Background and Description
Despite strong macroeconomic growth in recent years, Mongolia has struggled to translate this growth into increased household welfare, especially for poor people. The disconnect is largely explained by (i) heavy reliance on the mining sector, which accounts for only a small share of employment; and (ii) low productivity of the livestock sector, which is the biggest employer in Mongolia and is the mainstay of a quarter of the population (IMF 2019). Mongolia is one of the most sparsely populated countries globally, making the provision of essential services (such as health, education, heating, and water supply and sanitation) to rural residents challenging and costly. Livestock- based livelihoods are vulnerable to numerous sectoral weaknesses, along with exogenous shocks and stresses. Value chains are fraught with technical challenges in meeting basic quality, animal health, and sanitation standards and challenges related to market access and price fluctuations. In addition, extreme climatic events, especially dzud (severe winter weather disasters), have triggered episodes of catastrophic livestock mortality, while pastoral livelihoods are increasingly threatened by pasture degradation and climate change.
In 2002, after a particularly harsh dzud in which almost one-third of the country’s livestock perished, the government of Mongolia and the World Bank embarked on the three-phased Sustainable Livelihoods Program (SLP). The program aimed to address the vulnerability of pastoral livelihoods and increase public and private investment in rural communities in Mongolia. This is a Project Performance Assessment Report of the first and second phases of the program.
The first phase (SLP I, 2002–06) was designed to pilot mechanisms to de-risk and diversify rural livelihoods in eight core aimags (provinces; World Bank 2002).1 SLP I had three main components focusing on pastoral risk management (PRM), microfinance outreach, and community-driven development (CDD). The PRM component supported soum- (district-) level pasture management, pastoral livelihoods, and weather risk forecasting. The microfinance outreach component supported a Microfinance Development Fund (MDF), revolving loan funds, and an Index-Based Livestock Insurance program that later became an independent World Bank project (2005–16). Finally, a Local Initiatives Fund supported a community-driven mechanism to identify and implement investments in basic infrastructure and social services in rural and peri-urban areas.
The second phase (SLP II 2007–13) scaled these mechanisms to the national level, covering all 21 aimags. SLP II continued the PRM component and included support for a Livestock Early-Warning System (LEWS). Microfinance outreach continued through the MDF, but revolving loan funds were dropped because of unsatisfactory performance. The Local Initiatives Fund was replaced with a Community Initiative Fund (CIF), which similarly provided funds for subprojects selected by communities themselves.
The ongoing third phase (SLP III 2014–active), albeit not part of this project assessment, was designed to fully embed project mechanisms in government to ensure their sustainability. Its focus has pivoted entirely to the Local Development Fund (LDF; replacing the CIF) and complementary institutional strengthening at the community, soum, and national levels.