The Poverty Reduction Fund Project is designed around seven of key principles (Lao version) / (English version) that provide the basis for project implementation and supervision, as well as for local innovations, and for the evaluation of the project and its impact. The principles of the project, further explained below, are:

1. Simplicity
   The project design, rules and regulations are simple. This ensures greater transparency and local ownership of the project. Materials and methods used by the project are verified with villagers to ensure that they are properly understood and appropriate.
   
   
2. Menu of Options
   
   1. Community Infrastructure
      

      Sub Project Type	Items Eligible
      Access and Transport	Bridges, footpaths, tracks, culverts, ramps, piers, road repairs and up - grading
      Water systems	Wells, gravity water supply, small weirs, ponds, etc.
      Community Irrigation and Drainage	Weirs, canals, bunds, gates, spillways, and other structures
      Markets, community halls, and sanitation	Buildings, drainage, latrines, wells, and furnishings
      Health post or clinic and sanitation facilities	Building, furniture, latrine, supplies and medicines, allowance for nurses/midwives (in cash or kind)
      Schools, nurseries and sanitation facilities	Buildings, latrine, allowance for teachers (in cash or kind), supplies, equipment, furniture
      Community electrical supply	Mini-hydro generator, wiring

      
      
   2. Training Activities
      Many types of training can be funded under the project, as long as providers can be identified and contracted. (Civil servant or government-subsidized bodies cannot be paid using project funds)
      
      
   3. Pilots
      Grants for community enterprises and community social services as well as community revolving funds might be provided on a pilot basis but only starting in year two of the project. The experiences of year one will be the basis on which the decision regarding such pilots will be made.
      
      
   4. Types of Activity Prohibited in PRFP (the Negativelist)
      The project will not fund:
      
      
      • New roads; Road resurfacing; Road sealing (laterite, asphalt etc.);
      • Electrical, Gasoline or Diesel generators or Pumps;
      • Piped, Individual household water hook-ups;
      • Equipment or Materials that can be paid for from other funds;
      • Chain saws;
      • Pesticides and other Dangerous chemicals;
      • Investments detrimental to the environment;
      • Acquisition of land (purchase or lease), under any conditions;
      • Construction, Rehabilitation, or Maintenance of any Government office buildings;
      • Payments of salaries to government servants or the Salaries of the staff of government subsidized organizations;
      • Any activity unacceptable to a large number people (regardless of their ethnic background).
      • Forced (involuntary) resettlement is not allowed under any condition.
      • Voluntary resettlement requires an early special approval from Vientiane, prior to any decision in the inter-khet meeting.

      The Government and the World Bank will review the list of prohibited activities every year

3. Participation
   In order to ensure effective use of funds, villagers need to negotiate and collaborate together. Decision-making must involve more people than just the village government, party representatives or elite: it must involve the whole community. Assistance and information is provided to villagers by facilitators and consultants as well as local government technical staff, but the communities themselves decide priority subprojects for funding.
   
   
4. Ownership
   Villagers must be willing to contribute to subprojects to show their support and ownership of the activity. The local contributions can be in cash, in kind, and/or in labour. As with every other aspect of the subprojects, villagers themselves decide. This information must be included as a part of the khet proposal. To ensure sustainability, detailed operations and maintenance plans must also be included in proposals, and villagers must be genuinely willing to operate and maintain any infrastructure that is built . Operations and maintenance teams must be established before funds are disbursed. Encouraging high levels of ownership is critical if activities are to be sustained in the long term.
   
   
5. Transparency and Accountability
   Complete transparency and local accountability are essential. Villagers own the grants and they must be satisfied that the funds are used properly. All complaints will be taken seriously and investigated by the PRFP staff. Villagers are entitled to question project decisions and disbursements, and they must receive clear answers to their questions. At every stage and at routine meetings villagers must be informed how the funds are being used. Khet and village implementation teams must give a full and clear account of the use of grant funds to all of the villages. Villagers will be made aware of their rights early on in the process. They will also be told who to contact if things are not proceeding as planned and how to report problems.
   
   
6. Wise Investment
   (Sustainable, replicable, complementary)
   This project will expand annually to cover additional poor districts. The Poverty Reduction Fund is legally established so that it can channel assistance from many sources. The eventual aim is for it to provide a mechanism for revenue transfers to locally determined and community-managed development interventions in all poor areas: interventions that are wise investments. The scope of the initial project and the PRFP itself is not meant to supplant other, larger development efforts but to complement such efforts with small, local community investments. Sub-project activities need to also be relevant: that is to say, the degree to which the investment is effectively addressing the expressed needs of the poor communities must be given due consideration.
   
   
7. Empathy (“Siding With The Poor”)
   The Poverty Reduction Fund, all the PRFP consultants and facilitators work for the poor. As such, for each planned and implemented activity, in all processes and all procedures, preference is given to the poorest people in the community. Facilitators and consultants are evaluated based on this principle: their championship of the rural poor.The Poverty Reduction Fund, all the PRFP consultants and facilitators work for the poor.

Any change to the project design requires the mutual agreement of the Government of the Lao PDR and the World Bank, and it must be in accordance with the above principles.