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Nepal: Helping Rural Families Get on a Sustainable Path Out of Poverty

Education India

Nepal Poverty Alleviation Fund Directly Benefiting One Out of Every Ten Nepali


Beginning with the poorest six districts in 2004, the Nepal Poverty Alleviation Fund (PAF) is now operating in 59 of the 75 districts in the country. The project has helped a total of 650,021 beneficiaries, of which approximately 74 percent are women, and 55 percent come from communities that traditionally have been marginalized or excluded by reasons of geography, caste, and ethnicity.


In the early 2000s, a Maoist insurgency was at its peak and the county was struggling to break out of a trap of poverty, slow growth, poor governance, social exclusion, and deep inequalities. The national poverty rate in the country was estimated to be around 40 percent, and many attributed the insurgency to rural poverty and social inequalities. Much higher levels of poverty were noted in geographically remote regions and socially backward communities. Consistent with the government’s poverty reduction strategy and the Bank’s Country Assistance Strategy 2004-2007, PAF was conceived in 2004 as a direct means of addressing rural poverty and improving the livelihoods of communities traditionally excluded in decision-making (including women and members of lower castes such as dalits/janjatis).


PAF is a demand driven project that provides funds to community organizations, comprising of members from the target populations, to help in carrying out income generating activities (21 percent) and building small scale community infrastructures (79 percent). Using social mobilization and capacity building as primary tools in enabling these organizations to correctly identify demands, the project’s support has ranged from livestock and vegetable farming to building micro-hydro power facilities, small bridges, and connecting roads to link inaccessible communities to local and regional markets. The mandatory requirement for the community organizations to have at least fifty percent women members and to contribute towards their investments has ensured ownership and better use of PAF funds. PAF support has not only provided easy and low-cost access to much-needed credit to the target populations but also has empowered them to voice their concerns.


The World Bank has carried out two independent impact evaluations of the Poverty Alleviation Fund: one for the initial six pilot districts and another one for the additional 19 districts. Both the impact evaluations show positive results:

  1. PAF households saw their per capita consumption increase by 31.4 percent, and households that received PAF support for six months or more at the time of the baseline survey saw their per capita consumption increase by 42.2 percent compared to the non-PAF households.
  2. The increase in per capita consumption held true for dalits and janjatis as well – two of the sub-groups of the target population. These two groups combined saw an increase of 30 percent in their per capita consumption (proving the accuracy of PAF’s targeting mechanism).
  3. PAF-supported households saw a 10 percentage-point improvement in their food security status as articulated in PAF’s criteria.

Additionally, the regular monitoring data maintained by PAF’s MIS shows that:

  1. Approximately 66 percent of the households saw their real income increase by at least 15 percent and an average real income increase of 82.5 percent.
  2. Around 77 percent of the PAF community organization members are women, more than 60 percent are ultra-poor, and more than 50 percent are dalits and janjatis.


My daughter was born in this hospital; they’re doing a better job now than before. This is my grandson, he was born here, and we’re not going anywhere else because they’re taking care of us very well. 

——Manoharmani, Grandmother


PAF has forged a strong partnership with the government, both at the central and local levels, and non-government organizations (NGOs) at the grassroots level. Local NGOs are central to the operation of PAF as they link it with the community organizations and facilitate day-to-day activities. PAF has been working closely with the line agencies of the Ministry of Local Development and the Ministry of Agriculture and Cooperatives in the planning and implementation of sub-projects, as well as in securing additional resources. 

Toward the Future

Community Organizations are at the heart of PAF’s functioning. Because PAF targets a specific set of population, these organizations tend to have weak institutional capacity in the beginning. Regular oversight and technical support from NGOs, coupled with easy access to the revolving fund, ensures that these community organizations become self-sustaining over time. Many have now come together to form cooperatives and federations, and are working beyond just improving the livelihoods of limited people by contributing to agriculture commercialization and institutional strengthening, for example. PAF is currently developing a community organization “graduation” strategy. Given the government’s recognition of cooperatives as the “third pillar” of the economy, PAF is necessarily in the right direction to ensure sustainability of its interventions.

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