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14.1 Cost-Effectiveness

The cost-effectiveness of the participatory approach is for the time being difficult to determine as economic and social parameters are only in part adequate to measure costs and benefits. The assessment of the latter is however, important as it indicates economic and financial viability and facilitates communication with officials and experts in government, aid and donor agencies who see development predominantly from an economic point of view.

14.2 Benefits

The main direct benefits of rural poor groups include the following:

1) income generation,
2) employment generation,
3) capital formation, also by means of savings,
4) accumulation of other (tangible) assets,
5) access to credit,
6) development of community assets,
7) upgrading of skills.

The indirect benefits include:

1) on-going exchanges of information, experiences and views,

2) better management of group enterprises,

3) ability to articulate and solve problems,

4) development of grassroot organizations (institution-building),

5) more social security through group-belonging,

6) prevention or resolution of conflicts at household, group and village levels through dialogues,

7) spirit of participation, cooperation, sharing, self-confidence and self-reliance, other indirect "spill-over" benefits may include:

8) skills in speech and writing of the poor, and presenting ideas coherently and clearly.

9) overcoming shyness in dealing with officials and conducting meetings,

10) inculcating thrift habits,

11) acquiring ability in record keeping, money management and responsible spending, e.g. by reducing the expenditure of costly customary ceremonies,

12) reduction of vices like gambling, alcoholism and gossiping, and

13) group-wise helping persons in acute necessities like house building and land preparations.

The direct benefits can be measured mostly quantitatively to a sufficiently reliable extent, whereas the indirect ones can mostly only be described qualitatively.

A participatory project may very well be cost-effective when also its indirect benefits are assessed adequately and added to the direct, quantifiable outputs. There is however a great need for studies to develop a methodology to determine the cost-effectiveness of participatory projects.

Since the groups in participatory projects select usually low-risk activities, it may safely be assumed that the benefits outweigh considerably the costs both for beneficiaries and implementing government agencies and/or NGOs. Moreover, most governments in developing countries are charged with the responsibility of social uplift of the disadvantaged classes of people. Participatory projects assist in organizing the needy and thus enable the governments to provide services to these people and thus to discharge effectively in part their mandate. The projects offer to beneficiaries, among other advantages, economies of scale and social benefits by building organizational capabilities; they offer above all effective receiving/utilization systems (see Section 6.1).

14.3 Costs

A participatory process is usually supported in its initial stages by external staff and funds from local, national and/or other sources. However, the costs of the specific participatory elements or operations in a larger project are relatively minimal in relation to those of technical and other project components and are also temporary. The very essence of the participatory approach is its strong orientation towards self-reliance which implies, among other things, low and decreasing recurrent costs and cost-recovery by the beneficiaries. Although usually a participatory process thus needs some "start-up" external aid from a development or donor agency (never to be a major actor!), the basic objective is that the process becomes self-propelling as soon as possible and also expandable to larger numbers of poor people with no or minimal outside personnel and funds and thus with no or very low recurrent costs.

14.4 Extra Costs

The extra costs to make a project participatory consist of the following:

a) Financing in total or in part a relatively small number of locally recruited field workers who act for a limited project period (say three years) as participation agents (see Section 10). The latter could be and in several instances are selected from a country's extension staff and in these cases the field workers need only special training in group formation and action (see Section 10.4) and preferably also some additional "hardship" allowances for their pioneer work. Also means of transport are to be provided to the field workers (see Section 10.3).

b) Extra funds are required also for one or more inception and follow-up training field workshops on the participatory approach and procedures to be held in or near the project area(s), and some periodic (yearly) follow-up evaluation workshops including at national level.

c) Some extra funds are moreover needed for training in (beneficiary) participation, particularly in group dynamics and other topics directly related to group formation and action (see Section 11.3).

d) Finally, some limited funds are to be made available for participatory socio-economic research (see Section 12) as well as for grassroot monitoring and evaluation, both regarding the formation, action, performance and constraints of the groups (see Section 13).

14.5 Field Experience

Various elements which have been taken from field experience and illustrate the above points follow hereunder.

FAO launched under its People’s Participation Programme since 1982 twelve self-sustained pilot projects in Africa. Asia and Latin America. Eight of these projects have a three year period of field actions completed and show the following results and costs.

Over a period of on the average three years in total 864 groups were formed and guided with the help of 77 GPs (of whom 49 or 64% were female); each GP assisted thus in the formation of on the average 11 groups.

The 864 groups had in total 10.557 members: on the average 12 members per group. The eight projects served accordingly in total about 10.557 families and reached at least 63.342 beneficiaries when assuming an average family size of 6 persons.

In conclusion, on the average each project covered in its first three years of field action two project areas with in total ten GPs (of whom six were female). The latter promoted in total 108 small groups with 1.320 members. This means that each project reached in-depth on the average at least 1,320 families and covered thus not less than 7,920 beneficiaries.

The average cost of the donor contribution of the eight projects is about US $208,000 over three years and this amount covers most of the total project cost as the local contribution to these pilot projects is relatively low. The donor contribution includes:

1) Contractual services: (about 21% of the donor contribution) to finance: a) the basic salaries, hardship allowances ("topping up") and travel costs of the project staff (usually one coordinator and the group promoters (when seconded or recruited from the field action villages themselves, these costs are of course, lower); b) action-research on the groups (including small feasibility studies); c) local expertise and skilled, non-voluntary labour as and when required for possible physical works needed for certain selected group activities; d) project evaluation including by an independent institution; e) preparation of reports.

2) General operating expenses (about 8% of the donor budget) including part of rental and maintenance of equipment, communications and miscellaneous expenditures.

3) Supplies, equipment and materials, first for a Credit Guarantee Fund (about 16% of the budget) as a security for the lending institution to provide from its funds collateral-free group loans for inputs (see Section 9.2). Secondly, this budget item includes also various types of equipment including means of transport (13% of the budget), usually one vehicle for the participation coordinator and motorcycles for the group promoters.

4) Training on participation and other issues (about 17% of the budget) of beneficiaries as well as project and other supporting staff (see Section 11). This includes: courses, training materials, field workshops in the project areas and fellowships for well-performing group promoters.

5) Personnel services and official travel (about 13% of the budget): the salaries, travel and daily subsistence allowance of short-term local and/or expatriate consultants for technical backstopping (in total for three to six person/months).

6) Project servicing costs (about 7% of the budget) and special factor for inflation (5% of the budget).

The proportional sizes of the various donor budget items vary per project of course, and in practice are also in part interchangeable as participatory projects or components need a flexible design and budget.

With the foregoing global indications the order of size of the cost of group formation and guidance can be roughly estimated for any participatory project according to its number of intended beneficiaries and/or of small groups' to be formed as well as to its number and size of action areas.

The earlier indicated data on eight PPP projects showed that on the average each project yielded 108 small groups with in total 1,320 members in an initial period of three years. The total external aid costs for 7,920 beneficiaries (1.320 group members and their family members) was in the first three years about US $175,000 that is about $7 per year for each of the beneficiaries and about $44 per year for each group member.

The amount of $175,000 includes all budget items of the earlier indicated self-sustained participatory projects except the credit guarantee fund which forms on the average 16% of the donor budget. The credit fund has been excluded from the cost estimates because many larger projects dealing with the rural poor. include already a credit fund or provisions to obtain such fund for income-raising activities of the beneficiaries.

On the basis of the above given costs per project and beneficiary (which refer to small, self-sustaining pilot projects and are thus relatively higher than for other, larger projects). It can be assessed that the cost of effective beneficiary participation viz. by means of group formation and action, is in the initial three years about $220,000 for 10.000 beneficiaries or about $162,000 for every 100 groups formed and guided. In subsequent years these costs are far lower as many groups become more self-sufficient and need thus much less GP assistance. Moreover, well-performing groups have considerable spread effects: they facilitate the formation of new groups.

It should also be reminded that the average cost per beneficiary for larger (multi-million dollar) projects with sizeable technical components and target groups may, however, well be lower due to economies of scale.

The above figures are of course to be taken only as very global and rough estimates as firstly the participatory projects or components considered vary in size and design and secondly in each country various factors may considerably affect the specific costs of beneficiary participation as well as the total project costs. For example, the local salary levels of the group promoters, the availability and cost of transport, the experience of the poor with group action and the accessibility of the beneficiaries. The latter factor is related among others, to the remoteness, geography and physical infrastructure (roads, etc.) of the action areas and the type of local settlement patterns ranging from scattered to concentrated.

In conclusion, to render a conventional project fully participatory some elements like employment of group organizers, working through small groups, training, field workshops, action research and evaluation need to be added. These elements mean however, a far better design and chance of success of a project. The long-term economic and social benefits of such a project will outweigh considerably the relatively low additional costs.

In some instances extra budgetary allocations may not even be needed, but rather a reallocation of existing funds and staff. It is thus in certain cases preferable to reallocate existing funds and personnel to participatory projects or programmes rather than to increase public budgets and employment. Furthermore, as explained, participatory elements will cost comparatively less than self-sustained (pilot) participatory projects in isolation (like FAO’s PPP) as there will be economy in administration, coordination, supervision, technical guidance and evaluation.

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