Cost-benefit Analysis of CFPR
Sanjay Sinha (EDA Rural Systems Private Limited), Jyoti Gidwani (M-CRIL), Narayan Chandra Das (RED)
March - 2008
This paper presents a cost-benefit analysis of the first cohort (2002-03) of selected ultra poor (SUP) households of BRAC’s CFPR. The analysis calculates benefit of the programme using primary data collected through a set of surveys.
Benefit is measured as the increase in expenditure on food consumption, increase in medical expenses and/or income foregone from workdays lost as a result of an increase in the (financial) capacity to take such decisions, and increase in net financial and housing assets of the SUP households compared to not selected ultra poor (NSUP) households. As the social worth of improved expenditure is higher for poorer households, different social weights have been assigned to the benefit accrued by different sub-categories of households. Households were categorized on the basis of either per capita income or per capita energy consumption of SUP households in 2002. An alternative calculation of benefit has also been carried out by comparing the increase in per capita income of SUP households with that of NSUP households. Using the consumption indicators it has been found that at a 12% discount rate and a 12-year life of benefits, the benefit-cost (B-C) ratio is 5.07, while using the income method the B-C ratio is 3.83. Sensitivity analysis of the B-C ratio using consumption indicators shows that within a reasonable range of assumptions from relatively pessimistic to reasonably optimistic the B-C ratio lies in the range 3.12-6.23 allowing for discount rates of 10 to 15% and the life of benefits in the range of 10-15 years.
The analysis shows that the special investment programme of CFPR represents productive use of development funds for the benefit of ultra poor households in Bangladesh with obvious implications for additional investment.