91603 IDA at Work Nicaragua: Innovative Approaches Reach the Poor in Remote Rural Areas IDA is helping Nicaragua to scale-up its model interventions for tacking rural poverty F ollowing decades of instability and several natural disasters, Nicaragua has achieved a remarkable economic turnaround, and is now focused on innovative ways of reducing poverty, particu- larly in remote rural communities. Through a large debt relief effort, the International Development Association (IDA) helped Nicaragua free resources for greater spending on poverty reduction, and is focusing on scaling-up the country’s more successful innovations for reaching the rural poor. Catching up after a history of adversity By the early 1990s, Nicaragua was among the most highly indebted and unstable economies in the world. Following decades of political instability and several catastrophic natural disasters, public debt had soared to 350 percent of gross domestic product (GDP) in 1991. In 1993, half of all Nicaraguans were living in poverty and one-fifth in extreme poverty. In the mid 1990s, significant gains were made in stabilizing the economy, improving basic infrastructure and raising private investment. Then in 1998, the country was again set back by the devastating effects of a catastrophic hurricane. Since then, Nicaragua has made strong progress in restoring and sustaining macroeconomic stability. Real GDP growth has averaged 3.2 per- cent since 1998, inflation was brought under control and private investment grew from 15 to 29 percent of GDP during 1998-2008. A rather modest contraction of 1.5 percent during the 2009 global crisis and an early improvement of macroeconomic indicators in 2010 are signs that the economy has acquired greater resilience to shocks. However, by 2005, the poverty rate had only raised its annual spending on poverty reduc- decreased to 46 percent and social indicators tion programs to 12.4 percent in 2009 of GDP were showing only very gradual improve- from 10 percent in 2002. ments. Poverty in Nicaragua remains a predominantly rural phenomenon—more than In addition, IDA projects have concentrated two-thirds of the rural population is poor—and upon identifying and expanding Nicaragua’s although there had been a significant increase innovative programs that show promise in poverty-related spending, much of it did in delivering rapid, but also sustainable not have the desired impact in remote rural improvements for the rural poor. These pro- communities where almost 80 percent of Nica- grams range from the unique casas maternas ragua’s poor and extremely poor households for improving maternal health, to a program live. It was projected that Nicaragua would using community labor and adoquine blocks not be able to achieve a significant number to build cheaper rural roads faster, to a of the Millennium Development Goals (MDGs) project that works with the private sector by 2015. to deliver solar power to remote communi- ties, and finally, to another that is securing Creating the fiscal and property rights for marginalized, indigenous creative space to accelerate communities. poverty reduction Nicaragua’s innovative The impact of Nicaragua’s turbulent history programs achieve results on social welfare has been daunting, but this in rural communities same history has forged a national consensus that “business as usual” will not work to close ▪▪Casas maternas for better maternal the gaps, improve the conditions in which health. Since 1998, IDA has supported the Nicaraguan families live and work, and help expansion of the innovative casas maternas the country realize the economic potential of in rural communities with around US$14 mil- its strategic location and natural resources. lion. From these casa maternas, networks Indeed, Nicaragua has been a virtual caul- of community volunteers identify pregnant dron of experimentation—across government women in remote areas and bring them administrations and within civil society—of an array of services, including pre-natal programs to rapidly reach and improve lives checkups, birthing plans, and post-natal of its rural poor. follow up. Around the time of delivery, the women stay in the casas maternas, usually After the armed conflict of the 1980s, IDA located near health units, and receive addi- resumed operations in Nicaragua in 1991 tional support, such as with breast feeding, and has continued as steady partner repre- early parenting skills and family planning. senting, in recent years, about one-fifth of IDA support, targeted to the poorest 80 of development aid to the country. Following Nicaragua’s 153 municipalities, has helped Hurricane Mitch in 1998, IDA in 2002 launched to expand the number of casas maternas a major debt relief effort in three phases. to over 80 in 2010 from 12 in 2000, and the Nicaragua qualified for US$6.5 billion of debt number of women served to 17,200 in 2009 relief (equivalent its annual GDP), and in turn from around 2,300 in 2000. The reduction 2 in maternal mortality has been significant; tres where they charge batteries for their from 148 per 100,000 live births (measured low voltage lights and appliances. by survey) in 1998 to around 61 in 2009, as measured by administrative data. ▪▪Securing indigenous land rights. IDA has supported the development of a land rights ▪▪Improving rural roads with local labor program under which 15 of Nicaragua’s 21 and materials. Hurricane Mitch reversed indigenous territories in the historically much of Nicaragua’s earlier gains in road marginalized Caribbean Coast autonomous infrastructure. Since then, however, IDA has regions have already been titled and regis- invested over US$175 million in improving tered since 2005 (representing roughly 17 3,000 km of the country’s secondary and percent of the national territory). These rural roads, most of this using local labor territories have the highest incidence to deepen the impact on rural communi- of poverty in Nicaragua but also contain ties. IDA is now supporting the introduction much of the country’s forest, fishing, and of cheaper, locally-made adoquine blocks mineral resources. Over 104,000 people that allow faster, more labor-intensive, from 214 communities in five major ethnic and more sustainable road works. Under groups have benefited. This decentral- current operations, over 200 of the planned ized and participatory process has also 320 kilometers have been constructed in already succeeded in resolving several this way,  generating over 24,000 direct long-standing disputes and has spurred jobs and 95 community-owned enterprises. an engagement between local indigenous IDA also supported the creation of the groups and private investors. Meanwhile, Road Maintenance Fund, which develops IDA has also supported the demarcation of microenterprises to carry out routine road twelve protected areas and preparation maintenance. To date, 35 microenterprises of ten management plans for ensuring the employing around 400 persons have been sustainable development of the natural established (four more are planned)  and resources. are routinely maintaining 2,400 km or 88 percent of the maintainable core  road ▪▪Expanding rural financial services. IDA network. support for Nicaragua’s burgeoning micro- finance sector has helped to expand the ▪▪A public private partnership for rural delivery of rural financial services from solar power. Under an IDA project that the country’s 18 microcredit institutions, is piloting public-private partnerships for through technical assistance to these insti- rural electrification, almost 7,000 remote tutions, a second tier bank and the super- rural households (or 42,000 beneficiaries) visory authority. Since 2005, the number of have been equipped with solar home financial service points in rural areas has systems, marketed and installed by local increased by 25 percent to 253, and the enterprises with participation of local microcredit portfolio rose to US$212  mil- micro-finance institutions. Another 370 lion in 2009 from US$150 million in 2005, rural households are being serviced by notwithstanding the difficulties experi- seven pilot cooperative solar charging cen- enced during the global financial crisis. 3 ▪▪Connecting the poor through rural tele- This project has served as a pilot for a communications. Following support in the national multi-donor rural electrification 1990’s for liberalizing Nicaragua’s telecom program. sector, IDA has focused on expanding rural ▪▪US$43 million for the Land Administration access to telecommunications services, Project with parallel financing of €6 mil- first through the development of a Telecom lion from the Nordic Development Fund Investment Fund, which provided tele- and US$5 million from the US Millennium phone services to around 500,000 citizens Challenge Account. in 365 small towns during 2005-06. Since ▪▪US$7.5 million for the Broad-based Access 2007, IDA has supported the establishment to Financial Services Project and US$20 mil- of tele-centers providing internet access to lion for the Micro, Small and Medium Enter- all of Nicaragua’s 104 rural municipalities. prise Development Project IDA is now working to complete public tele- ▪▪US$23 million in total for the ongoing Rural phone access for another 397 rural towns. Telecom Project and the earlier Telecom- munications Reform project. IDA has contributed to expanding these locally grown programs… ... together with Nicaragua’s other partners As of July 31, 2009, IDA had committed US$1.5 billion in credits and grants to Nicaragua. The Because Nicaragua remains dependent on current portfolio consists of 15 active projects donor support, coordination and alignment with total IDA commitments of US$316 million are critical to improving results. Nicaragua (half of which are credits and half grants) is a pilot country for the One UN program, and US$40 million of trusts funds in various European Union (EU) donor coordination and sectors ranging from health and education, the OECD Multilateral Financial Institutions to rural infrastructure (roads, electrification, donor harmonization and alignment initia- telecom, water and sanitation). In support of tive. In this context, IDA has worked steadily the results listed above, IDA has contributed to ensure that all of the projects in Nicaragua since 1998: are designed and implemented in collabora- tion with other partners, particularly the ▪▪Health US$35 million for two operations under the Inter-American Development Bank, Central Sector Modernization Program. A American Integration Bank, the US Millen- third operation is currently under prepara- nium Challenge Corporation and the country’s tion for US$20 million. major bilateral partners. Efforts to scale up ▪▪ US$175 million for two operations under Nicaragua’s more successful development the Road Rehabilitation and Maintenance initiatives, such as the adoquine roads or the Program. A third operation is under prepa- indigenous land titling, have concentrated in ration for FY12. building partnerships across the development ▪▪ US$12 million for the Off-Grid Rural Elec- community to co-finance larger, more harmo- trification Program, combined with US$4 nized programs. million from the Global Environment Fund, and US$10 million from Switzerland, Spain Following the debt relief effort which mobi- and UN Development Programme (UNDP). lized support across Nicaragua’s develop- 4 ment partners, IDA was also instrumental in education, and on water and sanitation, if it convening and sustaining a joint multi-donor is to complete the array of basic services for effort providing budget support for Nicara- its rural poor. IDA has been supporting these gua’s policy and institutional reform program areas together with other partners, albeit between 2004 and 2010. with much less success, in part due to capac- ity constraints in government and the need IDA is also partnering extensively with non- for a national consensus on the way forward. governmental entities and has supported IDA is working together with the authorities several groundbreaking public-private part- on formulating a new long-term education nerships. These include the project that has strategy, and with the multi-donor Water developed private sector capacity for supply- and Sanitation Program, on ways to increase ing solar power to remote rural households, a the effectiveness of ongoing programs in this joint commission with the private sector on sector. updating Nicaragua’s 100-year old Commer- cial Code, and an NGO-indigenous peoples Meanwhile, Nicaragua has launched a prom- partnership to support basic infrastructure ising new initiative in family-based social development in the Atlantic regions. protection, which has already achieved certain successes in terms of its efficiency The next steps: finding new and effectiveness in reaching and supporting programs and partners vulnerable groups, such as street children. IDA is preparing an initial program to support Over the last decade, the IDA’s investment the expansion of this new initiative. program in Nicaragua has focused heavily on developing basic infrastructure and improv- In addition, IDA is already working with the ing social services for the poor in rural and government to engage and support the pri- often very isolated areas. IDA will continue to vate sector in its fight against poverty both support these activities—especially in health, directly through support for farmers and small education, rural roads, telecom, water and enterprises, and indirectly through building a sanitation, and electricity—and to scale-up better climate for private investment and job the successful pilots in coordination with creation. other donors. Last updated September 2010. However, Nicaragua still needs to develop and http://www.worldbank.org/ida implement robust strategies and programs in 5