The Asian Development Fund Operations: A Decade of Supporting Poverty Reduction in the Asia and Pacific Region

Abstract

Faced with growing development challenges - especially external economic shocks, climate change, and natural disasters - several developing countries in Asia and the Pacific are unlikely to reach the non-income Millennium Development Goal targets by 2015. There is therefore a need for stronger action as well as for more resources from the Asian Development Bank's (ADB) Asian Development Fund (ADF), especially for the poorer countries. The ADF offers loans at very low interest rates and grants to help reduce poverty in ADB's poorest member countries. This evaluation suggests that although ADF has financed only a small share of countries' investment expenditures, it has likely contributed to economic growth by helping them improve connectivity through transport investments; increase the level and reliability of power supplies; develop legal, regulatory, and institutional frameworks for finance and commerce; and increase agricultural production. This track record is encouraging. On a smaller scale, the ADF has also supported efforts to improve access to resources for smaller enterprises and for better social infrastructure. But the difficult circumstances of the ADF countries also call for a much stronger effort to encourage inclusive and sustainable development and strengthen the capacity of client institutions. Investments need to be better geared towards enhancing the access of smaller enterprises to investments; improving urban, social, and environmental services; increasing rural connectivity and electrification; and boosting economic participation. Furthermore, to get stronger results from ADF projects, it is vital to pay close attention to ways in which these projects can complement other efforts within and across sectors. In that context, coordination of cross-sectoral efforts with other development partners might be the preferred approach, rather than seeking complex, multi-sectoral projects run by a single institution. ADB also needs to monitor ADF operations better to improve performance and give more attention to outcomes, and their documentation. This will also facilitate future evaluations of ADF support.