First round application deadline

Back to work issues (note to self: having a one day weekend really gets to you after a few weeks, you never go to bed on a day in which either you did not go to work or you will not be waking up to work)...

But no complaints because these are exciting times for the project; on Thursday, the deadline for applications passed and the response has been incredible. We have now managed to count all of the applications and there were something like 350 concept notes (the first stage in the process) across all of our sector and cross-sector themes.

Counting them all has been quite tricky; we have had repeated power cuts and internet failures and there were quite a few duplicates and a bit of a technical issue with our mail server (thankfully now resolved).

Happily contemplating piles of concept notes

This number is much more than anyone expected and it goes to show the scale of appetite for a project like ABIF in Afghanistan. I remember discussions back in the design phase when we suspected that the budget would be a bit on the low side, but had imagined counting the number of applications in tens, not hundreds.

Of course, it is a question of quality much more than quantity. We now have to evaluate all of these applications; weeding out those which are ineligible, and rank the ones that are left. Because of the nature of the challenge fund process, it is only the very best that will receive grants, "best" meaning those that are most likely to contribute to achieving our development objectives. I have no doubt whatsoever that many of the concept notes we have received will be from applicants who have somehow failed to understand our project objectives, something for us to think about as we start to plan the marketing for Round 2.

(Despite the higher than expected number of concept notes, I think that I stand by my previous predictions... I reckon that we will end up with something like 10-20 fundable concept notes, but maybe I am being pessimistic!)

But whatever happens in the first round, the important thing is that we now have a really good foundation on which to take the project forward. Many of the concept notes that we have received this time will be good, but not good enough. My hope is that we will be able to work with these borderline applicants over the next few months to help them to better understand our objectives and submit a stronger application in the second round. This kind of learning from such a solid foundation really promises well for the future and places us in a much better position in terms of the depth of our contact database than I had anticipated at this stage of the project.

Needless to say, the team is delighted with the number of applications they have managed to generate. They have worked really hard over the two months that have passed since they joined the project and deserve a lot of credit for their efforts.

On day one none of them had any knowledge or experience of M4P (which guides our strategy) and none of them had worked on a challenge fund before! But nevertheless, they are smart people and have absorbed a huge amount in a very short space of time. Most importantly, they have also managed to communicate a reasonable share of that learning to a lot of people.

We have organised events with our main strategic partners (AISA, ACCI and the Afghan Industrial Association), sector presentations with ministries (Ministry of Mines and Ministry of Agriculture, Irrigation and Livestock), and we have run provincial events in Herat, Mazar, Kandahar and Jalalabad... It has been a busy time!

So this afternoon we completed the definitive database of applications. Tomorrow we start work on the serious business of evaluation.

And meanwhile, it has been snowing like crazy, this morning the view from the office looked like some kind of winter wonderland!

View from the ABIF office

A short walk in Karte-Se

One of our local butchers

Naturally, Friday is the weekend in the Islamic Republic of Afghanistan. So I thought I would take the opportunity of some time off work to write about something that has (almost) nothing to do with work.

The weather this morning was beautiful (clear air, cold and sunny), so I grabbed the chance to get out of the house and enjoy part of my weekend going for a walk and indulging in a bit of photography.

I have just returned from holiday in Europe, where I was reminded once again of how limited and/or distorted the impression folks back home have of what it is like to live in Kabul. Hopefully this post will give them (and anyone else who is interested) a bit more of an idea of what my neighbourhood looks like and what goes on during a typical Kabul weekend. And killing two birds with one stone, with ABIF being a market development project, I figured it wouldn't be a bad idea to take a fact-finding stroll through our local bazaar... 

Early morning wait to be hired

In my opinion, wherever I am, there is nothing quite like walking the streets to build some impression of the people who live where I am passing through, and to get a sense of place and atmosphere... For obvious reasons, this isn't always so easy in a place like Kabul, but neither is it impossible by any means.

Sadly, I know international colleagues who have been coming here for months or years but for whatever reason have never had the chance to wander around and enjoy the sense of experiencing the real city. I have even known instances of people posted here for several months but promising loved ones back home that they won't ever leave their compound. It is such a shame that international perceptions of Afghanistan have created such levels of anxiety. I cannot help but think that this anxiety feeds on itself, and with a few honourable exceptions the hundreds of so-called security advisers that hang around the city do everything they possibly can to perpetuate and even inflate it (along with their salaries).

I have always taken a different approach to looking after myself, but I am certainly not foolhardy (and that is not just a comment to try to stop my mother from worrying about me!). We do keep an eye on what is going on around us, but it has to be said that for the vast majority of time Karte-Se (the district where I live now and have lived for some 3 or 4 years in total) is a pretty normal sort of a place. Certainly a whole lot more normal than some of the more internationally-colonised parts of the city where concrete blocks, barbed wire and armed guards are the order of the day.

Typical shop front

Of course, as an outsider I know that however I live, I will only ever get the vaguest of impressions, nothing much more than a glimpse of what life is about in a city like this. But if I am going to stand any chance of getting close to local people outside of a work setting, whether it is Kabul or anywhere else, I reckon that the market is the best place to go. And I am delighted to report that this morning lived up to all expectations!

Without any doubt markets are my favourite kind of place wherever I travel. They are where families, friends, strangers, buyers and sellers all circulate and communicate in public, often so engaged in their business that they do not even notice that there is some inquisitive foreigner watching them. Markets offer a unique chance to see people interact with one another, as well as plenty of good photo opportunities...

Neighbourhood teapot shop

In our part of Kabul on the southern side of the city, Pul-e Surh (Red Bridge) market is the perfect place to go shopping for your essential meat, fish, fruit, veg and (of course) teapots.

How many specialist teapot retailers are there in the UK? Not so many I suspect and I am sure that any that are left have gone "out of town" these days.

Anyway back in Kabul, our market runs for about a mile or so along the local high street. And as with almost any suburb of any city, Pul-e Surh market is the public centre of the local community with shops, restaurants and market stalls.

But it comes with just a little bit of extra human interest and colour in comparison with many of the other places I have been.

In Kabul you see guys waiting around to get hired as casual labour for the day and you have the chance to witness fresh fish being gutted on the pavement, but there is also a chance to drop in on the egg breaking gambling den!

Fresh fish from Jalalabad

Now I have had the dubious pleasure of seeing dog fighting and cock fighting in Kabul, there was even a fighting sheep that lived just up the street at one stage, but before today (apart from the much tamer Bulgarian Easter ritual) I have never seen egg fighting. This was an egg-streme, full on fight to the finish.

I spotted a small crowd on the other side of the street, so dodging through the traffic (a danger that in my view, and I suspect statistically as well, far eclipses any threat from insurgents) to try to see what was going on.

There were probably 20 or so boys and men standing around in a circle which enclosed the crouching contestants. I peered through and with patience eventually managed to secure a prime position to see the action. A veteran player was being challenged by a younger rival. Painted eggs were selected carefully, with lots of sniffing (or at least, I think that is what was going on), and close inspection.

Up close to the egg breaking action!

Then one egg was held out with fingers wrapped around it and the other brought sharply down on the top end. Sometimes the result would be stalemate, on other occasions one egg would crack. The intensity of competition was palpable, this really should be an Olympic sport! Then after a series of such cracking competitions, much to the delight of the audience a winner emerged and (not terribly surprisingly in a country addicted to gambling) quite a lot of money changed hands!

At first, the resident champion appeared to be slightly nervous of the camera, I don't think he was used to being in the media spotlight. But with encouragement from the crowd, he regained his composure and was once again lost in total concentration on the job in hand.

But generally, how did people react when they see a foreigner wandering around taking the occasional photo?

It has to be admitted that a fair amount of staring goes on, but the prevailing atmosphere is mutual curiosity and friendliness. There is a lot of smiling and encouraging waving when I try to explain that I would like to take a photo. Nobody really seems to mind at all, in fact most people were delighted to have their photos taken. Typically before too long there is a small crowd keen to see the photo displayed on the camera's screen.

The only real sensitivity is about taking pictures which include women. I remember my first market photography trip in Kabul back in 2002 when I tried to take a photo of some women buying jewellery and almost had my camera ripped from my hands by a passer by. You live and learn, and this was a good lesson to get out of the way early on. I am happy to say that I have never experienced anything similar since that one occasion.

New water pipes, great for locals, but not so good for business

Language is a bit of an issue, but a few well timed hello's, thank you's, excuse me's in my feeble Dari seems to go a long way. And quite often you come across somebody who speaks English.

For example, at one point today I stopped and had a chat with a shop owner who was a generally cheerful sort of bloke, but was clearly unhappy about the impact on trade of the municipality digging up the street in front of his shop to lay water pipes.

If I remember rightly the work started 3 or 4 months ago, and he told me with quite some frustration that it has now stopped for the winter and won't restart until the spring. In the meantime, that stretch of the street is  virtually deserted and I can only imagine that his sales have plummeted.

Balloons for sale!

Who knows quite how long it will be until life for this particular shop keeper and his neighbours gets back to normal? And you do feel sorry for them considering how hard it is to make a living at the best of times. But given the appalling state of the city infrastructure, however disruptive, these kind of works are absolutely essential. In fact it is quite heartening to see how the pace of such work has really picked up in the last year or so, Kabul really is gradually becoming a much better place to be.

And by the time I get home again after a couple of hours walking around like this, I feel so much better. I feel as if I have stepped outside of the bubble in which I normally live. I have had a chance to smile and speak with people I would never have met otherwise and to break down some of the sense of isolation from reality that is a typical feature of the expatriate lifestyle in Kabul.

A decade of development

Yesterday I went to a conference organised by the Afghan Chamber of Commerce and Industry in the quite magnificent Kabul Star Hotel. The topic of the conference was the economic impact of the 2014 military withdrawal from Afghanistan.

The opening presentation was by the World Bank. Richard Hogg (ex DFID, now World Bank and a well-known Kabul face) told us about the four hundred and something billion dollars that the international community has expended on Afghanistan since 2001. Then Bill Byrd (who has been in and out of Kabul for about as long as I have) talked us through the economic implications of cutting all this spending.

I have spent most of the last 10 years in Afghanistan (at considerable cost to the taxpayer) trying to do my bit for private sector led economic growth. So part of me hoped that Bill would explain to the anxious audience that this anticipated reduction of military and civilian assistance would have all sorts of dire consequences for the Afghan economy. Surely catastrophe was inevitable (see recent Financial Times article on the subject) and we were staring into the abyss? How on earth could Afghanistan survive without development consultants like me?

So imagine my disappointment when Bill produced the World Bank forecasts showing that if we slash annual development assistance by an amount equivalent to 90% of Afghanistan's GDP over the decade following 2014 - assuming that the weather is reasonably good - there will be a slight reduction in the rate of economic growth (if I remember rightly, from an average of about 9% to something like 7%). And to be honest, given the margin of error in the data and the forecasts, what they were saying was that there will be nothing in it at all.

After a year of research, the finest and most-Afghan-seasoned brains at the World Bank have concluded that we can take all of the current annual cash value (and more) of  development assistance out of the Afghan economy and nobody will notice.

So there you go. Looking back on all of the wonderful things we have been doing for the last decade; those claimed impact numbers, the jobs we have created, the economic growth down to new laws and streamlined procedures, the poverty reduction we have(n't) achieved... I cannot believe that all of those flashy success stories were an exaggeration? Surely not!

But whatever you believe or don't believe, it does seem (based on WB forecasts) that so long as we only cut spending by 90% over 10 years (and it rains enough), we can leave Afghanistan quietly by the economic back door.

What can we conclude from this analysis? Either the country is now totally on the right economic path thanks to our hard work, or actually we are not quite as important as we think we are. Either way, I say job done and time well spent!



Incidentally, the conference was sponsored by one of the leading Afghan private airlines, which is presumably why the registration queues were so long, we were confined in a small crowded space for 4 hours, it started late, there was nowhere to sit comfortably and they forgot to serve the tea. 

Sorry if that is harsh, but couldn't resist the cheap joke!

Two faces of the Afghan private sector...

Casting (if that is the right word) manhole covers

Recently I had a chance (courtesy of the Afghan Industrial Association) to visit a few potential ABIF grant  applicants. The trip was designed to see what some of their members have already achieved and get an idea of the kind of future investments that they planned in order to develop their businesses further.

Lifting bits of old tanks

It is great to get out of the office and meet real business people in their "natural habitat". Such visits always provide valuable insights into how the Afghan private sector operates despite all of the problems and obstacles in the way, and the nature and scale of businesses that have been built up. There is really no substitute for first hand impressions, and this visit was an excellent opportunity to get to understand our applicants' perspective.

The first three photos on this post are of a factory that recycles scrap metal, breaking down things like old Russian tanks and turning them into essential products such as manhole covers, which are then sold to the local municipality. The process is pretty basic, but the business is successful.

It was really impressive to see this place operating at what looked like full capacity. My first questions concerned the availability of raw materials (including Russian tanks), but it seems that this is not a problem at least for the time being, and electricity supply, which has traditionally been a huge problem in Kabul, but as with the domestic supply, this has improved daramatically in recent years.

Cutting up sheet metal

For people who are particularly health and safety conscious, there may be questions over some of the working conditions in the factory, but improving standards on such issues is a question of education and gradual regulation. It won't happen overnight.

The most encouraging thing was that there was an air about the place of being busy. Everyone (and there were possibly about 30 people working at the time that we toured the factory) was busy.

The next photos show the interior of a newly opened fruit juice factory we visited on the same day. Built with the support of a donor project, we were told that this was a US$20 million investment. Unfortunately, by the time we got to the factory, they had finished the day's production run, but nevertheless it was clear to see that this was a well equipped factory being managed to the highest standards.

Early stage of fruit processing

The company was processing fruits mostly from the Kandahar region and producing concentrates and juices. The range of products included apple (the waste from which can be seen in the background of the first photo), pomegranate, melon and grapes. Interestingly, the factory manager reported availability of inputs as a constraint on their business and described plans to develop better linkages with farmers.

Another idea that the owner had to improve the business was that the remnants of the pressed fruits could be processed to be used as feed for livestock. At the moment such remnants are treated as a waste product; the factory dumps rather than sells the mashed fruit and local families apparently come to collect it for their own animals.

The potential for food processing in Afghanistan is significant and well documented. But it is going to take targeted and co-ordinated investment at all stages of the value chain to realise this potential.

Final stages of the juice production process

Horticulture is one of the six ABIF focus sectors. It would appear that we are going to receive some interesting applications in the first round (deadline for concept notes is today).

Our hope is (and the kind of ideas that we have been encouraging among potential applicants) that our grants can stimulate investment in processing facilities that can provide the commercial incentives and an anchor point for backward linkages to small scale producers.

Where it fits with their core investment idea, we have been encouraging potential applicants in the horticulture sector to look at ways in which they can provide services on a commercial basis (for example private extension services such as cultivation training) to contracted farmers in order to increase yields and incomes as well as improve the security of supply to the processer. This kind of win-win approach typifies the kind of business models that we are promoting.

And finally, a photo that I hope without being sentimental (because there is nothing sentimental about a two year old scrabbling around in dust and mud by the side of a road in temperatures close to zero) illustrates poverty in the every day life of many Afghans.

These were a couple of kids I saw sitting and playing by themselves in the street outside the scrap metal factory.

Health warning to governments: Bad numbers are bad for you

I have been wondering what it is about the prevailing obsession in international development with quantified results and league tables that really bothers me. I think that I am beginning to formulate an answer, and as I feel the passion of the number advocates, I feel like some kind of underground resistance fighter as I see what is happening in mainstream thinking on this subject.

Basically, I have come to the conclusion that many numbers and the league tables that are used to compare them are fundamentally flawed and frequently used in a way that undermines rather than promotes meaningful development. I first became aware of this when I was working at Katalyst (a project that has put huge efforts and incurred massive expenses trying to quantify its results), but now I see this trend being taken to absurd lengths. The way that this is happening needs to be challenged; dubious indicators, inadequate methodologies and bogus results should be exposed.

Even the architects of such absurdity (promulgating or guided by the work of the Donor Committee on Enterprise Development and its ridiculous attempts to come up with a methodology that produces quantified results for individual projects that can then be aggregated at a programme level) admit that results have been deliberately falsified by projects to make numbers more palatable to donors or are based on such combinations of  assumptions as to be meaningless. And remember that these very numbers then get quoted by government as evidence behind policy making!

We are living in a world where numbers have become ends in themselves, influencing much larger issues such as donor co-ordination and project design (the tail wagging the dog). One example of this is a major new DFID project where according to the published project documentation, one reason that DFID rejected the option of a multi-donor approach, because it would be easier to attribute results if they went alone. In ABIF, at one stage we were told that if we could not quantify the future impact of an unknown intervention with an unknown partner in an unknown sector at an unknown point of time, DFID would not be able to approve funding; "Just make something up!", we were told... so we did because at the end of the day, if this is the price you have to get on in life, then so be it (think Vaclav Havel's greengrocer).

My concerns about many of the league tables I see are based on three underlying reasons:

1. The design (choice and weighting of indicators) of the league table is a reflection of a particular and usually questionable world view;
2. In too many cases the results that determine a given position are inaccurate (either deliberately manipulate or incompetently calculated); and
3. Tables tend to become a substitute for thinking, it is so much easier to use simplistic devices than to think through issues.

Take the Doing Business survey, my favourite example at the moment. If you accept that the World Bank team that designed the indicators has devised the perfect business environment and that the closer every country in the world gets to this state of supposed perfection, the better things will be, then probably you will like the whole idea. It is so easy, you can design projects whose objectives are to improve the Doing Business ranking!

If on the other hand, you think that it is just possible that at different times and in different places, there could be room for local variations and variety in solutions, then you may question the one-size-fits-all approach Doing Business exemplifies. You may even be concerned by the opportunity cost of chasing this particular development rainbow.

So my proposal is that to break our addiction with numbers, we should follow a process similar to the public education and regulation that has helps people to quit smoking. First we should print health warnings on results and league tables, these could be increased in size and become more graphic with time. Then we could ban their use in enclosed public spaces (especially conference halls). Finally, we should go after the people that are peddling these highly addictive and dangerous substances, helping them to find alternative and more productive livelihoods.

More seriously, I really do argue that we should get back to thinking and looking at what are the intangible capacities that societies need to survive and develop and we should build our development objectives and results reporting around them. Put other indicators in their rightful place, as indicators, not objectives. Let's accept that human development is not a linear process, it is complicated and not everything can be quantified or monetised.

My thought is that development objectives could be better defined in terms of two key capacity dimensions relevant to human happiness in an uncertain world (neither of which I think can be quantified, but nevertheless we all know when they are present or absent):

1. The ability to withstand negative events; and
2. The ability to take advantage of positive opportunities.

These are the higher-level objectives that I have in mind as we implement ABIF. Whatever outcome or impact numbers we may have to make up in the future (and no doubt we will have to), these are the real measures that we have in mind when we use public money to improve the lot of our target groups in Afghanistan. But don't tell anyone... we could be in trouble if they knew!

Moving the focus from the superficial Doing Business-like indicator to this kind of goal would have huge implications for how development projects are designed and managed. It is this kind of thinking that underpins the market development approach, and this is why (despite my misgivings about some of the nonsensical claims I have read) I think that M4P is a very intelligent approach to development.

What is the role of the challenge fund investment panel?

Another practical blog (sticking to my New Year's resolution!)...

One of the issues that has been debated within the design team and with DFID during the design phase and as we progress with the implementation phase is the role of the ABIF Investment Panel (IP). While it appears to be the norm in the world of challenge funds to have an IP, as a newcomer to the world of challenge funds, I wanted to go back to first principles and look at how their role could be defined to maximise the panel's value added in the ABIF governance structure.

This kind of questioning has even led me to ask whether we need an IP at all? This may sound a bit radical (a dangerous thing to sound in the development consultancy business), but it is interesting to note that in the new DFID £350 million Girls' Education Challenge Fund (GEC), the idea of the investment panel was dropped between the Business Case being prepared and the project being re-tendered. So it seems that we are not alone in thinking about this issue...

So what is the role of the ABIF IP? As things stand, it is envisaged that the IP will review the Fund Manager's assessment at both of the two stages in the application process (concept notes and full proposals). The panel will comment on selected concept notes before short-listing and will make the final funding recommendation to DFID from the full proposals received at the end of the application process.

It is important to consider this role in the context of what the Fund Manager is being paid to do, and what the Fund Manager is being held accountable for.

Principally, the Fund Manager is paid to design the fund strategy, administer the challenge fund process, market the fund to applicants and support them through the process, undertake eligibility and assessment reviews, manage the profile of the portfolio (size of individual projects, location, risk of investment etc), and oversee monitoring and evaluation. These are the contractual undertakings for which DFID is paying the Fund Manager a fee.

In terms of accountability, it is the Fund Manager who is accountable for the performance of the fund at output and outcome levels. The targets and the milestones that the project is expected to achieve have been agreed between the Fund Manager and DFID during the design phase and are recorded in the project log frame.

So coming back to the role of the Investment Panel, the original intention (based on precedent) was that at both concept note and full proposal stages it would be the panel that would accept or reject applications. This seems to be the standard-ish approach across most DFID challenge funds. However, after much debate, we agreed that this would have two negative consequences that could be avoided with an alternative structure:

1. There was a mis-match between authority and accountability: If the IP could either force the Fund Manager to work on an application with which the Fund Manager was unhappy, or the IP could reject an application that the Fund Manager wanted to pursue, how could the Fund Manager be held accountable for the outputs or outcomes of the project; and
2. There was a clear duplication of roles with an imbalance of resources: If the IP was re-scrutinising applications for eligibility and re-assessing them from a strategic fit and budget priority point of view, then there was a serious question as to what role this left for the Fund Manager (essentially became a fund administrator) and whether the budgeted 3 days/3 months for members of the IP was sufficient.

This was the rationale behind restricting the panel's traditional role at the concept note stage. The ABIF panel can only comment on concept notes that had been pre-selected by the Fund Manager; they will not even see any concept notes that the Fund Manager has rejected and cannot throw out any concept note that the Fund Manager has approved.

My view is that this important change to the standard approach was a major step forward  in strengthening the ABIF governance structure. There was a much clearer alignment of authority and accountability and resources.

However, the ABIF IP still makes the final funding recommendation after the Fund Manager has assessed the full proposals received in the second stage of the application process. This, again speaking personally, I consider to be an unresolved contradiction between authority and accountability in our governance structure. This arrangement essentially postpones a large part of the problems mentioned above.

Importantly, there is no way that the Investment Panel can introduce a project for funding and they cannot force the Fund Manager to work on a project against the Manager's professional judgment, but they can still reject applications that the Fund Manager believes are fundable.This authority clearly has implications for the respective accountability of the Fund Manager and the Investment Panel that are not consistent with either party's contractual status.

It would be interesting to see what would happen in the purely hypothetical (and totally undesirable) situation in which the panel rejected a project that the Fund Manager believed should be funded. Would DFID reject the panel's recommendation and go with the Fund Manager (in which case, where does this leave the governance structure) or would DFID go with the panel despite the Fund Manager's judgment (in which case, who would be accountable if the project missed its targets because of this decision)? You could imagine that in extremis, this situation could lead to the resignation of either the Fund Manager or the Investment Panel just because both were doing their job as laid out in the governance charter.

So, if I had my way, and the Fund Manager was responsible for the final funding recommendation to DFID (the GEC approach), would there be an ABIF Investment Panel at all? I remember sitting in a meeting with DFID during the design phase and saying "I really don't see why we need an Investment Panel at all". Looking back on this, my underlying thinking was wrong, I should not have been accepting the role envisaged and then questioning the need for the panel in principle, rather I should have been accepting the need in principle and questioning the role. We all live and learn!

So thinking about things now, I can come up with four key (non-duplicating) responsibilities for a challenge fund investment panel:

1. Scrutinise the management of the challenge fund process to ensure that the Fund Manager is following due process and achieving key performance indicators;
2. Undertake a quality assurance process on the Fund Manager's assessment of applications and funding recommendations in the context of the project's desired outputs and outcomes;
3. Act as an independent arbiter of any complaints received from applicants that cannot be resolved by the Fund Manager; and
4. Ensure that the monitoring and evaluation arrangements overseen by the Fund Manager are appropriate to the context and resources of the project.

I have no idea how things will eventually work out with the ABIF governance structure, but we are having a useful and very constructive discussion. We will see whether we stick with something like the current design, or we move towards the GEC model.


(Note: the GEC has a dedicated DFID Team whose role includes something like the four points described above. This is an approach justified by such a large project, it would be inappropriate to a project the size of ABIF.)

Maximising challenge fund management efficiency

Before diving into the wider topics I mentioned in my previous post, I wanted to return to the practical realities of managing the investment project pipeline. (Note to self: Probably this is the kind of practical issue this blog should be focusing on anyway, it is just that I cannot keep quiet about the other stuff...)

So, this is a very practical post which I hope may be of some interest to anyone who is facing the same resource pressures to maximise project management value for money (the efficiency dimension) in a challenge fund project. It is about how we are managing the ABIF project pipeline.

It seemed to us that the critical success factor in terms of managing the pipeline (working with an applicant from an idea through to concept note and finally to full proposal and grant) was the ability of the ABIF team to focus time and effort on the most promising ideas from the very start. Given that we had less than two months between recruiting the ABIF team and the first deadline for concept notes (none of my colleagues having prior experience in M4P or challenge funds), and that our entire team comprises just 5 people who need to sleep occasionally, we have had to be fairly ruthless in achieving that focus! The issue we had to tackle was how to focus without compromising on the eventual outcome.

Hamayoon Shaheem, Deputy Fund Manager speaking at AISA launch

Achieving a broad initial outreach through effective marketing was an essential pre-condition of this focus if the key value-added of the challenge fund competitive approach (open to a large population and producing quality applications) was to be realised. To get this outreach:

1. We have worked with and through local strategic partnerships (in particular with the Afghan Investment Support Agency - AISA - and the Afghan Chamber of Commerce and Industry) to leverage their networks and media contacts;
2. We followed up on earlier provincial visits by making presentations in Herat, Jalalabad, Mazar and Kandahar; and
3. We have also made sector specific presentations (for example through the Ministry of Mines, at an event addressed by the Minister that attracted something like 200 mining enterprise owners).

ABIF Ministry of Mines presentation to potential investors

However, having made those initial contacts with potential applicants, we wanted to strike a manageable balance between giving a fair hearing to all and focusing on the most promising contacts. This required a rapid attrition rate in the early stages of the application process (even before concept notes are submitted). Some might say that this sounds like picking winners, but this is not the case, some of our most promising contacts are with competing firms from the same sector.

To be clear, attrition in the application process (drop out at whatever stage) might be due to any number of factors; it does not necessarily equate to rejection. Broad categories of reasons include:

1. The applicant or the project are ineligible for ABIF support (this would be the same as rejection); or
2. The idea needs significant further development before it can be worked up into a competitive concept note (this may result in a decision to work with the potential applicant over a longer period of time with the objective of receiving a concept note in a subsequent round); or
3. The idea is very promising, but even with grant support the applicant may not have the managerial or the financial capacity to deliver (this may result in us acting as a relationship broker to introduce the applicant to a potential consortium partner),

To manage this rapid attrition approach effectively required that we had some shared and objective measures that we could use consistently within the team. To this end, we developed an internal management tool "What makes a good project for ABIF?", which comprised two elements:

1. A definition and explanation of the key factors that we needed to see in an idea (either ready formed or with an obvious potential to be formed), under the headings - conveniently, 3 Ps - of project (the investment project), partner (the applicant) and people (the impact on our target beneficiaries); and
2. An internal questionnaire of specific points that the team could use as a mental checklist to guide their discussions at the initial contact stage.

This tool allowed us to identify the most promising ideas, what we call our "stars". To follow through on this, we instituted a weekly Deal Prediction Report (DPR). In the DPR, at this early stage each of the ABIF Fund Analysts reports on the number of contacts made and their prediction of the likely number of concept notes and (most importantly) the stars that they have identified. In the future the DPR will allow us to track the pipeline all the way through to grant agreements.

To ensure that this pipeline reporting is reasonably realistic and consistent across the portfolio, we introduced a very simple template by which each of the star predictions could be justified.

Obviously, these tools will be refined as we go into future rounds, but they have already proved to be invaluable in terms of managing our time and effort over the past few weeks. From broad guesses and subjective judgment, we have now moved (as the first deadline approaches next week) to a situation where we are reasonably confident that we know how many potentially fundable concept notes that we will receive. This evolution has undoubtedly been helped by having very clear and very transparent eligibility and assessment criteria, so that fund management team and potential applicant alike are working within a well defined framework.

And so that I can't just make this up afterwards and say, "I told you so", our current prediction is that from more than 600 initial contacts, we will receive between 10 and 20 concept notes that could (subject to budget constraints) be approved and developed as full proposals.

Of course, if this is way out, I will be able to come up with all sorts of reasons that justify the variance! But this is a reasonable estimate that we can back up with some sort of assessment right now...

What all of this means is that our pipeline ratios (for the first round) should look something like this:

1. Concept note to initial contact: The total number of concept notes is an important indicator of how relevant and accessible the competition is perceived to be by potential investors, so we hope to achieve a ratio of something more than one eligible concept note that broadly fits our strategic objectives for every 10 registered potential applicants (but given the time-frame of the first round, this may be way out).
2. Star concept notes received to star concept notes predicted: As this prediction has been at the heart of our pipeline management approach, I hope that this ratio will be close to one received for every one predicted, certainly it would be disappointing if a significant proportion of our stars failed to materialise.
3. Concept notes approved to star concept notes predicted: Again this ratio should be close to, or hopefully even above one to one. Maybe we will be pleasantly surprised by some unexpected quality concept notes which should supplement our predicted stars to push this ratio up a little bit.

Again, this kind of prediction is probably a bit dangerous (especially when we have no prior experience on which it is based), but I really do want to have a record of what we thought would happen against which we can compare what actually did happen... no making it up after the fact!

The plan is that these 10 or 20 (or whatever it turns out to be) star concept notes will be provisionally short-listed (subject to any immediate clarifications and due diligence) and we will then work with them over the next 2-3 months to develop full proposals in the second part of the application process. We hope that by applying this rigorous (sounds nicer than ruthless) early pre-screening and concept note assessment process, we can be confident that short-listed applications stand a very good chance of making it through to securing a grant.

Because of the constraints I mentioned earlier, we simply cannot afford to dedicate time and resources on ideas that do not have a realistic potential of being able to make it all the way through to grants. While other funds appear to have the resources to approve many more concepts than they make grants, this would not work for ABIF.

Given that this is such a new team and it is the first round, I have no doubt that our predictive capacity will improve in future rounds, but at least we have had some rational approach to managing our pipeline from the outset with the intention of maximising efficiency. The guiding principle being that we should reach as wide as possible, but then focus our efforts as early and as narrowly as possible. So, coming back to the attrition process, to put it into a rather crude graphic, we are aiming for something like the shape of triangle B, rather than that of triangle A.

Profiles illustrating different pipeline attrition rates

The only vague comparator that we have in Afghanistan is the ill-fated and now-dissolved ACAP Partners managed Afghanistan Renewal Fund. This was a US$20 million attempt to set up a private equity fund. The fund operated for about 3 or 4 years, and had identified 164 potential projects shortly before it was closed in 2006. Of these 164 potential projects, 27 reached pre-prospect stage and 12 reached prospect status. In the end, none went any further and the fund closed without making a single investment.

Of course ABIF is a grant provider, rather than an equity fund, but the ACAP Partners' experience is nevertheless indicative of the kind of problems we could face.

Anyway, this is how we are managing our pipeline. I hope that we will achieve the kind of ratios mentioned above, and most of all I hope that this approach will not mean that we miss opportunities that would have come good with a bit more nurturing. In other words, we should end up with broadly the same kind of outcome (the size of the top segment of the pyramid) whether the ABIF pipeline profile was more like triangle A or triangle B, it is just that it would much less efficient if we followed the type B approach.

In mitigation of concerns that we are focusing too aggressively, it has to be remembered that this is just the first round, and that attrition really is not the same as rejection. Once we have got through the first deadline and we have had a chance to do a real life assessment of the concept notes, that will be the time to look at those that didn't make the cut and identify any that would benefit from support with a view to bringing them back in a future round.