A Cost-Benefit Analysis of Practical Action’s Livelihood-Centred Disaster Risk Reduction Project in Nepal

A Cost-Benefit Analysis of Practical Action’s Livelihood-Centred Disaster Risk Reduction Project in Nepal

Using cost-benefit analysis to analyse community based disaster risk management projects

This study provides a systematic cost-benefit analysis of a community-based disaster risk management project led by Practical Action in two districts of Nepal over the period 2007 to 2010. The objectives of the project are:

  • to improve the socio-economic status of communities vulnerable to natural disasters, and
  • to enhance the capacity of stakeholders at different levels to adopt a livelihood centred approach to disaster risk reduction (LCDDR).
The Nepal project has two main components:
  • community level activities which reduce the impact of particular hazards by increasing livelihood opportunities, increasing resilience, and reducing vulnerability, while fostering preparedness to deal with the hazard and its aftermath
  • advocacy and capacity building to link community based experiences with district and national level institutions. Community based experiences and best practices are documented and used to demonstrate the validity of the livelihoods approach to disaster management to government institutions.
The assessment takes the form of a systematic quantitative analysis of the economic costs and benefits associated with the community-based project activities, and applies the analytic framework of economic social cost-benefit analysis. Benefits due to the project are measured in terms of the present value of real income gains compared to a 'without-project' baseline benefits. The costs incurred to achieve these benefits include the direct project costs as well as the opportunity costs of additional human and material resources contributed by the target households and other local stakeholders.

The main community-based project initiatives included in the assessment comprise of investments in irrigation facilities to reduce drought sensitivity, the installation of electrical fencing to reduce wildlife intrusion hazards, dam construction to reduce flood hazards, among other various activities to improve skills and productivity in and off-farming.

The study finds that the present value of benefits exceeds the present value of the total costs of the project activities in all cases. The results lend support to the view that the livelihood centred approach to disaster risk reduction (LCDDR) approach delivers value for money and deserves further funding.

The main recommendation for future LCDRR projects emerging from the assessment is that serious consideration to making cost-benefit analysis an integral accompanying component of future LCDRR projects from the project planning and inception phases onwards. While a backward-looking cost-benefit assessment at the end of a project is certainly commendable, the CBA approach is potentially most powerful, when it is used as a forward-looking planning and decision support tool to assist in channelling scarce project resources into activities with the highest expected net benefits.
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