for taxes and electricity bills) weakens the tax base and widens the fiscal deficit. The GoH aims to strengthen fiscal sustainability through stronger consolidation of the Central Government sector by cutting investment spending and adopting a comprehensive plan to rescue the country’s electricity system and reduce the debt of ENEE. This may lead to limited fiscal space, which could affect the project budget. These risks are considered substantial; however, the GoH’s commitment to the macroeconomic prudence in general is expected to support the success of the project. The team will closely track these issues with the GoH and, if necessary, adjust component activities.

68. Technical Design of Project or Program is rated Substantial. This risk is rated Substantial as the project would make investments in interventions that are new to the implementing agencies, such as the implementation of the transition strategy by the SSIS, and require effective inter-agency and inter-sectoral coordination (described in the risk category below). Although this project will only finance cash transfers in the urban areas, requiring all beneficiaries to have access to bank accounts, a large proportion of the rural beneficiaries do not have easy access to a bank account, which poses a significant risk for the program in ensuring smooth transition to improve payment mechanism in these remote areas. While strengthening the urban CCT Program and implementing a pilot phase of the urban transition strategy optimizes complementarity with the investments made in the rural CCT Program, there is a risk associated, given the fact that the effectiveness of the urban CCT Program is unknown and the fact that the incidence of poverty is lower in the urban areas than in the rural areas. The project will mitigate this risk by financing a series of evaluations including a process evaluation and an impact evaluation of the urban CCT and the transition strategy. The studies will allow monitoring implementation progress and timely adjustment of project activities if and when weaknesses are found.


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69. Institutional Capacity for Implementation and Sustainability is rated Substantial. The project will build on the own experiences of the agencies involved in project implementation. However, there are reform elements that require management and coordination capacity such as: (a) inter-agency and inter-sectoral coordination to implement the transition strategy; and (b) technical capacity to design and implement the reforms to ALMPs to make them more accessible to the poor. Risk mitigation measures have been incorporated into the project design, including provision of TA support and capacity building. Because there are uncertainties regarding the final outcomes of the INFOP’s reform, the project will consider potential alternative partners to provide short-term vocational training during the first year of the project. Finally, associating with the GoH’s Crédito Solidario Program may pose a risk as the effectiveness or the fiscal sustainability of the program are unknown. The project will mitigate this risk by assessing the FM structures and program processes as part of the institutional assessment supported by this project, and by starting the collaboration as a pilot and by evaluating the effectiveness of the partnership with the Crédito Solidario Program. Although the GoH is committing to annually allocate 10 percent of the funds from the FSPSRP, the FSPSRP faces competing needs and the allocation is not as secure with the regular national budget.36

70. Fiduciary risk is assessed as High. This rating takes into consideration the Bank’s prior assessment as Substantial for the already closed Social Protection Project (Report No. 54132-HN), and the additional potential challenges with the new project Sub-component 1.2, which will finance the urban transition strategy. SSIS is an entity with significant experience implementing the CCT Program under the Vida Mejor Program in the rural areas with donor-funded operations. However, given that the credit will finance a new line of CCTs (Urban) and given the complexity of the institutional arrangements, strengthening measures were recommended and incorporated into the project. These arrangements will be reviewed within the first 6 to 12 months of execution to ensure that these they are operating as intended, and adjustments will be made if needed. Additionally, from a procurement perspective, the risk rating of high is due to complex inter-institutional arrangements, the support and monitoring of contracts resulting from the high volume of procurements, especially those related to operational expenses and training events; and the country context. In addition, factors identified in the project procurement strategy for development such as market conditions, violence and security issues, could have a significant impact on the implementation of the activities. In order to mitigate these risks, close supervision will be carried out coupled with capacity building activities for relevant and qualified fiduciary staff.

.

36 This is because a Technical Committee makes decisions on fund allocation of the FSPSR, and the annual allocation is not written into law as the regular national budget, resulting in reallocations mid-year when the committee faces competing needs.


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II. RESULTS FRAMEWORK AND MONITORING

Results Framework

COUNTRY: Honduras Social Protection Integration

Project Development Objectives(s)

The objectives of the Project are to improve the outcomes of the urban component of the CCT Program and to strengthen the integration of the social protection system for the extreme poor.

Project Development Objective Indicators

RESULT_FRAME_T BL_ PD O

Indicator Name DLI Baseline Intermediate Targets End Target

1 2 3

Strengthening of the Urban CCT Program and Implementation of the Integrated Transition Strategy

Percent of urban CCT beneficiaries who are in the bottom two quintiles of the income distribution (Percentage)

42.00 42.00 43.00 44.00 45.00

Number of urban CCT beneficiaries in the three prioritized municipalities of the Project who complete upper secondary school (11th grade or 12th grade) (Number)

364.00 364.00 746.00 1,166.00 1,649.00

Number of female urban CCT beneficiaries in the three prioritized municipalities of the Project who complete upper secondary school (11th grade or 12th grade) (Number) (Number)

204.00 204.00 418.00 653.00 923.00


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RESULT_FRAME_T BL_ PD O


1 2 3

Institutional strengthening for the CCT Program and the Integration of the Social Protection System

Percent of CCT beneficiaries receiving cash benefits via an alternative payment mechanism (Percentage)

0.00 0.00 21.00 43.00 50.00

Certification of the RUP to ensure the quality of the targeting system (Text)

None Contract with consultancy firm signed

First deliverables of consultancy firm received

RUP database certified.

PDO Table SPACE

Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO


1 2 3

Strengthening of the Urban CCT Program and Implementation of the Integrated Transition Strategy

Beneficiaries of social safety net programs (CRI, Number)

1,130,140.00 1,130,140.00 1,130,140.00 1,130,140.00 1,130,140.00

Beneficiaries of social safety net programs - Female (CRI, Number)

595,447.00 595,447.00 595,447.00 595,447.00 595,447.00

The Rural Integrated Transition Strategy designed (Text)

None Rural strategies designed and approved.

Number of schools that have been trained on vocational training (skills for life and jobs) (Number)

0.00 0.00 10.00 25.00 40.00

Number of urban CCT beneficiaries who complete 9th grade and enroll in 10th grade (Number)

645.00 850.00 1,055.00 1,260.00 1,465.00


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1 2 3

Number of female urban CCT beneficiaries who complete 9th grade and enroll in 10th grade (Number)

309.00 408.00 506.00 605.00 703.00

Number of urban CCT beneficiaries in the three prioritized municipalities of the Project who received a micro-credit (Number)

0.00 200.00 400.00 700.00 1,100.00

Institutional strengthening for the CCT Program and Integration of the Social Protection System

Gender sensitive messages integrated into materials developed (Text)

None

Gender sensitive messages integrated into soft skills training and communication materials

Soft skills training materials and communication materials implemented with gender sensitive messages

Soft skills training and communication materials with gender sensitive messages validates through the beneficiary satisfaction survey.

Soft skills training materials and communication materials updated

Percent of urban CCT program beneficiary households that appear in the first payroll for the calendar year and received three consecutive payments in a calendar year (Percentage)

0.00 0.00 37.00 42.00 47.00

Number of urban CCT beneficiaries completing financial inclusion orientation (Number)

0.00 2,050.00 3,700.00 5,350.00 8,650.00

Number of female urban CCT beneficiaries completing financial inclusion orientation (Number)

0.00 1,640.00 2,960.00 4,280.00 6,920.00

The Social Protection Policy Updated (Text)

SP Policy prepared in 2013 Action Plan established for the updating of the SP Policy

Updated SP Policy drafted Socialization and validation of the draft revised SP Policy conducted

Final draft of updated SP Policy completed

Unification of the urban and rural Urban and Rural CCTs Operational Manual of the Implementation of the Program unified


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1 2 3

CCTs for the integration of the CCT Program (Text)

operated separately. Program standarized unified CCT Program Operational Manual

Percentage of complaint/grievance filed in GRM responded within five business days of receipt (Percentage)

0.00 50.00 60.00 70.00 80.00

Percent of urban CCT beneficiaries who report that they received satisfactory/adequate response to their grievances reported through the GRM according to the beneficiary satisfaction survey (Percentage)

0.00 65.00

Impact evaluation of the integrated transition strategy conducted (Text)

None conducted Endline data collection and analysis completed.

Contingency Emergency Response Component

Time taken to disburse funds requested by the Government for an eligible emergency (Weeks)

0.00 4.00

IO Table SPACE

UL Table SPACE

Monitoring & Evaluation Plan: PDO Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Percent of urban CCT beneficiaries who are in the bottom two quintiles of the

Percent of urban CCT beneficiary households who

Annual.

National household

The National Statistics Institute (INE) collects

INE collects the data,


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income distribution received the benefits in the last two years and are in the bottom two quintiles according to the latest national household survey (EPHPM).

survey (EPHPM).

the household survey annually.

SCGG will analyze.

Number of urban CCT beneficiaries in the three prioritized municipalities of the Project who complete upper secondary school (11th grade or 12th grade)

Number of urban CCT beneficiaries in the three prioritized municipalities of Coloma, San Pedro Sula and the Central District of Tegucigalpa who complete upper secondary school (11th grade or 12th grade)

Annual

The SIG Platform and the Secretary of Education MIS (SACE)

Based on the SIG Platform and Secretariat of Education Administrative data.

SSIS and SEDUC

Number of female urban CCT beneficiaries in the three prioritized municipalities of the Project who complete upper secondary school (11th grade or 12th grade) (Number)

Number of female urban CCT beneficiaries in the three prioritized municipalities of Choloma, San Pedro Sula, and the Central District of Tegucigalpa who complete upper secondary school (11th grade or 12th grade) )

Annual

The SIG Platform and SEDUC MIS (SACE)

Administrative data based on SIG and SACE.

SSIS SIG team in collaboration with SEDUC.

Percent of CCT beneficiaries receiving cash benefits via an alternative payment mechanism

Percent of CCT beneficiary households (urban and rural) receiving CCT benefits through an improved payment mechanism.

Annual

The SIG Platform.

Total number of CCT beneficiary households paid, and those paid through improved payment mechanism will be identified in the SIG Platform payroll creation.

CCT Program UCP/SIG Platform team.


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Certification of the RUP to ensure the quality of the targeting system

International certification process of the RUP completed.

Implementation phases.

Progress report.

Supervision.

UCP and CENISS.

ME PDO Table SPACE

Monitoring & Evaluation Plan: Intermediate Results Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Beneficiaries of social safety net programs Twice a year.

The SIG Platform

The SIG Platform

The SIG Platform team/UCP.

Beneficiaries of social safety net programs - Female

Twice a year.

The SIG Platform

The SIG Platform

The SIG Platform team and UCP.

The Rural Integrated Transition Strategy designed

Integrated transition strategies designed and approved for urban and rural areas, respectively.

Twice during the project.

Progress report

Supervision.

CCT Program UCP.

Number of schools that have been trained on vocational training (skills for life and jobs)

Number of schools (10th to 12th grade) in Choloma, San Pedro Sula, and the Central District of Tegucigalpa whose teachers have been trained on how to give vocation training (skills for life and jobs).

Annual.

Supervision. Progress Report

Supervision.

SSIS- UCP

Number of urban CCT beneficiaries who complete 9th grade and enroll in 10th grade

Number of urban CCT beneficiaries who complete 9th grade and enroll in 10th grade in urban CCT nationwide

Annual

The SIG Platform and SEDUC MIS (SACE)

Administrative data based on the SIG Platform and SEDUC SACE.

CCT Program UCP in collaboration with SEDUC.


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Number of female urban CCT beneficiaries who complete 9th grade and enroll in 10th grade

Number of female urban CCT beneficiaries who complete 9th grade and enroll in 10th grade, in urban CCT nationwide

Annual

The SIG Platform and SEDUC's SACE

Administrative data based on the SIG Platform and SEDUC's SACE.

SSIS UCP in collaboration with SEDUC.

Number of urban CCT beneficiaries in the three prioritized municipalities of the Project who received a micro-credit

Number of urban CCT beneficiaries in the three prioritized municipalities of Choloma, San Pedro Sula, and the Central District of Tegucigalpa who received a micro-credit

Annual

The SIG Platform and Credit Solidario MIS

Administrative data based on the SIG Platform and Credito Solidario MIS

SSIS UCP in collaboration with Credit Solidario.

Gender sensitive messages integrated into materials developed

Gender sensitive messages are integrated into the soft skills development materials and communication materials developed through the project, validated through the beneficiary satisfaction survey and updated incorporating findings from the beneficiary satisfaction survey.

Annual

Progress report and supervision

Supervision

UCP

Percent of urban CCT program beneficiary households that appear in the first payroll for the calendar year and received three consecutive payments in a calendar year

Percentage of urban CCT beneficiary households that appear in the first payroll of the calendar year and receives three consecutive payments in a calendar year

Annual

The SIG Platform

The SIG Platform payment information

CCT Program UCP/SIG Platform team

Number of urban CCT beneficiaries completing financial inclusion orientation

Percent of urban CCT beneficiaries that received

Annual

Progress report.

Supervision.

CCT Program UCP,


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orientation on financial inclusion.

payment team.

Number of female urban CCT beneficiaries completing financial inclusion orientation

Number of CCT beneficiaries completing the orientation on financial inclusion (80 percent of the beneficiaries being female).

Annual

Progress report

Supervision.

CCT payment team and UCP/SSIS

The Social Protection Policy Updated

An updated Social Protection Policy is drafted, socialized and validated, and draft finalized.

Annual

Progress report

Supervision.

CCT Program UCP.

Unification of the urban and rural CCTs for the integration of the CCT Program

Urban and Rural CCT Programs are unified into one Program.

Annual.

Progress Report.

Supervision.

SSIS UCP.

Percentage of complaint/grievance filed in GRM responded within five business days of receipt

Percentage of cases received in the grievance redress mechanism responded within three days of receipt.

Annual

The SIG Platform beneficiary care system module (Modulo de atencion a praticipantes, MAP).

The SIG Platform MAP.

The SIG Platform team.

Percent of urban CCT beneficiaries who report that they received satisfactory/adequate response to their grievances reported through the GRM according to the beneficiary satisfaction survey

Percent of urban CCT beneficiaries who reported grievances through the GRM are satisfied with the response or reported receiving an adequate response to their grievance, according to the beneficiary

Once. Beneficiary satisfaction survey will be carried out in Year 3 of the project.

Beneficiary satisfaction survey

Household survey

Consultant firm contracted by UCP/SSIS


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satisfaction survey

Impact evaluation of the integrated transition strategy conducted

Impact evaluation baseline data collection, endline data collection and analysis conducted and completed.

Annual

Progress report.

Supervision.

CCT Program UCP.

Time taken to disburse funds requested by the Government for an eligible emergency

This indicator will be monitored only when the CERC is triggered.

SEFIN

Progress report.

SEFIN

ME IO Table SPACE


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ANNEX 1: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN

COUNTRY: Honduras

Social Protection Integration Institutional and Implementation Arrangements

1. The proposed project will be implemented by the SSIS at the SEDIS, in line with the institutional arrangements established by the Government to execute the BVM CCT Program. Day-to-day management of the project including procurement and supervision of all activities will be conducted by the UCP under the SSIS.

2. The CCT Program is managed by the SSIS with the oversight of the Technical Committee, which oversees the implementation of the CCT Program, including the reformed urban CCT Program, once the program is unified. The Technical Committee approves the program’s operational legal framework and oversees the program operation. The committee consists of the following members: the SEDIS, SSIS, Secretary of Health, SEDUC, Secretary of Finance (SEFIN), SCGG, and CENISS. The reformed urban CCT is expected to provide transfers for school-aged children as noted in the table below.

Table 1.1. Revised Annual Urban CCT Education Grant Schedule, in HNL

Basic Grant 1st to 6th Grades 7th to 9th Grades 10th to 12th Grades

First Child

Two or More

First Child

Two or More

First Child

Two or More

Current 3,480 2,520 3,000 3,000 3,480 — —

Revised 2,000 1,200 1,400 2,400 2,700 3,400 3,900

3. Under the project, three cash transfer payments a year will be made based on verification of compliance with the education co-responsibility in urban municipalities. The verification of the education co-responsibility will rely on the SACE, which records school enrollment, attendance, and grade completion for all formal schools at all grade levels nationwide. Through online interoperation between the SIG Platform and SACE, the CCT Program will be able to verify the beneficiary children and youth school enrollment and attendance, which will determine the CCT benefit amounts. The SEDUC will continue to strengthen and operate the SACE, particularly to ensure that secondary school enrollment and attendance data are accurately provided, as the information for 10th up to 12th grades are newly required for the reformed urban CCT Program.

4. New households will be incorporated into the CCT program to maintain overall coverage. Given the extension of the education grant to 12th grade, households eligible for the CCT Program who continue to meet the co-responsibility will remain in the program until the youngest child finishes 11th or 12th grade. This will result in reduced numbers of beneficiary households ‘graduating’ from the program in the next two years, and, consequently, lesser numbers of beneficiary households will be newly incorporated during those two years. Nevertheless, some space for new incorporations to the program is expected, with no new incorporation of households with only primary school children (1st to 6th graders) and the ongoing updating of households’ socioeconomic information by CENISS. Based on the updated information, some


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of these households may no longer be categorized as extremely poor and hence will no longer be eligible for the CCT Program.

5. Cash transfers to beneficiaries will be made through a payment agency pursuant to the provisions of Financial Institution Agreements signed between the SSIS and relevant financial institutions, and under terms and conditions that are acceptable to the Association. The SSIS is exploring engaging the BCH to channel cash transfers through their Automatic Clearance House ‘ACH Pronto’, linked to CEPROBAN which allows instantaneous transfers to any accounts in the 18 participating banks. Initiating payments through the BCH’s ACH Pronto and CEPROBAN could be targeted in 2019, starting with CCT Program beneficiaries who already own bank accounts, scaling up to other beneficiaries who open bank accounts through the financial inclusion efforts. During implementation, other alternative payment agents may be identified and streamlined into the payment mechanism for the program to undertake payments in geographic areas where beneficiary households do not have access to private banks.

Figure 1.1. Project Components and Activities under Each Component

6. Implementation of the urban transition strategy will require coordination and collaboration with multiple agencies including the SEDUC, Crédito Solidario Program, and implementors of ALMPs. The urban transition strategy implemented under Sub-component 1.2 will include: (a) the expansion of alternative education, (b) the design and provision of vocational training (soft skills for life and jobs), and (c) referrals to short-term vocational skills training and assistance to apply to microcredit programs. These activities will only be implemented on a pilot basis in the three selected urban municipalities of Choloma, San Pedro Sula, and the Central District of Tegucigalpa. The provider of alternative education will follow the national curriculum and feed enrollment and student achievement information to the SACE. Materials for the school curriculum “vocational skills training (soft skills for life and jobs)” will be developed and


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implemented in schools on a pilot basis in the three selected municipalities, targeting 9th graders to 11th graders. Although the curriculum for vocational skills training already exists, there are currently no pedagogical materials for teachers to follow. The project will therefore benefit all children attending the targeted schools along with the CCT beneficiary youth. Short-term vocational training will be provided in the communities where the youth live, based on a local market study conducted during the first year of the project. These training courses are expected to have a duration of approximately four months, in addition to entrepreneurship training provided by the Crédito Solidario Program. Participants for the short-term vocational training may be youth or adults of current or past CCT beneficiary households. Urban CCT program beneficiaries’ participation in these short-term vocational training or microcredit programs is optional and therefore, not included as a co-responsibility of the CCT Program.

7. Sub-component 2.1 will support investments to improve service delivery of the CCT Program managed by the SSIS, including reinforcements to the program’s MIS, the communication strategy, M&E including a process evaluation, beneficiary satisfaction survey and an impact evaluation, and strengthening of the GRM. The project will build on the systems developed by the Social Protection Project (Report No. 54132-HN), and as these delivery systems were built for the CCT Program as a whole, the continued investments under this project will benefit the CCT Program operation nationwide.

8. Reinforcements for the Beneficiary Care System and the GRM. The project will support and strengthen the Beneficiary Care System and the GRM developed through the previous Social Protection Project. Lessons learned for the effective implementation of the GRM from the Social Protection Project include the importance in the use of mobile equipment (for example, tablets) to ensure that the facilitators on the ground have access to the GRM system to report and follow up on grievances.

9. Diagnostic, reinforcement, and upgrading of the SIG Platform. The project will finance a diagnostic of the functions of the MIS, established through the financing of the Social Protection Project. Based on the findings of the diagnostics, the project will finance reinforcements and updates to the system by prioritizing issues related to enhanced information security and accountability. Additional modules to the MIS will be developed to monitor the implementation of the transition strategy and to monitor the co-responsibilities for the urban CCT Program. The project will also finance purchase of software licenses and small information technology (IT) equipment.

10. Monitoring of the CCT Program and impact evaluation of the urban transition model. As the urban CCT has not undergone similar M&E processes as the rural CCT Program over the past eight years, the project will strengthen the monitoring of the urban CCT Program implementation through the preparation of a process evaluation and a round of beneficiary satisfaction surveys. Given the pilot nature of the implementation of the urban transition strategy, it will be rigorously evaluated. A baseline survey will be conducted during the first year of the project and at the beginning of the third year of the project as well as an end-line survey at the end of the fourth year of the project. A firm will be contracted to conduct the impact evaluation data collection and analysis. Due to the short period between the treatment/exposure to the interventions and the end-line data collection, the labor market insertion will not be the main outcome indicator, but the evaluation will assess the impact of the soft skills training, career orientation, vocational skills training, and attitudes and aptitudes of beneficiaries for future careers.


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11. Sub-component 2.2 supports activities led by the SCGG and CENISS in line with their institutional mandates. The SCGG will lead the activities related to the implementation of the Social Protection Law and the Vida Mejor Platform. CENISS on the other hand manages the RUP and the ROI and will continue to ensure the effective poverty targeting of social programs. Interagency agreements will be signed with the SCGG and CENISS to clarify roles.

12. Strengthening of the targeting and M&E of the SP Platform will support the strengthening of the SCGG’s role in monitoring and evaluating the implementation of the SP Policy and support CENISS in enhancing its beneficiary targeting for SP programs. The M&E of the SP Policy will include workshops for knowledge exchange on M&E systems and practices, technical support for the revision of the targeting systems’ PMT formula to be aligned to the new poverty lines expected to be available in 2021, support for the development of strategic planning and evaluation of the SP Policy, and assistance in strengthening the SCGG’s leading role in improving SP program administrative registries and management systems.

13. Certification of the targeting process, data management, and data quality. Certification of the targeting processes in data management and data quality will provide an international seal of approval for the quality of the system. An international firm will be hired to review the processes adopted by the targeting system managed by CENISS, ensuring that high standards are maintained for the management and updating of the RUP database.

14. The UCP and its operational costs to run the operation of the project. The UCP will be housed in the SSIS, with one project technical specialist, one dedicated procurement specialist, two procurement assistants, one FM and disbursement specialist, one accountant, and one monitoring specialist financed by the project. The UCP will continue to be responsible for implementing accountability mechanisms for the project and for administering the institutional procedures and systems for interinstitutional coordination and monitoring and evaluating the overall implementation. Although the UCP will continue to execute the procurement and FM functions for the project, the SEDIS has recently completed a reform centralizing administrative functions, such as procurement and FM, to the UPEG under the newly established Sub-secretariat of Administration. The UPEG will coordinate and oversee the budgeting and managing of program funds, including the financing of this project, requiring close coordination between the UCP and the UPEG. Once UPEG is firmly established, an assessment will be carried out to confirm if certain administrative functions of the project could be absorbed by UPEG.

Implementation Support Plan

15. World Bank team members involved in implementation support will be based in Washington DC, the Honduras Country Office, and the El Salvador Country Office to ensure timely, efficient, and effective implementation support. The core team is expected to conduct four formal implementation support missions during the first year of implementation, including field visits. After the first year, the periodicity of the implementation support missions is expected to be reduced to two missions a year and maintained throughout the project. Detailed inputs from the World Bank team are as follows:

(a) Technical inputs. (i) technical experts and professionals to support the elaboration of terms of reference (consultant and non-consultant services); (b) field visits to follow implementation of the planned operational enhancements; and (c) TA for implementation of the urban transition strategy, technical assessments, and policy reviews.


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(b) Fiduciary requirements. During preparation, the World Bank team identified capacity-building needs to strengthen FM capacity and improve procurement management in the context of World Bank operations. Support will be provided from the Honduras Country Office. Formal implementation support of FM reports and procurement will be carried out semiannually, while prior review will be carried out for contracts specified in the Procurement Plan as required.

(c) Social safeguards. During implementation, the social specialist will closely monitor the implementation and compliance of safeguard requirements under the project, conducting at least two field visits a year.

16. The project will require the following implementation support in the first year. The Implementation Support Plan will be revised after the first year of implementation.

Table 1.2. Required Project Supervision for the First Year

Skills Needed Number of

Staff Weeks Number of Trips

Comments

Senior SP specialists (task team leaders)

14 4 Senior SP specialists will oversee the entire operation, supervise technical and fiduciary aspects, and ensure effective implementation of the project.

Senior SP specialist 8 4 The senior SP specialist will provide support in policy dialogue.

SP specialist 8 4 The SP specialist will provide overall implementation support to the SP system agenda.

Procurement specialist 6 0 The procurement specialist will support the implementing agencies on related issues.

Senior FM specialist 6 0 The senior FM specialist will support the implementing agencies on related issues.

Safeguards specialist 3 2 The safeguards specialist will ensure effective inclusion of indigenous peoples and Afro-Hondurans into the project design and implementation.


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ANNEX 2: ECONOMIC ANALYSIS

COUNTRY: Honduras

Social Protection Integration A. Project’s Expected Development Impact

Component 1: Strengthening of the Urban Conditional Cash Transfer Program and implementation of the Integrated Transition Strategy

1. Sub-component 1: Urban CCT Reform and financing of cash transfers. The Project will alleviate current poverty by supporting consumption through periodic CCTs paid to mothers and promote the accumulation of human capital among children by way of conditionalities.37 Component 1 finances a portion of CCTs paid out through the GoH’s CCT Program to eligible extremely poor beneficiary households living in urban areas. CCTs are programs that transfer cash to poor and extremely poor households on the condition that those households make prespecified investments in the human capital of their children.38

2. Based on the urban CCT Program’s current schedule of payments, the maximum amount for which a household is eligible is HNL 9,960 per year, or HNL 830 per month—the equivalent of about US$34 per month per household based on eligibility and compliance with health and education co-responsibilities. Depending on the demographics of each household, some households would be eligible for the entire transfer, while others would only be eligible for a lesser amount depending on the number of children they had in primary and secondary school. Based on current demographics, the median and mean monthly transfer amounts would be approximately US$22 and US$26, respectively, with the median benefit amount representing 12 percent of median household income of the urban extreme poor or approximately 15 percent of post-transfer household income of the poorest quintile (US$175).39 This benefit amount is in line with the global average of CCT programs—15.6 percent.40 However, because the extreme poverty gap is so high in Honduras, the transfer is a modest share of the food staples basket. The median transfer amount—US$22—represents just 6.5 percent of the food staples basket (extreme poverty line) in urban areas, assuming an average of 5 members per household based on demographics from the 2016 EPHPM.

3. In this context, conditional on the verification of co-responsibilities, the program will continue to fund transfers to approximately 50,000 extremely poor households in urban areas. In the first year, the project will finance all the urban cash transfers, while from the second year onward, the project funds

37 P. Ibarrarán, N. Medellín, F. Regalia and M. Stampini, 2017. “How Conditional Cash Transfers Work: Good Practices after 20 Years of Implementation.” Inter-American Development Bank 38 Health and nutrition conditionalities generally require periodic checkups, growth monitoring, and vaccinations for children less than 5 years; perinatal care for mothers; and attendance by mothers at periodic health information talks. Education conditions usually include school enrollment, attendance on 80–85 percent of school days, and occasionally some measure of performance. Source: Fiszbein, A., and N. R. Schady. 2009. “Conditional Cash Transfers: Reducing Present and Future Poverty.” The World Bank. 39 In agreement with INE definitions, the urban extreme poor are defined as those with a household income of less than HNL 1,649.01 per capita (per month) (the basic food basket in urban areas), equivalent to US$72, in 2016. 40 World Bank, 2018. The state of social safety nets 2018. Washington, D.C.: World Bank Group.


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will go toward funding payments to approximately half of these households. In total, the urban CCT Program will benefit approximately 6.0 percent of extremely poor Honduran households and 16.2 percent of the urban extreme poor.41

Program Impacts

4. In general, CCT programs have been found to generate positive impacts with respect to: (a) poverty reduction (that is, Foster–Greer–Thorbecke [FGT] class of poverty measures on increased total and food expenditures); (b) education (that is, increased school attendance); and (c) health and nutrition (that is, use of health services, dietary diversity, and anthropometric measures).42 The majority of impact evaluations of CCT programs have occurred in the context of rural CCT programs. For example, impact evaluations conducted in the context of the previous World Bank-funded Social Protection Project in Honduras are consistent with the aforementioned impacts, with the rural CCT Program resulting in a decrease in the poverty headcount and gap, increased school attendance (with increased impacts the further along a child was in school43), and improved health outcomes.44 Positive impacts in the context of rural CCT suggest that urban CCT could demonstrate similar positive impacts. The evidence that exists with respect to the impacts of urban CCT programs indicates that programs also lead to increased consumption and increased school enrollment and attainment and contribute to improved anthropometric measures (that is, child weight-for-age, height-for-age, and birth weight) and women’s empowerment.45

41 Based on data from the 2017 EPHPM, there are 834,186 and 308,263 extremely poor households in Honduras at the national and urban levels, respectively. 42 There is also strong evidence that CCT programs have reduced child labor. There is, however, less evidence with respect to learning and cognitive development outcomes. For health, CCTs have led to increases in the use of health services and dietary diversity; however, complementary actions may be required to achieve greater and more consistent impacts on child anthropometric measures. Source: Bastagli, F., J. Hagen-Zanker, L. Harman, V. Barca, G. Sturge, T. Schmidt, and L. Pellerano. 2016. “Cash Transfers: What Does the Evidence Say. A Rigorous Review of Programme Impact and the Role of Design and Implementation Features.” London: Overseas Development Institute. 43 Children tend to drop out of school more often the further along they are in their studies due to the increased opportunity costs associated with attending school at an older age. 44 Education impacts were found to be more pronounced than those on health outcomes. Positive health impacts include increases in height and weight monitoring and visits to health centers with infants and reductions in the prevalence of Acute Diarrheal Disease, Acute Respiratory Infections, and malnutrition among children. 45 Monthly consumption expenditure (Colombia’s Familias en Acción); value of food consumption; school enrollment, attainment, and time devoted to studying (Mexico’s Opportunidades); educational attainment (Jamaica’s PATH); child labor force participation (Colombia’s Familias en Acción and Mexico’s PROGRESA); significant reductions in low birth weight (Colombia’s Familias en Acción); women’s empowerment (Brazil’s Bolsa Familia); and delayed marriage, first and second births, and time to premarital sex (Mexico’s Oportunidades). Sources: O. Attanasio, E. Fitzsimons, and A. Gomez, 2005. The impact of a conditional education subsidy on school enrolment in Colombia.; M. Angelucci, and O. Attanasio, O., 2009. “Oportunidades: program effect on consumption, low participation, and methodological issues”. Economic development and cultural change, 57(3), pp.479-506.; M. Angelucci, O. Attanasio, and V. Di Maro, 2012. “The impact of Oportunidades on consumption, savings and transfers”. Fiscal Studies, 33(3), pp.305-334.; J.R. Behrman, J. Gallardo-Garcia, S.W. Parker, P.E. Todd, and V. Vélez-Grajales, 2012. “Are conditional cash transfers effective in urban areas? Evidence from Mexico”. Education Economics, 20(3), pp.233-259.; O. Attanasio, E. Fitzsimons, A. Gomez, M.I. Gutierrez, C. Meghirand A. Mesnard, 2010. “Children’s schooling and work in the presence of a conditional cash transfer program in rural Colombia”. Economic development and cultural change, 58(2), pp.181-210.; J.R. Behrman, J. Gallardo-Garcia, S.W. Parker, P.E. Todd, and V. Vélez-Grajales, 2012. “Are conditional cash transfers effective in urban areas? Evidence from Mexico”. Education Economics, 20(3), pp.233-259.; M.M. Gaarder, A. Glassman, and J.E. Todd, 2010. “Conditional cash transfers and health: unpacking the causal chain. Journal of development


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5. Measuring the impact of CCT programs is complex given the multidimensionality of programs and the large number of outcomes involved. In short, CCT programs attempt to produce an impact at two periods. In the first instance (in the short term), transfers aim to allow families to overcome income poverty. In the second instance (in the medium and long term), through compliance with conditionalities associated with increased use of education and health services, programs aim to promote families’ investment in the human capital of their children through education and improved nutrition. The hope is that increased human capital allows for improved labor market outcomes and increased income later in life, allowing children to escape the intergenerational poverty trap.46

Economic Analysis

6. The economic analysis detailed herein utilized two strategies. For one, the team simulated the near-term effects of transfers on urban extreme poverty. Next, the team analyzed the potential effects of an increase in total years of schooling on future income. These are simple simulations that estimate direct effects and do not consider behavioral responses (that is, female empowerment) or other relevant dimensions.

7. Simulations consisted of selecting fictional beneficiaries based on: (a) extreme poverty status, (b) living in urban areas, and (c) satisfying eligibility criteria (that is, have children registered in the 1st up to 12th grades at a public school) and then analyzing the intervention’s potential impacts. For this analysis, simulations were conducted using the 2016 National Household Survey (Encuesta Permanente de Hogares de Propósitos Múltiples). The analysis assumes perfect targeting of urban extremely poor households (although particularly in urban areas, this is not expected to be realized) and should thus be interpreted as the best-case scenario with respect to poverty impacts.

8. Short-term objective - extreme poverty reduction. Transfers will increase the income and consumption of beneficiary households and therefore reduce the extreme poverty gap. The FGT class of poverty measures—the headcount index or FGT0, poverty gap index or FGT1, and poverty severity index or FGT2—are used to analyze poverty, as well as the poverty impacts of interventions. The headcount index measures the proportion of the population that is poor. The poverty gap index measures the extent to which individuals fall below the poverty line (that is, poverty gap) as a proportion of the poverty line. The squared poverty gap index (that is, poverty severity index) reflects changes in inequality among the poor, increasing the weight put on the income level of the poorest members in society relative to those that are less poor.47 The figures in Table 2.1 show the FGT class of poverty measures before (that is, without) and after (that is, with) the project (at the household level, consistent with the way in which the National Statistics Institute [Instituto Nacional de Estadística, INE) calculates poverty statistics), assuming that benefits are channeled to 50,000 extremely poor urban households. The analysis does not take into consideration impacts of the rural CCT Program. Estimates indicate that transfers will contribute to 0.2 percentage point and 0.3 percentage point reductions in the total and urban extreme poverty headcounts, respectively, with 0.2 percentage point and 0.3 percentage point reductions in the total and urban

effectiveness”, 2(1), pp.6-50.; World Bank IEG, 2014. “Social Safety Nets and Gender: Learning from Impact Evaluations and World Bank Projects.” World Bank.; and M. Gulemetova-Swan, 2009. “Evaluating the impact of conditional cash transfer programs on adolescent decisions about marriage and fertility: the case of Oportunidades.” 46 O. Attanasio and C. Murgueitio, C., 2017. Evaluación de Impacto del Programa de transferencias monetarias Bono Vida Mejor. Econometria Consultores. 47 J. Haughton and S.R. Khandker, 2009. Handbook on poverty+ inequality. World Bank Publications.


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extreme poverty gap; either way small impacts are expected. There is no effect on poverty reduction, in general, given that beneficiaries that escape extreme poverty will still be poor.

Table 2.1. Poverty, Extreme Poverty, and Gini Indicators (%)

Urban and Rural Urban Only Without With Without With FGT0 38.7 38.5 28.2 27.9

Extreme Poverty

FGT1 18.3 18.2 12.1 11.8

FGT2 11.5 11.3 7.3 7.0

FGT0 61.1 61.1 59.8 59.8

Poverty FGT1 31.2 31.1 28.8 28.7

FGT2 20.1 20.0 18.0 17.7

Gini 52.4 52.3 48.6 48.4

Note: Team estimates based on SEDLAC (CEDLAS and the World Bank) using the 2016 EPHPM.

9. In addition to smoothing income and reducing extreme poverty, the CCT Program also aims to reduce future poverty. To that end, the program enhances human capital investments in education, health, and nutrition.

10. Long-term objective - human capital investment. Human capital investments are low in Honduras. As demonstrated in Figure 2.1, current trends demonstrate an increase in school dropouts beginning at age 12, the point at which children make the transition from the second to the third cycle of the Honduran school system. Up until that point, enrollment levels are more or less the same for extremely poor Honduran children and non-extremely poor peers.

Figure 2.1. School Enrollment - Children in Urban Households

Source: 2016 National Household Survey (EPHPM).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

5 6 7 8 9 10 11 12 13 14 15 16 17

Age

Non-extreme poor Extreme poor


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11. The CCT Program aims to close the gap in extremely poor households’ school enrollment to ensure that extremely poor households provide their children with the human capital investments necessary for becoming healthy adults, which should, intuitively, lead to increased future incomes and reduce the incidence of intergenerational poverty. As already mentioned, CCT programs in LAC have had significant positive impacts on school enrollment and attendance and monitoring visits to health centers by children. However, in part due to the methodological complexities of evaluating the long-term impacts of CCT programs, the long-term impacts are difficult to estimate.

12. Currently, simulated CCT beneficiaries of school age living in urban areas complete approximately 3.9 years of schooling, relative to 4.6 for non-beneficiaries. For illustrative purposes, this analysis presents results from Mincerian earnings regressions for two groups: (a) formal sector employees and employers (group A) and (b) those working in the informal sector (that is, self-employed, domestic workers, and so on) (group B) (Table 2.2). Regression results indicate that there are significant positive benefits from completing secondary school (between 7 and 9 years of education) with monthly wage premiums of 74.8 percent and 53.2 percent in the formal and informal sectors, respectively.48 These program impacts are expected to result in increased future earnings to an even greater extent. Transfers may also have some additional behavioral impacts, which may increase the future income of their children (that is, improved self-esteem).

Table 2.2. Mincerian Regression - Earnings Equation (Dependent Variable - Log Labor Income)

Source: Staff estimates based on the 2016 National Household Survey (EPHPM). Robust standard errors in parentheses; ***p < 0.01, **p < 0.05, *p < 0.1. Population between 18 and 64 years old.

48 With the dependent variable in log form, the percentage increase in monthly wages associated with a dummy variable

coefficient is calculated as (𝑒𝛽 − 1) × 100eˆB -1 100, where 𝛽 is the estimated coefficient.

(1) (2)

VARIABLES Group A Group B

Age 0.0613*** 0.0517***

(0.00742) (0.00768)

Age squared -0.000685*** -0.000563***

(9.31e-05) (9.59e-05)

Male 0.177*** 0.402***

(0.0283) (0.0315)

Urban 0.295*** 0.293***

(0.0299) (0.0322)

[6] years of schooling 0.444*** 0.175***

(0.0419) (0.0365)

[7-11] years of schooling 0.709*** 0.369***

(0.0469) (0.0480)

[12] years of schooling 0.877*** 0.462***

(0.0464) (0.0599)

[13-15] years of schooling 1.015*** 0.656***

(0.0620) (0.121)

[>16] years of schooling 1.377*** 1.466***

(0.0503) (0.308)

Constant 6.622*** 6.187***

(0.146) (0.150)

Observations 3,933 4,513

R-squared 0.258 0.084


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B. Efficiency

13. Given the limitations in quantifying many of the benefits of the program in monetary terms and the limited evidence base available, a full-fledged cost-benefit or cost-effectiveness analysis is not conducted here. Efficiency is difficult to evaluate given that, although intervention costs are current and certain, benefits are normally delayed and uncertain; further, they are likely not limited to the subset of outcomes analyzed in an impact evaluation.49 Nonetheless, several studies investigating the efficiency (that is, assessments of the cost of interventions in relation to impact on outcomes of interest) of CCT programs are informative with respect to their cost-effectiveness. For example, in Honduras, for every US$4.58, the previous Family Allowances Program contributed to a 1 percent gain in school enrollment.50 For PROGRESA/Oportunidades in Mexico, demand-side subsidies through PROGRESA are more cost-effective than supply-side expansions (that is, building schools).51 For the same program, lifetime earnings of a person with 0.68 more years of education, who works from age 15 to 65, generate a 12 percent return for each additional year of education.52

14. Sub-component 1.2: First Phase Implementation of the Urban Transition Strategy. The project will also strengthen the sustainability of the urban CCT Program by designing and implementing a transition strategy to prepare beneficiary youth for adulthood, by improving access to social and economic inclusion services. Beneficiaries of the transition strategy include parents of children, as well as youth who are 16 years old and above. The strategy will rely primarily on ALMPs, policies that directly intervene in the labor market with the aim of generating more and better employment opportunities for workers.53 Youth employment programs have demonstrated statistically significant positive effects on labor market outcomes (employment, earnings, and business performance). Effective programs contribute to integrate: (a) multiple interventions and services; and (b) profiling and individualized follow-up and monitoring systems.54 In this case, the target of ALMPs will be mothers and children no longer eligible to receive program benefits.

15. The transition strategy entails three components: (a) a soft skills training delivered to all school-age children irrespective of their age; (b) a microenterprise skills training and assistance to apply for microfinance through the GoH program Crédito Solidario; and (c) expansion of alternative education (10th to 12th grades).

49 There may also be a need to account for negative impacts. See World Bank IEG. 2014. “Social Safety Nets and Gender: Learning from Impact Evaluations and World Bank Projects.” World Bank. 50 S. Galiani and P.J. McEwan, 2013. “The heterogeneous impact of conditional cash transfers.” Journal of Public Economics, 103, pp.85-96. 51 D.P. Coady and S.W. Parker, 2002. “Cost‐effectiveness analysis of demand‐and supply‐side education interventions: the case of PROGRESA in Mexico.” Review of Development Economics, 8(3), pp.440-451. 52 J.R. Behrman, S.W. Parker, and P.E. Todd, 2005. “Long-term impacts of the Oportunidades conditional cash transfer program on rural youth in Mexico (No. 122).” Discussion papers//Ibero America Institute for Economic Research. 53 Examples of such policies include training programs that aim to increase the skills of the labor supply, wage subsidies that aim to increase firms’ demand for labor, and job search and matching assistance that aims to better enable firms and workers to find and contract with one another. Source: McKenzie, D. 2017. “How Effective Are Active Labor Market Policies in Developing Countries? A Critical Review of Recent Evidence.” The World Bank Research Observer 32 (2): 127–154. 54 J. Kluve, S. Puerto, D. Robalino, J.M. Romero, F. Rother, J. Stöterau, F. Weidenkaff and M. Witte, 2018. “Do youth employment programs improve labor market outcomes? A quantitative review.” World Development, 114, pp.237-253.


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16. The microenterprise skills training and application to microfinance program assisted by the project is loosely modeled after a graduation program first implemented by Bangladeshi NGO BRAC. Generally, in a BRAC graduation model, participants receive a complementary set of interventions, including: (a) a productive asset of their choice, (b) training and support for that asset, (c) life skills coaching, (d) weekly consumption support for a fixed period, (e) access to a savings account, and (f) health information or services. This set of interventions is designed to provide a ‘big push’ over a limited amount of time to help households start up their own business and, in doing so, overcome the poverty trap. Evidence suggests that graduation strategies can be effective at helping the poor establish sustainable self-employment and generate lasting improvements in well-being (that is, consumption, food security, income, savings, and health).55 In the context of the project, the strategy will include two components: (a) self-employment; and (b) assistance to apply for microfinance. Employment training ensures that beneficiaries have the necessary skills to start up a microenterprise; microcredit programs aim to promote self-employment through loans. Beneficiary households will have the option of choosing the microenterprise skills training and/or microfinance alternatives.

17. Self-employment training. Training in skills useful for the labor market has been found to contribute to increased productivity.56 In recognition of the link between skills and productivity, the World Bank’s Skills Toward Employability and Productivity (STEP) prescribes as its third step ‘Building job-relevant skills’.57 There is evidence suggesting that self-employment training can be effective, affecting outcomes including sales, business practices associated with improved business performance, and business survival.58,59,60 Training participants are expected to be more likely to: (a) have their own business; and (b) receive a higher income.

55 Banerjee et al. (2015) investigate the impacts of a graduation program in which the poorest members of villages in six countries (including Honduras) are provided with a productive asset grant, training and support, life skills coaching, temporary cash consumption support, and, in some cases, access to savings accounts and health information or services. In the case of Honduras, positive results after one year are, in some cases, no longer present given that a large percentage of households’ productive asset--chicken--had died due to illness. There is other evidence on the effectiveness of the BRAC model and evidence on the effectiveness of entrepreneurship programs in Peru combining training with either a grant or a loan. Sources: A. Banerjee, E. Duflo, N. Goldberg, D. Karlan, R. Osei, W. Parienté, J. Shapiro, B. Thuysbaert, and C. Udry, 2015. “A multifaceted program causes lasting progress for the very poor: Evidence from six countries”. Science, 348(6236), p.1260799.; O. Bandiera, R. Burgess, R., N. Das, S. Gulesci, I. Rasul, and M. Sulaiman, 2013. “Can basic entrepreneurship transform the economic lives of the poor?”.; A.U. Ahmed, M. Rabbani, M. Sulaiman, and N.C. Das, 2009. “The impact of asset transfer on livelihoods of the ultra-poor in Bangladesh”. BRAC Res. Monogr. Ser, 39, pp.339-380.; M.S. Emran, V. Robano, and S.C. Smith, 2014. “Assessing the frontiers of ultrapoverty reduction: evidence from challenging the frontiers of poverty reduction/targeting the ultra-poor, an innovative program in Bangladesh”. Economic Development and Cultural Change, 62(2), pp.339-380.; N.C. Das and F.A. Misha, 2010. “Addressing extreme poverty in a sustainable manner: Evidence from CFPR programme”. BRAC CFPR Work. Pap, 19.; G. Betcherman, M. Godfrey, S. Puerto, F. Rother and A. Stavreska, 2007. “A review of interventions to support young workers: Findings of the youth employment inventory”. World Bank Social Protection Discussion Paper, 715, pp.461653-1253133947335.; and S. Urzúa and E. Puentes, 2010. “La evidencia del impacto de los programas de capacitación en el desempeño en el mercado laboral”. Inter-American Development Bank. 56 World Bank. 2010. “Stepping up Skills for More Jobs and Higher Productivity.” Washington, DC: World Bank Group. 57 Ibid. 58 M. Valdivia, 2015. “Training or technical assistance? A field experiment to learn what works to increase managerial capital for female microentrepreneurs.” 59 O. Puerto, 2007. Learning from International Experiences: The Youth Employment Inventory. Background paper for Sierra Leone Economic and Sector Work, World Bank, Washington, DC. 60 S. Urzúa and E. Puentes, 2010. “La evidencia del impacto de los programas de capacitación en el desempeño en el mercado laboral”. Inter-American Development Bank.


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18. Assistance to apply for microcredit Loans provided by Crédito Solidario will be assumed entirely by the Crédito Solidario Program. Crédito Solidario is a multicycle credit product in which the entrepreneur begins the first cycle with up to HNL 5,000 (approximately US$205) for a period of 6 months. During the second loan, the entrepreneur receives up to HNL 10,000 (US$410) for a period of 12 months. During the third cycle, the entrepreneur may apply for a loan of up to HNL 20,000 (US$820) for a period of 18 months. The entrepreneur may spend the loan on working and/or investment capital. All loans carry an interest rate of 12 percent per year with weekly payments.

Component 2: Institutional Strengthening for the CCT Program and Integration of the Social Protection System

19. The project will also provide TA to strengthen the institutions implementing the GoH’s Vida Mejor Platform, improving delivery of SP and labor market programs and services. Activities to be completed include: (a) support for the SP system’s financial inclusion strategy; (b) updating of the SP Policy; (c) interagency coordination; (d) provision of TA certification of the RUP; and (e) updating of the PMT model for selecting beneficiaries. With respect to the CCT Program, this component will support improvements to the program’s implementation arrangements, including: (a) support for strengthening beneficiary care system which includes the GRM; (b) strengthening of the payment mechanism; (c) design and implementation of the communication campaign; and (d) design of the rural transition model.

20. Activities under this component are expected to improve the effectiveness of social assistance programs to poor and vulnerable households to help address their myriad vulnerabilities, improve interagency efficiency through improved coordination and information sharing among government agencies in providing support to households, and improve responsiveness to households by providing a reliable repository database of household information. Improvements to the RUP and an updating of the PMT will help reduce leakage, double dipping, and fraud with respect to benefits. Estimates based on international experiences indicate that targeting potential beneficiaries of social assistance can account for 25–75 percent of all administrative costs related to the implementation of social programs. Additionally, given Honduras’ precarious risk profile, improvements made to the Vida Mejor Platform would ensure fast response to households in the event of a crisis. Moreover, the harmonization and updating of targeting mechanisms should decrease inclusion and exclusion errors, thus making spending on assistance programs more progressive and effective. Lastly, an effective financial inclusion strategy in the context of the CCT Program may be beneficial to the long-term sustainability of the CCT Program, given that similar strategies have contributed to households increasing savings levels in other contexts (that is, Mexico).61

C. Fiscal Cost Analysis

21. The CCT Program represents a significant expense for the GoH and, as a result, its fiscal sustainability has been carefully analyzed by the Government. With an average benefit level of US$26 per month per family, the total cost of transfers paid to the 50,000 urban beneficiary families would represent approximately 0.06 percent of GDP 2020, declining over time, assuming no increase in benefit levels nor the number of beneficiary households (Table 2.3). The GoH has a financing plan that includes both

61 P. Bachas, P. Gertler, S. Higgins, and E. Seira, 2018. “How debit cards enable the poor to save more (No. w23252).” National Bureau of Economic Research.


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national and external (IDA and the IADB) financing with domestic sources as a percentage of total program spending increasing over time.

Table 2.3. Estimated Cost of the CCT Programa

Year Number of

Beneficiaries Total Cost

(US$ millions) GDP

(US$ millions) Total Cost as

Share of GDP (%)

2019 50,000 15.6 25,841.4 0.060

2020 50,000 15.6 28,059.9 0.056

2021 50,000 15.6 30,469.9 0.051

2022 50,000 15.6 33,066.6 0.047

2023 50,000 15.6 35,884.6 0.043

Source: IMF Economic Outlook62 for GDP and GDP growth.

https://www.imf.org/external/datamapper/datasets/WEO/1. Note: a. Total cost estimated by multiplying the average transfer amount per household (as estimated based on demographic data from the 2016 EPHPM and poverty estimates from SEDLAC (CEDLAS and the World Bank); GDP amounts are the most recent IMF estimates.

22. The GoH is fully aware of the financing needs that will result from this program and, more generally, the fiscal constraints that it is currently facing. Nonetheless, given the positive impacts demonstrated by the program and the understanding that domestic sources of funding are necessary to ensure its long-term sustainability, the Government through the FSPSRP, has committed to allocating 10 percent of its funds annually to urban and rural CCT Programs cash transfers.

D. Rationale for Public Sector Provision

23. Public sector provision of safety nets and, more generally, SP is justified on the grounds of equity, as well as ethical and political grounds. Social safety nets are noncontributory transfer programs seeking to prevent the poor or those vulnerable to shocks and poverty from falling below a certain poverty level. Because any solution achieved through the market depends on the initial distribution of resources, a case can be made for the public provision of goods (and services) that the poor consume more than the non-poor on grounds of redistribution. Moreover, non-reimbursable transfers also alleviate constraints on individuals to invest in their human capital, incentivize the use of existing public services, and increase educational and health outcomes for beneficiaries. These, in turn, have high positive externalities (that is, overall national productivity).

24. In the absence of the program funded by the project, it is likely that the intergenerational cycle of poverty would continue. Evidence on CCT programs clearly demonstrates a link between such programs and: (a) poverty reduction; and (b) human capital accumulation. However, in the absence of transition models to ‘graduate’ beneficiaries into productive inclusion opportunities following their exit from the CCT Program, the positive gains from the CCT Program participation may not be fully realized.

62 https://www.imf.org/external/datamapper/datasets/WEO/1

https://www.imf.org/external/datamapper/datasets/WEO/1

https://www.imf.org/external/datamapper/datasets/WEO/1


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25. The project contributes to solving two related market failures, one associated with human capital accumulation and a second associated with employment. With respect to the first failure, the CCT Program incentivizes the parents of children in poor households to make the necessary investments in education to ensure that children have the human capital necessary to access productive opportunities upon completing school. Regarding the second, the transition strategy provides former CCT Program beneficiaries with temporal productive inclusion opportunities to allow them to transition between the period during which they receive cash benefits to a post-CCT Program period in which they become self-sustainable. The funding of policies to transition former CCT Program beneficiaries into productive inclusion opportunities (that is, apprenticeship and assistance to apply for microcredit) is necessary given the reluctance of the private sector to employ the poor and extremely poor. A successful intervention during this period is crucial to ensure that households stay out of poverty.

26. Further, improving the efficiency and effectiveness of social spending is critical for the public sector; the policies and systems to be strengthened by way of Components 2 and 3 will help improve the management of public resources and coordination of publicly funded programs. Investing in key instruments to increase the efficiency and effectiveness of SP sector spending, such as through alternative payment mechanisms, program decentralization, coordination of line ministries, and M&E, constitutes important public goods with large positive externalities in the context of poverty reduction strategies.


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ANNEX 3: PROCUREMENT

COUNTRY: Honduras

Social Protection Integration 1. Procurement will be carried out in accordance with the ‘World Bank Procurement Regulations for IPF Borrowers’ (July 2016, revised November 2017 and August 2018) (Procurement Regulations). A PPSD has been prepared by the recipient, which describes how procurement in this operation will support the PDOs and deliver value for money under a risk-based approach. The PPSD provides adequate supporting market analysis for the selection methods detailed in the Procurement Plan. Mandatory Procurement Prior Review Thresholds detailed in annex I of the World Bank’s Procurement Procedure are observed. All procurement procedures, including roles and responsibilities of different units, will be defined within the Project Operations Manual. The PPSD and a procurement plan covering at least the first 18 months of project implementation have been prepared by the Borrower based on PPSD results and were agreed with the Bank. 2. Procurement Plan. In accordance with paragraph 5.9 of the Procurement Regulations, the World Bank’s STEP system will be used to prepare, clear, and update Procurement Plans and conduct all procurement transactions for the project. The Procurement Plan will be prepared by the recipient in accordance with the results provided by the PPSD and will be agreed with the World Bank as part of the negotiations. A summary of the PPSD will include recommended procurement approaches for higher-risk/value contracts.

3. Goods. Goods to be financed under this project will include computers, servers, IT network equipment, surveillance equipment, software, and security certificates.

4. Non-consulting services. The project will finance services such as such as financial services for CCTs,63 reproduction of training materials, instant messaging services, and institutional email services.

5. Selection of consulting services. Consulting services to be financed under the project will be services such as model of attendance for last years of school in urban zones, impact evaluation, beneficiary satisfaction survey, certification of the RUP, financial audit, and design of financial orientation strategy, among others.

6. Bidding procurement documents. Standard Procurement Documents (SPDs) shall be used for all contracts subject to international competitive procurement and those contracts as specified in the Procurement Plan tables in STEP. For bidding processes with national market approach, bidding and request of quotations documents have been agreed with the World Bank.

7. Operating costs. Operating costs refer to reasonable recurrent expenditures that would not have been incurred by the Project Implementation Unit in the absence of the project. The project will finance operating costs, such as office equipment and supplies, vehicle operation and maintenance,

63 Pending definition by the Government of the payment mechanism to be used for the CCTs of this project.


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communication and insurance costs, office administration costs, utilities, travel, per diem, supervision costs of locally contracted employees, and reasonable bank transfer fees.

8. Capacity assessment. The World Bank has performed a capacity assessment process to evaluate the adequacy of procurement arrangements of the SSIS. The assessment focused on how the SSIS will be organized to procure using the loan’s funds, in terms of staffing structure, procurement record system, internal controls, roles and responsibilities, and so on.

9. The key issues and risks concerning procurement for project implementation include: (a) definition of mechanism payments for the CCTs; (b) current restructuring process of the SSIS; (c) incremental work because of the scope of project; (d) coordination between technical units and procurement; and (e) complex interinstitutional arrangement.

10. The corrective measures that have been agreed are: (a) to be determined in the PPSD, including the procurement process related to the payment mechanism determined by the Government; (b) composition of the UCP with appropriate staff in terms of qualifications and quantity; and (c) the Operational Manual will set roles and responsibilities of the technical and procurement specialists.

11. Frequency of procurement supervision. In addition to prior review supervision to be carried out by the World Bank, the capacity assessment of the Project Implementation Unit will recommend the annual supervision missions’ periodicity and the percentage of the post review processes to be reviewed.

Table 3.1. Summary of the PPSD (recommended procurement approach for higher-value contracts)

Description Estimated Cost (US$)

Prior/Post Review

Market Approach

Procurement Method

Non-consulting services

Financial services for CCTs payments

130,000 Prior National Request for Quotations

Consulting services

Impact evaluation 500,000 Prior International

Quality-and Cost-Based Selection


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ANNEX 4: FM ASSESSMENT

COUNTRY: Honduras

Social Protection Integration 1. Fiduciary risk is assessed as High. Key risk factors considered are the following:

(a) Project design. This requires CCTs payments in the urban area (while the previous project financed only rural area programs), training entities to be identified under Sub-component 1.2, and the provision of TA to Government stakeholders, Sub-component 2.2.

(b) Funds flow. At least US$18.7 million (62 percent of the credit) will be allocated to urban CCTs, with a new payment mechanism to be implemented aimed at enhancing transparency and reducing the risk of cash payments, but this will require educating the beneficiaries on the access and use of bank accounts.

(c) Urban CCT payments will be prioritized for three municipalities, two of them in the main cities of Honduras, expanding payments of CCTs to beneficiaries in upper grades (10th to 12th), attending the traditional formal education (SEDUC) or alternative formal education modality, a demographic population which poses different challenges from those of the rural areas.

(d) Operational arrangements which are complex and include the coordination of new project activities with other stakeholders, arrangements with CENISS on the information of the CCTs urban beneficiaries, required improvements to the SIG to capture the beneficiary information and process the CCT payrolls (planillas), and hiring of the financial entity (ies) under the new payment mechanism.

(e) Multiple information systems pose challenges to ensure the timely availability and links of reliable information required to monitor project implementation: Integrated Financial Management System (Sistema Integrado de Administración de Finanzas, SIAFI)/SIAFI Module for management of external resources (Unidades Ejecutoras de Proyectos con Recursos Externos, UEPEX) for financial information, SIG for validating and processing the planillas and uploading of CCTs information to the agreed payment mechanism, and CENISS providing the data of beneficiaries eligible for the program.

2. Subject to the implementation of the agreed action plan, the proposed FM arrangements can be

considered acceptable to the World Bank. The action plan includes the following:

(a) Agreed procedures and interinstitutional agreement entered with CENISS.

(b) Improvements incorporated into the SIG platform for capturing and generating the CCTs urban payroll (planillas).

(c) Implementation of the action plan on urban CCT payment mechanisms and hiring financial entity (ies) completed.

(d) External assessment of SIG is conducted.


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(e) Operational Manual updated to incorporate, among others, procedures, urban CCTs payment mechanism, institutional arrangements with the new stakeholders, protocols for verification of compliance conditions under the alternative educational modality and the transition strategy, and CCTs’ compliance with program conditions validated before processing the payments through the SIG platform and a random on-site verification.

(f) Agreed format and content of the interim financial reports.

(g) Establishment of internal controls for monitoring contracts financed under the project throughout project implementation.

(h) Hiring external auditors within three months of effectiveness.

(i) Compliance reviews of CCT payments conducted by a firm or external auditors.

(j) Agreed interinstitutional agreements between the SSIS stakeholders, which includes the SCGG, SEDUC, and CENISS.

3. Budgeting arrangements. The UCP, with the support of a dedicated financial staff for the project, will be responsible for preparing and monitoring the annual operating plan and the respective budget, the latter integrated into the SSIS’ annual budget and monitored though SIAFI/UEPEX.

4. Accounting and financial reporting. The budget and accounting for the project is to be managed through SIAFI/UEPEX, the Government’s official financial MIS. The SIAFI/UEPEX accounting structure captures the information of the project by component and sub-component, including the CCT payments. The CCT payments are reported on an aggregated basis only, when funds are transferred to the bank/financial entity(ies) for payments to the beneficiaries. Tailored reports on CCT payments can be generated from the CCT Program MIS (SIG), including, but not limited to, payments by beneficiary, municipality, compliance criteria, and so on.

5. CCT Program MIS (SIG). At the SSIS’ request and in accordance with the parameters provided, such as region, compliance criteria (corresponsabilidad), CENISS provides the data of eligible CCTs beneficiaries. The information is uploaded to SIG, the SSIS’s IT platform, and once the corresponsabilidad is validated the CCT payroll is prepared. The SSIS will enter into an interinstitutional agreement with CENISS, defining the framework and protocol of procedures of data sharing for the information required on the eligible urban CCT beneficiaries. The SIG will be updated to process the information related to the urban CCT. This and other procedures applicable to the urban CCT payments, such as beneficiary eligibility criteria, amount to be paid, selected municipalities/neighborhoods, and program conditions will be documented in the manual for urban CCTs and integrated to the Project Operations Manual. External audits of the World Bank operations have identified areas of improvement surrounding the SIG platform; thus, it has been agreed that an assessment of this information system will be conducted by an external qualified expert to be contracted within five months of the effectiveness date.

6. The SSIS will submit semiannual interim financial reports (June 30 and December 31), within 45 days after the semester being reported, in the format and content agreed with the World Bank in the Disbursement and Financial Information Letter.

7. Internal controls. The SSIS has well-established internal controls and procedures; nevertheless, the Project Operations Manual will be updated, aiming to strengthen the internal controls.


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8. Flow of funds. The SSIS will open two separate Designated Accounts in U.S. dollars at the BCH, one for urban CCT payments and the second one for the other project components. The SSIS will be responsible for the FM of the activities carried out by the participating entities and no transfer of funds to them will be involved. Payments are processed through SIAFI, interfaced with UEPEX. Funds from the Designated Account are transferred to the operating account (libreta) in Honduran lempiras or U.S. dollars, as applicable, for payment to vendors.

9. The Project Operations Manual and the interinstitutional agreements with other stakeholders under Sub-components 1.2 and 2.2, and the contract with the training entity providing the alternative formal education (Sub-component 1.2), will define the protocol to validate the compliance of co-responsibility by both the entities and the beneficiaries attending the alternative education modality and/or transition strategy, as well as receiving the CCT payments. Under the alternative education modality, which covers grades 10th to 12th, a contract will be entered under the terms of reference and conditions acceptable to the World Bank.

10. The CCT payments from the previous three World Bank credits have been made under an agreement with the National Bank for Agricultural Development (Banco Nacional de Desarrollo Agricola, BANADESA), with a combination of cash payments through its 30 agencies complemented by mobile units mobilized to the communities, a mechanism that, besides being inefficient and less transparent than direct transfers, involves certain risks such as robbery and attacks. In addition, there are indications of the Government’s intentions of merging this bank with Honduran Bank for Production and Housing (Banco Hondureño para la Producción y la Vivienda, BANPROVIH) (the local press continues publishing articles of the Government’s ongoing discussion about BANADESA’s fate). As a disbursement condition, at least one financial entity in accordance to the Procurement Plan will have to be contracted. In parallel, the SSIS continues negotiating the proposed payment mechanism for the use of the CEPROBAN service ‘ACH Pronto’ for the payments to beneficiaries, through the regulated financial institutions by the BCH, which currently includes 14 main banks, all of them with agencies in the three selected municipalities. The ACH Pronto charges a fee for each transfer to the beneficiary accounts. Contracting of financial entities will be under terms of reference acceptable to the World Bank, and if the fees to the financial entities are to be paid with credit funds, a competitive contracting process in accordance with the World Bank procedures will be required. In addition, under this new payment mechanism, the beneficiaries should open bank accounts in one of the participating banks, where there is a financial product, ‘cuenta basica’ (basic bank accounts), with minimum costs and offered to the vulnerable population. Basic bank accounts are an optional product offered by only a few banks, and most of the banks offer a product implicating financial cost to the beneficiaries, in terms of keeping a minimum balance and fees charged for account maintenance, thus the CCT beneficiaries will have to be educated in the use of this financial instrument. Furthermore, because of processing the payment through CEPROBAN ACH Pronto service,64 in addition to the validation of compliance conditions (corresponsabilidad) through the SACE, the SSIS will implement other controls to conduct onsite validation of the beneficiaries’ compliance. In addition, the SSIS will monitor and implement mitigation measures for those beneficiaries who do not withdraw (hence there are no movements to the bank account) the CCT payments from their bank accounts.

11. The implementation of the newly proposed CCT payment mechanism requires an action plan, including a window to consider other mechanisms options. A consultant financed by the World Bank

64 World Bank consulting report on new mechanisms of CCT payments.


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presented other potential alternatives to conduct the CCT payments that will require further analysis and approach through non-bank institutions that could facilitate payments in areas not covered by the BCH regulated banks.

Figure 4.1. Proposed CCT Payments through ACH Pronto and CEPROBAN

12. Designated Account advances and justifications: (a) a Designated Account with a fixed ceiling of US$1,500,000 for all project components, except Part 1.1 of the project; and (b) the second Designated Account with variable ceiling up to the forecast of six months cash flow of programmed CCT payments, or another period if necessary, with customized statement of expenditures for the justification of expenditures and supported with the CCTs compliance reviews conducted by external auditors. These and other additional disbursement procedures will be stated in the Disbursement and Financial Information Letter.

Table 4.1. Disbursement Categories

Category Amount of the Credit Allocated

(expressed in US$)

Percentage of Expenditures to be Financed (inclusive)

(1) Goods, non-consulting services, and consulting services, Training and Operating Costs under Parts 1, 2, and 3 for the Project

11,290,400 100

(2) CCTs under Part 1(b) of the Project 18,709,600 100

(3) Emergency expenditures under Part 4 of the Project 0

Total amount 30,000,000

13. Audit arrangements. The project’s annual financial statements will be audited by a private firm under the terms of reference and list of audit firms acceptable to the World Bank. The project’s annual audit report will be submitted to the World Bank no later than six months after the end of each audited


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period. In addition, a firm or external auditor will conduct every six months, or other period agreed by the World Bank, compliance reviews of the CCT payments, under terms of reference acceptable to the World Bank. The compliance review report will be submitted to the World Bank not later than 90 days after the end of the covered period.

14. In accordance with the World Bank General Conditions, the borrower will make the audited financial statements, or cause the audited financial statements to be made, publicly available on time and in a manner acceptable to the World Bank. Following the World Bank’s formal receipt of these statements, the World Bank will make them available to the public in accordance with the World Bank Policy on Access to Information.

15. FM supervision. To monitor the project’s FM arrangements, the team will conduct at least two full FM supervision missions per year, to assess continuity of the agreed FM arrangements. Also, the team will conduct desk reviews of interim unaudited financial reports, CCTs compliance review reports, and annual audit reports.

Table 4.2. Action Plan

1. Project Operations Manual approved by the Working Bank, incorporating Effectiveness

a. CCT payment mechanism documented

b. Arrangements with CENISS for payments of urban CCT payment

c. Manual for the urban CCT conditions and payments prepared

2. Interim financial reports and project chart of accounts are agreed Appraisal (completed)

3. Inter-Agency Coordinating Agreements are entered Within 3 months from the effective date 4. External auditors contracted

5. Firm contracted to conduct the CCTs compliance review of CCT payments

6. At least one financial institution agreement (or contract) entered, for CCTs payments

Disbursement condition

7. SIG platform has been updated and to allow processing of payroll and payment of CCTs (education grants)

8. Evaluation of SIG platform is conducted by an external consultant Within 5 months after effectiveness

9. Alternative mechanisms of payments are explored Implementation

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