Sector wide approaches (SWAps) are mechanisms by which development agencies collaborate to support sector reform programmes that are based on a country’s long-term vision for its development. They have evolved as a means of improving development cooperation and aim to strengthen government ownership and coordination of projects.
Interest in SWAps has grown in recent years. The World Bank is committed to advance proposals to allow for fuller participation in SWAps in a drive to modernise its lending instruments and to support new approaches to donor coordination. This paper looks at ways in which the Bank can adapt its procedures to support sector programmes. It proposes the introduction of special procedures for applying the Bank’s financial management procurement and disbursement policies, which would mean that the Bank would be able to pool funds with governments and other donors participating in SWAps. SWAps are characterised by country/government ownership, direction and coordination of programmes, donors and other stakeholders involved, and are targeted at the development of a particular sector. Donors and governments typically pool funds for disbursement from a common account. SWAps also aim to foster country capacity building and the more efficient use of resources, and are usually found in social sectors and in countries where many donors are active.
Fiduciary arrangements for SWAps do not necessitate creating a new lending instrument for the Bank, nor do they necessitate a change in Bank policy. Implementation of the proposed measures should be straightforward, although administrative costs to the Bank will be high because of the scope and complexity of the operations. However, cost savings should accrue to borrowers. Suggestions are that:
- Transactions would be financed from a pool of funds to which the government and participating donors would contribute in agreed proportions
- Building blocks for SWAps would include: risk assessment and mitigation; agreement among financiers; financing arrangements and monitoring and auditing
- The financial management system will include: financial management assessment; a financial management action plan; financial reporting; auditing and monitoring and supervision
- The procurement arrangements for SWAps would include: risk assessment and mitigation; a procurement plan; the use of international procurement procedures; national/sectoral procurement procedures; a manual of procedures; reporting; post review; technical and procurement audits and misprocurement/remedies
- The disbursement arrangements that would apply to SWAps are: there would be no change to expenditures not financed from the pool and the Bank would disburse the agreed proportions from expenditure financed from the pool
- SWAps are governed by the Banks fiduciary policies for investment lending.
The following recommendations are drawn from the Bank’s experience with SWAps:
- Sector institutional assessments and fiduciary risk mitigation measures should be undertaken at the outset. If serious weaknesses are found, then remedial measures should be applied. Bank specialists should also be involved in these processes
- Larger-than-normal budget coefficients for preparation and supervision may be necessary. Flexibility is also required in the allocation of funds to disbursement categories
- Reliable information systems and appropriate procedures for joint reviews are necessary for effective monitoring and evaluation of SWAps performance
- Earmarking funds to finance specific pre-identified expenditure items diminishes the benefits of the SWAps programme and undermines government ownership.
