Guidelines for Poverty Targeted Investments Classification of IDB Operations

By SDS/POV (03/98, En)

The Inter-American Development Bank's overarching objective to promote poverty reduction in the Region was reinforced with the Eighth General Increase of Resources, approved in 1994. At this time, it was also established that the Bank should monitor implementation of the high priority given to poverty reduction in its lending program by identifying poverty-targeted investments (PTIs). Furthermore, it was requested that Management monitor and report annually to the Board of Executive Directors on the proportion of lending which meets PTI criteria. As stipulated in the Eighth Replenishment Document (AB-1704, para. 2.93), PTI projects are also eligible for an additional 10-percentage-point financing from the Bank, to supplement the regular shares accorded to the various country groups.

A system exists to track whether or not loans classify as Poverty Targeted Investments (PTI) in order to better monitor the mandates of the Eighth Replenishment. Under the current rules, three criteria can be used to determine PTI classification :

  1. Sector Automatic Classification: Projects automatically classify as PTI when they support programs in the following sectors: Pre-School, Primary Education, Early Childhood Development, Social Programs for at Risk children and Adolescents, Primary Health Care, Nutrition, Urban Development of Marginalized Areas, Small-holder Agricultural Production, Microenterprises, Social Investment Funds and Emergency Employment Operations.
  2. Geographic Classification: Projects can classify as PTI when project benefits are targeted to regions, cities, neighborhoods, or areas identified as poor within each country. Proxy income measures such as unsatisfied basic needs, below country-average social indicators, or other household characteristics that are strongly correlated with poverty may be used to classify such areas. There is no pre-defined cut-off point for the application of this criterion. Project teams must justify on a case by case basis how the targeting mechanism used, given the specific characteristics of the operation, serves to target resources to the poor.
  3. Headcount Classification: Projects can classify as PTI when more than 50% of the potential beneficiaries of the operation are likely to be poor according to the selected PTI poverty line for each country.

Table 1: Poverty Lines Used for PTI Classification: Latin America and the Caribbean -yearly average-

The Poverty and Inequality Advisory Unit has established the following contact person for all regions in order to answer questions on the application of PTI criteria.

Cesar Bouillon (202) 623 2997;

He is able to receive requests for review of Profiles II and Loan Documents, and can also provide methodological guidance on how to meet the classification criteria. The Poverty and Inequality Advisory Unit will attempt to provide project teams with a helpful response to their inquiries in less than one week.

 

 

 

World Bank PTI (Program of Targeted Interventions)

Classification Criteria

For purposes of comparison, presented below is an overview of the PTI Classification Criteria used at the World Bank. We also provide a summary review of the main similarities and differences between the criteria used by the World Bank and by the IDB.

World Bank PTI (Poverty Targeted Interventions) Classification Criteria:(1)

An investment project must meet at least one of the following criteria in order to be in the PTI:

  1. the project has specific mechanisms for targeting the poor (involves narrow targeting with specific mechanisms to reach the poor at the individual or household level e.g. a nutrition project for malnourished children)

    2. and/or

  2. the proportion of poor among project beneficiaries is significantly larger than their proportion in the overall population (involves broad targeting at the level of expenditure category, sub-sector, or geographic region, e.g. a water supply project in the poorest region). Although benefits accrue to all, the poor are more likely to benefit relative to the nonpoor because they are more likely to lack access to the services being provided, and because the demand by the nonpoor for these services is likely to be satisfied already.

** In addition, project components which meet either of these criteria must account for at least 25% of the total IDA/IBRD loan or credit amount.

Some Similarities and Differences with IDB PTI Classification Criteria

  • The World Bank does not have the sector-specific automatic criteria used at the IDB.
  • At the World Bank, in order to qualify as PTI, only 25% of the total loan or credit amount has to meet one of the classification criteria. The IDB criteria, as presently defined, apply to the entire loan or credit amount.
  • The World Bank always requires that the beneficiaries of the projects have a higher proportion of poor than does the population at large. In contrast, criteria at the IDB is not a relative concept.
  • The IDB offers an incentive to PTI projects -- an additional ten-percentage-points financing option. The World Bank does not offer a financial incentive to PTI projects.

(1) IBRD Operational Directive 4.15, par. 52, reaffirmed in A. Choksi memo of 7/20/93.

 

Last updated: 04/26/07