How can donors and partner countries assess the intended and unintended consequences of donor interventions? The Organisation for Economic Cooperation and Development (OECD) explores ex ante Poverty Impact Assessment (PIA), which can assist in modifying the design of interventions to improve pro-poor impacts by identifying key areas for monitoring and evaluation (M&E). It can be applied to most modalities of donor support.
PIA is a process which helps policy-makers to understand the intended and unintended consequences of their interventions. This approach considers that good design of an intervention requires governments and their partners to understand the effect of their policies on diverse social groups, actors and institutions, including those not targeted by the policy.
The Paris Declaration on Aid Effectiveness stresses the importance of results-oriented frameworks, harmonisation and alignment to improve aid effectiveness and to assure better pro-poor outcomes. Yet, prior analysis of the impacts of policy and investment decisions on poverty reduction is a complex task. It is often built on contentious assumptions and is dependent on data availability. Ex ante PIA helps donors and their partners understand and maximise the poverty reducing impacts of their interventions. It responds both to the need for accountability to partners’ constituencies and to the importance of transparent evidence-based decision-making. It can identify interventions with high impact on poverty reduction and pro-poor growth as well as mitigating measures to protect the poor. A broad application of ex ante PIA could also provide a basis for a harmonised reporting system on poverty impacts.
Poverty Impact Assessment helps decision makers determine strategic choices for public actions so as to have the greatest impact on reducing poverty and achieving pro-poor growth. PIA provides a better understanding about potential winners and losers of an intervention and thus strengthens a results-oriented approach. PIA helps to understand stakeholders and institutions that influence and are influenced by an intervention understand the importance and inter-relationship of specific transmission channels through which changes are transmitted to the stakeholders assess the likely positive and negative outcomes for stakeholders taking into account multi-dimensionality of poverty assess the reliability of data/information and knowledge gaps.
Using PIA, policy-makers can estimate the likely quantitative and qualitative outcomes of the policy for poor groups, identify potential risks and assess the reliability of available data. Through involving people with different interests and approaches, ex-ante Impact Assessment helps to save resources, and design interventions to be better targeted to achieve their goals and avoid unintended harmful consequences. Thus it also contributes to strengthening the transparency and accountability of democratically elected governments, and encourages consistency of policy-making across policy areas.
PIA is not just another new approach to assess the distributional impacts of interventions. It deliberately draws on existing approaches and their terminology, in particular on the Poverty and Social Impact Analysis (PSIA). While PSIA is more suitable for structural policy reforms, PIA is more a stand-alone approach to assess the poverty outcome at project and programme levels. But it can also help at the initial phase of sector or policy reforms to identify requirements for a full-fledged PSIA. PIA is thus less resource demanding. While a complete PSIA requires more than 100 000 Euro, the estimated cost of PIA is less than 20 000 Euro.