An Evaluation of the World Bank's Trust Fund Portfolio

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CHAPTER 3THE RELEVANCE AND EFFECTIVENESS OF TRUST FUND SUPPORT FOR DEVELOPMENTBox 3.6 MDTFs: A Limited Share of Total Aid, But an Important Aid Coordination Platformin Post-Conflict SituationsIn fragile and conflict-affected situations, multidonor trust funds (MDTFs) are now theprimary source of finance for Bank-managed programs—accounting for $1.8 billion incommitments in fiscal 2009 compared with $1.4 billion in IDA commitments. How wellhas the Bank implemented these trust funds? The Bank is well regarded for itsleadership, technical skills, and apolitical approach, but donors express frustration withcumbersome Bank-mandated processes, especially procurement.Bank-managed MDTFs for post-conflict situations have had three important advantages:• They provide a forum for donors to coordinate activities that fall both insideand outside the trust fund, including through the creation of a joint needsassessment at the outset, as in Afghanistan, North Sudan, Iraq, and elsewhere.In the special case of Iraq, even though only a small fraction of donor supportwas provided through the Bank- and UN-managed trust funds, the governancestructure of the MDTF served as a point of encounter for coordination betweenthe United States and donors who opposed the initial military action.• They can insulate the technical aspects of project design and implementationfrom political considerations in highly charged environments, as in theMulticountry Demobilization and Reintegration Program Project in Rwanda.• Transactions costs are reduced for capacity-stretched recipients, althoughparallel structures introduced to accelerate implementation have tended topersist longer than anticipated.But there were also some important obstacles to successful implementation of theMDTFs:• In several cases, capacity building was not as effective as anticipated, perhapsreflecting the use of parallel structures for initial implementation. In Iraq, poorsecurity prevented the location of staff in the field to provide informal technicalassistance. Slow capacity building led to implementation delays, restructuredprojects, and slower than expected impact on the ground. Progress in buildingcapacity in North Sudan has been uneven and modest compared with the scaleof the challenge.• Relations with the United Nations were almost universally weak, particularly inthe important early stages of support. In North Sudan, the UN was expected toimplement initial emergency operations as the government built up capacity towork with the Bank’s fiduciary systems, but disagreement over the use of UNprocurement and financial management systems led to substantial delays. Oneproblem is the differing timetables for the two institutions—the Bank’s focus ondevelopment requires a long view, while the UN’s political and security focusdemands short-term solutions.• Donors’ interest in channeling resources through Bank-managed trust funds—to ensure high fiduciary standards and focus on results—was in some casesinconsistent with their desire for rapid implementation of emergencyoperations. The tension emerged in extensive complaints regardingcumbersome procurement systems and snail-paced disbursements. Forexample, in South Sudan there was a public row over the Bank’s slowimplementation, which was related to its strict rules for oversight while workingwith partners with very low capacity.Sources: Random sample; Scanteam (2010); Rwanda case study; Schiavo-Campo (2003).34
CHAPTER 3THE RELEVANCE AND EFFECTIVENESS OF TRUST FUND SUPPORT FOR DEVELOPMENT3.26 Investing in global public goods at the country level. Grantfinancing provided by trust funds has been instrumental inpromoting investments in developing countries for the provision ofglobal or regional public goods. Most of this investment to date hasfocused on control of communicable diseases; environmentalpreservation; and, more recently, climate change adaptation andmitigation. On issues involving global externalities, “grants are anincentive to trigger internal actions within countries and also providethe Bank with a way to engage with line ministries in middle-incomecountries,” according to a Bank sector manager.Box 3.7 Bank-Managed Carbon Funds: Innovative But Limited Catalytic ImpactThe Carbon Funds are used to support emissions-reductions purchaseagreements—or transactions—that provide financing for low-carbonprojects. These funds, and the Carbon Finance Unit in the Bank, wereestablished as pilots for testing the concept of a carbon market and the novelchallenge of defining, creating, and trading carbon as a commodity as wellas integrating this challenge with development goals.As an institutional innovation the funds have played an importantdemonstration role in helping to open a new mode of environmentalfinancing, popularizing the idea of carbon markets, and contributing to theinstitutional infrastructure of the market. The role of the Bank in thisbusiness was established with an exit strategy that called for it to relinquishits role as a carbon offset buyer as the private market began to flourish. Yet,while the Bank has moved into higher-risk, pilot areas over time, itcontinues to build up its lower-risk business after the market has taken off.As a vehicle for catalytic finance and technology transfer, the record of theCarbon Funds is mixed. The emission reduction purchases are supposed tostimulate green investments that would not otherwise happen. In practice,they have contributed to the diffusion of a number of technologies andsupported innovative technology investments in some countries. But muchof the support for energy technologies has gone to projects where theCarbon Fund financial leverage—and hence its catalytic impact—has beenrelatively small.Source: IEG (2010a).3.27 Four examples illustrate the range of issues and activitiessupported by these global public goods trust funds. The Global Fund(discussed earlier) and the GAVI Fund Financial Intermediary bothaddress problems of communicable diseases and provide financing thathas its greatest benefits at the country level. The Ozone Phase Out trustfund was established to help countries meet their commitments underthe Montreal Protocol. An IEG evaluation found that it workedreasonably well because of its laser-like focus on its core objective,funding of programs for which there was strong country ownership, andcapacity building support, notably as a key component of Bank-By offeringgrant financingand supportingcustomizedgovernancearrangements,trust funds havebeeninstrumental infosteringcountry-levelinvestments inthe provision ofglobal andregional publicgoods.35
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The World Bank GroupWORKING FOR A W
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©2011 The Independent Evaluation G
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CONTENTSAllocation of Trust Fund Re
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CONTENTSFigure 5.3 All Networks, Es
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AcknowledgmentsThis report was prep
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SummaryAs development challenges ex
Page 14 and 15: SUMMARYchannels? In addition, the B
Page 16 and 17: SUMMARYinnovative development finan
Page 18 and 19: SUMMARYdonor funds in line with rec
Page 20 and 21: Management ResponseIntroductionMana
Page 22 and 23: MANAGEMENT RESPONSEplay at the leve
Page 24 and 25: MANAGEMENT RESPONSEattention needs
Page 26 and 27: MANAGEMENT ACTION RECORDMajor Monit
Page 28 and 29: Chairperson’s Summary:Informal Me
Page 31 and 32: 1. The Role of Trust Funds in theGl
Page 33 and 34: CHAPTER 1THE ROLE OF TRUST FUNDS IN
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Page 42 and 43: CHAPTER 2THE WORLD BANK’S TRUST F
Page 56 and 57: CHAPTER 3THE RELEVANCE AND EFFECTIV
Page 80 and 81: CHAPTER 4MANAGEMENT AND ACCOUNTABIL
Page 96 and 97: CHAPTER 5THE IMPACT OF TRUST FUNDS
Page 109 and 110: 6. Findings and Recommendations6.1
Page 111 and 112: CHAPTER 6FINDINGS AND RECOMMENDATIO
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the evaluation, namely operational
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Appendix A: Methodology NoteCalcula
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Appendix B: Trust Fund Use in the E
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APPENDIX B: TRUST FUND USE IN THE E
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APPENDIX B: TRUST FUND USE IN THE E
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APPENDIX C: LIST OF INDIVIDUALS CON
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APPENDIX D: CORE TRUST FUND PORTFOL
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Appendix E: Trust-Funded FinancialI
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APPENDIX E: FINANCIAL INTERMEDIARY
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APPENDIX E: FINANCIAL INTERMEDIARY
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Appendix F: Reliance on Donor Funds
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APPENDIX F: RELIANCE ON DONOR FUNDS
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Appendix G: World Bank Operational
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Appendix H: Organizational Aspects
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Appendix I: Trust Fund Support for
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ENDNOTES3. Over fiscal 2002-10, the
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ENDNOTES31. Cited in a 2008 indepen
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SELECTED BIBLIOGRAPHYKharas, H. 200
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SELECTED BIBLIOGRAPHY____. 2010l.
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An Evaluation of the World Bank's Trust Fund Portfolio

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