This component will comprise the following subcomponents: a) reviving, forming and strengthening of community-based organizations (CBOs); b) community-level subprojects for rehabilitation and improvements to essential village-level social and economic infrastructure and facilities; c) livelihood support activities for vulnerable groups and people; and d) pilot programs to test innovative community development and empowerment approaches. The main beneficiaries are IDPs and other conflict-affected people in about 600 selected focal villages in the project area.

The goal of this subcomponent is to reestablish and create sustainable village-level institutional arrangements that are capable of village-level planning, implementation and monitoring development activities in the rural areas. The project would primarily work through the traditional CBOs such as FOs, Rural Development Societies (RDSs) and newly created Women Rural Development Societies (WRDSs). This subcomponent would finance: a) community mobilization activities leading to the formation and/or revitalization of inclusive CBOs and institutional arrangements at village level; b) preparation of village base-line social economic profiles (VSEP) and village rehabilitation plans (VRPs); c) building capacity and improving technical, financial, organizational and management skills of communities to plan, execute and manage development activities on a demand-responsive manner. The outcome of this component would be inclusive, sustainable and viable village-level CBOs that are capable of maintaining the village assets created and repaired under the project using their own initiatives and finances and managing village-level revolving funds. The subcomponent will finance technical assistance, consultancy services and training.

The goal of this subcomponent is to reestablish and improve productive and service capacity of village infrastructure essential for basic living conditions and employment. To achieve this goal the project will finance: a) the rehabilitation, restoration, improvement and augmentation of minor and medium irrigation schemes; b) rehabilitation of ponds, dykes, saltwater exclusion structures and barrages in the Jaffna district; c) repairs and improvements to rural access roads to farms and schools, etc., and link roads to markets and townships; d) construction of drinking water facilities, school buildings and community centers and community

storage facilities for agricultural inputs and produce; and e) implementation of complementary agricultural-productivity enhancement activities under the rehabilitated irrigation schemes. All of the activities will be selected and prioritized by the villagers and be planned,implemented and monitored with the active participation of the communities. This subcomponent will finance civil works and consultancy services required to implement these activities.

The objective of this component is to enhance living conditions and quality of life of vulnerable people. The target group will compromise those who do not possess irrigated lands and other income-generating opportunities, widows, women-headed households, etc. These goals would be achieved through providing: a) financial grants to village-level CBOs and women RDSs to disburse small loans to the most vulnerable people in the community to start income-generating activities using principles of micro-finance and revolving fund programs to the specific socioeconomic situation prevailing in the project area. WRDSs will be the village institution responsible for

targeting and selecting beneficiaries, financial management and procurement and monitoring and account keeping of the repayable loans to individuals using the financial grants from the project to WRDSs.