Business Case and Intervention Summary: Hunger Safety Net Programme Phase 2 (HSNP 2)
Intervention Summary
What support will the UK provide?
1. The proposed Hunger Safety Net Programme Phase 2 (HSNP 2) will have two outputs:
i.
Output 1: Government of Kenya (GoK) supports cash transfers to help meet chronic and
acute needs in the arid and semi-arid lands, which are integrated within the wider National
Safety Net Programme; and
ii.
Output 2: HSNP households receive timely, predictable electronic cash transfers.
2. Kenya’s arid and semi-arid lands are routinely food insecure and rates of acute malnutrition regularly
rise above emergency thresholds, becoming particularly severe when there are environmental, market
or security shocks. Historically, the principal means of addressing this has been costly and often poorly
targeted food aid, with limited attention being given to non-food interventions. HSNP Phase 1 (HSNP 1)
was piloted as one component of DFID Kenya’s larger Social Protection Programme Phase 1 (200713). HSNP1 has spent £40.5 million (m) to date and tested an alternative approach to food aid in four
of the poorest and most vulnerable counties of Northern Kenya: Marsabit, Mandera, Wajir and Turkana.
Currently, it reaches 69,000 households (i.e. 496,800 of the poorest people) with predictable electronic
cash transfers worth £13 per household a month.
3. Under HSNP 2, the UK will expand and increase support in these four counties, and will build
sustainability through the GoK which will, for the first time, also co-fund HSNP in line with its proposed
medium term plan. HSNP 2 will provide cash transfers for 100,000 of the poorest households (66%
women headed), worth £17-19 a month over the next 4 years (i.e. reaching 720,000 of the poorest
people, with 49% femalebeneficiaries). This will help to stop HSNP households sliding into further
poverty, and enable them to increase their expenditure on food, education, health, and wider livelihood
opportunities. This will make a major contribution to the achievement of DFID Kenya’s Operational Plan
result. HSNP 2 will also offer a response to ICAI commitments, by building a scalable emergency cash
transfer response to drought for 470,000 households (3,384,000 people). This will enable DFID, other
donor and/ or GoK funds to be able to respond rapidly and at scale in times of crisis (e.g. a drought).
4. This business case is for a total of £85.59m from 2014-17. £32.63m of this was already approved in
2007 under our original 10 year Social Protection Programme. An additional £52.96m is needed to
deliver results under HSNP 2. Funding comprises:
 Electronic cash transfers going directly to beneficiary bank accounts via an internationally
procured private sector payment provider (82% of total funds). This will cover (i) cash transfers
(88% of this total); and (ii) delivery costs (12% of this total).
 An internationally procured Project Implementation and Learning Unit (PILU) within the National
Drought Management Authority (12% of total funds). The PILU will be responsible for: (i) Management,
monitoring; (ii) Long and short term technical assistance for capacity building and delivery; and (ii) the
internationally procurement of independent evaluation services.
 A DFID held contingency (6% of total costs). This will cover: (i) inflation costs; and (ii) transition
payments for people moving in and out of the programme as a result of better targeting.
Why is UK support required?
5. UK support is required to help: (i) deliver improved social protection through cash transfers as
safety nets to the poorest people in the arid and semi-arid lands of Kenya; (ii) build long-term
scalability and crisis response capacity; and (iii) Kenya build and support its own welfare system,
enabling a sustainable exit strategy for DFID.
6. In 2012, Kenya had an estimated 8 million vulnerable people eligible for some form of social
protection. As set out in Kenya’s long-term plan (Vision 2030) and the new constitution, the Government
of Kenya (GoK) is committed to the development of a national social protection system. A new National
Social Protection Policy sets out the vision to progressively achieve this right, by providing universal
access to social protection for the vulnerable throughout their lives, increasingly funded by GoK.
7. GoK expenditure on social protection is increasing, but challenges remain. Kenya now spends 0.8%
of its GDP supporting social protection in the form of safety nets, with a quarter of this as cash transfers
(i.e. 0.2% GDP). However, current schemes are fragmented, uncoordinated, targeting is patchy, funding is
insecure, and coverage is lower than need.
8. In response, GoK is developing a National Safety Net Programme. This will create a framework
around which GoK’s five current principal cash transfer programmes, including HSNP, will be harmonised
to help accelerate the pace, scale and quality of their delivery. It will also support the transition to
1
sustainable GoK financing, including GoK funding of HSNP 2.
9. The counties making up the arid and semi-arid lands of Kenya are amongst the poorest areas
nationally. For example, 94% of households in Turkana live below the national poverty line (set at 40
pence a day using 2005 prices). They have been long marginalised in development efforts and national
policy. Drought and other hazards regularly, and increasingly, affect the livelihoods of the poor and the
focus of past aid efforts has been on reacting to emergencies rather than creating sustainable
development.
10. GoK recognises that these inequities need to be addressed.Private sector interest in the ASALs is
also increasing. Changes to the constitution and the recently revised Arid and Semi-Arid Lands policy
and institutional framework have noted that these areas need to be brought much more fully into the
country’s political, economic and social development. Development support sits alongside increasing
private sector investment in infrastructure and extractive industries. This is helping not only to ensure
survival for the poorest, but also laying the broader foundations for growth and graduation from poverty.
11. Evaluations of HSNP 1 show that it is successfully serving a safety net function. 7% of HSNP
households have been lifted out of the bottom 10% of poorest households nationally, whereas 4% of
control households fell into this category. HSNP households are able to reduce emergency sales of assets
and safeguard their belongings and productive assets. Money is spent on food, education and healthcare,
and productive investments (e.g. livestock or business). During the 2011 Horn of Africa drought, unlike in
other households, poverty did not increase in HSNP households.
12. DFID is a lead partner in building resilience in the arid and semi-arid lands, both for the chronically
poor as well as those acutely affected in times of crisis. DFID is supporting a range of programmes
and investments that will build resilience and early humanitarian responses in Kenya. HSNP 2 is a core
part of that. It will expand HSNP 1, primarily as a safety net for the chronically poor, and have the potential
to scale up in times of crisis, reaching all 470,000 households registered in the four focal counties. HSNP
2 will help GoK to increasingly fund and manage cash transfer programmes in the arid and semi-arid lands
itself, facilitating an exit strategy for DFID.
What are the expected results?
13. The programme impact is to: Reduce poverty, hunger and vulnerability for the poor in Kenya’s
Arid, Semi-Arid lands. The programme will continue to focus on four of the poorest, drought prone
counties in Northern Kenya (Marsabit, Mandera, Wajir and Turkana). This will be measured by changes
in the % of households below the absolute poverty line in these counties (e.g. from 94% to 74% in
Turkana). The programme outcome is to: Create better and more sustainable safety nets for poor
and vulnerable households, particularly for households in the arid and semi-arid lands.
14. Key results by 2017 include:
 Sustainability: (i) GoK funding to HSNP as a percentage of in-year financial contributions to Ending
Drought Emergencies in the Medium Term Plan will increase from 0-80%; and (ii) GoK plans to
account for 49% of total programme costs and 54% of the beneficiary caseload.
 Coverage and women beneficiaries: (i) 100,000 of the poorest and most vulnerable households
(66% women-headed) or 720,000 people (49% of them women and girls) will receive predictable,
timely, electronic cash transfer payments directly into their bank accounts, worth £17-19 a month; and
(ii) financial access will improve with bank accounts for at least 300,000 women.
 Poverty Impact: When compared with control households, HSNP households will show: (i) increased
poverty reduction, particularly for the poorest households; (ii) sustained food consumption and
improved dietary diversity; and (iii) improved asset retention.
 Scalable Safety Nets for an early crisis response: (i) 470,000 households (reaching approximately
3.4 million people) will be registered with the private sector payment provider and set up with bank
accounts and cards in order to potentially receive emergency cash transfer payments during times of
crisis; and (ii) HSNP will lead the system for scaling up emergency cash transfers as part of the
national drought management response, with agreed levels of GoK contingency financing.
15. Evaluation, VfM and Operational Targets: HSNP2 will have an independent mid and end evaluation.
In 2016/17, the administrative cost of the whole programme will be 18%, averaging 21% over Phase
2. This competes with DFID’s other cash transfer programmes globally. The administrative costs for the
World Food Programme’s main food aid programme averaged 51% (2005/10). DFID Kenya will deliver
10% of DFID-wide cash transfer results and HSNP 2 will account in total for 78% of the DFID
Kenya OP cash transfer target.
Business Case: Strategic Case
2
A. Context and need for a DFID intervention
The changing national policy and budget frameworks for Social Protection in Kenya
1. In 2012, Kenya had an estimated 8 million vulnerable people eligible for some form of social
protection1. As set out in Kenya’s long-term plan (Vision 2030) and the 2010 constitution, the
Government of Kenya (GoK) is committed to the development of a national social protection system. A
new National Social Protection Policy (NSPP) sets out the vision to progressively achieve this right, by
providing universal access to social protection for the vulnerable throughout their lives, increasingly
funded by GoK.
2. GoK expenditure on social protection is increasing, but implementation challenges remain,
particularly for cash transfer programmes. Kenya now spends 0.8% of its Gross Domestic Product
(GDP) supporting social protection in the form of safety nets. While the majority of this expenditure still
goes on emergency food aid2, a quarter is spent via cash transfers (CTs) (i.e. 0.2% GDP), which is low by
international and regional standards3. For these CT programmes, coverage still remains low; schemes are
fragmented, uncoordinated, targeting is patchy, funding is insecure, and coverage is lower than need4. In
addition, the national social protection system is weak and under-resourced5. Gaps in capacity, skill,
experience and evidence exist at all levels, and these are likely to be compounded at County and District
level under devolution from 20136.
3. In response to these challenges, and in line with NSPP objectives, GoK is developing a National
Safety Net Programme (NSNP) 7 around which the five current principal CT programs can be
increasingly coordinated and harmonised. The five programmes under NSNP are: (i) Older persons
Cash Transfer Programme (OPCT); (ii) Orphans and Vulnerable Children (CT-OVC); (iii) the Hunger
Safety Net Programme (HSNP); (iv) the Persons with Severe Disability Programme (PWD); and (v) the
Urban Food Security Programme (UFSP). The NSNP will provide the basis to: (i) scale up coverage of
CTs to the poor and vulnerable, creating more robust systems for targeting, payments and monitoring and
evaluation (M&E); (ii) build sustainable financing in the medium and long term; (iii) harmonise
implementation arrangements to maximize existing capacity; and (iv) ensure consistency with GoK’s
social protection goals as set out in the NSPP.
4. Through the NSNP, GoK will increase the coverage of the main CT programmes over the next four
years (2013/14-2016/17), demanding additional financial resources. This will expand the number of
poor people benefiting from CT programs. The current GoK allocation to these programs is KSh 8.04 bn.
To achieve the scale-up targets proposed, the five programs will require a total of K.sh. 12.8 bn in FY
2012/13. The projected budget for the programs will increase to KSh 16.5 bn in 2016/17. This is
equivalent to allocating between 0.25% and 0.32% of Gross Domestic Product (GDP) to CT programs,
over the next four years8.
5. A key indicator of sustainability is that under the NSNP, GoK financing, as a percentage of total
social protection financing, will increase from 39% to 77% between 2012 and 2017. Under the NSNP
framework, GoK proposes to fund HSNP for the first time9 . This will help the transition to greater GoK
financial sustainability and facilitate a sustainable exit strategy for DFID. For further and fuller discussion
of this context, including financial projections, please see the business case for the Social Protection
Programme Phase 2 (SPP2) [Quest reference: 3911628].
Poverty in the Arid and Semi-Arid Lands of Kenya
6. Poverty remains widespread throughout Kenya with almost 47% of the population below the
poverty line10. In 2005/2006, 16.5 million people in Kenya were considered food insecure11. But poverty
is unevenly distributed amongst the Kenyan population, and regional and geographical disparities persist.
7. The arid and semi-arid lands (ASALs) occupy 84% of Kenya’s land mass and just under a quarter
of its population (see Figure 1). However, it remains chronically poor, drought prone and marginalised12.
People are extremely vulnerable to shocks and stresses, including frequent drought events. They are
routinely food insecure and rates of acute malnutrition regularly rise above emergency thresholds,
becoming particularly severe when there are environmental, market or security shocks. The development
potential of the ASALs has historically been severely under-resourced and under-exploited13, the
environment is extremely harsh, infrastructure is basic, the economy is poorly developed and support
services are few, whilst insecurity remains a threat14. For further details on this context, please see the
business case for the Arid Lands Support
Figure 1: Map of Kenya Showing the ASALs
Programme (ASP) [Quest ref: 3695174].
3
ASALs: The development challenge
8. Consequently, the ASALs score persistently low
against a range of national development
indicators15, for example:
9. Poverty: Some 74% of people are below the
national poverty line (94% for Turkana)16;
10. Food security: Famine is chronic and emergency
food relief is critical for survival for 3.5m17;
Expenditure on food consistently forms around 78%
of consumption expenditure in HSNP HHs18.
11. Education: Children are less likely to enrol in school
(21% in Wajir compared with the national average of
92%), and are less likely to complete primary
education (42% in the ASALs compared with 81%
nationally)19;
12. Health and sanitation: The average distance to a
health facility in is 52km, ten times the national target
(5km). Nearly 43% of people in arid areas take more
than one hour to reach water in the dry season; 24%
take more than two hours20;
13. Infrastructure: Northern Kenya covers close to
400,000km2 of land but has less than 700km of
tarmac road, most of which is in disrepair. Only one
county, Isiolo, is currently connected to the national
Source: GoK (11.10.12) Sessional Paper Number 8
electricity grid and ICT coverage remains poor21.
14. Politics: Less than a third of people are registered to
vote,22 and many feel remote from national political and economic processes23.
15. Hence, the ASALs present an integrated and dynamic set of development challenges24. Poverty
means limited access to education, healthcare, and capacities to diversify livelihoods, and increasing food
insecurity25. For example:
i.
Pastoralism is a viable and well adapted livelihood for some, but it is changing26. Increasing
commercialisation is concentrating ownership of viable herds with an ever smaller minority of
people. Population pressure, poor land use management, asset depletion from repeated shocks,
unintended impacts of food aid, conflict and political pressure linked to devolution, is leading many
to seek alternatives in new settlements or peri-urban areas. Recent research also flags that whilst
livestock remains important, livelihood aspirations are changing to focus beyond livestock towards
commercial or professional futures in more urban areas27. Education is seen as the key strategy
to reach these goals. Traditional development investments focused solely on pastoralism alone
will not sufficiently increase the resilience of the majority of the population.
ii.
Market dependence exposes pastoral households: Pastoral and marginal agricultural
households are heavily dependent on markets either to sell their livestock and products and/or to
purchase cereals. But these are poorly integrated, resulting in pastoral households routinely
facing high cereal prices and low livestock prices, further compromising purchasing capacities and
compounding food insecurity28.
iii.
Private sector interest in the ASALs is increasing. This is due to natural resources (including
oil and wind) and future regional infrastructure corridors. These developments could create new
opportunities for growth, market integration, skills development and jobs. However, there also
risks and uncertainty over whether benefits will be evenly spread, or may further marginalise and
increase the vulnerability of some groups29.
iv.
Kenya is undergoing a major shift towards devolved governance30. This provides
opportunities for marginalised vulnerable counties (including through access to the Equalisation
Fund), but also significant risks given their already weak capacity, logistical and environmental
challenges.
v.
Insecurity within the ASALs and also across borders (particularly, but not only Somalia) are a
major constraint to building longer term resilience31. This includes natural resource-based
conflict, especially during drought or stress periods. Linked to this, resource-based conflict in
4
pastoral areas further exacerbates food insecurity.
vi.
Gender and youth: Whilst the roles of women and men in pastoral areas are interdependent,
there are inequalities in voice and influence. Economic factors, the rigidity of socially ascribed
gender roles and women’s limited access to power, education, training and productive resources
as well as social exclusion, limit their voice and opportunities32. These issues are compounded by
patrilineal inheritance practices in many communities that can limit women’s inheritance rights,
especially for land. Young people are also shifting away from pastoralism, but have few
alternative economic or employment opportunities, and with a lack of political power, they are also
disadvantaged. Vulnerability in the ASALS is also not spread uniformly at household level with
stresses and shocks having a disproportionate impact on children (with children under five years
of age are most at risk of morbidity and mortality) and women (especially pregnant and
breastfeeding women).
vii.
Climate change is a threat multiplier. Pastoralists, agro-pastoralists, and marginal agricultural
farm households face more frequent and more severe droughts and floods. Accelerated land
degradation means only a small proportion of rainfall is accumulated and stored for productive
use. This further strains a fragile social, political, physical and economic environment. The 2011
drought was one of the worse for a number of years affecting the Horn of Africa33.
16. Historically, the main intervention to address these challenges has been provision of food aid
(see Figure 2). Over the past
Figure 2: Population Requiring Emergency Assistance March 2004 - February 2013
eight years Kenya has
experienced four episodes of
severe drought (in 2004/05,
2005/06, 2008/09, and
2010/11). Figure 2 indicates the
numbers of people who have
required emergency food aid
since 2004. The provision of
emergency food relief year after
year to chronically poor and
food-insecure populations has
become common place in the
ASALs.
17. However, non-food
interventions, in particular
CTs, are getting more
Source: Data provided by the VAM Unit (Vulnerability Analysis and Mapping Unit) of
attention. Food aid is
34
the World Food Programme in December 2012.
expensive , often late, and
based on reactive crisis/
emergency responses, rather than preventative, anticipatory risk management. It is also argued that it has
increased vulnerability in the ASALs, with food aid incentivising populations to settle in unviable
settlements. In Kenya, an estimated Kshs 10bn is spent on emergency food aid each year35. It is argued
that reorienting this financing for subsidies to safety nets and reforming emergency food aid systems to
deliver as predictable safety nets would be less costly and more effective36.
The changing national policy, institutional and budget frameworks for supporting the ASALs
18. Historically, development assistance to the ASALs has been fragmented, uncoordinated and
reactive with more emphasis on emergency responses. This has saved lives, but it has arguably done
little to enhance the resilience37 of households (or institutions). There has also been a lack of clear
coordination by the Government. However, in the last year there has been significant progress from a
policy and institutional perspective.
19. The Constitution (2010) 38 and Vision 203039 (2011) both identify the ASALs as needing a specific,
coordinated and long-term development plan. The Constitution recognises the importance of
addressing the needs of the ASALs as marginalised areas40. Vision 2030 articulates how its goals will be
realised in the specific context of Northern Kenya, and the need to integrate ASAL priorities fully into the
national framework for development policy and planning.
20. The Ending Drought Emergencies in Kenya Country Programme Paper (EDE CPP or EDE) (2012)
articulates how Kenya will end drought emergencies within the next ten years 41. It re-frames drought
management in terms of the debate on vulnerability and resilience, arguing that drought resilience will only
be built by both public and private investment in the basic foundations for development (as articulated in
5
the Vision 2030 strategy). It strengthens the institutional and financing framework for drought
management in Kenya, and calls for more effective international financing mechanisms. It also fulfils
Kenya’s responsibilities under the Intergovernmental Authority for Development (IGAD) initiative to end
drought emergencies in the Horn of Africa. It sets out a 10 year programme in 6 strategic response areas
(SRAs) with the National Drought Management Authority (NDMA) as the lead implementation agency (see
Figure 3 below): SRA 1: Peace and Human Security; SRA 2: Humanitarian Assistance (when required);
SRA 3: Climate proofed infrastructure development; SRA 4: Building Human Capital; SRA 5: Sustainable
Livelihoods adapted to Climate Change; and SRA 6: Multi-sectoral and multi-stakeholder coordination.
Figure 3: Overview of the SRAs under the EDE.
Source: EDE CPP (2012)
21. The NDMA will also have responsibility for scalable CT safety nets as an emergency response
mechanism in the ASALs. Providing safety net support to vulnerable households that are negatively
affected by shocks protects their consumption, human capital and productive assets. At present, none of
the five cash transfer programs under the NSNP has the ability to rapidly scale-up its coverage or
increase the support provided in response to shocks. This undermines their ability to provide effective
safety net support to poor and vulnerable households in times of crisis or shock. The existing GoK drought
response management system consists of (i) the early warning system; (ii) approved contingency plans;
(iii) contingent financing; and, (iv) monitoring and evaluation. This system is managed by the NDMA, with
the exception of the contingency financing, which is being established as the National Drought and
Disaster Contingency Fund (NDDCF)42 under the Ministry of Finance (MoF), to be managed by a Board of
Trustees. Under the NSNP, the revised Drought Response Operations Manual of NDMA and HSNP
Operations manual will detail procedures in each of these areas as they apply to CTs. These will refer, at
a minimum, to the procedures for scaling-up the HSNP in response to drought. It is envisaged that the
system will progressively expand to encompass the other programs and a response to other types of
shocks43.
22. National Policy for the Sustainable Development of Northern Kenya and other Arid Lands44
(otherwise known as ‘The ASALs policy’): The recently launched ASALs policy, endorsed at cabinet
and Parliamentary level, recognises the need to bridge the development gap between the ASALs and the
rest of the country. It seeks to re-frame, in light of the region’s history, the way in which Northern Kenya
and the ASALs are considered by Government: (i) As a region of opportunity and potential, not just
challenge; (ii) As a region where Government will think and act differently, taking its unique characteristics
into account (including mobility, low population density, and pastoralism’s distinct institutional
arrangements); and (iii) As a region which is fully part of Kenya, and therefore whose citizens are entitled
to the same basic rights in development as other areas of the country. As such, it reinforces Constitutional
provisions on inequality and marginalisation and: (i) Recognizes the value of pastoralism and
domesticates the African Union Policy Framework for Pastoralism in Africa; (ii) Emphasizes the region’s
contribution to national development, which will be achieved by accelerating investment in the foundations
for poverty reduction and economic growth (such as roads, security, and human capital); (iii) Opens the
way to new approaches to service delivery and governance; and (iv) Establishes a stronger institutional
framework for multi-sectoral and multi-stakeholder ASAL development.
23. This evolution in policy and institutional frameworks for the ASALs is being translated into
6
budgetary aspirations and allocations. The EDE Medium Term Plan (EDE MTP 2013-17) sets out the
financing framework for the ASALs in line with the EDE budget aspirations. This is now informing sector
level discussions with the MoF in relation to the Medium Term Expenditure Framework (MTEF). Table 1
sets out proposed GoK allocations to HSNP.
Table 1: Proposed GoK financing to HSNP
GoK
contribution to
HSNP (KShs)
2013/14
2014/15
312,000,000
624,000,000
2015/16
1,248,000,000
2016/17
2,496,000,000
TOTAL
4,680,000,000
Source: EDE MTP (2013-16)
24. Hence, for GoK both the evidence and proposed budgetary commitments to CTs as an efficient
response to chronic and transitory poverty in the ASALs is growing45. The MTP and NSNP reflects
in policy and budgetary terms, the need for CTs in the ASALs (currently HSNP), to respond as:
 A predictable safety net with regular electronic cash payments addressing chronic poverty;
 Building the capacity to be a scalable safety net, facilitating rapid responses to shocks;
 A tool to help build resilience and underpin wider efforts to increase agricultural productivity, diversify
livelihoods and improve nutritional and education outcomes in the ASALS.
What are development partners doing?
Coordinating support around the NSNP
25. The World Bank proposes to support the NSNP with a new financing instrument, the Program for
Results (PfR). Building on existing policy work supported by DFID under the Social Protection
Programme Phase 1 (SPP1), the World Bank will support the GoK to develop and deliver the NSNP. The
PfR is a lending instrument through which the World Bank finances the achievement of results rather than
the provision of inputs. DFID has been supportive at the World Bank Board in the development and
implementation of this instrument. The key features of the PfR are that it (i) It disburses upon achievement
of programme results rather than inputs; (ii) finances and supports government programs, whether they
are sectoral or sub-sectoral, national or subnational; and (iii) focuses on strengthening the institutional
capacity needed for programs to achieve their desired results. It disburses resources based on the
achievement of pre-agreed results, called Disbursement Linked Indicators (DLIs).
26. There will be three focal ‘results areas’ under the PfR for NSNP: (i) strengthening programme
systems to ensure good governance (e.g. establishing a “single registry”, linked to programme MISs
and the use of electronic payment systems to reduce delivery costs); (ii) harmonizing standards across
CT programs to improve sectoral coherence (e.g. establishing best practice standards on targeting,
MIS, payment systems, grievance and appeals mechanisms and a GoK led M&E framework); and (iii)
expanding cash transfer programs to promote more comprehensive and equitable coverage to
vulnerable populations while ensuring long term sustainability (e.g. adopting a coordinated approach
to geographic expansion and agreeing criteria for progressively expanding coverage of programs, based
on the expansion of the GoK safety net budget).
27. The financing for the proposed PfR would be US$250m with planned approval by the World Bank
Executive Board expected in mid-2013. Of this, the World Bank plans to allocate US$50 million to the
creation of a contingency fund, linked to the Early Warning System and National Drought Management
Authority, so that the NSNP could scale-up in response to shocks. Remaining resources would be used to
support government expansion of the coverage of the other CT programs and strengthen implementation
systems.
28. Through the NSNP, it is proposed that for the first time, alongside donor contributions, GoK will
provide direct financing to the HSNP. A Medium-Term Expenditure and Financing Framework (MTEFF)
has been developed by the World Bank which details the expected increase in the total coverage of CT
programs, the relative contribution of each programme to this as well as the sources of funding to finance
this expansion46. The proposed GoK budgets for the HSNP programme are in line with the EDE MTP
budget illustrated above, see the SPP2 business case for more details [Quest ref: 3911628] and Annex 1
for an outline of proposed TA Support.
Coordinating support around the ASALs policy, institutional and budgetary frameworks
7
29. Development assistance is increasingly coordinating around this ASAL policy, institutional and
budget framework.47 Donor coordination is improving and efforts are being made to understand how and
where funding is being targeted in the ASALs (see Annexes 2 and 3). Development partners have
highlighted the need to support: (i) Community approaches that protect and promote productive
pastoralism, in terms of governance, growth and access to social services; (ii) Developing an enabling
environment for the development of the ASAL areas, focussing on: a) Infrastructure, which is key to
connecting the ASALs to the rest of the word, to facilitate private sector investment and to provide
adequate health and education; b) Security and rule of law to address not only conflicts generated
around access to resources, but also integrating the difficult regional context; and c) Investing in human
capital as a pre-requisite for growth and home based expertise; and (iii) Building resilience: through
increased agricultural productivity, diversified livelihoods and the use of CT safety nets to address chronic
and acute poverty and inequality.
What is DFID doing in response to these agenda’s?
Ensuring the NSNP takes account of HSNP and GoK contributions to HSNP
30. DFID is exceptionally well placed to ensure the NSNP to take account of HSNP and GoKs
contributions to HSNP. We are the key bilateral donor working very closely with the WB and GoK in the
NSNP process. Since October, we have pro-actively been participating in the NSNP policy dialogue,
actively shaping the agenda, especially in relation to the DLIs and protocols affecting HSNP. We have
succeeded in getting amendment in the NSNP PAD, DLI matrix, protocols. For example, we have
managed to:
 Ensure that the budget projections for GoK’s contribution to HSNP were included in full in the relevant
sector medium term plan (EDE MTP) in order to inform future negotiations and sector MTEFs;
 Ensure that these figures were translated into the WB NSNP MTEFF at 100% funding levels;
 Get an MoU signed with GoK and DFID on HSNP, were recorded outlining our budget profile and the
GoK EDE MTP figures in full;
 Ensuring DFID funds for HSNP were one of only two projects recorded as appropriation in aid in the
GoK budget printed estimates
 Increase and secure the GoK HSNP request from a verbal Kshs 50m to the full EDE MTP FY 13/14
request of Ksh 312m, despite significant institutional change (i.e. during the transition of HSNP
implementation being under Ministry of Northern Kenya, to NDMA);
 Ensure that request from NDMA passed unreduced through Treasury so that the budget currently
being debated in Parliament contains 100% of the EDE MTP request for in FY13/14; and
 Significantly alter the language in the NSNP DLIs and their Protocols (1, 9) to enhance the prospect of
the getting 100% of the proposed EDE MTP GoK contributions to HSNP into the MTEF 14/15-16/17.
Building resilience in the ASALs
31. Resilience has been a focus for DFID Kenya for several years, with a growing a portfolio of
approximately $300m earmarked for the ASALs over the next 4 years delivered through 11 relevant
national or subnational existing/ planned programmes. The portfolio provides a layered and integrated
package of programmes, which provide both a safety net to stop people falling further into poverty,
destitution or malnutrition, but also a ladder out - including through support to human capital development,
livelihoods, the private sector and growth enablers such as power provision.
32. DFID Kenya’s resilience strategy is focused on strengthening the “ability of households in the arid
and semi-arid Lands (ASALs) to maintain or transform living standards in the face of droughts and
other shocks or stresses without compromising their long-term prospects”. Given the nature of the
context, efforts must do more than just tackle food insecurity, but also address some of the underlying
causes of vulnerability – including poverty and socio economic marginalisation. This is aligned to the
GoKs policy and institutional frameworks as outlined above, including efforts to accelerate investments in
the foundations for development in the ASALs. See Maps 1 and 2 below for an overview of DFID’s
current investments in the ASALs.
33. DFID Kenya is focusing most effort on Turkana, Wajir, Mandera and Marsabit, where poverty rates
and vulnerability to shocks are most intense. DFID’s contribution in these counties is focused on:
a) Strengthening peace and security, through the creation of County Peace Forums that will support
Governors to maintain security and address local causes of conflict.
8
b) Strengthening human capital through better access to key public services supported through our
nutrition, health and education programmes.
c) Supporting a safety net for the very poorest, through the provision of a predictable cash transfer for the
poorest households, ensuring vulnerable households do not fall into destitution (the focus of this business
case).
d) Strengthening household and community coping capacities and adaptive livelihoods, through
investing in public and household assets and livestock insurance.
e) Supporting a shift to “no regrets” for early responses in anticipation of and during bad seasons,
including scaled up nutrition, cash transfers and intensified livelihood support. This will be facilitated
through predictable risk financing integrated into relevant on-going multi-year programmes.
f) Strengthening the role of the private sector to create livelihood opportunities and stimulate growth,
through our Markets for Poor Programme, STARCK+ and proposed Mini-Grids power programme.
g) Strengthening national and local institutions that can deliver services to poor people in accountable
and transparent ways, through our sectoral-specific programmes (e.g. HSNP, Nutrition, Health), but also
to the National Drought Management Authority through our Arid Lands Support Programme.
h) Working towards greater sustainability by encouraging Kenyan Government to maintain policy
commitments to the ASALs and back this up with budgetary commitments at national and subnational
levels (e.g. against the EDE commitments and other relevant sectoral issues).
i) Committing to donor coordination and alignment to Kenyan priorities, and also support the provision
of public goods (e.g. single registry across four counties which can be used by GoK and other donors) and
internally seek to maximise integration of programmes where appropriate.
j) Supporting robust monitoring and evaluation systems to strengthen evidence of what works.
Map 1: Overall DFID Kenya investments in the ASALS (201217)
Map 2: DFID Kenya Investments in the ASALs (2012-2017)
Current and planned $ spend per person over 5 years
9
HSNP 1: Piloting a predictable safety net in the ASALs
34. HSNP 1 is at the core of DFID Kenya’s work on resilience. Under HSNP 1, DFID currently reaches
69,000 of the poorest HH (66% women headed) or 496,800 of the poorest people in four of the poorest
and most vulnerable ASAL counties: Marsabit, Mandera, Wajir and Turkana. HSNP beneficiaries receive
regular, predictable CTs via the use of innovative, biometric (fingerprint verified) smart cards (currently
valued at Ksh 1,750 or approximately £13 per HH, per month). This equates to £3.00 per adult
equivalent for each HH receiving the CT. Payments are made to beneficiaries through a private sector
Payment Service Provider (PSP), currently Equity Bank48 and its network of 150 local agents.
35. As outlined in the evidence section below, HSNP CTs have been important survival mechanisms
for the poorest people in the ASALs, particularly in times of drought. While it is widely recognised
that CTs alone are unlikely to graduate people out of poverty 49, HSNP 1 has demonstrated that is acting
as a safety net for both the chronic and acutely poor.
HSNP 2: A predictable and scalable safety net for the ASALs that contributes to the NSNP
36. HSNP 2 proposes to build on, and expand HSNP 1, primarily as a safety net for the chronically
poor, in line with the NSNP. However it will also have the potential to scale up and respond in
times of crisis. HSNP 2 will therefore have two outputs:
i. GoK supports cash transfers to help meet chronic and acute needs in the arid and semi-arid
lands, which are integrated within the wider National Safety Net Programme; and
ii. HSNP households receive timely, predictable electronic cash transfers for both chronic and acute
responses.
37. HSNP 2 will contribute to the development of GoK owned safety nets under NSNP through: (i)
Strengthening the MIS to improve fiduciary controls and monitoring: HSNP has supported creation of a
single registry with programme MIS’s interlinked and agreed standards for payroll controls; (ii) 100% of its
payments being made through 2 factor authentication: (card and biometrics); (iii) Functioning grievance
and appeals mechanisms; (iv) Regular and comprehensive M&E and reporting; and (v) GoK contributing
funding to HSNP for the first time.
38. HSNP 2 will expand as a predictable CT safety net to the poorest HHs in the ASALs. International
evidence shows that responding to chronic poverty and food insecurity is more effective through a
predictable safety net than emergency food aid. While food aid saves lives, it is not as effective at halting
the erosion of livelihoods and the slide into deeper poverty50. In line with the NSNP, it is proposed that the
CT payments to HHs will increase by 5% p.a. from Kshs 2,300 per HH, per month (£17) in FY 13/14 to
2,700 (£19) in FY 16/17. This equates to £4.10 per adult equivalent per HH by the end of the project.
In line with the EDE, ASALs policy and the NSNP, it is proposed that funding will come from both DFID
and GoK contributions to the programme (see proposed caseload and budget trajectories outlined below
in the Appraisal section51).
39. HSNP 2 will also have the ability to act as a scalable safety net in times of crises. Scalability refers
to the ability to grow or shrink rapidly (e.g. via changes in the coverage of beneficiaries; size and
10
frequency of transfers). Scalability is important, as safety nets should be able to tackle both chronic and
acute dimensions of poverty and food insecurity in disaster-prone areas. Scalability may also be more
cost-efficient than setting up once off humanitarian responses; it creates synergy between “relief” and
“development”; and by enabling reductions in assistance during the recovery period, reduces the risk of
disincentives. During times of shock, HSNP 2 will act in the interests of the wider public good and be able
to direct CTs to reach up to 470,000 pre-registered HH who will already have bank accounts and cards.
Thus it can act as a platform for other funding (e.g. GoK, other donors such as WFP or AusAid) to provide
a more effective, early humanitarian response in a crisis.
B. Impact and Outcome that we expect to achieve by 2017
40. The programme impact is to: Reduce poverty, hunger and vulnerability for the poorest in Kenya’s
arid and semi-arid lands. The programme outcome is to: Create better and more sustainable safety
nets for poor and vulnerable households, particularly for HHs in the arid and semi-arid lands. This
will be measured through the following indicators:
 Sustainability: (i) GoK funding to HSNP as a percentage of in-year financial contributions to Ending
Drought Emergencies in the Medium Plan will increase from 0-80%; and (ii) GoK plans to account for 49%
of total programme costs and 54% of the beneficiary caseload.
 Coverage and women beneficiaries: (i) 100,000 of the poorest and most vulnerable households (66%
women-headed) or 720,000 people (49% of them women and girls) will receive predictable, timely,
electronic cash transfer payments directly into their bank accounts, worth £17-19 a month; and (ii)
financial access will improve with bank accounts for at least 300,000 women.
 Poverty Impact: When compared with control households, HSNP households will show: (i) increased
poverty reduction, particularly for the poorest HH; (ii) sustained food consumption and improved dietary
diversity; and (iii) improved asset retention.
 Scalable Safety Nets for an early crisis response: (i) 470,000 households (reaching approximately 3.4
million people) will be registered with the private sector payment provider and set up with bank accounts
and cards in order to potentially receive emergency cash transfer payments during times of crisis; and (ii)
HSNP will lead the system for scaling up emergency cash transfers as part of the national drought
management response, with agreed levels of GoK contingency financing.
41. The outputs and their associated indicators are:
42. HSNP is integrated into the broader National Safety Net Programme framework
1.1 % of DFID's HSNP financing on the GoK budget as appropriation in aid;
1.2 Number of households registered with HSNP and carded with bank accounts for potential
emergency cash transfer payments (in Turkana, Marsabit, Mandera and Wajir counties); and
1.3 Procedures for scaling-up HSNP in response to drought are developed with DFID support ( within
NDMA and HSNP).
43. HSNP beneficiaries receive timely, predictable electronic cash transfers;
2.1 Number of HSNP beneficiaries who receive cash transfers supported by DFID (i) Total (ii) Female
(iii) Male; and
2.2 % of payments disbursed from payment service provider (PSP) on time.
44. Improved operation of HSNP 2 for the poorest in the 4 targeted counties
3.1 Targeting: % of HSNP beneficiaries enrolled who are in the bottom 10% nationally;
3.2 Monitoring and Evaluation: Monitoring and evaluation of HSNP in the ASALs; and
3.3 Rights, complaints and greivance system: (i) Functional and NSNP compliant rights, complaints
and grievance (R,C&G) mechanism in place ; and (ii) Awareness of rights under the programme.
Appraisal Case
11
A: What are the feasible options that address the need set out in the Strategic case?
Options to support HSNP 2
45. The options to support HSNP have been affected by several factors as outlined below in Table 2a.
Table 2b outlines seven feasible options of moving forwards with the HSNP 2, summarising these in
relation to the two highest priority factors: the rate and pace of scale up by DFID as well as the peak
difference from the DFID Kenya Operational Plan targets. Of these 7 options, 6 will be examined in the
appraisal case, since Option 5c is currently discounted.
Table 2a: Factors affecting HSNP 2 options
Factors affecting consideration of HSNP 2 options
Priority
( very high, high,
medium or low)
1. TA contributes to leveraging greater financial sustainability for HSNP 2
through supporting GoK to fund HSNP 2 in line with the NSNP and EDE
MTP budget commitments
2. DFID funded caseload contributes to meeting (but not significantly under or
over-shooting) the DFID Kenya Operational Plan target
3. Based on lessons learned from the HSNP 1 pilot, HSNP 2 more effectively
targets the poorest and expands to an optimum case load in a short time
frame using electronic CTs with 2-factor authentication linked to bank
accounts
4. Strengthening HSNP 2 as a predictable safety net for both chronic and
emergency responses
Table 2b: Summary of options to be appraised
OPTION
Pace and scale of total scale up, with number of DFID HH in total
caseload 2013/14-2016/17
1: 130K
Early
FAST CT scale up
Option 1 (FAST/ EARLY): Scale up the total caseload for cash transfers
under HSNP 2 from 69,000 HH to 130,000 HH by 2014/15:
DFID caseload ‘000 HH
Of these, DFID caseload in
bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
2: 130K
Late
Of these, DFID caseload in
bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
2015/16
105,800
2016/17
75,800
83,000
100,000
88,000
63,000
5,700
100,000
9,000
130,000
24,200
130,000
54,200
130,000
2013/14
94,200
2014/15
101,000
2015/16
95,800
2016/17
75,800
83,000
5,700
100,000
86,000
9,000
110,000
81,000
24,200
120,000
63,000
54,200
130,000
SLOW CT scale up
Option 3 (SLOW/ EARLY): Scale up the total caseload for cash transfers
under HSNP 2 from 69,000 to 100,000 HH by 2014/15
DFID caseload ‘000 HH
Of these, DFID caseload
in bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
4: 100K
Late
2014/15
121,000
Option 2 (FAST/LATE): Scale up the total caseload for cash transfers
under HSNP 2 from 69,000 to 130,000 HH by 2016/17:
DFID caseload ‘000 HH
3: 100K
Early
2013/14
94,300
2013/14
89,300
2014/15
91,000
2015/16
75,800
2016/17
45,800
78,000
5,700
95,000
80,000
9,000
100,000
67,000
24,200
100,000
40,000
54,200
100,000
Option 4 (SLOW/ LATE): Scale up the total caseload for cash transfers
under HSNP 2 from 69,000 to 100,000 HH by 2016/17. Caseload trajectory
12
HSNP 2 Peak
Difference from OP
results (FY 14/15)
+35%
+13%
2%
-6%
High
High
Medium
Medium
Assumptions
and issues
 Assume av.
74% GoK as
% of MTP
over the 4
years as a
whole
 GoK FY1-4
trajectory as
% of MTP in
that year =
60%, 50%,
70%, 83%.
 CT-OVC BC
approved at
40,000 HH
by 2016/17
(increasing
from 34,000
HH in 13/14
by 1,500 HH
per year)
 Original OP
target for
DFIDK was
830K HH
as follows:
DFID caseload ‘000 HH
Of these, DFID caseload
in bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
5: BAU/
moderate
& early
scale up/
close
2013/14
84,300
2014/15
81,000
2015/16
70,800
2016/17
45,800
74,000
5,700
90,000
72,000
9,000
90,000
62,000
24,200
100,000
40,000
54,200
100,000
NO CT scale up/ CLOSE
A: Retain the current beneficiaries at 69,000 HH with no GoK funding.
Caseload trajectory as follows:
DFID caseload ‘000 HH
Of these, DFID caseload
in bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
2013/14
69,000
2014/15
69,000
2015/16
69,000
2016/17
69,000
62,000
0
69,000
62,000
0
69,000
62,000
0
69,000
62,000
0
69,000
B: Scale up the current beneficiaries to 100,000HH early, with no GoK
funding. Caseload trajectory as follows:
DFID caseload ‘000 HH
Of these, DFID caseload
in bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
6: BAU
for DFID
with GoK
at 74% of
EDE MTP
2013/14
90,000
65,000
2014/15
100,000
74,000
2015/16
100,000
74,000
2016/17
100,000
74,000
0
90,000
0
100,000
0
100,000
0
100,000
C: End DFID support to the programme (i.e. do nothing).
A: Retain the current beneficiaries at 69,000 HH with GoK funding as per
option 3. Caseload trajectory as follows:
DFID caseload ‘000 HH
Of these, DFID caseload
in bottom 10% nationally
GoK caseload ‘000 HH
TOTAL CASELOAD
2013/14
69,000
2014/15
69,000
2015/16
69,000
2016/17
69,000
62,000
5,700
74,700
62,000
9,000
78,000
62,000
24,200
93,200
62,000
54,200
123,200
-23%
+12%
N/A
-23%
 0% GoK
contribution
 Retaining
existing
beneficiaries
at 69K would
fall short of
OP target
 GoK
contribution
as under
Option 3
 Retaining
existing
beneficiaries
at 69K would
fall short of
OP target
B. Assessing the strength of the evidence base for each feasible option including delivery routes
46. All options are required to demonstrate evidence in relation to the design features highlighted
above. Hence, this section outlines the overall evidence base for:
i.
The use of TA in national social policy and sectoral reform processes, specifically the NSNP;
ii.
Targeting, role and impact of CTs in delivering improved welfare, resilience and socioeconomic impacts for HHs (global, in Kenya and in the HSNP1);
iii.
The delivery route of using electronic cash transfers with two factor authentication via a Private
Sector Payment Provider (PSP); and
iv.
The impact and utility of scalable safety nets.
Evidence on the use of TA in national social policy and sectoral reform processes, specifically the
NSNP
47. Use of TA to influence national policy and sectoral reform processes: The aid literature suggests
that TA is difficult to deliver well – and historically has often been ineffective52. The Accra High Level
Forum on Aid Effectiveness (2008) identified factors that contribute to effectiveness of technical
cooperation, including management capacity which can progressively shift TA towards country systems
and a focus on the processes of capacity building53. A review of evidence on health TA for DFID in 2007
suggests that success is highly context, culture and time specific54.
48. DFID’s influencing work is closely linked to our TA – often we use TA as a practical means for
gathering and providing evidence for informing better policy making. Contrary to the aid literature,
13
DFID’s recent Country Programme Evaluations are generally positive about DFID’s sectoral TA. The
evidence55 highlights the need for any TA to be: (i) Country led; (ii) Coordinated; (iii) Market-based; and
(iv) Fully pooled. For example, in health, TA has strengthened capacity to develop health policy (Pakistan,
Zambia, and Kenya) and flexible use of short-term technical support has responded well to demands and
been able to inform the policy agenda (Ethiopia). The DFID health portfolio review found that influencing
appears likely to be very cost-effective, although a full quantitative cost-effectiveness analysis of
influencing is likely to remain impractical. In the case of governance and public service reform (PSR),
evidence shows that TA has worked best in countries where there has been a significant degree of
ownership and direction from the recipient country56.
49. Use of TA to influence national social policy and sectoral reform processes: A major evaluation of
10 years of World Bank support to Social Safety Nets (SSNs) (2000-2010) was recently published.57 It
noted that over the decade, the Bank began to move from a project-focused approach that emphasized
delivery of social assistance benefits, toward an approach that focused on helping countries build SSN
systems and institutions to respond better to poverty, risk, and vulnerability. It underscored the importance
of a country-specific and time-varying blend of lending and all forms of non-lending support: formal
economic and sector work, non-lending TA, capacity building through training or South-South
learning, involvement in donor coordination or impact evaluation. Specifically, the provision of long
term knowledge and TA support was seen as an essential investment alongside operational assistance.
This was often provided most effectively through multi-donor trust funds. It concluded that the Bank should
focus on strengthening its engagement in low-income countries, emphasizing lending and non-lending
(TA) instruments that support SSN systems and institutional capacity, and improving the results
frameworks of operations that support the development of SSN systems.
50. DFID’s use of TA to support SPP1 in Kenya has delivered results: From a baseline where there was
no social protection policy in place (2007), the right to social protection is now enshrined in the new
Constitution, and the NSPP has now been agreed by the GoK Cabinet. A recent study of the social
protection sector, carried out by the Ministry of State for Planning, National Development and Vision 2030
(2012), jointly funded by the World Bank, DFID and UNICEF, provides an overview of the current status of
the sector and identifies the complexities, evolution and challenges. It reviewed 22 of the larger
programmes, including DFID programmes which are two of the largest, with total financing to KSh 75 bn.
This notes the utility of DFID TA provision for social protection policy support under SPP1 and underpins
the rationale for TA support to NSNP development and delivery.
51. The GoK and donors are now actively working towards the development and delivery of the NSNP:
Funding is being proactively discussed and put into the relevant next Medium Term Plans and Medium
Term Expenditure Frameworks (MTEFs) developed in the relevant GoK line ministries. Although formal
budget lines are still being finalised, the amount of government spending on social protection across the
5CTs in the NSNP has increased substantially as evidenced earlier. Furthermore, there has been a
progressive increase in bilateral and multilateral funding from a diversity of sources reflecting a general
commitment to, and support for, the NSNP.
52. Operationally, there is common agreement on what specific TA support will be needed to help
develop and deliver NSNP (as set out in Annex 1). There is greater willingness to actively support
collaboration across the different social protection programmes, to share learning, to link MIS and to
harmonise approaches where appropriate. For example, DFID is currently funding key TA that underpins
the development and delivery of the NSNP and attainment of initial DLIs:
a) Development of the Single Registry: This will reflect the design developed under the HSNP and will
be taken up by the NSNP, allowing greater transparency and value for money in beneficiary
monitoring and case management. This will have considerable benefits in reducing the targeting costs
and streamlining the administration across all 5 CT programmes in the NSNP.
b) MTEF consultancy on social protection programmes in Kenya: This will report on the 5 CTs in the
NSNP and the MTEF/budgeting process (stakeholders to include MoF, line ministries, and donors),
addressing issues of financial sustainability of CTs over the medium to long term. It will make
recommendations on budget aspects of the PfR, including advising on TA support, DLIs and other
aspects of NSNP design and implementation. It will provide DPs (including DFID) with wider lessonlearning on MTEF/budget management in Kenya of value to other sectors (including health and
education).
c) Scaling up safety nets with the NDMA: This will help to design a system to scale-up the NSNP
using the framework of the NDMA and the National Disaster and Drought Contingency Fund
(NDDCF). The aim is for the NSNP to have a designated source of contingency financing within the
NDDCF that can be used when an agreed set of early warning indicators are triggered to scale up
cash transfer support to populations affected by a shock. The process by which the NSNP is scaled-
14
up will be based on the existing drought response management systems: the early warning system;
contingency planning; and drought contingency fund management. It will also build on the existing
institutional arrangements for the NSNP and NDMA at all levels.
53. In summary, there is mixed evidence that the use of TA to support the NDMA will have a positive
impact on leveraging GoK financing to HSNP. This supports the case for the limited scale-up
presented in Option 3a and 4.
Evidence on CT targeting in Kenya and in HSNP 1
54. Operationally, there have been a number of important advancements in the social protection
Sector in Kenya. Safety net programs tend to be well targeted to poor counties and locations, although
the relative share of safety net beneficiaries in each location does not appear to reflect the poverty rates in
that location41. Safety nets currently use a range of methods to identify those households that are eligible
for the program, such as categorical targeting, community-based targeting, and proxy means tests.
55. The HSNP has tested58 three alternative targeting mechanisms in order to assess which was most
effective at identifying poor and vulnerable households. Each sub-location was randomly assigned
one of the targeting mechanisms, and the success of each approach was then evaluated using a
combination of quantitative and qualitative analysis. The three approaches that were piloted were:
 Community-based targeting (CBT). Communities were tasked with identifying both appropriate
targeting criteria and the neediest households up to a specified quota. This approach was put into
action with the intensive support of partner NGOs. There is some suggestion that categorical targeting
can be easier for communities to understand and less costly in terms of data requirements59.
 A universal social pension for all individuals above a certain age (SP). A 55 year cut-off was used
for those who could prove their age using official documents (such as a national identification card or a
birth certificate), whereas the age of 60 was used as the threshold for those who had to prove their
age using a historical calendar implemented by a vetting committee60.
 A dependency ratio (DR) approach. This method identifies and targets households who have a high
number of dependants - defined as children aged 17 years old and under, the elderly aged 55 years
and over, and the disabled or chronically ill (with either physical or mental impairments). These cut-offs
varied from district to district.
56. A 2011 assessment of the effectiveness of these three methods concluded that the CBT approach
was the most effective for identifying the poorest households, but still had shortcomings that
could be complimented by other approaches61. Beneficiary households in CBT areas were 50 % more
likely to be poor (falling below the 51 % relative poverty line) than non-beneficiary households, compared
to 14 % more likely in the social pension areas and 17% in the dependency ratio areas. The performance
of the dependency ratio approach was undermined by implementation errors, as 30% of households
receiving the benefit were found not to be eligible (while 23% of eligible households were not covered).
57. The targeting accuracy of the social pension was very high, demonstrating the relative ease of
applying the age-based criteria (96% of beneficiaries were eligible and 83 % of eligible households
were covered by the programme). However, it appears that the presence of an elderly person in a
household is not strongly associated with poverty in the programme’s operational areas62. This
assessment also assessed the possible results of using a proxy means test (PMT) to target HSNP
resources and found that there was a possibility of such an approach outperforming any of the tested
methodologies. Table 3 below shows the results a targeting simulation exercise for HSNP areas. The first
column projects that ratio of poverty rates amongst beneficiaries and non-beneficiaries for each method of
targeting. The second column shows poverty targeting scores for each method of targeting using the
Coady-Grosh-Hoddinott index63. This index quantifies the effectiveness of targeting transfers. A score of
1 would signal targeting that was no better than random.
58. Hence, HSNP is currently field testing a combined targeting approach using both the CBT and
PMT. Early results show there is no single perfect targeting methodology but the combination is more
robust and able to overcome the shortcomings of each approach (see Table 4). The members of the team
designing the approach have drawn on the PMT methodology used by the CT-OVC. The results of both
approaches will be compared while targeting teams are in the field, and any differences in how
households are ranked or grouped will be resolved by checking the accuracy of the data collected and by
discussion between targeting teams and community leaders.
Table 3: Results of a Targeting simulation exercise for HSNP areas
Ratio of poverty rates
15
CGH index
bens vs. non-bens
% of eligible households that are
poor / poverty rate
CBT areas – actual
1.50
1.21
SP – simulated
1.33
1.17
DR – simulated
1.45
1.15
PMT
2.91
1.47
HSNP targeting mechanisms:
Key: CBT = Community Based Targeting; SP = Social Pension and DR = Dependency Ratio
Source: OPM (2010)64
Table 4: Comparison of PMT and CBT targeting methodologies
Targeting methodology strengths
Targeting methodology weaknesses
CBT

Represents the communities agreed view of
household’s well-being relative to other
members of the community.

Provides opportunity for public scrutiny of
individual households well-being
classification.



There is no absolute expression of well-being and
therefore is a relative rather than absolute
measure of well-being (i.e. it is not comparable
across locations.
It can't easily generate thresholds.
Is open to elite capture.

The historical nature of the data;

Questions on whether the relationship between
the proxies and actual consumption from 2005-06
still hold in 2012-13?

There is 32% of rural and 14% of urban variation
in consumption that is not explained by PMT. So
for some households actual consumption will not
be well estimated.
PMT

Provides a "best" approximation of
consumption from the last available
household survey (i.e. gives an estimate of a
households well-being without costly and
time consuming direct measurement of
consumption).

Generates individual score for each
household.

Provides an absolute measure of well-being,
and therefore comparable across villages
within the same stratum used in the model.

Weights can be updated if future survey
maintains same indicators.

The model is focused on ASAL areas,
improving its explanatory power when
compared to national models (e.g. used for
the OVC programme).
Evidence on the Impact of CTs: (International/ Kenya/ HSNP 1)
The role of CTs in delivering improved welfare, resilience and socio-economic impacts for HHs: global
and in Kenya
59. DFID has been a thought leader in CTs globally and has provided much of the evidence to support
improved processes and practices65,66,67. There has been a rapid growth in CT programmes globally,
and these are now estimated to reach between 0.75 and 1 billion people68. The evidence for the impacts
of CTs in reaching the poor is increasing69. DFID’s Cash Transfers Evidence Paper published in 2011
highlights the growing evidence on the impact of social protection schemes in reducing poverty and
vulnerability. There is now more substantial evidence that well-designed and carefully implemented
schemes have also resulted in other development gains, from human development to women’s
empowerment and economic inclusion and growth.
60. International evidence shows that targeted social protection interventions directly reduce poverty
and inequality. Old age pensions in South Africa have reduced the poverty gap ratio between the richest
and the poorest citizens by 13%. At the same time, the country’s comprehensive system of cash transfers
16
has doubled the share of national income that the poorest 20% of the population receives. In one of the
most notable examples globally, Brazil has experienced a remarkable reduction in inequality – driven
largely by a reduction in extreme poverty. Studies have found that Bolsa Familia, the largest conditional
cash transfer program in the world, was responsible for 21% of this decline in national inequality, while
having no negative impact on economic growth. Most recently, the Rwanda government has attributed the
fall in poverty from 57% in 2006 to 45% in 2011 to the Vision 2020 Umurenge Program of public works
and cash transfers, along with two other key development programs70.
61. Evaluations of CT programmes, including in Kenya, show that social protection directly reduces
chronic poverty and vulnerability71. There is robust evidence72 from numerous countries that CTs have
leveraged sizeable gains in access to health and education services, as measured by increases in school
enrolment (particularly for girls) and use of health services (particularly preventative health, and health
monitoring for children and pregnant women). CTs also have a proven role in supporting specific
vulnerable groups (people living with HIV and AIDS, orphans and vulnerable children)73.
62. A randomized control trial HSNP 174 facilitated a better understanding of how CTs are used and the
impact they have for the pastoral HHs in the ASALs of Northern Kenya. Early evidence75 looking at
impacts from one follow up round suggested that relative to the control group, the impacts of HSNP1
were:
i.
Increased poverty reduction and a slower slide into poverty in crisis years: During the high
levels of drought and price inflation in 2011, poverty incidence did not increase among HSNP
beneficiaries but did amongst control households – where a significant increase in poverty rates
was detected – suggests that the HSNP is performing its function as a ‘safety net’.
ii.
Increased food consumption and improved dietary diversity: An increase in the consumption
of food by recipients of the cash transfers with 69% of beneficiaries reporting that they have been
able to have more and/or larger meals since receiving the HSNP cash transfers. Beneficiaries are
consuming more diverse diets since the programme started – especially poorer households, for
whom the cash transfer adds more value relative to total household monthly income, and smaller
households which receive a higher per capita transfer value per month. Beneficiaries also report
that since receiving the cash transfers they have been able to have more and/or larger meals, and
express a clear preference for cash support in contrast to food aid. Large and partially settled
HSNP households are also less likely to receive supplementary feeding.
iii.
Increased HH retention of productive assets: Decline in productive asset retention amongst
beneficiary households (15%) has been much less than in control groups (42%). HSNP
households are more likely to have retained their livestock, especially goats, than control
households, who lost livestock during the drought. Beneficiaries valued the fact that HSNP
transfers allowed them to buy food with this cash, rather than selling their animals to cover
essential spending needs, which would otherwise have been unavoidable.
iv.
Uptake in credit: Increased from 55% to 75% of households.
v.
Changes in work patterns: 20% of households reported positive changes to work patterns as a
direct result of cash transfers.
vi.
Health expenditure: 11% of HHs reported spending some of the transfers on health related
consumption76.
vii.
Education expenditure: 20% of beneficiary households also reported increased expenditure on
education.
63. More recent quantitative and qualitative analysis77 of HSNP 1 which looked at a second follow up
group has shown continued improvements in the lives of beneficiaries.
i.
Increased poverty reduction and a slower slide into poverty in crisis years: Seven percent of
beneficiary households were lifted out of the bottom 10% income decile, whereas 4% of control
households fell into the poorest income group. Overall, therefore, the change between beneficiary
and control HHs was therefore 11%. Furthermore, there was a reduction in poverty incidence
amongst beneficiary households, as measured by a 3% reduction in poverty relative to the national
poverty line; in the control group it increased by 5%. Hence, overall, the change between
beneficiary and control HHs was therefore 8%. This is being driven by significant decreases in
consumption among control households which did not occur for HSNP households. In other words
the programme is having a cushioning effect, mitigating the poverty impact of drought and other
adverse shocks for HSNP households. These positive impacts are greater for the poorest half of
beneficiaries; these households are 15% less likely to fall in the bottom national decile. The
poverty gap and severity of poverty declines by 12% and 11%. Increasing poverty focus due to use
of PMT and CBT means the future poverty impact should increase.
17
ii.
iii.
The transfer is functioning as an important safety net for many of the beneficiaries and
demonstrating increased consumption expenditure: Programme beneficiary households have
experienced KSh 263 additional expenditure per month per adult equivalent. As this is based on
4.5 adult equivalents this implies about KSh1,180 additional shillings expenditure per month.
Heterogeneity analysis shows the per adult equivalent impact increases to KSh 384 when only the
poorest half of beneficiary households are looked at – or KSh 1,730 per household.
The qualitative impacts of HSNP on women and older persons as well as persons living
with HIV have also been demonstrated (see case studies on http://www.hsnp.or.ke/79). Table 5
summarises the impact findings.
Table 5: HSNP 1 impacts (findings from follow up group 2)
Impact area
Finding
Consumption
HSNP beneficiaries prioritised the cash transfer on food, education and health expenditures HSNP
beneficiaries spent the transfer on a variety of items, but principally food. Beneficiary households
were able to consume a wider variety of food items and in greater quantities. Overall and especially
for the poorest households the HSNP operated as a safety net with limited transformative effects. A
small of households able to meet their more of their food requirements were able to use the transfer
to invest in their livelihoods strategies, in particular petty trading.
Livelihoods
HSNP transfers seemed to enable more elderly beneficiaries to reduce the amount casual labour
they undertook, substituting it with self-employment and in some cases hiring other workers. Some
beneficiary households were also able to reduce distress sale of assets, in particular livestock. A
few beneficiary households were able to expand their existing businesses.
Local
economy
HSNP has probably contributed to the dynamism and growth in the local markets that were also
driven by other exogenous factors including the increased sendentarisation in HSNP areas.
Education
A large part of the HSNP transfers were spent on school expenses and this was enabling
beneficiary households to overcome the financial barriers to education. Households were able to
buy books, stationary, pay for examination fees and wear clean uniform. This resulted in less
disruption to the education of children and improved psycho social wellbeing of the children. These
resulted in better attendance of children and may have led to improved performance in schools.
Prices
HSNP has also contributed to some opportunistic price hikes in a few cases during payment days,
however the main inflationary pressures stem from exogenous factors beyond the control of HSNP
programme.
Source: OPM (2013)80
64. In summary, there is good evidence that the continued and scaled-up funding by DFID to the
HSNP programme will positively impact in delivering improved targeting, welfare, resilience and
socio-economic outcomes for HSNP HHs. Qualitative evidence shows that this will benefit women,
older persons and persons living with HIV also. Combined with the TA support above, it also provides
DFID with leverage in policy discussions and ensures a seat at the policy discussion table. This evidence
supports the case for all options that retain and expand CTs to HSNP. It is a sound basis for the
case for scaling up presented in Options 1, 2, 3, 4, 5b and 6.
Evidence on delivery mechanisms: Payment via electronic cash transfers using two factor
authentication and a private sector payment provider
65. The payment mechanism is important because it has a direct impact on both the effectiveness and
efficiency of a cash transfer programme. An essential component of any cash transfer programme is a
payment mechanism that delivers regular, reliable transfers in a way that is accessible to programme
beneficiaries. Such a system needs to involve minimal costs for both benefit providers and recipients, to
be reliable and timely, and to provide sufficient documentation to facilitate an effective audit. The
accountability and security of the payment mechanism is particularly critical in the Kenyan context
because of the concerns about fraud and corruption. International evidence suggests that for beneficiaries
the payment mechanism must deliver monies reliably and with dignity. Additional developmental benefits
can be gained if payments are delivered electronically to an account. Bringing financial services to nonbeneficiaries may enhance support for a programme from those not identified to receive a CT81,82.
66. International trends in payments for cash transfer programmes have seen a move away from
manual cash based systems disbursed through government offices and staff and a move towards
outsourced electronic payments and financially inclusive mechanisms. (A financially inclusive
payment mechanism provides recipients with access to financial services most frequently with a savings
mechanism such as an account), 45% of the social transfer schemes introduced globally in the 10 years
to 2008 use electronic payment mechanisms; over the five years to 2008, about half of these schemes are
18
considered financially inclusive83.
67. More recently a review of the evidence from four countries with large, well established schemes
has reiterated this move towards electronic payments and financial inclusive mechanisms. In most
cases, this has been achieved by exploiting technology to provide recipients with bank accounts (see
Figures 4 and 5 below). The payment mechanisms used by cash transfer programmes can be categorised
into three types (1) Manual – Physical Cash (2) Electronic – Limited Purpose instrument (3) Electronic –
Financial Account. There have been moves overtime from type 1 to types 2 and 3 which offer greater
financial inclusion. Type 3 payment mechanisms offer programme’s the greatest flexibility and
beneficiaries the greatest benefits. Figure 5 shows this evolution in the CT programmes in Brazil,
Columbia, Mexico and South Africa and provides additional information about the four cash transfer
programmes there.
Figure 4: Payments categorisation
Figure 5: Move over time to electronic payments
19
Source: Bold (2012)84
68. In order to make recommendations about how payment service provision could be improved
under the NSNP, a strategic assessment50 reviewed the current use of PSPs by a range of CT
programmes in Kenya. While the assessment focused on transfers provided by the cash transfer
components of the NSNP, it also looked at approaches used by other programmes such as
Concern/Oxfam’s use of Safaricom’s mobile money transfer service (M-PESA) in their urban cash transfer
pilot and the use by the WFP of Equity Bank’s magstripe cards (which are simple cards requiring PIN
authentication) in their Cash For Assets Pilot. Table 6 below indicates the main differences in the services
provided by these different payment service providers.
Table 6: Key differences in PSPs providing Cash Transfer Payments in Kenya
Postal Co-corporation of
Kenya
Equity (biometric card as under
HSNP 1)
Equity (Magstripe)
Safaricom M-PESA
mobile money
transfer
Payrolls are transmitted
manually, with 4 payrolls
printed on each site involving
hundreds of pages.
Payrolls are transmitted
electronically.
Payrolls are transmitted
electronically.
Payrolls are
transmitted
electronically.
Recipients can collect
payments from their
allocated Post Office branch.
Recipients are able to collect
payments from any Equity Bank
payment agent (and can collect
money from different agents in
different months).
Recipients are able to collect
payments from any Equity
Bank payment agent,
including ATMs and bank
branches.
Recipients are able to
collect payments from
any M-Pesa agent.
This is a special service
provided for the CT
programmes.
Payment agents are part of the
core infrastructure, but use of
biometrics is specific to the cash
transfer programmes and required
investment in special equipment
such as biometric readers.
This is part of the mainstream
payment infrastructure.
This is part of the
mainstream payment
infrastructure.
The cashier checks the
recipients ID against the
printed payroll then makes
the recipients either sign or
Recipients are issued with a smart
card with their name and photo on
it and with biometric fingerprints
in the chip. Recipient presents
Recipients are issued with a
magstripe card and PIN
number. The payment agent
inserts this card into an online
Recipients are issued
with a Safaricom SIM
card and an M-PESA
account. Using the M-
20
print their fingerprints on the
4 copies of the payroll before
giving them the full amount
of their grant.
card at the paypoint where the
agent inserts it into a point of
sales device to authenticate the
identity before issuing payment.
card reader (or ATM) and the
beneficiaries enter their pin
number.
PESA menu on their
phone.
One factor authentication
(the lack of a mechanism to
check fingerprints means
that the ID card is the only
form of authentication).
Two factor authentication
(Biometric card and fingerprint).
Two factor authentication
(Magstripe and PIN).
Two factor
authentication (SIM
and PIN).
471 branches.
5,300 agents.
149 branches, 560 ATMs and
5,300 agents.
45,000 Agents.
Source: (World Bank 2013)85
69. Kenya’s regulatory and legislative framework affects social cash transfers because it determines
how payments can be made. The Anti-Money Laundering Act, which was passed in 2009, requires that:
(i) payment service providers must be regulated financial service providers; (ii) all payments must be
made in real time online; (iii) banks must fulfil stringent “know your customer” checks, thus making it
almost impossible to provide payments to recipients without a national ID; (iv) agents cannot be exclusive
to a single bank; and (v) no systems can be used that are based on technologies or standards that cannot
be integrated with other elements of the national payment system. Although this legislation was passed
over three years ago, there is still no timetable for when it will come into force.
70. The evidence provided through the strategic assessment86 suggested:
 New contracts should only be signed with service providers that can comply with the Anti-Money
Laundering Act to ensure that programmes are compliant when the legislation comes into force.
 Use should be made of the mainstream payment infrastructure. Special purpose infrastructure tends to be
very costly and is unlikely to be need given the recent strengthening of the mainstream infrastructure.
Furthermore, the mainstream infrastructure must comply with credible international standards, whereas if
non-standard approaches are used, this can often leave programme beneficiaries outside of the financial
services mainstream. The de facto standard for national and international payments is two-factor
authentication using a magstripe card and a PIN.
 Beneficiaries should be provided with an account that will allow them to take advantage of financial
services, for example, to save a proportion of their transfer
71. There is also a need to address the current use of short-term contracts with payment providers.
While at present these are renewed regularly, they carry the risk of interruption in payment services.
Moreover, it is important to ensure that any change in payment provider makes the payment system more
accessible to programme beneficiaries. At present, pay points are often situated far from the beneficiaries’
homes and they often have to endure long waiting times at those pay points. This can incur both
considerable time and financial costs. A recent review of the OPCT and the PWSD-CT found that, in rural
areas, beneficiaries frequently spent between KSH300 and 500 on transport costs and travelled on
average one or two hours. Furthermore, once at the payment point beneficiaries would also frequently
have to wait, sometimes for more than three hours. Selecting payment providers who can offer a larger
number of pay points, particularly in rural areas (through a network of agents), should improve this
situation.
72. Evidence from Kenya shows that the payment mechanism has an impact on non-beneficiaries
also. Prior to HSNP 1, Northern Kenya was only served by one bank, KCB which had only 5 branches in
the entire 222,500km2 programme area. With Equity as the PSP, an additional 5 branches and 150 agents
were added, bringing financial services to a community that had historically been poorly serviced. This
approach stimulated local markets to benefit whole communities, deepening financial inclusion in the
ASALs87.
73. Evidence shows that the frequency with which payments are made within a CT programme, also
affects the programme’s impact. Making payments more frequently leads to greater consumptionsmoothing by households, while less frequent, lump-sum payments contribute more to productive
investments (including the payment of school fees). The frequency of payments can also have cost
implications. Small, more frequent payments result in increased overhead costs, which are not only borne
by the programme, but also by the beneficiaries who incur time and travel costs in collecting their transfer
payments.
74. In summary, there is good international and country specific evidence that predictable, electronic
21
CTs delivered through private sector payment service providers with two factor authentication will
lead to improved welfare, resilience and socio-economic impacts for the poorest HHs in the
ASALs. This is a sound basis for the case for scale-up presented in Options 1,2, 3, 4 and 5b.
Evidence on the impact and utility of CTs relative to food aid and the impact of scalable safety nets
75. Food aid has historically played a very important role in responding to humanitarian crises in
Kenya and is generally credited with saving lives in these situations. However, given this focus on
emergency response, there is, to date, no robust evidence of the impact of food aid on beneficiary
households or the communities88. There is some suggestion that these interventions result in improved
food and nutrition security among beneficiary households and improved diversity in crops planted, but
these findings do not compare these outcomes as compared with a control group and the latter may be a
result of the public works activities under the food for assets program.
76. Between 2005 and 2010, a total of Ksh 17.8 billion was channelled to Kenya’s safety nets, 41% or
KSh 7.3bn was food aid. The WFP Protracted Relief and Recovery Operations (PRRO)89 focuses on
the ASALs and will spend US $424.5 million between May 2012 – April 2015($141.5 m or £93.1m) a
year. In 2010, an estimated 35% of all safety net beneficiaries were receiving support from the WFP
General Food Distribution Programme, the main programme under PRRO. Evidence suggests that while
PRRO has had the ability to scale up in response to shocks, this tends to be driven by levels of donor
support in cash or kind and it is less good at scaling down90. The non-transfer costs for the PRRO as a
proportion of total expenditure were consistently higher than the average for other safety nets in Kenya
(51% for the period 2005-2010 as compared with 24% for all other safety net programs)91.
77. CTs tend to be cheaper and faster to deliver than food aid92. Food aid often has to be procured
internationally, but even when it is procured locally, it can take several months before procurement
processes are completed. The delivery of food aid also involves significant costs and takes time, whereas
cash transfers sent through the banking system tend to be much faster. For example, evidence suggests
that for every $100 spent, a much higher proportion of that $100 ends up in the hands of beneficiaries
under a cash transfer program compared to a food program. This is a consequence of the transport,
handling and storage costs of food (whether domestically or internationally purchased) and the fact that
food for such programmes is often procured internationally at a higher cost (once delivered to a domestic
port) than it can be purchased in local markets93.
78. Cash allows households to spend money where they need it. This means they can spend money on a
more comprehensive food basket rather than standard rations, as well as meeting other needs (e.g.
health, education etc.) The combination of lower costs and faster speed means that the cash has a
greater impact in terms of smoothing consumption and protecting livelihoods per dollar spent94. Food
shortages are most commonly the result in constrained access to food rather than an absolute lack of
availability of food. Provision of food is responding to an availability failure (which rarely exists) rather
than an entitlement failure (which frequently exists)95. Cash usually reduces the opportunities for
corruption because it provides greater accountability than transfers in food. Cash doesn't 'fall off the back
of a lorry' or get 'infested by pests' etc. Audit trails for cash go all the way to the beneficiary – for food they
frequently focus on procurement of food and transportation with less focus on what happens to food after
that.
79. However, there are risks. Cash is significantly at risk of food price inflation and is much more subject to
'reductions in ration size' in real terms than food. Cash tends to have a less significant consumption
smoothing affect than food, its greater fungibility means that a higher proportion of CTs are used for other
household expenditure. Women tend to have more decision making power over the use of food transfers
compared to CTs.
80. There is significant evidence that a faster response is possible when existing instruments are
used instead of developing new ones. Ethiopia’s Productive Safety Net Programme (PSNP) includes a
risk financing mechanism (RFM) that allows the programme to be scaled up in the event of a shock. The
time between the request for PSNP risk financing resources and disbursements was six weeks in 2011.
See Box 1 for further details of the speed of the Ethiopian risk financing mechanism response.
Box 1: Ethiopia’s PSNP’s Risk Financing Mechanism
2011 saw a major drought affecting a number of countries across the Horn of Africa, including Ethiopia. A
humanitarian appeal was launched in March 2011, five months after the semi-annual seasonal assessment was
completed. While the March appeal resulted in some resources being made available for the response, as of
December 2011 (nine months after the appeal was launched and some 13 months after the original assessment), 94 %
of the funding for the humanitarian appeal was in place. By contrast, in August 2011, when regular PSNP transfers
22
stopped, the risk financing mechanism (RFM) completed a rapid verification of needs in highland aeas within a month
of the request for RFM resources, and financing was disbursed within two weeks of the request. From request to
disbursement took six weeks. This shows that, when the preconditions are met, the RFM easily outperforms the
humanitarian system in terms of verifying needs and disbursing resources for a response to be delivered through
government systems. While an assessment is required to determine the impact of the RFM on livelihoods, the RFM’s
early and preventive response to an identified need means that it has a far higher chance of helping affected people
not to resort to negative coping strategies and asset depletion as a response to a shock.
Source: Ibid.
81. In summary, there is mixed evidence on the impact and utility of CTs relative to food aid as well as
the impact and utility of scalable safety nets. This is a fair basis for the case for CTs overall and
including scalability as presented in Options 1, 2, 3, 4 and 5b.
D. Appraisals of the Options
Table 7: Factors affecting appraisal of the options
Factors Description
Weighting (1-5)
1
TA contributes to leveraging greater financial sustainability for HSNP 2
through supporting GoK to fund HSNP 2 in line with the NSNP and EDE
5
MTP budget commitments
2
DFID funded caseload contributes to meeting (but not significantly under
5
or over-shooting) the DFID Kenya Operational Plan target
3
Based on lessons learned from the HSNP 1 pilot, HSNP 2 more
effectively targets the poorest and expands to an optimum case load in a
3
short time frame using electronic CTs with 2-factor authentication linked to
bank accounts
4
Strengthening HSNP 2 as a predictable safety net for both chronic and
3
emergency responses
Table 8: Scoring the factors affecting HSNP2 options.
Score
(1-5)
Score
Score
(1-5)
Score
Score
(1-5)
Score
Score
(1-5)
5
4
20
4
20
5
25
5
25
3
16
3
15
5
25
2
5
3
15
4
20
4
20
4
20
2
10
4
20
2
10
3
4
3
3
5
4
15
12
5
4
15
12
5
4
15
12
3
4
9
12
2
3
6
9
4
3
12
9
2
4
6
12
62
67
72
66
41
56
Score
Score
Option 6
Option 5b
Option 5a
Score
(1-5)
Option 4
Score
Option 3
Score (1-5)
Option 2
Score
Option 1
1
Total
Score
(1-5)
Weight (1-5)
FACTOR
Factors affecting consideration of HSNP 2 options
53
E: What are the costs and benefits of each feasible option? Identify the preferred option.
Costs of whole programme intervention
82. Table 9 below summarises programme costs for all options appraised96. The financial case below
describes the basis for the different components in more detail.
Cost efficiency of Phase 1 and Phase 2 and differences between Options
23
83. The pattern of administrative to total programme costs in the HSNP programme broadly follows
that expected as cash transfer programmes mature and grow. Figure 6 below combines historic data
up to 2011/12 with projected figures for 2012/13 to 2016/17 for all of the options. The ratio of
administration to total costs declines to 20% in 2011/12. It then increases substantially in 2012/13 due to
new investments in targeting, registration and carding for an expanded caseload.
84. In 2012/13 £5.3 million has been invested in improving targeting and registering all households in
the four counties. This investment has led to the substantial improvements in targeting using the
combination of PMT and CBT described in all options in the cost effectiveness section below.
85. It needs to be noted that cost provides a scalable benefit beyond the predictable transfers
provided in the HSNP 2 programme. There is a much wider public good element to this programme
described under the benefits section below. 2014/15 then sees investment in the payments system.
Administrative costs return to about 20% of total costs from 2015/16. The other discernible trend is that
costs rise slightly in 2015/16 due to re-registration and evaluation costs. Future re-targeting exercises will
be less costly as they will focus on communities and households that monitoring suggests are on the
borderline of inclusion.
86. GoK’s share of the programme increases significantly in the last two years of the programme.
GoK’s level of administrative costs have been factored in as 15% as used in the NSNP and PfR
projections. It is hoped that these prove an over-estimate for HSNP, but these figures have been retained
to be conservative and to remain consistent with assumptions and data in other GoK sources.
87. Figure 7 below shows the growth path in HSNP programme of administration costs as a share of
total programme value. The first figure shows Phases 1 and 2 with all options shown for Phase 2. The
second figure shows the differences in administrative cost ratios for Phase 2 more closely. Larger
programme size involves some economies of scale although the high share of variable or operational
costs after 2013/14 mean that this effect does not lead to a striking difference in value for money on cost
efficiency grounds.
88. Appraisal Case Section F below (How VFM will be monitored) examines cost efficiency in more
detail e.g. looking at the components parts of administrative costs and how they are expected to evolve.
Table 9: Programme Costs for all options
24
2013/14
2014/15
2015/16
2016/17
Option 1 - 130K HHs early
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
18,400,000
8,654,000
300,000
71,111
108,000
27,533,111
25,171,000
3,932,000
300,000
92,444
108,000
29,603,444
27,880,000
5,468,000
1,000,000
85,333
108,000
34,541,333
33,717,000
5,739,000
400,000
92,444
108,000
40,056,444
105,168,000
23,793,000
2,000,000
341,333
432,000
131,734,333
Option 2 - 130K HHs late
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
18,400,000
8,654,000
300,000
71,111
108,000
27,533,111
22,350,000
3,932,000
300,000
78,222
108,000
26,768,222
25,030,000
5,468,000
1,000,000
85,333
108,000
31,691,333
32,991,000
5,739,000
400,000
92,444
108,000
39,330,444
98,771,000
23,793,000
2,000,000
327,111
432,000
125,323,111
Option 3 - 100K HHs early
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
17,860,000
8,630,000
300,000
68,000
108,000
26,966,000
20,940,000
3,780,000
300,000
71,000
108,000
25,199,000
21,450,000
5,310,000
1,000,000
71,000
108,000
27,939,000
25,940,000
5,510,000
400,000
71,000
108,000
32,029,000
86,190,000
23,230,000
2,000,000
281,000
432,000
112,133,000
Option 4 - 100K HHs late
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
17,050,000
8,349,000
300,000
64,000
108,000
25,871,000
18,846,000
3,340,000
300,000
64,000
108,000
22,658,000
20,021,000
4,338,000
1,000,000
67,556
108,000
25,534,556
25,573,000
3,508,000
400,000
71,111
108,000
29,660,111
81,490,000
19,535,000
2,000,000
266,667
432,000
103,723,667
Option 5a - 69K HHs, DFID only
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
13,674,000
8,349,000
300,000
49,067
108,000
22,480,067
14,448,000
3,340,000
300,000
49,067
108,000
18,245,067
14,798,000
4,338,000
1,000,000
49,067
108,000
20,293,067
17,896,000
3,508,000
400,000
49,067
108,000
21,961,067
60,816,000
19,535,000
2,000,000
196,267
432,000
82,979,267
Option 5b - 100K HHs, DFID only
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
16,510,000
8,413,000
300,000
71,111
108,000
25,402,111
20,256,000
3,473,000
300,000
71,111
108,000
24,208,111
21,446,000
4,498,000
1,000,000
71,111
108,000
27,123,111
31,538,000
3,850,000
400,000
71,111
108,000
35,967,111
89,750,000
20,234,000
2,000,000
284,444
432,000
112,700,444
Option 6 - 69K HHs, GoK MTP
Transfers
Admin. incl GoK costs
Evaluation
Household costs
DFID staff costs
Total
14,484,000
8,559,000
300,000
53,154
108,000
23,504,154
16,333,000
3,675,000
300,000
55,462
108,000
20,471,462
21,099,000
4,338,000
1,000,000
66,271
108,000
26,611,271
31,042,000
5,631,000
400,000
87,609
108,000
37,268,609
82,958,000
22,203,000
2,000,000
262,496
432,000
107,855,496
Source: DFID Kenya calculations (2013)
Figure 6: HSNP: Administration to total programme costs
25
Total
Source: DFID Kenya calculations from HSNP data
Figure 7: Growth path in HSNP programme of administration costs as a share of total programme value
Source: DFID Kenya calculations from HSNP data
Benefits
89. A range of benefits seen under HSNP 1 have been outlined above. The consumption expenditure
benefits have been particularly striking as shown in the Table 10 below Programme beneficiary
households have experienced KSh 263 additional expenditure per month per adult equivalent. As this is
based on 4.5 adult equivalents this implies about KSh1,180 additional shillings expenditure per month.
This was approximately 67% of the value of the transfer.
Table 10: HSNP Consumption Expenditure Benefits
HSNP households
Outcome
BL
FU
78.1
1753.1
1568.3
47.9
-6.6*
61.3
88
88
0
Poverty gap
41.2
38
Poverty gap squared
22.7
19.5
Mean consumption
expenditure
BL
FU
1941.1
2019.2
54.4
Control households
Dif
Number of
observatio
ns
Dif
Dif-in-dif
(at FU)
-184.9***
263.0**
2435
65.9
4.6
-11.14**
2435
93.2
96.9
3.7***
-3.728
2435
-3.2
45.6
50.4
4.7**
-7.992***
2435
-3.2
25.7
29.9
4.2**
-7.395***
2435
Proportion of
households (%):
 in the bottom
national decile
 below absolute
poverty line
26
Source: OPM (2013) Notes: BL = Baseline survey; FU = Follow-up survey with same households two years after
baseline survey; Dif = difference or change between Baseline and at Follow-up survey; Dif-in-dif = a measure of impact
based on the difference between the change experienced between beneficiary and control groups between Baseline and
Follow-up.
90. Heterogeneity analysis shows the per adult equivalent impact increases to KSh 384 when only the
poorest half of beneficiary households are looked at – or KSh 1,730 per household. Under HSNP 2,
improved targeting means that this type of impact can be achieved with the poorest households. The
combination of CBT and PMT should result in a much stronger poverty targeting of new beneficiaries
increasing the programme benefits especially amongst the very poorest households.
91. Table 11 below models indicators of targeting, proportion of beneficiary households who are poor
and poverty impact. The following definitions are used:
 Ratio of poverty rates (ben./non-ben.) shows the ratio of poverty rates between beneficiaries and
non-beneficiaries. The higher the rate the better targeted are households enrolled. As HSNP 2
expands, initially a better targeting mechanism should increase this targeting indicator. However, with
further expansion, this ratio will tend to fall as the poverty rates of households not included in the
programme declines.
 Number of beneficiaries in poorest 10% shows the number of beneficiary households in the poorest
national decile.
 Poverty headcount shows the proportion of beneficiaries who are in the poorest 10% nationally
 Poverty gap measures how far on average beneficiaries are from the poverty line (this measure
captures reductions in expenditure poverty that are omitted from the poverty headcount because most
beneficiaries do not cross the poverty line threshold even if their consumption increases).
92. This indicative analysis shows that options involving a larger scale up achieve the highest scores
for targeting, numbers of poor beneficiaries reached, and poverty impact.
93. It is important to note that the current 69,000 households will be verified according to the new
targeting method and those not eligible will be taken off predictable transfers. This means that the
targeting indicators, numbers of poor beneficiaries and impact will improve for all options. The targeting
indicators will converge for all options and potentially be higher for the smallest size programme if
targeting was very strong (as it should include the poorest households).
94. Options 1 and 2 have the highest poverty targeting scores because there a larger number of
households are brought into the programme using the improved targeting approach compared to
households already enrolled. They also have the highest number of poor beneficiaries due to scale.
Table 11: HSNP Model: Indicators of targeting, proportion of beneficiary households who are poor and poverty impact 97
27
(a) Targeting
(i) % of beneficiaries in poorest decile
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
87.6
82.7
82.7
82.7
85.2
87.6
85.2
84.2
82.7
86.0
87.8
87.6
87.6
87.6
88.1
88.3
88.3
87.8
87.6
88.4
90.0
90.0
90.0
90.0
90.0
87.8
87.6
87.6
87.6
88.1
89.0
88.5
88.0
84.0
87.4
(ii) Ratio of pov. rates (bens/non-bens)
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
1.83
1.89
1.89
1.89
1.84
1.83
1.81
1.86
1.89
1.82
1.79
1.83
1.83
1.83
1.79
1.77
1.77
1.79
1.83
1.77
1.69
1.69
1.69
1.69
1.69
1.79
1.83
1.83
1.83
1.79
1.72
1.74
1.78
1.86
1.78
(iii) Coady Grosh Hoddinott index
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
1.62
1.37
1.37
1.37
1.56
1.62
1.49
1.43
1.37
1.60
1.68
1.62
1.62
1.62
1.73
1.73
1.73
1.68
1.62
1.77
2.09
2.09
2.09
2.09
2.09
1.68
1.62
1.62
1.62
1.73
2.00
1.90
1.75
1.50
1.79
(b) Numbers of poor beneficiary HHs
(i) Number of ben. HHs in poorest decile
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
87,855
107,543
107,543
107,543
94,538
87,855
93,732
101,147
107,543
90,496
83,405
87,855
87,855
87,855
81,834
79,486
79,486
83,405
87,855
78,487
62,203
62,203
62,203
62,203
62,203
83,405
87,855
87,855
87,855
81,834
67,124
69,882
82,570
103,488
80,766
(c) Poverty impact across whole population
NB lower values correspond to higher impact
(i) Poverty headcount (P0) after transfer
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
38.1
36.5
36.5
36.5
37.8
38.1
37.5
36.9
36.5
38.1
38.9
38.1
38.1
38.1
39.0
39.6
39.6
38.9
38.1
39.6
41.4
41.4
41.4
41.4
41.4
38.9
38.1
38.1
38.1
39.0
41.0
40.6
39.2
37.0
39.5
(ii) Poverty gap after transfer (P1)
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
11.4
10.9
10.9
10.9
11.3
11.4
11.2
11.0
10.9
11.4
11.6
11.4
11.4
11.4
11.6
11.7
11.7
11.6
11.4
11.8
12.5
12.5
12.5
12.5
12.5
11.6
11.4
11.4
11.4
11.6
12.3
12.1
11.6
11.0
11.8
(iii) Poverty severity gap after transfer (P2)
Option 1: 130K HHs early
Option 2: 130K HHs late
Option 3: 100K HHs early
Option 4: 100K HHs late
Option 5A: 69K DFID only
Option 5B: 100K DFID only
Option 6: 69K DFID plus GoK
2013/14 2014/15 2015/16 2016/17 Average
4.9
4.6
4.6
4.6
4.8
4.9
4.8
4.7
4.6
4.9
4.9
4.9
4.9
4.9
5.0
5.0
5.0
4.9
4.9
5.0
5.3
5.3
5.3
5.3
5.3
4.9
4.9
4.9
4.9
5.0
5.2
5.1
5.0
4.7
5.0
Source: DFID Kenya calculations (2013)
95. DFID’s contribution to this impact is reflected in Table 12 below. This shows the trajectory in the
number of poor households in the bottom 10% nationally by consumption expenditure that will benefit from
28
DFID resources directly. This impact is based on DFID’s share of the transfer caseload.
96. Options 1 and 5b deliver the highest returns in terms of numbers of very poor households reached
by virtue of scale and the depth and scale of poverty in the four counties.
Table 12: HSNP: DFID contribution to this impact
Option 1: 130K HHs early
Total number DFID HHs
DFID HHs in poorest 10% nationally
Option 2: 130K HHs late
Total number DFID HHs
DFID HHs in poorest 10% nationally
Option 3: 100K HHs early
Total number DFID HHs
DFID HHs in poorest 10% nationally
Option 4: 100K HHs late
Total number DFID HHs
DFID HHs in poorest 10% nationally
Option 5A: 69K DFID only
Total number DFID HHs
DFID HHs in poorest 10% nationally
Option 5B: 100K DFID only
Total number DFID HHs
DFID HHs in poorest 10% nationally
Option 6: 69K DFID, plus GoK
Total number DFID HHs
DFID HHs in poorest 10% nationally
2013/14
2014/15
2015/16
2016/17
Average
94,000
83,000
94,000
83,000
89,000
78,000
84,000
74,000
69,000
62,000
90,000
83,000
121,000
100,000
101,000
86,000
91,000
80,000
81,000
72,000
69,000
62,000
100,000
88,000
106,000
88,000
96,000
81,000
76,000
67,000
71,000
62,000
69,000
62,000
100,000
88,000
76,000
63,000
76,000
63,000
46,000
40,000
46,000
40,000
69,000
62,000
100,000
88,000
99,000
83,000
92,000
78,000
75,000
99,000
70,000
62,000
69,000
62,000
98,000
87,000
69,000
62,000
69,000
62,000
69,000
62,000
69,000
62,000
69,000
62,000
Source: DFID Kenya calculations (2013)
Benefits of carding beyond improved targeting of HSNP beneficiaries
97. The investment in carding, registration and expanding the payments system to all households in
the four counties brings significant benefits beyond better targeting and more robust payment
system for the HSNP programme. Based on 470,000 households in these counties, HSNP households
and an additional 340,000 (options 1 and 2), 370,000 (options 3, 4 and 5b) or 401,000 households (Option
5a) will potentially benefit from a range of disaster response and resilience programmes. The registration
process provides a platform for planned interventions including cash transfers triggered by acute
disasters. DFID’s ASAL programme sets aside £3,000,000 for piloting such responses. The registration
exercise will be used by a wide range of donors and also by GoK in planning and delivering resilience
activities and disaster responses.
Financial sustainability and GoK budgeting
98. GoK presently spends approximately KSh 6bn each year on emergency programmes including
about KSh3 bn on emergency food. The NDMA supports the the efficacy and cost effectiveness of CTs
as a drought management response – both for predictable transfers for chronic needs and for triggered
responses to acute crises. This strong interest in cash transfers is reflected in financial projections
in strategic documents including the Country Programme Paper for EDEs and the draft EDE MTP
(see Table 13 below).
Table 13: EDE MTP Budget for GoK contributions to HSNP
2013/14
2014/15
2015/16
2016/17
TOTAL
MTP Projection (KSh)
312,000,000
624,000,000 1,248,000,000 2,496,000,000 4,680,000,000
MTP Projection (£)
2,300,000
4,500,000
8,800,000
17,300,000
32,900,000
Projected GoK households
5,700
9,000
24,200
54,200
Required budget/MTEF as a % of MTP
60%
50%
70%
83%
74%
MTEF allocations required for GoK scale-up
£ 1,370,000 £
2,250,000 £ 6,160,000 £ 14,330,000 £ 24,110,000
Source: GoK (2013) EDE MTP (Draft 4.2.13)
Note: As a proportion of GoK budget98 (expenditure + net lending), proposed funding to HSNP increases from 0.01% in FY 13/14
to 0.10% in FY16/17.
99. These projections have yet to be formalised in Kenya’s Medium Term Expenditure Framework
(MTEF) which forms the basis for annual budget allocations. There are two main reasons why MTEF
29
allocations lag behind line ministry level planning. Firstly, although GoK allocations to other CT
programmes (e.g. OVCs) have been on-going for several years, cash transfers as an emergency
response is a concept that has only gained significant momentum over the last year. For the Social
Protection MTEF Working Group to have received an adequate ceiling by August 2012 would have
required much progress than had been made by that stage in making the case for additional GoK
resourcing for HSNP. Making this case – especially increasing the understanding in the Ministry of
Finance – concerning the merit, cost effectiveness and system integrity of HSNP is an objective by the
coming September 2013 when sector ceilings are set. This is necessary to increase the ceiling passed to
the Social Protection Sector Working Group to accommodate additional proposals for the three years
2013/14 to 2015/16. Support to sound budgeting which links sector and MoF processes will be provided
through TA building on recommendations from a review of the MTEF process and HSNP in late-2012.
100. Secondly, the MTEF and budget process for 2013/14 has been compressed into a much shorter
time than usual. Sector MTEF Working Groups had only two months rather than four to prepare MTEF
submissions in order to complete the budget cycle before elections in March 2013. It has been a highly
compressed budgeting year making it difficult to argue for additional resources to the sector over and
above those in the August ceilings. Despite this, the Ministry of Northern Kenya and NDMA have
succeeded in securing an allocation in the 2013/14 budget.
101. NDMA is committed to securing finance in line with the projections in the MTP. The Ministry of
Special Programmes is also supportive of shifting delivery towards CT instruments. The Ministry of
Finance are also engaged in negotiation over budget allocations to cash transfer programmes including
HSNP through the P4fR appraisal process. The projections in this Business Case reflect dialogue with
NDMA and in PfR dialogue. Table 14 below shows the value of MTP projections in sterling along with
DFID Kenya’s central projection of likely GoK funding. The corresponding number of households that
could be afforded with this allocation are then shown.
102. The rest of the table compares options in terms of the shares of GoK overall DFID funding. For
Options 1 and 2, GoK share of the caseload rises to 40% by 2016/17 as the programme expands to
130,000 households. The share of GoK caseload rises earlier in Option 2 as DFID’s funding supports a
slower scale-up to that target caseload.
103. Options 3 and 4 see GoK share of the caseload rise to 54% by 2016/17. In Option 4, the share
increases earlier due to the slower overall build-up. Options 5a and 5b are not shown as DFID effectively
accounts for 100% of the programme caseload.
Basis for preferred option
104. The factors affecting choice of options are highlighted in Tables 2a and 7 above. Based on the
weightings, (High or medium) options 3 and 4 are front runners as they see an increased share of GoK
caseload earlier. GoK accounts for 54% of the HSNP caseload by 2016/17 compared to 42% with
Options 1 and 2. Given DFID Kenya’s Operational Plan targets for numbers of beneficiaries reached,
Options 3 and 4 also lead. Option 3 (which sees a sharper increase in the first two years) enables a faster
rise to a caseload of 100,000 households while meeting the OP target, without significant overshoot.
Option 6 sees faster progress in the share of households funded by GoK but is higher risk in terms of
unlocking GoK funding.
105. Options 1 and 2 provide more scope for meeting extensive need in the next four years. The
larger scale-up may also support administrative structures improve the capability for managing drought
emergencies. On the other hand the higher scale-up carries a modest risk that other lower cost
interventions may meet the needs of some of the caseload e.g. one-off cash transfers for less vulnerable
households may achieve much of the cushioning impact of predictable transfers.
106. The recommended option is Option 3 as it achieves significant GoK share of the total caseload
(54%) while delivering at 2% over the OP targets and providing a substantial scale-up to test the
new targeting approach.
Table 14: MTP projections in sterling along with DFID Kenya’s central projection of likely GoK funding and share of caseload
30
GoK MTP projections
GoK projected allocation
Projection as % of MTP
GoK no. of households
Total programme costs **
DFID total costs
GoK as % of total resources
2013/14
2014/15
2015/16
2016/17
TOTAL
£ 2,290,000 £ 4,490,000 £ 8,804,000 £ 17,263,000 £ 32,847,000
£ 1,370,000 £ 2,250,000 £ 6,160,000 £ 14,330,000 £ 24,110,000
60%
50%
70%
83%
73%
5,700
9,000
24,200
54,200
£ 26,490,000 £ 24,720,000 £ 26,760,000 £ 31,450,000 £ 109,420,000
£ 25,280,000 £ 22,100,000 £ 22,090,000 £ 16,120,000 £ 85,590,000
5%
9%
23%
46%
22%
Option 1
Total no. of households
DFID no. of households
DFID as % of total households
GoK as % of total households
100,000
94,000
94%
6%
130,000
121,000
93%
7%
130,000
106,000
82%
18%
130,000
76,000
58%
42%
Option 2
Total no. of households
DFID no. of households
DFID as % of total households
GoK as % of total households
100,000
94,000
94%
6%
110,000
101,000
92%
8%
120,000
96,000
80%
20%
130,000
76,000
58%
42%
Option 3
Total no. of households
DFID no. of households
DFID as % of total households
GoK as % of total households
95,000
89,000
94%
6%
100,000
91,000
91%
9%
100,000
76,000
76%
24%
100,000
46,000
46%
54%
Option 4
Total no. of households
DFID no. of households
DFID as % of total households
GoK as % of total households
90,000
84,000
93%
7%
90,000
81,000
90%
10%
95,000
71,000
75%
25%
100,000
46,000
46%
54%
Option 6
Total no. of households
DFID no. of households
DFID as % of total households
GoK as % of total households
75,000
69,000
92%
8%
78,000
69,000
88%
12%
93,000
69,000
74%
26%
123,000
69,000
56%
44%
Source: DFID Kenya calculations (2013)
** - Total costs less evaluation and household and DFID staff costs
31
F. What measures can be used to monitor Value for Money for the intervention?
Economy
107. The different cost components will be monitored as in Table 15 below. The main cost drivers of
the programme that make up set up, roll out and operational costs will be tracked by the HSNP
Secretariat. These include the costs related to the payment mechanism for programme expansion and
the grievance and targeting components.
108.
GoK administrative costs are based on a 15% level being used in GoK/WB negotiations for the PfR
programme. Detailed DFID analysis of programme costs for the the OVC programme found that – after
the initial years of scale-up – this was a reasonable estimate. GoK costs were 16% over the entire OVC
programme, although only 13-14% in the last years but had been much higher in the first years of
programme set-up.
Table 15: HSNP Cost components
£ unless otherwise stated
No. of HHs enrolled at end of year
New HHs enrolled each year
2013/14
2014/15
2015/16
2016/17
2013/14-16/17
95,000
26,000
100,000
5,000
100,000
-
100,000
-
395,000
31,000
Transfers
Payments infrastructure (set-up)
Payments expenses (roll out)
Payments expenses (operational)
Transfer management costs
Targeting costs
Complaints and grievances
Evaluation
17,860,000
4,270,000
760,000
630,000
170,000
1,340,000
300,000
20,940,000
670,000
180,000
1,340,000
300,000
21,450,000
620,000
190,000
1,000,000
1,310,000
1,000,000
25,940,000
520,000
240,000
1,310,000
400,000
86,190,000
4,270,000
760,000
2,440,000
780,000
1,000,000
5,300,000
2,000,000
Progamme managt and policy TA
1,250,000
1,250,000
1,250,000
1,250,000
5,000,000
Costs borne by Beneficiaries
DFID staff time (Full time equivalents)
68,000
108,000
71,000
108,000
71,000
108,000
71,000
108,000
281,000
432,000
GoK administrative costs
210,000
340,000
940,000
2,190,000
3,680,000
32,029,000
112,133,000
Total
26,966,000
25,199,000
Source: DFID Kenya calculations (2013)
Cost efficiency
32
27,939,000
109. Building on the analysis of cost efficiency above, Phase 2 will monitor the actual values of line
items in order to calculate the actual cost efficiency ratios of the programme (see Table 16).
Table 16: HSNP 2: Preferred Option (Option 3): Cost efficiency metrics
2013/14
95,000
89,667
6.0
12.0
No. of HHs receiving payments
Est. number of HHs receiving payments (period average)
Est. avg no. transfers received per year by enrolled HHs
Est. avg no. months' transfers per year by enrolled HHs
Alpha Ratio: transfers / total costs
Ratio of admin to total costs
Cash Transfer Ratio: admin to transfers
Number of transfers (cards paid) per year over 6 cycles
Number of monthly transfers per year
2014/15
100,000
100,000
6.0
12.0
2015/16
100,000
100,000
7.0
14.0
2016/17
100,000
100,000
7.0
14.0
0.67
0.33
0.48
0.85
0.15
0.18
0.80
0.20
0.25
0.82
0.18
0.21
538,000
1,076,000
600,000
1,200,000
700,000
1,400,000
700,000
1,400,000
Transfer value per transfer paid (£)
Admin cost per transfer paid (£)
Total cost per transfer paid (£)
£
£
£
33.20
16.04
49.24
£
£
£
34.90
6.30
41.20
£
£
£
30.64
7.59
38.23
£
£
£
37.06
7.87
44.93
Transfer per monthly payment received
Admin cost per monthly payment received
Total cost per monthly payment received
£
£
£
16.60
8.02
24.62
£
£
£
17.45
3.15
20.60
£
£
£
15.32
3.79
19.11
£
£
£
18.53
3.94
22.46
Source: DFID Kenya calculations (2013)
110. Figures 8 and 9 below show respectively the growth in the HSNP programme and split between
set up, roll out and operational costs over Phase 1 and projected costs for Phase 2. GoK
administrative resources have been allocated across set-up, roll out and operational costs according to
the ratios in the OVC programme. By 2016/17, costs are entirely operational as the costs associated with
roll out fade away as the programme reaches its maximum size in 2015/16.
Figure 8: Growth in the HSNP programme
Source: DFID analysis of HSNP data
Figure 9: Split between set up, roll out and operational costs over Phase 1 and projected costs for Phase 2
33
Source: DFID analysis of HSNP data
Cost effectiveness
111. For cost effectiveness, the shilling cost per reduction in poverty gap (consumption
expenditure) will be monitored over time for HSNP 2. This measures the shilling cost to the
programme of a shilling reduction in poverty – or additional expenditure by people below the poverty line.
A CT programme might typically expect to have a unit cost of reduction in poverty significantly above 1 in
the early years, but the value to approach 1 overtime. A score of 1 would mean that every shilling spent
of transfer (or total programme cost) leads to an additional shilling expenditure by people below the
poverty line this reducing the poverty gap.
112. This unit cost will also be compared to complementary or competing instruments such as food
aid and temporary CTs in response to drought emergencies. Temporary CTs triggered by exceeding
weather thresholds in specified geographic areas are the closest instrument. An example of an important
cost effectiveness issue is that predictable transfers should only be provided to households and
communities for which the additional cost of a full twelve months of transfers has a much higher level of
impact. It is possible that less poor and vulnerable households will not demonstrate as much additional
impact from predictable compared to temporary transfers.
113. Going forward we can anticipate a broadly downward trend for a number of reasons. Firstly,
administrative costs will decline further from 2010/11 levels, with the notable exception of 2012/13 due to
the investment in targeting, registration and carding.
114. Secondly, targeting will be significantly more pro-poor in HSNP 2 as new beneficiaries are
identified using the combination of PMT and CBT. The proportion of beneficiaries in the poorest 10%
nationally will rise to 80% to 90% under HSNP 2 from about 50% to 60% under HSNP 199. ‘Inclusion
errors’ (with reference to the national poverty line) will be close to zero having been 11% under HSNP1100.
As the proportion of people below the poverty line increases the cost effectiveness metric increases as the
metric only ‘scores’ additional consumption by poor people as a reduction in poverty.
115. Thirdly, the consumption expenditure impact on poorer beneficiaries seems to be much
greater than on less-poor beneficiaries. The second year of impact analysis showed that the poorest
half of beneficiaries experienced a greater reduction in poverty compared to the whole sample
(12% percentage points closer to the poverty line compared to 8% for the whole sample; and KSh384
additional expenditure per adult equivalent per month compared to KSh263 for all beneficiaries).
When the average household size is taken into account (about 4.5 ‘adult equivalents'), these impacts
suggest that transfers of approximately KSh1,000 to 2,000 per month during the period of the follow-up
survey are being transmitted into additional consumption of a similar order of magnitude.
116. Fourthly, the value of the transfer will be larger in real terms under Phase 2 than the period
looked at under the impact assessment. The impact of different transfer values have not been looked
at empirically. However, the assessment shows that the impact has been greater on smaller households
where the transfer is of higher value per family member.
117. The comparators for this indicator will be:
 Against HSNP over time (e.g. annual calculations) in order to monitor the evolution of cost effectiveness
 Against cash transfer programmes with similar poverty and safety net objectives in other countries e.g.
Ghana (2.15) and Ethiopia (1.87)
 Against other instruments with a similar objective in Kenya including (i) food aid; and especially (ii)
34
temporary cash transfers in response to shocks.
118. Cost effectiveness has improved during Phase 1, appears to decline in 2012/13 and 2013/14 but
only due to investment in programme effectiveness and then is projected to improve significantly
in the 2014/15. A crude proxy of the unit cost of each shilling reduction in poverty has been estimated
using two variables: (1) the ratio of administration costs in total costs; and (2) inclusion errors – in this
case, transfers made to people who are not very poor (in the bottom 10% nationally). This metric
penalises costs other than transfer costs and targeting errors. A score of 1 is the theoretical optimum
(zero administration costs and zero Type 1 inclusion errors – targeting errors where beneficiaries are
wrongly included in the programme) and higher scores represent lower cost effectiveness. Figure 10
shows this metric for HSNP from 2009/10 to 2016/17 and suggests that HSNP improved its cost
effectiveness from a score of 3.4 in 2009/10 to 2.0 in 2011/12. In 2012/13 and 2013/14 the metric
increases due to the investment in registration, targeting and the payment service mechanism to 2.9. But
going forward this metric is expected to improve to around 1.4 by the end of the programme as
administration costs decline and targeting improves.
Figure 10: Trend in cost effectiveness: metric based on Type 1
Source: DFID analysis of HSNP data
G.
Summary Value for Money Statement for the preferred option
119. HSNP is delivering substantial impact at a declining and comparatively low cost compared to
many other programmes. The drivers of economy and cost effectiveness are quite well understood.
These include: the effectiveness of the targeting approach and the cost and effectiveness of the payments
mechanism. All options that involve expansion under Phase 2 involve rolling out to better targeted
(poorer, more vulnerable) households that the HSNP impact assessment shows benefit relatively more
from cash transfers. All options also involve a switch to a secure payment service provider using
electronic transfers with 2 factor authentication.
120. The preferred option does not maximise the number of households for which HSNP is likely to
be an effective – and potentially the most cost effective – instrument. However, it is an option that
manages a potential risk of taking on households that it later turns out would benefit nearly as
much from acute (and lower cost) interventions. It is possible that a larger expansion (e.g. to 130,000
households) to would risk including some households for which temporary cash transfers in response to
droughts would deliver much or all of the impact of more costly predictable transfers.
121. The choice of scaling up quickly to 100,000 households in Year 1 rather than more slowly in
Year 3 provides an opportunity for including a wider spread of geographic/administrative areas at
an early stage. Such a strategy comes at a short term cost in poverty reduction (as opposed to targeting
the poorest locations first). The potential dynamic benefit, however, is that more areas will gain
experience of administering cash transfers, helping prepare for managing temporary cash transfers as an
emergency response.
122. We project that administrative costs, as a share of total programme costs, will settle below 20%
from the second year of Phase 2, with potential for lower administrative costs if GoK projections
prove to be overly conservative. The preferred option has an administration cost of 17.5% of the
total programme cost by 2016/17.
35
123. We project that the KSh cost of each KSh1 reduction in the poverty gap will decline from about
KSh3.4 in 2009/10 to KSh1.4. The basis for this is the reduction in administrative costs and the improved
impact following from more poverty-focused targeting. Cost effectiveness will be monitored closely during
implementation, over time and against alternative instruments for achieving the same of similar objectives.
124. The preferred option is recommended on the basis of being the most likely to build GoK
financial sustainability in the short – medium term. This is as GoK increasingly builds on the existing
political ownership of HSNP. To date GoK has not funded HSNP 1 at all but the future trajectory is
positive. This is based on the assumption that HSNP receives 74% of the GoK budget for HSNP
submitted under the EDE MTP.
125. Under our preferred option (3), by the 2016/17, GoK will account for 49% of the total
programme costs for HSNP and 54% of the caseload of households.
H. What is the likely impact (positive and negative) on climate change and environment for each
feasible option?
Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk /
opportunity; C, low / no risk / opportunity; or D, core contribution to a multilateral organisation.
The score ranges from 1-5, where 1 is low contribution and 5 is high contribution, based on the relative
contribution to the success of the intervention.
126. HSNP 2 is rated overall as Category ‘B’ on climate and environment risks and opportunities for
the preferred option. Social protection programmes like HSNP2 which include safety nets through cash
transfers, are at risk from climate variability and change. HSNP2 objective of reducing poverty and
vulnerability will more likely be achieved if the short and long-term shocks and stresses associated with
climate change and environmental resources are fully considered.
127. HSNP 2 already includes a number of components which aim to reduce vulnerability and
increase resilience against climate variability and change. However there is need to develop more
evidence on whether cash transfers can directly help build assets – including public goods and natural
assets in response to climatic shocks. Climate and environment standards/measures need to be
developed as a part of the M&E framework of HSNP2. This could assist in monitoring and measuring how
scaling up cash transfer safety nets reduce vulnerability and improve coping/ adaptive strategies to
environmental resources and climate change.
128. Table 17 below summarises the category for each of the options and suggests the likely
risk/impact and opportunity on climate change. Please see Annex 4 for the quest link to the full
Climate and Environment Assessment.
Table 17: Climate and Environment Assessment summary
Option
1
2
3
4
5a
5b
6
Climate change and Environment
risks and impacts, Category (A, B, C,
D)
B
B
B
A
A
B
A
Climate Change and Environment
opportunities, Category (A, B, C, D)
B
B
A
C
C
A
A
I. Theory of Change of the preferred option: Option 3
129. The theory of change (ToC) for the HSNP 2 is illustrated in Figure 11. Our intention under this
programme is to reduce poverty, hunger and vulnerability and improve resilience for the poorest HH in
36
Kenya’s ASALs. In order to do this, HSNP2 needs to:
i.
Increase the scale of, and better target, DFID support to the HSNP for both chronic and
acute responses;
ii.
Invest in building a more a coordinated and effective NDMA that engages effectively in the
GoK budget process to leverage GoK resourcing to HSNP.
130. Evidence from HSNP 1 shows that CTs lead to improved welfare resilience and socio-economic
impacts for HSNP HHs101 . Investing in social protection programmes can reduce poverty and
vulnerability of poor HHs. Through regular and predictable CTs HSNP HHs have: increased poverty
reduction with a slower slide into poverty in crisis years; increased food consumption and improved dietary
diversity; increased their retention of productive assets; increased their uptake of credit; positively
changed their work patters and increased expenditures on health and education. More recent evidence
has shown that there has been some contribution to the wider economy and some financing to invest in
livestock and business. Evidence from the evaluation and targeting work has demonstrated that it is
possible for HSNP 2 to improve its impact on the poorest. Overall, this evidence is stronger for the chronic
caseload but the ability of HSNP to respond to the 2011 Horn of Africa crisis with an emergency response
gives grounds for optimism that it can function effectively as a scalable safety net.
131. The HSNP2 intends to invest in TA to help build the capacity of GoK’s NDMA to develop and
deliver as part of the NSNP. The TA will help: (i) strengthen HSNP programme systems to ensure good
governance; (ii) harmonise HSNP to improve sectoral coherence with the NSNP (iii) expand CTs to
promote more comprehensive and equitable coverage; and (iv) develop HSNP as a scalable safety
net. This demands more efficient and effective social protection systems (e.g. building sustainable
financing in the medium and long term, improving targeting and biometric registration process, integrating
management information systems, developing a coordinated M&E framework, maintaining effective
independent complaints and grievances systems; and building the capacity of staff to deliver. This also
assumes that the GoK policy makers and DPs will continue to engage and support the social protection
policy and lead its preliminary implementation through the reforms outlined in the NSNP and sector level
documents such as the EDE MTP. Regarding scalability, DFID is currently supporting key TA work in this
area as highlighted previously.
132. Some evidence gaps have been identified in the ToC which should be incorporated in
monitoring and evaluation work (see Section C of the Management Section), these include: (i)
DFID’s policy influence; (ii) The impacts and relative impacts of support to the acute caseloads and
triggers for their payment; and (iii) Better understanding of intra-household impacts.
Figure 11 Theory of change for preferred option
Reduce poverty, hunger and
vulnerability for the poorest in Kenya’s
TOVC
arid and semi-arid
lands (ASALs)
37
Create better and more sustainable
safety nets for poor and vulnerable
households, particularly for
households in the ASALs
Improved welfare, resilience and socioeconomic impacts via greater retention of
assets and increased poverty reduction
for HSNP HHs (chronic and acute)
HSNP
functions as
part of GoK
National Safety
Net Programme
100,000 HH (720,000
people) receive timely,
predictable, electronic
HSNP CT payments
GoK supports cash transfers for
chronic and acute responses in the
arid and semi-arid lands, which are
integrated within the wider NSNP
GoK resources
support HSNP
Procedures for HSNP to
be a scalable safety net
designed, tested and in
use
DFID support TA for
HSNP and NDMA
Direct DFID support
to HSNP CTs
Assumptions:
1. GoK is active and willing to continue to engage in the SP sector; 2. Funding support by GoK is in the spirit of EDE MTP
commitments; 3. HSNP 2 will adequately support the programme delivery and NDMA with required operational
implementation capacity to produce required results and ability to manage risks; and 4. Contingency financing for rapid
emergency responses by GoK are in place. To note: Size of the arrows indicates strength of evidence to support this link.
Commercial Case
Direct procurement through a contracted supplier
A. Clearly state the procurement/commercial requirements for intervention
133. HSNP1 was a pilot programme which experimented with implementation and management
processes. In order to bring together a diversity of skills and experiences, to ensure that fiduciary risk
was low and that there were checks and balances across the programme, a number of different
stakeholders/ partners were involved, each delivering on different components of the programme. This
placed a considerable management burden on DFID. This burden was partly relieved by the creation
of an HSNP Secretariat, contracted by DFID Kenya and composed of international technical
assistance coupled with local expertise. The HSNP Secretariat was responsible for the day to day
management of the programme, ensuring all the different components were fully functioning and
monitored. The HSNP Secretariat was based inside the Ministry of Northern Kenya.
134. Under HSNP 1, there were five components, delivered as follows:
38
(i) Day to day Management: Via an internationally procured contract between DFID Kenya and HTSPE
which procured the international and local TA under the HSNP Secretariat.
(ii) Administration: Via a contract between DFID Kenya and a consortium of NGOs to deliver the
administration component: (Oxfam and World Vision in Turkana; Care in Marsabit and Save the Children
UK in Mandera and Wajir).
(iii) Payments: Via a trust fund accountable grant agreement between DFID Kenya and the Financial
Sector Deepening Trust (FSD). FSD is a special purpose vehicle. It was set up by DFID to support the
development of financial markets in Kenya as a means to stimulate wealth creation and reduce poverty.
Its goal is to expand financial services among lower income households and small businesses.
(iv) Evaluation: Via an internationally procured contract between DFID Kenya and Oxford Policy
Management to conduct the evaluation of HSNP1.
(v) Rights and Grievances: Set up towards the end of Phase 1 and run via an accountable grant
between DFID Kenya and the International NGO HelpAge International.
135. Key Lessons learned from HSNP 1 were that: (i) The HSNP Secretariat functioned as a
freestanding unit and there was limited ownership from GoK outside of the Minister for Northern Kenya.
There was limited integration into the GoK institutional and delivery framework, and therefore, the extent
to which HSNP1 sufficiently contributed to building GoK capacity can be questioned. (ii) There was
limited engagement from the HSNP Secretariat and DFID Kenya in influencing wider policy dialogue in
the sector and therefore GoK funds were not leveraged into HSNP. (iii) Roles and responsibilities
between the partners running different components, (and even between stakeholders within a
component), could have been clearer. This created tensions between the different implementing partners
as well as with DFID. (iv) DFID itself could have done more to improve the governance arrangements,
and there were significant transaction costs to DFID Kenya in managing so many different components.
Procurement/commercial requirements for intervention
136. Based on the findings and lessons from Phase 1, discussions with NDMA, there is clear
added value in DFID procuring a Service Provider to manage HSNP. A Service Provider working
closely with the NDMA to build GoK capacity is felt to offer improved performance as well as contribute to
a sustainable exit for DFID through building ownership with GoK and capacitating GoK effectively to
implement HSNP.
Options for delivery
137. A number of options to deliver this service provider were considered (see below):
Table 18: Options for Service Provision to implement HSNP 2
Option
Advantages
Disadvantages
1) BAU: HSNP Secretariat
continues unchanged: HSNP
Secretariat to continue to
manage all components:
Payments, Rights and
Grievances, Management
and Monitoring, Evaluation.
Already established. Reduction
of transaction costs for DFID
Kenya.
2) FSD to manage all
components.
Experienced management of
payment component. Natural fit
for Rights and Grievances. Good
existing relationship with GoK.
Would be the manager of the
PSP contract.
Significantly reduced
transaction costs to DFID Kenya.
Seek TOR for Service Provider
Not integrated into GoK institution.
Limited capacity to deal with all
components. In reality does not
sufficiently reduce DFID K
transaction costs. Mixed reputation.
Potential conflict of interest
between implementation and
evaluation not sufficiently mitigated
in existing governance
arrangements.
Not a programme management
organisation. Lack of capacity.
Programme management doesn’t fit
with FSD strategy and remit. Kenya is
now part of an Africa-wide FSD
(Simba) institution.
Payments component is well
established with market leading
service provider with a strong GoK
3) Internationally procured
international Service
Provider to manage all
39
Decision
?
Rejected
Rejected
Rejected
components.
4) Internationally procured
international Service
Provider Consortium to act
as a Project Implementation
and Learning Unit (PILU) to
manage:
 Management and
Monitoring;
 Rights and
Grievances and
 Evaluation
FSD to manage Payment
Component.
experienced organisation in
programme management as
well as Evaluation.
Will help to build NDMA’s
capacity.
Reduced transaction costs to
DFID Kenya. Seek TOR for an
experienced organisation/
consortium in programme
management and evaluation.
Will help to build NDMA’s
capacity. Evaluation component
retains independence via
governance structures and subcontracting actual work. Can tie
into broader ASALs framework.
Reduced fiduciary risk and uses
already strong DFID/FSD
relationship and service
provider for payments
component.
relationship. Fiduciary risk of
channelling funds to PSP via FSD and
a service provider.
Not a single contract, so potentially
higher transaction costs than option
3.
Finding a service provider
consortium capable of programme
management and evaluation?
Strength and experience of lead
agency in consortium.
Potential conflict of interest on
evaluation work and potential for
compromised quality.
Preferred
138. Hence, for HSNP 2, Option 4 above is the preferred choice, moving from 5 components under
HSNP 1 to 2 delivery components in this phase. Table 19 below provides further details on the
delivery and procurement mechanisms for each component. Terms of reference for the PILU are
currently being finalised with NDMA to ensure that the PILU effectively builds GoK/ NDMA capacity.
Table 19: HSNP 2 components and procurement mechanisms
Component
Delivery mechanism
Procurement
Direct/Indirect
1. Project
Implementation and
Learning Unit (PILU)

Direct


a) Management and
monitoring
PILU will be contracted through an international procurement
process. A suitably qualified service provider will be procured
through a call down framework agreement through a mini
competition under Lot B of the Wealth Creation Framework,
(Rural Economic Development, Livelihoods, and Natural
Resource Management) under a recently concluded
Procurement group OJEU process. The PILU consortium will be
responsible for delivery of sub-components: 1a, 1b, and 1c
below.
Consortia with experience of managing complex social protection
programmes, overseeing rights and grievance work as well as
contracting evaluation work in Africa, and that can demonstrate
the ability to work alongside the GoK will be considered.
Capacity building Long term TA will cover the provision of: A
Senior Coordinator; An MIS specialist; A monitoring specialist; An
administrator; and Support staff.

Short term TA to HSNP will mainly be funded through the NSNP
under the SPP 2. Some ad hoc consultancies may be needed to
cover specific short-term pieces of work and analysis relating
directly to HSNP 2. These consultancies will be contracted
competitively by the PILU, in consultation with DFID and GoK.

Monitoring will be overseen and coordinated by the PILU, using
existing monitoring tools such as the programme MIS, the Single
Registry and financial reports from the payment service provider.

The Technical Working Group will provide oversight of this
component and this component will work closely with the
40
monitoring specialist in the PILU.
b) Rights and
Grievances

An accountable grant between the Service Provider and HelpAge
International, but overseen and managed by the PILU service
provider consortium working to NDMA. It is recommended that
DFID, NDMA, HAI and the PILU have a clear MoU in place to
manage this sub-component.
Accountable
Grant with
Service
Provider.
c) Evaluation

The PILU contract will include management of an independently
contracted evaluation provider.
Could be direct
or indirect

It may also include procurement of this evaluation provider
through DFID’s Global Evaluation Framework Agreement but
timing constraints may make it more efficient for DFID to
separately organise the procurement and then hand over the
management.

It is possible that we could seek a consortium able to undertake
the evaluation as well as other elements of the PILU contract but
this also has risks due to the different skills required and the lack
of control over which evaluators partner with which
management agents.

A final decision will be reached in time to inform the ToRs for the
PILU.

The critical need for independence of this sub-component will be
managed via the proposed PILU governance structures. An
independent reference group will also be set up to oversee the
evaluation.

It is recommended that DFID, NDMA, and the PILU have a clear
MoU in place to manage this sub-component.

Through an existing trust agreement with Financial Sector
Deepening Trust (FSD), to a private sector payment service
provider, tendered through the OJEU process.
2. Payments
Third party
Grant
Agreement
B. How do we expect the market place will respond to this opportunity?
139. FSD Trust called for Expressions of Interest (EoIs) for a new payment service provider in
November 2012. This resulted in 8 credible proposals. This is indicative of the level of interest in
financial sector deepening by the market. It also reflects the market’s desire to participate in HSNP 2,
which has meant that the offers submitted were highly competitive. Most of those that were considered
have extensive experience within Kenya and offered innovative solutions in difficult conditions. There are
several potential players who may bid for the Service Provider tender, all of whom are either in Kenya or
have expressed the desire to deepen their presence in Kenya. This should ensure that we receive some
highly competitive tenders, offering personnel with relevant experience and backgrounds, both from an
international and a Kenyan background.
140. In terms of local consultancy contracts issued by the Service Provider/PILU, the market is
very competitive both with local and international expertise. Wherever possible local expertise will be
used, driving down costs for travel and accommodation.
C. How does the intervention design use competition to drive commercial advantage for DFID?
141. The intervention is designed to ensure that as much work as possible will be contracted using
OJEU tender processes and DFID frameworks. The tender for the PILU will be done through a minicompetition within Lot B of the Wealth Creation Framework, in conjunction with Procurement Group. The
framework has already undergone a full OJEU process. If needed, PrG will oversee the OJEU process
on the Evaluation Component. Competition in this sector is strong for the Kenyan market. Proposals will
be evaluated for value for money, with an aim to drive down administrative costs in relation to direct
programme costs.
41
D. What are the key cost elements that affect overall price? How is value added and how will we
measure and improve this?
142. The PILU cost drivers will be mainly personnel based. All tenders will need to show that
proposed personnel have relevant local and international experience and that costs are pinned to the
prevailing market rates. Tenders will be assessed both against the current market and against delivery of
similar programmes in neighbouring countries such as Uganda.
143. For the Evaluation sub-component, the key drivers of economy will be the cost of the field
work. Lessons learned from Phase 1 will be applied to Phase 2 to ensure most efficient numbers of field
workers are to be recruited and obstacles to delivery such as security will be taken into account in the
initial proposal. Costs will be monitored against Phase 1 costs, with an intention to reduce the costs for
each period of field work.
E. How will the contract be structured and how will contract & supplier performance be managed
through the life of the intervention?
144. The contract for the PILU, will fall under the Wealth Creation Framework agreement, which is
the product of a full OJEU process, and will also be set up by the Procurement Group. It will be
output based and managed by the PHV programme management team alongside Procurement Group.
The PILU will be monitored on a monthly basis against pre-agreed work plans by the PHV programme
management team.
145. The sub-contract for the Evaluation provider will be output based, dependent on agreed
deliverables. This contract will be managed by the PILU with inputs from the PHV programme
management team. Oversight of the deliverables will be carried out by the proposed Technical Working
Group and Steering Committee (see Management Case for further details).
Delivery through a third party entity (multilateral organisation; civil society organisation or support to
government)
A. Why is the proposed funding mechanism/form of arrangement the right one for this intervention,
with this development partner?
146. The Payments Component is managed through a third party Grant Agreement to the FSD
Trust. FSD is an independent Kenyan Trust established to deepen the reach and availability of
financial services for the poor in Kenya. Its strategy in Kenya is to work with the existing financial
system to enable it to develop and provide products and services that impact the poor, whilst also
encouraging new entrants to the financial sector. A key element is to facilitate branchless banking
through integrating the reach that mobile telephone applications technology offers with innovative
financial products. FSD’s success has now led to the creation of a pan-African approach to deepening
access to financial services. SIMBA is a skills and innovation for Micro Banking programme, developed
in partnership with the World Bank and implemented in collaboration with FSD trusts established by
DFID in Kenya, Tanzania, Rwanda and Nigeria.
147. FSD’s strategy for supporting social protection in Kenya is to expand and enhance a
sustainable market for government payments to help move towards a cash-lite economy and
expand access to financial services, in particular for women and in the ASALs. This will build on
the demand created through social protection programmes such as HSNP 1, and recent developments
on the supply-side enabled by new technology.
148. FSD is currently the only player in the local market able to procure and monitor these
services. They also have the expertise gained from monitoring the pilot phase 1 and have developed
ToRs for the tender of a new payment service provider based on lessons learnt from phase 1.
149. FSD is in the process of retendering the payment service provider (PSP) contract to ensure
that the provision of cards and payments is a cost effective and more competitive process. An OJEU
limited tender process has been run and eight EOI received and evaluated. A contract is currently
being worked up with the preferred bidder.
150. The contract for the payment service provider will be managed through FSD and will have
42
clear service-level agreements (SLA) and deliverables. FSD will monitor performance against these
and take the necessary action if needed by withholding fees. Monthly reconciliation of payments will be
provided by the payment service provider to FSD, who will forward on a report to the PILU and its
governance structures including NDMA and DFIDK for monitoring purposes. We will develop clear
Terms of Reference between FSD and DFID Kenya for managing HSNP 2.
151. The Rights and Grievances Component was established towards the end of HSNP 1, in order
to cover the transitional registration process. This is being run through a civil society organisation –
Help Age International, who submitted a new proposal to modify and extend their initial grievance work
under the first phase. There is limited expertise available in the market in this specific area and
HelpAge were well placed to extend their existing grievance mechanism to cover HSNP 2.
152. The Rights and Grievances Component has been issued under an Accountable Grant
Arrangement with Help Age International and currently funded by AusAID funds, managed by
DFID. HelpAge provide quarterly narrative and financial reports which are analysed by the PHV
programme team against logframe indicators and followed up by a quarterly meeting to ensure issues
are identified and resolved. They are also currently monitored by the HSNP Secretariat and it is
envisaged that the PILU will take over this Accountable Grant agreement and monitoring of
performance will be ensured through the PILU governance structures.
B. What assurance has been obtained on capability and capacity to deliver?
153. For component 1 (all sub-components), the ToR will ensure that capability and capacity to
deliver are weighted accordingly during the bid selection process. On component 1 b, we have also
worked with HelpAge International to analyse their workplan, staffing and administration to ensure they
have the resources in place to deliver against their logframe indicators. A Due Diligence assessment will
be carried out in the month of June 2013.
154. For component 2, in light of increasing management of the PSP, FSD have added capacity to
ensure greater programme management and oversight of delivery. Regular monthly meetings are
held with DFID Kenya and other partners to ensure greater coordination between partners. For HSNP 2
we are setting up specific Terms of Reference for the new phase, outlining roles and responsibilities of
FSD in the management of the payment service provider.
C. Is there an opportunity to negotiate on anticipated costs?
155. The majority of the intervention’s costs will go on CTs. Key cost elements for the provision of the
cash transfers are the actual cash transfer costs versus the costs for administration. The proportion
of administration costs to cash transfer costs have been reduced from 1% in 2008 to 0.43% in 2012/13,
and is predicted to reduce to 0.17% by 2017, as we have moved from setup to scale up and due to
negotiations with partners on costs. We have negotiated a flat rate charge for FSD to oversee the
payment service provider.
156. A major cost element for the payment service provider is infrastructure costs. As part of the
targeting process we will consider geographic location of beneficiaries in order to minimise the costs of
setting up the local infrastructure to provide payments. These infrastructure costs will be compared with
Phase 1 costs with an intention to reduce the overall infrastructure costs from Phase 1.
157. The Rights and Grievances component has been issued to a single NGO, rather than an
expensive consortium as happened in Phase 1. This has driven down the unit costs of the
component. HelpAge provided a competitive proposal. During negotiations administrative costs were
reduced from 10% to 7.5%, personnel and transport costs were also negotiated down from the original
proposal.
Financial Case
A. Who are the recipients of all proposed payments?
Table 20: Recipients of all proposed payments
Component
Direct recipients of payments
43
Indirect recipients of
payments
1. A: Managing and Monitoring
Component
OJEU contracted Service Provider
Consortium
NDMA, National Safety
Nets Programme.
1. B: Evaluation Component
Evaluation sub-contractor
1. C: Rights and Grievances Component
Sub-contracted via call down
framework/OJEU contracted
Evaluation organisation
Help Age International
2. Payments Component
Financial Sector Deepening Trust
Private sector bank. Most
vulnerable 10% of
households falling under
the poverty line in Turkana,
Wajir, Marsabit and
Mandera.
Rights Committees, Kenya
National Human Rights
Commission, National
Safety Nets Programme
B. What are the costs to be incurred directly by DFID?
158. Costs to be incurred directly by DFID are outlined in Table 21 below by component and
major budget line. The table includes in brackets the funding type – accountable grant (AG) or
contract and implementing partner – where this is known.
159. Component 1 a: Management & Monitoring: Costs for the programme manager and TA for
policy and management support functions to be procured through a contract have been projected
based on costs of TA under HSNP 1. The amount also reflects DFID’s judgement on TA
requirements for HSNP 2 that will not be covered by NSNP TA.
160. Under the Management Component a focused re-registration exercise will take place. The
aim of this will be to re-target households who are at the margin of eligibility – both existing
beneficiaries and non-beneficiaries. It is estimated this will cost about £1 million although the cost will
depend on the scale of the exercise required. It is proposed that this will be procured through a fresh
contract.
161. As part of a more effective poverty targeting strategy for HSNP 2, there will be a transition
off the programme, of some of the existing HSNP 1 beneficiaries. The extent of this caseload will
be clear by June once the re-registration exercise is complete. This transition will happen over two
payment cycles. Extra financial provision has been allocated to cover this transition, currently costed
at 50% of Phase 1 beneficiaries receiving two additional payment cycles at new transfer levels from
July (£2.33m). This has been included as a line item within the contingency financing.
162. Component 1 b: Rights and Grievance Component: AusAid are expected to fund the bulk of
this component in the first two financial years with DFID’s contribution being about 40% of the cost in
the outer two years.
163. Component 1 c: Evaluation: The evaluation component will most likely be contracted to an
independent service provider. The costs represent a central estimate of what will be required based
on initial scoping of the evaluation requirements and experience under HSNP 1. There are different
ways to tackle evaluation; the Management Case below discusses these and the approach to
deciding the scope of this work.
164. Component 2: Payments: The largest item is the transfers received by households. Apart from
coverage, this is a function of (i) the shilling value of the transfer; and (ii) the shilling-sterling exchange
rate. The projections are based on the real value of the transfer being protected using (a) a 5%
Kenyan inflation rate and (b) 3% nominal depreciation of the Kenyan shilling against sterling.
165. The funds are passed initially to FSD as manager for the Payment Service Provider (PSP).
FSD ensures funds are passed to the payment service provider in time to make payments. FSD’s
management charge is just below 1% of transfers. The management charge increases to 2% in the
last year in relation to DFID transfers. It is envisaged that FSD will also manage GoK transfers, thus
whilst the DFID cash transfer contribution drops, the GoK cash transfer value increases. The increase
in fund management costs is in relation to dealing with funds from both GoK and DFID and the
increase in management burden as a result. We are currently working with the GoK for them to take
44
on board these operational costs as recurrent expenditure in their budgets. The PSP fees comprise
infrastructure (e.g. point of sale devices for payment agents across the four counties), costs of cards
and a charge per payment. These costs are being finalised in contract negotiations with the PSP.
Table 21: Costs incurred directly by DFID
Expenditure line
1. A Management and
monitoring component
Progamme management and
policy
Re-registration
2013/14
2014/15
2015/16
2016/17
2013/14-16/17
1,250,000
1,250,000
2,250,000
1,250,000
6,000,000
1,250,000
1,250,000
1,250,000
1,250,000
5,000,000
-
-
1,000,000
-
1,000,000
1. B Evaluation component
Evaluation
300,000
300,000
300,000
300,000
1,000,000
1,000,000
400,000
400,000
1. C Rights component
Complaints and grievances
-
-
1,310,000
1,310,000
1,310,000
1,310,000
2,000,000
2,000,000
2,620,000
2,620,000
20,730,000
14,980,000
19,910,000
19,060,000
16,890,000
16,080,000
12,690,000
11,930,000
70,220,000
62,050,000
140,000
180,000
190,000
240,000
Payment service provider
5,610,000
670,000
620,000
520,000
750,000
7,420,000
Contingency
General contingency (3%)
Contingency for re-targeting
transition in 2013/14
3,000,000
670,000
640,000
640,000
640,000
640,000
470,000
470,000
4,750,000
2,420,000
2. Payments component
Transfers
Transfers manager
Total
Total, excl general contingency
Memo: DFID % of admin costs
excl. contingency
2,330,000
2,330,000
25,280,000
24,610,000
22,100,000
21,460,000
22,090,000
21,450,000
16,120,000
15,650,000
85,590,000
83,170,000
39%
11%
25%
24%
25%
Source: DFID Kenya calculations (2013)
166. To enable the programme to take into the account of any changes in the operating
environment, the programme will build in a break point two years from the start of the
programme. This break point will analyse political risk, rate of spend, cost-effectiveness, targeting
efficiency, impact and level of GoK buy-in. Following the recommendations of the break point report, it
may be necessary to revise the financial case to cater for an increase in beneficiaries.
C. Is the required funding available through current resource allocation or via a bid from
contingency? Will it be funded through capital/programme/admin?
167. Required funding is through current resource allocation and will be funded through
programme costs. The intervention was outlined in the DFID Kenya Operational Plan for 2012-2015.
An annual inflator of 5% has been added to the cash transfer line and a contingency line of £2.65m
has been included to cover fluctuations in the sterling cost of transfers and other cost components that
have been underestimated.
168. The potential negative impact of food price inflation has been taken into account. Food
inflation: 5% is IMF’s estimate of inflation (CPI). We have factored in an additional 3% contingency. If
inflation is much higher, then most situations will be covered by either:
45




3% Contingency financing in HSNP and Arid Lands Support fund acute Risk Facility response.
Annual review under the NSNP which will look at transfer levels and inflation.
A DFID-wide global response if food price shock is global – as in 2008-09
Additional finance from mechanisms and finance for acute responses if prices are Kenya/Horn
specific – being developed now
D. What is the profile of estimated costs? How will you work to ensure accurate forecasting?
169.
Estimated costs will be split over the years as follows in Table 22:
Table 22 Profile of estimated costs under HSNP 2
Expenditure line
1. A Management and monitoring
component
1. B Evaluation component
1. C Rights component
2013/14
2. Payments component
General contingency (3%)
Contingency for re-targeting
transition in 2013/14
2014/15
2015/16
2016/17
1,250,000
1,250,000
2,250,000
1,250,000
6,000,000
300,000
-
300,000
-
1,000,000
1,310,000
400,000
1,310,000
2,000,000
2,620,000
20,730,000
19,910,000
16,890,000
12,690,000
670,000
640,000
640,000
470,000
2,330,000
70,220,000
2,420,000
2,330,000
Total
25,280,000
22,100,000
22,090,000
16,120,000
Total, excl general contingency
24,610,000
21,460,000
21,450,000
15,650,000
39%
11%
25%
24%
Memo: DFID % of admin costs excl.
contingency
2013/14-16/17
85,590,000
83,170,000
25%
Source: DFID Kenya calculations (2013)
170. Accurate forecasting will be managed through the use of output based contracts with
clearly defined deliverables over defined time periods. Payments to the service payment provider
through FSD will follow an agreed advance schedule necessary to guarantee predictable transfers.
Payments through the AG are reviewed annually and are monitored at every quarterly meeting and
adjusted if necessary.
E. What is the assessment of financial risk and fraud?
171. A Fiduciary Risk Assessment (FRA) was carried out in 2010/2011 which found that DFID
funds were not exposed to significant risk. Other key recommendations from the FRA have been
fed into the design of this business case for phase 2. Another FRA will be carried out to assess the
end of HSNP 1 in June 2013 and key recommendations from this will also be built into HSNP 2.
Further Fiduciary Risk Assessments will also be carried out in year two of Phase 2 to inform the
proposed break point report and if necessary a follow-up audit will be carried out.
172. Financial risk and fraud assessment of use of DFID funds is low. No funding is going through
a third party provider or government systems. DFID retains direct control of monitoring and measuring
the funds flow through contracts and AGs. CTs to beneficiaries will be done electronically, direct to
beneficiary bank accounts with real time reconciliation, thus reducing the fiduciary risk. Beneficiaries
will use a two factor authentication process to access the funds, offering another level of protection
against fraud.
F. How will expenditure be monitored, reported and accounted for?
173. Expenditure on contracts will be monitored monthly against pre-agreed deliverables,
performance and against forecast spend, by the PHV programme management team. Any
46
issues and concerns will be drawn to the attention of the PHV Senior Adviser and the Kenya
Leadership Team. Contract holders will provide a narrative to explain performance and flag areas of
concern around under/overspend in advance of the expected problem, so that it can be investigated
and resolved as quickly as possible.
All contract holders are expected to provide a full list of valued assets and account for these
assets, their condition and value at the end of the contract period. FSD will be expected to
provide to DFID Kenya a bi-monthly reconciliation of CT payments as well as provide a report of the
performance of the service payment provider against its contracted service-level agreements. Upon
approval of this report by DFID Kenya and verified by the Managing Agent, FSD will be able to issue a
payment request for the next tranche of funding. HelpAge will provide quarterly reporting of
expenditure against forecast. Payments will be released upon approval of breakdown of previous
quarterly spend and a realistic forecast for the next quarter.
Management Case
A. What are the Management Arrangements for implementing the intervention?
174. DFID Kenya has signed an MoU with the Government of Kenya reflecting proposed UK and
Australian support to the Arid Lands Support Programme and to HSNP, until 2017102.
Management
175. In DFID, the intervention will be overseen by the Senior Poverty, Hunger and Vulnerability
Adviser and the Poverty, Hunger and Vulnerability programme management team consisting of the
Senior Programme Officer, the Programme Officer and Programme Assistant. Expertise will be drawn
from other focal staff within DFID Kenya (Accountability and Results Team, etc). Although part of the
NSNP, HSNP 2 will sit separately from other CT programmes that currently fall under the Social
Protection Secretariat. HSNP will be implemented through the GoKs NDMA, which it has now been
confirmed will fall under the Ministry of Local Government and Devolution103. The NDMA will report to the
ASALs Secretariat, the policy and decision making body coordinating the EDE strategy (see Figure 12a).
176. The PILU will manage the day to day implementation and oversight of the programme. The
PILU will be composed of a Project Director, an HSNP MIS specialist, an administrator, a
monitoring and evaluation specialist, a communications specialist plus administrative support
staff. The PILU will work closely with the NDMA to ensure coordination with and build GoK capacity
within Government structures. The PILU will have oversight of the Evaluation Component, as part of its
contract and will manage the Rights and Grievances Component, taking over HelpAge International’s
Accountable Grant agreement. The PILU will be able to procure ad hoc short term technical assistance
should it be needed. In addition TA will be provided through the NSNP in the areas outlined in Annex 1.
The PILU will work closely with FSD to provide targeting data and verify payment reports.
177. The Evaluation Component will be provided by the service provider consortium awarded the
PILU contract or sub-contracted directly by the PILU or DFID. If done via DFID this will either
proceed through a mini-competition through the evaluation call down framework contract or a
direct competitive OJEU process. It will be important for evaluation TA to liaise with NDMA to ensure
the HSNP evaluation strategy feeds into a greater ASALs wide evaluation framework (see Figure12b).
Figure 12a: Institutional framework for ASAL development
47
1. Core ASAL
Transformation Structures
Cabinet SubCommittee
2. Specialist ASAL-focused
institutions
3. ASAL
Stakeholder Forum
Inter-Ministerial
Coordination
Committee
State (within parent
Ministries)
National Drought
Management
Authority
Livestock Marketing
Board
National Council on
Nomadic Education
Non-State
Northern Kenya
Education Trust
Northern Kenya
Investment
Fund
etc
etc
4. ASAL
Secretariat
Source: EDE MTP/ Sessional Paper No 8
Figure 12b: Proposed HSNP 2 management relationship
Source: DFID Kenya
Key: Accountability
Governance
178. Under current plans, the responsibility of HSNP 1 is transferring from the Ministry of Northern
Kenya (which will no longer continue in its current form) to the NDMA. The policy and institutional
framework outlined earlier, while expected to stand on the basis of previously agreed cabinet and
parliamentary documents, could still be subject to further change. In this context, DFID is working to
finalise the ToR for the PLIU and seek agreement on the proposed governance structures for HSNP 2,
including clarifying budget, M&E, reporting and accountability lines between all stakeholders.
179. It is proposed that :
48
i.
The PILU and FSD will be accountable to the Technical Working Group (TWG) comprising
NDMA and DFID who will meet monthly to look at issues of CT payments, MIS, M&E and
grievances and provide feedback to the PILU against its workplan.
ii.
The PILU will provide monthly narrative and financial updates to the TWG based on a preagreed work plan. Part of the financial updates will be provided to the PILU by FSD who will
send monthly payment reconciliations to the PILU to enable the flow of funds and payment
windows to be monitored. The PILU will also be responsible for monitoring the outputs of the
Rights and Grievance mechanism against the logframe indicators as well as oversight of the
Evaluation component. The PILU will be located within the NDMA and that the staff will work
closely with any direct counterparts in the NDMA to build capacity. Funds will be channelled
from DFID to the PILU. These funds will be used to procure ad hoc technical assistance and
short term contracts to address any capacity gaps on delivering HSNP in the NDMA.
180. FSD will manage the payment service provider element of the Payments Component, but will
use information provided by the HSNP MIS managed by the PILU. The PILU will be responsible for
ensuring the quality and reliability of data and data flows from the MIS to FSD. The contract for
managing FSD will be held by DFID and an MoU will be developed against this with clear service
delivery agreements. However, as shown in Figure 12b, FSD will be accountable to both DFID and
NDMA.
181. The work of the TWG, PILU and FSD will be overseen by a Steering Committee (SC). The SC
comprises: NDMA, Social Protection Secretariat, World Bank, AusAID, the ASALs Secretariat and DFID.
It will meet quarterly to discuss strategic issues relating to ASALs policy affecting HSNP 2; endorse
PILU workplans and review progress and ensure HSNP deliverables against DLIs under the PfR for the
NSNP are met.
B. What are the risks and how these will be managed?
Table 23: Risks HSNP 2
RISK
PROB. (15) where
1 is low
GoK commitments to
the HSNP budget are
in the spirit of the
EDE MTP and NSNP
MTEFF following the
Election result.
Institutional changes
lead to disruption as
MDNKOAL is
disbanded after the
2013 election.
GOK does not
gazette the National
Drought and Disaster
Contingency Fund in
a timely manner,
constraining flexibility
of safety nets in
times of drought
5
IMPACT
(1-5)
where
1 is low
5
5
2
3
4
Retargeting between
phase 1 and 2 to
focus on the poorest
HHs leads to a loss
of some of the old
caseload and
beneficiaries are
disgruntled.
4
4
Development
partners are unwilling
or unable to cluster
2
4
MITIGATION
RAG
rating
The proposed GoK funding trajectories have been set at a
sector level to be negotiated with Treasury as part of the wider
Social Protection discussions under the NSNP MTEF annually.
We will be supporting TA in NDMA to build capacity in this
area and are proactively engaged in policy dialogue on the
sector and HSNP budgets.
It has been agreed that the newly institutionalised National
Drought Management Authority (NDMA) will house the HSNP
and oversee its implementation. It is assumed that NDMA will
report to the ASALs Secretariat under the Ministry of Special
Programmes as per the proposals pre-election.
The MoF is finalizing the establishment and gazetting of the
NDDCF. NDMA is overseeing on-going work to revise the early
warning system, contingency plans and M&E system to include
a cash-based response through the HSNP.
Red
Experimental targeting was a major part HSNP Phase 1 and
has provided valuable lessons for HSNP Phase 2. The
evidence for improved targeting has been reviewed and a
more appropriate method identified. The additional effort
placed on livelihood profiling in HSNP Phase 2 will enhance
targeting accuracy. A communication strategy is in place and
the Rights Committees are available to address any
grievances around poor targeting and to report back to the
HSNP Phase 2 staff via the County Steering Group.
Greater donor coordination on development of the ASALs is
being developed, led by the EU. Other donors have also
expressed a willingness to combine resources to have a more
Red
49
Red
Red
Amber
support services.
Misuse of funds.
2
4
A low level of support
from the government
to cash transfers to
the arid lands.
2
3
Conflict in the ASALs
disrupts
implementation.
2
4
coordinated approach. The devolved planning process which is
ongoing will further assist this.
An FRA was carried out in 2010 which found that DFID funds
were not exposed to significant risk. Further FRAs will be
carried out through the programme’s life and the take-up of
recommendations will be assessed at the Annual Review.
The programme will strengthen the relationship between the
GoK and the programme to ensure its commitment. HSNP
Phase 2 will also work with the ASAL Secretariat and Treasury
to develop policies and gain financial commitments by GoK to
ensure continuity, and provide policy support to the wider
debate on social assistance in Kenya.
Conflict in the ASALs has limited the areas where HSNP1 has
been able to work and work will continue to be in the safer
areas. DFID and other donors will benefit the Programme. In
addition the livelihood development aspects of the programme
should reduce pressure on scarce resources and promote
greater harmony in the long term.
The commercial elements of the cash transfer will be tendered.
Banks see HSNP Phase 2 and other cash transfer
programmes as a significant part of their future portfolio of
work and are keen to explore a diversity of uses of smartcards.
Amber
Amber
Green
The efforts which
2
5
Green
have been made to
engage the
commercial sector
(Equity Bank) in
HSNP1 are lost if a
substitute partner
cannot be engaged
under HSNP 2
Probability is marked between 1 and 5, where 1 is considered low and 5 is considered high probability. Impact is marked
between 1-5, where 1 is considered to have a low impact and 5 a high impact.
C. How will progress and results be monitored, measured and evaluated?
169.
This Business Case makes provision for extensive monitoring and evaluation work.
Monitoring Strategy
182. Detailed monitoring will take place throughout the period of HSNP 2. The registration process has
provided extensive information for the whole population of the region covering a range of things including
household composition, poverty status and livelihood base. This exercise is central to the programme’s
operation and will be repeated every three years to ensure appropriate targeting of HSNP. With the wider
work underway in the sector, there is an intention to develop a monitoring strategy for the ASAL areas
which will be greater than HSNP 2. DFID will engage with this process and where possible dovetail
monitoring activities required for HSNP 2 with a wider exercise. In the event that the wider exercise stalls,
we will ensure adequate monitoring data for HSNP 2.
183. Monitoring activities for HSNP to date have been led by the HSNP Secretariat and we envisage
this will continue. Information on the characteristics of cash transfer beneficiaries, such as age, sex, area
of residence and the number of payments received is available through the programme MIS system, online, meaning DFID can take a snapshot of progress with programme delivery at any point in time; this is
useful in reporting against DFID’s headline indicator “the number of people receiving DFID supported cash
transfers’. Monitoring activities will ensure that progress against the log-frame milestones and targets can
be assessed annually and at project end. Output indicators are directly attributable to the programme;
outcome indicators track the diversity of outcomes expected to be achieved by the programme.
170. For the next phase, Monitoring activities will also involve:
-
-
Gathering community level data about the economy, including shocks
Collecting information about other cash or food programmes that operate in the target areas (whether
through the smartcard used for HSNP 2 or not) and who the beneficiaries are; the single registry should
provide this information
Collecting information on complaints/ grievances around HSNP 2
Recording all payments made on each beneficiaries card
Keeping close records of the costs of operation of HSNP 2 to allow cost effectiveness analysis (the project
MIS includes cost data – both recurrent and fixed- useful in value for money analysis).
Monitoring funding GoK (and other donors) put into HSNP and other welfare programmes in the NSNP.
50
-
Documenting DFID work to influence GoK on funding of NSNP.
184. A detailed note setting out the full suite of monitoring activities and timelines will be produced
to ensure a record of what is expected. Some of the £2 million budgeted for targeting/ re-registration and
some of the £2 million for monitoring and evaluation is available to fund this work. The Managing Agent/
Secretariat will produce quarterly monitoring reports to the NDMA to ensure action is taken based on the
information obtained.
Evaluation plan
185. The first phase of HSNP involved an evaluation comprised of a quantitative baseline survey and
qualitative work (undertaken in 2010 and reported in 2011), follow up (undertaken in 2011 and reported in
April 2012) and second year follow up (undertaken 2012, with preliminary findings available March 2013).
Hence, at the time of designing HSNP 2 the baseline and full one year follow up data were available, plus
some early analysis from the second year follow up. This longitudinal data provided some interesting and
promising findings, as highlighted earlier.
186. For HSNP 2 it is necessary to continue with some longitudinal tracking of beneficiaries and nonbeneficiaries to evaluate the impact of HSNP in order to learn more about the impact of the transfers on
households and help improve future targeting. This will not be entirely straightforward as some nonbeneficiaries from the earlier study are now scheduled to enter the programme and receive payments thus
we cannot simply extend our initial impact evaluation. In considering how to approach this we first identified
our key ‘impact’ questions and then looked at how two possible evaluation approaches might work with
regard to each question.
187. It will also be important to examine our policy influence, a key part of our support. This is likely to
involve monitoring changes in budget allocations of GoK in respect of the NSNP and exploring to what
extent DFID policy dialogue might have contributed to changes. These evaluation questions can be
included in the work tendered, and managed as a distinct element of the evaluation, with appropriate
methods employed.
188. We will also have an interest in some process type evaluation questions which will consider
how the programme is implemented and assess the extent to which it represents value for money.
These will be included in the evaluation work tendered and it is envisaged they will be addressed through
desk study and qualitative interviewing. For possible evaluation designs to address these impact questions
and more on the evaluation process envisaged see Annex 6. The evaluation questions we wish to
address with respect to HSNP are:
1st order
1. What are the overall effects of HSNP 2 in terms of asset retention, well-being, food diversity, health and
education, comparing beneficiaries and comparable non-beneficiaries?
2. For which sub-groups are effects most pronounced? (Taking account of poverty status, household size,
extended family units-polygamy, geographic location – counties/ districts). Does livelihood base (e.g.
livestock, remittance-based, petty trading etc.) or sedentary/ mobile make a difference?
3. Can this analysis lead to identifying (for targeting) cohorts that benefited more than others from the cash
transfer in terms of sustained/improved well-being, dietary health and education outcomes? And
therefore suggest a revised targeting threshold or cohort to enhance a medium term sustainable
caseload for the GoK, while maintaining an effective safety net function?
4. Do people ‘graduate’ from HSNP 2? If so, who, how, where and why? Over time, how are effects
sustained after cash transfers stop? Does receipt of the cash over a longer period generate longer
lasting benefits, which extend to new livelihoods opportunities? Or are the benefits limited to coping
with a shocks and/or chronic vulnerability?
5. Are triggered payments more/ less cost effective than regular payments? How can the effects of
predictable transfers be compared with those of short term transfers triggered in response to acute
shocks?
2nd order
6. What are the costs and benefits of HSNP 2 (work will be undertaken to determine what CBA might be
possible, perhaps using DALYs, (disability adjusted life years) rates of return on education, changes in
welfare, assets.
7. Can we learn anything about the transfer value for future transfers? Could a lower amount have a
similar impact for some HHs? Could more have sufficient impact to justify the extra cost?
8. How does HSNP data provide a basis for selecting households within a geographic triggered drought
response payment?
9. How do HSNP 2 M&E and EDE M&E framework complement each other?
10. Compare cost/impact of predictable cash transfers with other interventions used to support households
51
in the four counties.
Logframe: [QUEST REF: 3915054]
52
MAIN ABBREVIATIONS USED IN TEXT
AR
ASALs
bn
CSO
CT(s)
CT-OVC
DD
DFID
DLIs
DPs
EDE
FRA
GoK
GDP
HH(s)
HIV and AIDS
HSNP
IE
JRIS
KIHBS
KSh
LOC
m
M&E
MDNKOAL
MIS
MoU
MTP
MTEF
MTEFF
MTR
NDDCF
NDMA
NGO
NSNP
NSPP
NSPS
OPCT
OVC
PCK
PCR
PfR
PHV
PMOC
POC
PRRO
PWSD-CT
SP
SPP
SSN
TA
UNICEF
VFM
WFP
Annual Review
Arid and Semi-Arid Lands
Billion
Civil Society Organisation
Cash Transfer(s)
Orphan and Vulnerable Children Cash Transfer Programme
Dietary Diversity
UK Department for International Development
Disbursement Linked Indicators under the PfR Programme to support the NSNP
Development Partners
Ending Drought Emergencies
Fiduciary Risk Assessment
Government of Kenya
Gross Domestic Product
Household(s)
Human immunodeficiency virus infection and Acquired immunodeficiency syndrome
Hunger Safety Net Programme
Impact Evaluation
Joint Review Implementation Support
Kenya Integrated Household Budget Survey
Kenyan shillings
Local OVC Committees
Million
Monitoring and Evaluation
Ministry of State for Development of Northern Kenya and Other Arid Lands
Management Information System
Memorandum of Understanding
Medium Term Plan
Medium Term Expenditure Framework
Medium Term Expenditure Financing Framework (for the NSNP under PfR)
Mid Term Review
National Drought and Disaster Contingency Fund
National Drought Management Authority
Non-Governmental Organisation
National Safety Net Programme
National Social Protection Policy
National Secretariat for Social Protection
Older Persons Cash Transfer
Orphans and Vulnerable Children
Postal Corporation of Kenya
Programme Completion Review
Program for Results
Poverty, Hunger and Vulnerability
Programme Management Oversight Committee
CT-OVC Performance Oversight Committee
Protracted Relief and Recovery Operations
People With Severe Disabilities Cash Transfer
Social Protection
(DFID) Social Protection Programme (Phase 1 = SPP1; Phase 2 = SPP2)
Social Safety Net
Technical Assistance
United Nations Children Fund
Value for money
World Food Programme
53
ANNEXES:
Annex 1: Technical Assistance Requirements for the National Safety Net Programme
A. Required Technical Assistance
#
SOURCE TECHNICAL ASSISTANCE
I. Critical Inputs
1.
DLI 1,2
Individual consultant to support revision of CT-OVC program
targeting process if required following impact evaluation of CTOVC program.
2.
DLI 13
Individual consultant to update M&E Sections of CT-OVC and
HSNP manuals
3.
TA, all
Firm to carry-out the Functional Review of the four cash transfer
DLIs
programs to produce: Capacity Strengthening Plan to include
Staffing & Training, Equipment, Systems; and
Harmonization/Consolidation Strategy
4.
TA, all
Capacity enhancement based on Functional Review (Staffing,
DLIs
Audit Office, Procure Equipment etc.)
5.
IFAR
Individual consultant to support procurement function within SP
Secretariat
6.
IFAR
Individual consultant to support financial management within
DOGSD and SP Secretariat
7.
IFAR
Individual consultant to support financial management in the CTOVC Program
II. The most vulnerable and poorest households enrolled
8.
DLI 1,2
Firm to support recertification for OPCT, PWSD and UFS-CT
based on: MIS exception reports, stipulated recertification
procedures based on Operations Manuals, and complaints and
grievances lodged on the programs.
9.
DLI 3
TA to analyse the 2009 national census data, KIHBS, existing
coverage by cash transfer programs and other relevant data to
inform the Expansion Plan.
10.
Technical Support to KNBS to integrate 2009 Census list of
Locations with that used by programs.
54
ESTIMATED
COST (US$)
DATE FOR
20,000
Sept 13
4,000
Sept 13
200,000
Jul-13
COMPLETION OF
PROCUREMENT
CONTRACTING SUPERVISING
AGENCY
AGENCY
DCS (CTOVC Project)
TBD
Nov-13
50,000 pa
ASAP
50,000 pa
ASAP
50,000
Dec-13
DCS
HSNP Sec./
DCS
SP Sec.
SP Sec.
DCS (CTOVC Project)
DCS (CTOVC Project)
DCS (CTOVC Project)
SP Sec.
ASAP
World Bank
SP Sec.
Possible
SP Sec. (CT- SP Sec.
OVC Project)
SP Sec.
DCS
Possible
5,000
#
SOURCE TECHNICAL ASSISTANCE
ESTIMATED
COST (US$)
11. DLI 3
Firm to support to large-scale targeting/recertification in line with
expansion plan or as a result of targeting assessments/PIBS
12. DLI 1,2,
Individual consultant to review PMT Targeting methodology to
14,15
harmonize poverty criteria across all programs if identified as
needed by single targeting exercise pilot or Harmonization
Strategy
13. DLI 1, 2, Firm to support the collection of household information for
3
existing beneficiaries (possibly harmonize with recertification
process (No. 11))
III. Beneficiaries receive appropriate, reliable and accessible payments
14. DLI 4,5
Individual Consultant to support the SP Sec. to (a) determine the
payment architecture for the NSNP, (b) provide input to the
process to contract PSP(s), particularly the TOR, and (c) to
support contract management
15. DLI 4,5
Firm to support large-scale enrolment of beneficiaries particularly
with respect to linking them with PSPs (as is currently the case in
CT-OVC program).
16. DLI 6,7
Individual consultant to support the Payment Working Group on
flow of funds and timeliness of payments.
17. TA
Consultant to advise on benefit level and mechanisms for
preserving purchasing power
IV. Complaints and Grievances
18. DLI 8,9
Firm to support the implementation of the Communication
10,11
Strategy with a focus on beneficiary awareness.
19. DLI 8,9
Support to the development and fund printing of service charters
10,11
and other communications tools as proposed by the
communication strategy.
V. Monitoring and Evaluation
20. DLI
Firm to conduct Program Implementation and Beneficiary
1,2,8,
Satisfaction Survey for period of PfR (PIBS)
10,13
55
50,000
DATE FOR
COMPLETION OF
PROCUREMENT
CONTRACTING SUPERVISING
AGENCY
AGENCY
Possible
SP Sec.
Possible
SP Sec
July 13
UNICEF
SP Sec.
Aug 2013
FSD
SP Sec.
Possible
14,000
August 2013
UNICEF
SP Sec.
11,750
July 2013
World Bank
SP Sec
50,000
Possible
1,000,000
SP Sec.
Oct 13
DCS (CTOVC Project)
SP Sec.
ASAP
SP Sec. (CT- SP Sec.
OVC Project)
#
SOURCE TECHNICAL ASSISTANCE
21. DLI 13
22. DLI 3
23. DLI 3
24. DLI 13
25. DLI 3
Short-term individual consultants to assist M&E staff in each
ministry, including building capacity to report
New contract to individual Consultant to (a) Enhance MIS/Single
Registry; (b) Support MIS/Single Registry maintenance, training
and trouble-shooting.
Firm to conduct Independent Single Registry/MIS systems
assessment
Firm to conduct HSNP Impact Evaluation
Periodic support for MIS/SR upgrades
VI. Harmonizing Sector
26. DLI 14
Individual Consultant to support the development of the
Consolidation Strategy.
27. DLI 14
Consultants or short-term secondees to augment the permanent
staff of the Ministry, as needed, to address any short-term
capacity gaps arising from the reform.
VII. Complementary and graduation
Other
Study on complementary to support the movement of
households out of poverty
ESTIMATED
COST (US$)
DATE FOR
24,000
Possible
30,000
Mar-13
DFID
50,000
Aug-13
SP Sec. (CT- SP Sec.
OVC Project)
DFID
NDMA
SP Sec (CT- SP Sec.
OVC Project)
COMPLETION OF
PROCUREMENT
TBD
CONTRACTING SUPERVISING
AGENCY
AGENCY
18,000
SP Sec.
SP Sec.
Possible
SP Sec.
World Bank
UNICEF
SP Sec.
B. Ongoing Technical Assistance
#
Area
Technical Assistance
1
I
Firm to support the Government to revise the Operations Manuals for OPCT, PWSD-CT and
UFS-CT
2
I
Individual consultant to revise targeting procedures for the HSNP
3
V
Social Protection Secretariat M&E Specialist
4
V
Firm to conduct CT-OVC Evaluation
56
Contracting
Agency
World Bank
Help Age
Supervising
Agency
DFID
HSNP Sec.
UNICEF
SP Sec.
DCS
DCS
SP Sec.
#
Area
5
VI
6
VI
7
VII
Technical Assistance
Contracting
Agency
Individual Consultant to (a) Enhance MIS/Single Registry; (b) Support MIS/Single Registry
maintenance, training and trouble-shooting.
Individual Consultant to assist the Government to move DFID financing to the HSNP onbudget, to budget for the HSNP, and to include long-term projections for the HSNP in the
sectoral MTEF.
Consultant to design the system to scale-up the NSNP in response to shocks.
Source: NSNP TA requirement. (Draft 22.3.13)
57
Supervising
Agency
SP Sec.
DFID
NDMA
Annex 2: Donor Funding in the ASALs
Source: FAO (2013) Based on donors self-reporting funding to the ASALs
Annex 3: Total Donor funding per ASAL County
58
Source: Ibid.
59
Annex 4: Climate and Environment Assessment [Quest Link: 3921208]
Annex 5: Economic Appraisal [Quest Link: 3921261]
Annex 6: Evaluation Design Options
The possible designs are, in summary:
1. ‘Small n’ or ‘HSNP based’: Design an impact evaluation (like a regression discontinuity
design, utilising PMT score) which would track an estimated 2600 beneficiary and 2600
non-beneficiary households (in 260 settlements) at 2-yearly intervals starting with a
baseline in 2013, follow up in 2015 and end line 2017. Livelihood zone within county would
be used as a primary stratifier for the sampled settlements and we would also explore
taking account of distance to a school/ market. Within settlements, the non-beneficiary
households would be selected as those closest to the cut-off for eligibility for HSNP 2 (e.g.
those that were eligible based on the PMT but not based on the CBT or vice versa and did
not qualify for the cash transfer; initial analysis suggests there would be sufficient
households). The registration exercise and PMT would provide the basis for sampling and
selecting a control. The survey instrument used at baseline and follow up would capture
many of the same variables collected at registration/ re-registration, but go into more detail
in gathering a robust measure of consumption aligned to the Kenya Integrated Household
Budget Survey (KIHBS) consumption measure. A decision should be reached on whether to
seek to include anthropometric measurements to assess levels of malnutrition.
2. ‘Large n’ or ‘Registration, wider ASAL based’. Identify a larger selection of beneficiaries
and non-beneficiaries than in the ‘small n’ approach (probably 10 of each in 2,000
settlements so a total of 20000 beneficiaries and 20000 non-beneficiaries), using the
regression-discontinuity type method for selection described above. Do not gather a new
baseline position but rather use the registration data as the baseline. Gather additional
information at 2 yearly intervals – again using the registration (re-registration) instrument to
provide the relevant data. This approach thus gives a smaller amount of information, but
with the ability to identify changes with a higher degree of precision. It would be expected
that over time some households would switch categories from beneficiary to non-beneficiary
or vice versa which would permit interesting analysis.
Table 1 summarises the pros and cons of these two approaches.
Consideration
Depth of questionnaire
Size of sample
Ability to link to EDE/ other trigger
payments and potentially draw
comparisons
Ability to address new questions
that emerge
Value as a platform for the wider
community interested in the ASALs
Value in judging quality of PMT/
providing updates
Small n
Better – should be
pursued if interested in
detail on consumption
Smaller – but judged
sufficient for questions
Worse
Large n
Worse – but judged
sufficient for questions
Worse - Will be additional
info, but not necessarily
sample size to
accommodate
Worse
Better - Sample size likely
to be good; not sure
whether information would
be available, but good
vehicle for adding
additional small studies;
following up groups of
emerging interest
Better
Neutral – would rely on
KIHBS to provide basis for
calculating new PMT
Neutral - would rely on
KIHBS to provide basis for
calculating new PMT
60
Larger – far more
precision
Better
Cost
weights.
Better-if KIHBS type
consumption aggregates
collected.
Better: Estimate half large
n (could be as low as
£500k although probably
notably more)
weights
Worse: Estimate double
small n (could come in at
minimum £1million) BUT
some of funding could be
reallocated from reregistration budget.
The factors affecting the decision on which approach to pursue might depend on wider
activity/ interest in the sector (and potentially there may be other funders interested in a ‘large n’
approach, a final decision on which to pursue would be made by June 2014.
Whichever approach we use, by 2017 it is expected that we should have sufficient data to be
able to state conclusively what the impacts of HSNP are, comparing beneficiaries and nonbeneficiaries. Once there is conclusive evidence on the effects of HSNP 2 there will no longer be
an imperative to continue to evaluate with a control group of non-beneficiaries and, assuming the
programme continues, further data collection could be concentrated on monitoring the beneficiaries
only, plus registration exercises periodically to enable re-targeting.
Preliminary design work for the impact evaluation component has been undertaken to
generate the material presented here (Pinney 2013 – available from DFID Kenya). Further
detailed evaluation design work will be instigated as soon as a choice on broad approach has been
made. This will address issues of instrument design (ensuring alignment with KIHBS data on
consumption if we go for the ‘small n’ with consumption aggregate enumeration option), fieldwork
timing (to ensure seasonal variation is accounted for and consider how frequently data need to be
collected). It will allow a baseline position to be collected (if we go for the small n approach) or
wider stakeholder engagement and potential ‘add ons’ as a result of that if we go for the large n
approach. As well as the impact evaluation component the evaluation work we commission will
also include components looking at the process of implementing HSNP and value for money
considerations and at the policy influence DFID is able to have through HSNP and the wider NSNP
process. Appropriate methodologies for addressing these questions will be used.
The evaluation work will be undertaken independently. Governance arrangements will be
worked up and will depend to an extent on whether we pursue the wider sector option, or narrower
HSNP 2 option – although in either case a wide range of stakeholders should be involved. While to
date evaluation has sat outside Government institutions, we would aim to work more in partnership
with Government in this next phase. This may involve joint commissioning and management of
evaluation work. Any evaluation reports will be made publically available and we will continue to
learn from cash transfer work in other countries such as Ethiopia and Zambia – and to feed in our
own findings to the wider evidence base. We will be participating in an evaluation event linked to
cash transfers in Zambia in June.
Also to pursue in the longer-term, will be options for boosting the sample of KIHBS in the
HSNP 2 areas. This would provide updated PMT weights and to a lesser extent, provide aggregate
indicators for programme monitoring. At present this tool was not judged sufficient since it is out of
our control and the frequency is unknown. We currently envisage there being a 2013 round of
fieldwork (with findings available 2015) and 2017/18 data collection (findings available 2020); the
most recent information dates from a 5/2005- 4/2006/ enumeration.
ENDNOTES
61
1
This included orphans and vulnerable children; children and adults with disabilities; older people; and
chronically ill adults.
2 In 2005, the Government provided KSh 48m to CT programs. That support had increased to KSh 2.4bn in
2010, and it continues to grow. While emergency food aid is still 53.2% of safety net spending, by the end of
2010, CTs constituted a quarter of all of total safety net spending in Kenya (i.e. equivalent to 0.2% of GDP),
having increased rapidly from a very low base. See Business case on SPP2 for more details.
3 The main cash transfer programs are the Cash Transfer for Orphans and Vulnerable Children (CT-OVC),
Hunger Safety Net Programme (HSNP), Older Persons Cash Transfer Programme (OPCT), Persons with
Severe Disabilities Programme (PwSD) and the Urban Food Subsidy Programme (UFSP). These programs
make up the National Safety Net Programme (NSNP).
4 World Bank 2012, NSNP Concept note.
5 The roles and responsibilities of the different agencies involved in SP were discussed at a workshop as part
of the SPP1 Annual Review 2012.
6World Bank and AusAID (2012). Devolution Without Disruption. Pathways to a successful new Kenya. See:
www.worldbank.org/Kenya/devolution
7 Kenya Social Protection Sector Review (2012)
8 See World Bank (2013) NSNP draft PAD and Aide Memoires.
9 All GoK figures on financing to HSNP are proposed as these have been developed through the NSNP and
medium term planning process in advance of the election and its full conclusion.
10 KNBS (2007). Basic Report on Well-Being in Kenya: Based on Kenya Integrated Household Budget
Survey 2005/06.
11 Ministry of State for Planning, National Development and Vision 2030 (2012) The Kenya Social Protection
Sector Review Report.
12 Ministry of State for Development of Northern Kenya and other Arid Lands (11.10.2012). Sessional Paper
No. 8 of 2012 on National Policy for the Sustainable Development of Northern Kenya and other Arid Lands:
‘Releasing Our Full Potential’
13 Kenya Vision 2030.
14 Government of Kenya (Draft 4th Feb 2013). Drought Risk Management and Ending Drought Emergencies
Medium Term Plan (2013-17)
15 Kenya Integrated Household Budget Survey 2005.
16 In 2005 seven districts in the north had a Human Development Index that was half the national average
and below Sierra Leone. See UNDP, 2006 ‘Kenya National Human Development Report, 2006: Human
Security and Development: A Deliberate Choice’. The HDI for Sierra Leone in 2005 was 0.336. The Human
Development Index is a composite measure of four indices: life expectancy, adult literacy, gross enrolment
(primary, secondary, tertiary), and GDP per capita.
17 DFID (2012) Kenya Multi-Hazard Disaster Risk Assessment.
18 OPM (2011). Hunger Safety Net Programme M&E Baseline Report. Poverty has multiple dimensions but
the Kenya Integrated Household Budget Survey (KIHBS -2005/6) bases poverty on consumption patterns
rather than income. It defines three key poverty levels: 1) food poverty, 2) absolute poverty, and 3) hard core
poverty. The food poor are unable to meet their basic daily energy requirements; the absolute poor are
unable to meet basic food and non-food needs, and the hard core poor are those who cannot meet basic
food needs even if they forego all non-food needs.
19 Ministry of State for Development of Northern Kenya and other Arid Lands (11.10.2012). Sessional Paper
No. 8 of 2012 on National Policy for the Sustainable Development of Northern Kenya and other Arid Lands:
‘Releasing Our Full Potential’
20 Ministry of State for Development of Northern Kenya and other Arid Lands (11.10.2012). Sessional Paper
No. 8 of 2012 on National Policy for the Sustainable Development of Northern Kenya and other Arid Lands:
‘Releasing Our Full Potential’
21 Ministry of State for Development of Northern Kenya and other Arid Lands (11.10.2012). Sessional Paper
No. 8 of 2012 on National Policy for the Sustainable Development of Northern Kenya and other Arid Lands:
‘Releasing Our Full Potential’
22 Ibid.
23 Office of the Prime Minister (2010). Releasing Our Full Potential: National Policy for the Sustainable
Development of Northern Kenya and other Arid Lands. Draft Sessional Paper to the Government of Kenya.
24 The Famine Early Warnings Network for Kenya (FEWS) identifies a series of underlying factors for food
insecurity in the ASALs: http://www.fews.net/ml/en/info/Pages/fmwkfactors.aspx?l=en&gb=ke&fmwk=factor
25 In the arid lands, where HSNP1 has been piloted, the situation is more pronounced. Save The Children
(2007) found for North Eastern Kenya, for example, that “despite almost continuous emergency support...
since the drought of 1997-98, there has been an increase in poverty in the region.” Livestock ownership has
steadily declined due to drought and disease, diets have changed for the worse, and the percentage of the
population in the poor and very poor wealth groups has increased from 45-50% to 50-60%. This reflects a
picture of common trends across the arid lands. WFP (2009) notes that “The percentage of Kenyans unable
to meet basic food needs has increased over the last year from 44 percent to 77 percent in pastoral/agropastoral areas.”
62
26
DFID (2012) Kenya Multi-Hazard Disaster Risk Assessment
Ibid.
28 Ibid.
29 Ibid.
30 Ibid.
31 Resilience in this context is defined as the ability of households in the ASALs to maintain or transform
living standards in the face of shocks or stresses without compromising their long-term prospects.
32 Nzioki (undated). Gender Dimension of Risk, Vulnerability and Insecurity for Social Protection: Kenyan
study. Draft Report. Supported by the Intergovernmental Authority for Development (IGAD) and European
Development Fund.
33 DFID (2012) Kenya Multi-Hazard Disaster Risk Assessment
34 Between 2005 and 2010, total spending on safety nets increased from Ksh 11.9 billion to Ksh 20.5 billion.
In 2010 this was equivalent to 0.80% of Kenya’s GDP. Throughout this period, emergency food
aid continued to dominate safety net spending, accounting for 53.2% of the total (World Bank Draft PAD,
NSNP 2013).
35 NDMA (pers. comm 2013)
36 World Bank (2012). The World Bank’s Africa Social Protection Strategy 2012–2022.
37 Resilience in this context is defined as: “the ability of households in the ASALs to maintain or transform
living standards in the face of shocks or stresses without compromising their long-term prospects.” DFID
Kenya Resilience Strategy (2013).
38 See revised Government of Kenya Constitution (2010). See: www.constitutionnet.org/vl/item/finalconstitution-kenya-2010
39 Endorsed by the Ministry of State for Planning, National Development & Vision 2030 on 16th August 2011.
40 Article 56 says that the State shall put in place affirmative action programmes designed to ensure that
minorities and marginalised groups are supported and included. Furthermore, the Bill of Rights says that all
State organs and all public officers have the duty to address the needs of vulnerable and marginalised
groups within society.
41 Ministry of State for Development of Northern Kenya and other Arid Lands (11.10.2012). Sessional Paper
No. 8 of 2012 on National Policy for the Sustainable Development of Northern Kenya and other Arid Lands:
‘Releasing Our Full Potential’. See: www.dmikenya.or.ke/downloads/ASAL-policy/
41 Government of Kenya (Draft 4th Feb 2013). Drought Risk Management and Ending Drought Emergencies
Medium Term Plan (2013-17)
42 The NDDCF is yet to be gazetted but this is expected in 2013.
43 See World Bank (2013) NSNP Draft Aide Memoire 28.3.13
44 National Policy for the Sustainable Development of Northern Kenya and other Arid Lands. Approved by
Cabinet 11th October (2012). Passed by Parliament 6th December 2012 (Sessional Paper number 8 of 2012).
27
45
46
The MTEFF is a World Bank document. See latest versions from the World Bank Team (8/2/13) available
via Will Wiseman (wwiseman@worldbank.org).
47 Ministry of State for Development of Northern Kenya and other Arid Lands (11.10.2012). Sessional Paper
No. 8 of 2012 on National Policy for the Sustainable Development of Northern Kenya and other Arid Lands:
‘Releasing Our Full Potential’
48 Equity Bank is a financial services provider headquartered in Kenya. Equity Bank has the largest customer
base in Kenya, with over 7m accounts (over 60% of all bank accounts in Kenya in 2011). Equity Bank started
as a small building society and microfinance company, and maintained a corporate vision of providing
services to the poor after transition to a bank. It has grown rapidly In the last five years with a strong regional
presence in East Africa and a plan to expand quickly in other countries. It is closely associated with DFID,
having received support from DFID through the Financial Sector Deepening Trust Kenya (FSD), CDC and
IFC, and is currently the payment service provider (PSP) to the DFID Hunger Safety Net programme (HSNP)
in Kenya through FSD.
49 Slater R. (2009). Cash Transfers: Graduation and growth. ODI Project Briefing Number 29. ODI, London.
50 GoK (2012) Kenya Social Protection Sector Review. June 2012
51 The proposed funding would be:
63
KENYA FY
2012/13
HSNP Transfer levels
Nominal increase from 2014/15
Transfer per cycle (every 2
3500
months)
Rounded figures to allow cashing out
Transfer per month
1750
Avg. no. cycles per year
6
Transfer per year
21,000
Exchange rate to £
130
£ per year
162
Per Adult Equivalent (PEA) at 4.5
36
adults per HH
Monthly £
13
Monthly PEA
3.0
2013/14
2014/15
2015/16
2016/17
4,600
5%
4,830
5%
5,072
5%
5,325
4,600
2,300
6
27,600
136
203
45
4,900
2,415
6
29,400
139
212
47
5,100
2,536
6
30,600
142
225
50
5,400
2,663
6
32,400
145
223
50
17
3.8
18
3.9
19
4.2
19
4.1
Source: DFID Kenya calculations
52
A Vision for the Future of Technical Assistance in the International Development System, Oxford Policy
Management 2003
53 Draft ROACH methodology: http://www.um.dk/NR/rdonlyres/248E3D29-DA6E-4448-976EB9134369CB72/0/CDEstep3_Methodology.pdf
54 Improving Technical Assistance in the context of SWAps Javier Martínez, HLSP, July 2006
55 DFID TA How To Note, 2006
56 See: http://www.gsdrc.org/docs/open/HDQ850.pdf
57 IEG (Independent Evaluation Group). 2011. Social Safety Nets: An Evaluation of World Bank Support,
2000–2010.
Washington, DC: Independent Evaluation Group, the World Bank Group.
58 OPM and IDS (2011) HSNP Targeting Effectiveness Evaluation Report, Kenya Hunger Safety Net
Programme: Monitoring and Evaluation Component, Oxford Policy Management (OPM), Oxford and Institute
of Development Studies (IDS), Brighton and Pinney, (2012), Provisional monitoring and evaluation
framework for HSNP+, Unpublished
59 World Bank (2013). Draft Policy Note on Social Protection. Unpublished.
60 The historical calendar lists locally known historical events such as severe droughts, conflicts or other well
known incidents. These are then compared with what is known about a potential beneficiaries birth and
childhood to come up with an estimation of their year of birth.
61 OPM and IDS, (2011) HSNP Targeting Effectiveness Evaluation Report, Kenya Hunger Safety Net
Programme: Monitoring and Evaluation Component, Oxford Policy Management (OPM), Oxford and Institute
of Development Studies (IDS), Brighton
62 Ibid.
63 Coady D., Grosh M., and Hodditnott J. (2004). Targeting of Transfers in Developing Countries: Review of
Lessons and Experience. World Bank and IFPRI
64 Ibid.
65 NAO (2011). Transferring Cash and Assets to the Poor.
66 Hodges A., White P. and Greenslade M. (2011). Guidance for DFID Country Offices on Measuring and
Maximising Value for Money in Cash Transfer Programmes. DFID, London.
67 DFID (2011). Cash Transfers, Evidence Paper. Policy Division. DFID, London.
68 Ibid.
69 Ibid. There is growing evidence that transfers can help people escape chronic, often inter-generational
poverty; in part by leveraging gains in non-income, human development outcomes, accelerating progress
towards Millennium Development Goal (MDG) targets. Finally, there is recognition that in situations of chronic
food insecurity (eg Ethiopia), institutionalised transfer programmes are more efficient and effective than
repeated annual emergency food aid.
70 World Bank (2013). Draft Policy Note on Social Protection. Unpublished.
71 Government of Kenya, June (2012) Kenya Social Protection Sector Review.
72 DFID (2011). Cash Transfers: Evidence paper. Policy Division, DFID London.
73 Ibid.
74 Kenya HSHP, Monitoring and Evaluation Component, Impact Analysis Synthesis Report, Oxford Policy
Management (OPM) and Institute of Development Studies (IDS) (May 2012). This impact evaluation of HSNP
was conducted using a mixed methods approach. A randomised control trial was designed, with fieldwork in
64
24 ‘treatment’ and 24 ‘control’ sub-locations, randomly selected. A sample of 1,434 treatment and 1,433
control households.
75
A robust measure of programme impact after one year is provided by the four year one impact reports
Kenya Hunger Safety Net Programme Monitoring and Evaluation Component Impact Analysis Synthesis
Report, May 2012; Kenya Hunger Safety Net Programme Monitoring and Evaluation Component Quantitative
Impact Evaluation Report: 2009/10 to 2010/11, May 2012; Kenya Hunger Safety Net Programme Monitoring
and Evaluation Component Qualitative Impact Evaluation Report: 2009/10 to 2010/11, March 2012; Kenya
Hunger Safety Net Programme Monitoring and Evaluation Component Consolidated Operational Monitoring
Report, May 2012. OPM (2012a), Consolidated Operational Monitoring Report, Kenya Hunger Safety Net
Programme: Monitoring and Evaluation Component; OPM and IDS (2012b), Qualitative Impact Evaluation
Report: 2009/10 to 2010/11, Kenya Hunger Safety Net Programme: Monitoring and Evaluation Component,
Oxford Policy Management (OPM), Oxford and Institute of Development Studies (IDS), Brighton
OPM and IDS (2012b), “Quantitative Impact Evaluation Report: 2009/10 to 2010/11, Kenya Hunger Safety
Net Programme: Monitoring and Evaluation Component,” Oxford Policy Management (OPM), Oxford and
Institute of Development Studies (IDS), Brighton.
76
OPM(2011). A Preliminary Evaluation of the Impacts from the Hunger Safety Net Programme, Kenya and
OPM (2012a), “Consolidated Operational Monitoring Report, Kenya Hunger Safety Net Programme:
Monitoring and Evaluation Component,” Oxford Policy Management (OPM), Oxford
77
OPM (2013) Kenya Hunger Safety Net Programme: Monitoring and Evaluation Component Analysis for
HSNP Phase II Business Case. 24 February 2013
78 Specifically for the gender, OAP and HIV case studies see:
http://www.hsnp.or.ke/index.php?option=com_phocadownload&view=category&download=8:genderstories&id=6:hsnp-cases
79 Specifically for the gender, OAP and HIV case studies see:
http://www.hsnp.or.ke/index.php?option=com_phocadownload&view=category&download=8:genderstories&id=6:hsnp-cases
80 Ibid.
81 World Bank/ Pulver (2013) Strategic Assessment of Payment Services for the Kenya NSNP. Appraisal
document for the NSNP.
82
World Bank (2013) The Kenya National Safety Net Program for Results Technical Assessment. (14.1.13)
83 Pickens M et al. (2009) Banking the Poor via G2P Payments. Focus Note 58. Washington DC CGAP.
84 Bold D et al (2012) Social Cash Transfers and Financial Inclusion: Evidence from four countries. Focus
Note 77. Washington DC CGAP.
85 World Bank (2013) Strategic Assessment of Payment Services for the Kenya NSNP. Appraisal document
for the NSNP. Quoted in the Above.
86 World Bank (2013) The Kenya National Safety Net Program for Results Technical Assessment. (14.1.13)
87 World Bank (2013) Strategic Assessment of Payment Services for the Kenya NSNP. Appraisal document
for the NSNP.
88 GoK (2012) Kenya Social Protection Sector Review. June 2012
89 PRRO is focused on the ASALs and consists of 3 programmes: (i) General Food Distribution (GFD)
(2,180,858 beneficiaries in 2010); (ii) Supplementary Feeding for child nutrition (454,677 beneficiaries in
2010); and (iii) Food for Assets (140,000 beneficiaries in 2010). It has the following objectives: 1)Assist
emergency-affected households in reducing the impacts of shocks by addressing their food needs;
2) Reduce acute malnutrition among children under 5 and pregnant and lactating women in identified
populations in crisis-affected areas; 3) Enhance communities’ resilience to shocks through asset creation,
and increase government capacity to design and manage disaster-preparedness and risk;
4) Support and re-establish livelihoods, food security and nutrition aftershocks.
90 Ibid.
91 GoK (2012) Kenya Social Protection Sector Review. June 2012
92 World Bank (2012). The World Bank’s Africa Social Protection Strategy 2012–2022.
93 DFID (2012) Ethiopia’s Productive Safety Net Programme, 2010-2014 – a value for money assessment.
94 World Bank (2013) The Kenya National Safety Net Program for Results Technical Assessment. (14.1.13)
95 World Bank (2012). The World Bank’s Africa Social Protection Strategy 2012–2022. DFID (2012)
Ethiopia’s Productive Safety Net Programme, 2010-2014 – a value for money assessment and PSNP
transfer review study.
96 Quest link for the Economic Appraisal is at Annex 5.
97 NB: impact indicators for Option 6 are approximate as they have been estimated outside the main model.
98 GoK budget here refers to projections based on IMF projections for GoK 2013/14 and 2015/16
(expenditure + net lending) see: IMF Enhanced Credit Facility IVth review (2012)
99 Table 4.1, Analysis for HSNP2 Business Case, OPM (2013).
100 Table 4.6, HSNP M&E Targeting Effectiveness Evaluation Report (2011)
101 DFID (2011). Cash Transfers: Evidence paper. Policy Division, DFID London.
102 Please see [Quest: 3882740]. Overall the objectives of the partnership between DFIDK and MDNKOAL
are: to work together in the Arid and Semi-Arid Lands (ASALs) of Kenya and to provide cash transfers and
65
investments in the ASALs in order to reduce extreme poverty and improve resilience for 830,000 people in
Kenya’s most marginal areas. This includes working together to: (i) ensure effective, financially secure and
well-targeted use of safety net and cash transfer programmes; and (ii) developing and testing new
approaches to the provision of drought contingency funding to support some of the most vulnerable and poor
people in Kenya; (iii) strengthen integration/alignment of policies, institutions and practices in the ASALs.
103 This has recently been determined at the end of May 2013.
66