Social funds is a broad term which refers to a variety of programmes-Social Emergency Funds(SEFs), Social Investment Funds (SIFs) and Social Action Programmes(SAPs)- that evolved during the last ten years at initiative of Bretton Woods Institutions (BWI) to offset the increase in poverty induced by adjustment. SFs distinguished themselves from traditional programmes because: they had a strong short term anticyclical character; were mostly multisectoral; emphasized employment generation and human capital formation and not so much food subsidies and social insurance; relied mostly on demand-driven schemes; were run by temporary autonomous bodies; had fairly high costs per capita for both wage and non-wage items; focused mainly on the social groups affected by adjustments; and counted on greater visibility and external support that normal governments programmes. As of late, SIFs increasingly started shifting towards permanent community-based programmes often supported by local and foreign NGOs focusing on the creation of social infrastructure in regions where state services were absent or deficient.
SFs have been introduced in more than 70 countries. They have been extremely common in Latin America, very common in Africa, and rare but becoming more common in South Asia, the low-income economies in transition and, recently, South East AsiaandEast Asia. SFs counted on limited resources:0.1-0.3 per cent GDP(per programme year)in Africa, and 0.4-1.0 in Latin America. In 1997, the World Bank, the staunchest advocate of SFs, had a SF portfolio of only 1.3 US$ billion out of total commitments of 120 US$ billion. preliminary 1998 data on South East Asia suggest higher amounts (between 2.5 and 7.5 per cent of GDP), though it is unclear over how many years these will be disbursed. In addition, SFs did not have an effect on the total social expenditure/GDP ratio, as in most cases the rise of the latter during the years of execution of the SFs was less than the drop that occurred during the years of crisis and adjustment.
Social Funds are decentralized mechanisms by which the World Bank’s funds are made available to an autonomous institution whose role is to finance the investment needs of the population, expressed by their groups, local associations, or NGOs on the field. The financing of a Social Fund is considered by the World Bank as a « project », therefore « subproject » is the name for each individual investment financed. At the time of its creation, there are certain criteria which are adopted, which will serve to determine which type of projects are receivable.
Social Funds are generally multi-sectorial mechanisms which finance subprojects aiming at
improving access to social services (education, health), creating employment opportunities or
generating revenue through activities for the poorest populations, and undertaking small community investments (small urban works, community centers, rural wells, water distribution in the poorest suburbs, rural roads, etc.).
Even though most Social Funds are willing to consider subprojects put forward by NGOs (for
example, the alphabetization program of Caritas-Egypt benefited from a successful bid from the Egyptian Social Fund), access to Social Funds is, in some cases, reserved for local organizations or local groups (women's groups, peasant groups, etc.). In these cases, NGO’s work could consist in helping local organizations in preparing their demands, and to monitor the financing that they obtain. It's in countries which have had a successful decentralization process where this type of NGO’s help is the most common. As the rules governing these methods are different for each country, it becomes important to consult the evaluation reports (PAD - Project Appraisal Document)to understand the different operating rules for each Social Fund. This situation can also change with time. In Bolivia, for example, administrative and budgetary decentralization put into place in 1975 led to local authorities being given greater responsibilities. In this country, requests must result from the planning process of municipal investments. However, in Honduras, the Social Fund created a window in favor of the most disadvantaged, to which NGOs have direct access.
Social Funds reflect an important evolution in the mode of action of the World Bank : with
investments which are counted in billions of dollars, they have become the principal means of promoting Community Driven Development.
It is important to stress the fact that NGOs’ participation in Social Funds is not limited to obtaining financing for the sub-projects that it has possibly submitted, but that an NGO can be often associated to training action, technical assistance, or monitoring/evaluation of the Social Fund.
Social funds have proven to be a creative complement to "top down" programs that have long been a mainstay of development thinking. By giving communities the power to identify and implement their own local development priorities, social funds
have given voice and responsibility to local organizations. As such, social funds are similar to other efforts in both developed and developing countries that promote decentralization of control through a wide variety of alternative service delivery mechanisms as part of reform and modernization of the state.
The results are compelling. Central governments finance small-scale initiatives and projects at the community level which are identified and carried out by local governments, line agencies, NGOs and/or community groups. These local investments haveexpanded access to primary schools, health facilities, water supply and sanitation, improved rural roads, provided opportunities for training and other social services, benefiting millions of people. This increased access had been accompaniedby higher quality service delivery and increased utilization, resulting in improvements in well-being of the poor.
Over the last ten years, there has been a great deal of adaptation and experimentation in the basic model. With its origin in addressing the social costs of economic adjustment, the social fund approach is being applied to emergency employment creation, natural disasters and post-conflict reconstruction,
longer-term poverty reduction, support to decentralization and social capital creation, depending on country circumstance. As objectives have evolved, so, too, has institutional design. In some countries, social funds are merging with the decentralization process, as in Bolivia where the social fund operates entirely
through the municipal planning and budgeting process. In other countries, social funds are bringing communities more directly into the development process, improving local governance from the bottom up, and strengthening civil society, particularly in post-conflict and transition economies. There is no "one size fits
all" blueprint of a social fund because no single set of objectives or institutional arrangements is appropriate in all contexts.
Julie Van Domelen, The World Bank
THEORETICAL BACKGROUND
The fallowing information is based in the chapter 11-social funds ; by Andrew Batkin
In his work of Social Protection in Asia and the Pacific for the Asia Development Bank.
Social funds are agencies, based in government, which provide finance for small-scale projects, normally infrastructure schemes, proposed by local government or community organizations. These were initiated in Latin America in the mid-1980s, mainly in response to economic and
post-conflict dislocations. The principal reason for the rapid growth of social funds has been their perceived “ability to deliver” in terms of making a relatively visible, quick and efficient impact on living standards in poorer communities.
The terms “social fund” and “social investment fund” are normallyapplied to the108 loan projects that theWorld Bank (WB)hasapproved since1987, mainly in Latin America and Africa.1 However, many projects assisted byother donors have identical or similar characteristics to the WB social fundconcept in that they establish funds, which canvass proposals for small-scale
schemes from local government and/or community organizations. They usuallyoperate in defined target areas, appraise the proposals in terms of the particularobjectives of the fund, and provide finance for the proposers to implement theworks themselves, or through contractors, normally with some degree of localfinancial contribution.
Approaches to social funds design
These three characteristics define a method of operation. What makes social funds particularly interesting is: first, the wide variety of country contexts to which this methodology has been applied; and second, the way in which different combinations of objectives have been adopted to fit different country circumstances. In other words, although the method of operation is broadly common, the perceived linkage between the activities of different funds and the goal of poverty reduction over the short or long-term varies substantially; These design specifics have been dapted to target different groups of people across the full range of crisis situations: economic reform and transition; conflict and refugee resettlement; chronic and acute poverty; and
natural disaster. Social funds incorporate different combinations of the following six objectives:
(i)Short-term labor opportunities.
(ii)Infrastructure creation and rehabilitation.
(iii)Non-infrastructure income generation.
(iv)Private sector promotion.
(v)Civil society strengthening.
(vi)Decentralization.
All social fund designs incorporate more than one of these objectives and the most ambitious decentralization initiatives include all six.
The following illustrate some of the trade-offs between objectives which
have been an issue for different funds and which social fund designers have to
confront:
Trade-off 1: Quick disbursement vs. other objectives.
Trade-off 2: Incomes from labor vs. other benefits.
Trade-off 3: Parallel structures vs. public sector reform.
Trade-off 4: Public, private and civil sector involvement.
Social Fund Financing Social funds are heavily dependent on donor financing.
National contributions are made up of a commitment to the fund from national resources and contributions from scheme beneficiaries, local government, community organizations, elites, churches, etc. National contributions are made up of a commitment to the fund from national resources and contributions from scheme beneficiaries, local government, organizations, elites, churches, etc.
Key Issues, Options and Alternatives
Problem Contexts Social funds and projects that include elements of social-fund methodology have proven to be an effective public response to a variety of problems, including:
(i) Chronic and/or acute poverty
(ii) Post-economic crisis
(iii) Transition to a market economy
(iv) Post-natural disaster
(v) Post-civil conflict
(vi) Refugee integration
(vii) Isolated and ethnic minority communities
Alternative Objectives The goal of all social funds is poverty reduction in the shorter or longer
term, but the nature of the linkage between the fund activities and the poverty reduction goal varies substantially among funds. This is because different funds give different priorities to six possible objectives:
(i) Short-term labor opportunities
(ii) Infrastructure creation and rehabilitation
(iii) Non-infrastructure income generation
(iv) Private sector promotion
(v) Civil society strengthening
(vi) Decentralization
Policy and Institutional Issues Social funds are a relatively recent, supplementary intervention, outside the framework of mainstream government programs. An important motivation for the explosive growth of funds in the past 13 years has been the frustration among governments and donors about the difficulty of translating financial commitments into tangible benefits for the poor through the existing bureaucracy. The key to success in most funds has been the relative autonomy, freedoms and capacity of the fund’s project management unit (PMU), fostered by a close donor presence and external audit, compared with line ministries.
Social Funds and Poverty Reduction The alternative social fund objectives entail different linkages between the activities financed by the fund and the goal of poverty reduction. There is
now considerable evidence about the impact of the various objectives of social fund methodology on poverty.
The poverty impact of improving schools, clinics, water supplies, access roads etc. are well established. The evaluation evidence is that the rehabilitations of schools, clinics and water points in poorer communities are highly appreciated, well used and have a marked impact on poverty.
The linkage between decentralization and poverty reduction is indirect, and dependent on factors such as local accountability, transparency and the quality of participatory procedures at local level.
Targeting Social funds can be geographically targeted relatively efficiently and offer a means of providing social protection in situations where acute or chronic problems are geographically localized.
the evidence is that the extent to which targeting is effective in
practice in concentrating resources on the most needy areas depends on the quality of the outreach achieved by the fund, and the objectivity and independence of decision making
Second, minimum wage rates for short-term labor can be targeted quite precisely according to local circumstances.
Third, it is well established that the types of infrastructure most commonly created through social funds (clinics, schools and water points) are of particular benefit to women and children.
Fourth, it is difficult for social funds to target the poorest of the poor and the most vulnerable households, which do not have able-bodied laborer.
Participation Analysis Social funds are commonly understood to offer a higher degree of community participation than traditional government infrastructure programs implemented through line ministries or local government.
Sustainability The sustainability of schemes financed by social funds and the benefits flowing from them is variable. The purpose of short-term job creation is to provide immediate income support rather than longer term benefit.
The sustainability of small-scale infrastructure schemes is better in projects where there has been authentic local choice in scheme selection.
There is little evidence to date about the financial or institutional sustainability of social funds in terms of becoming mainstream government functions. With the exception of three funds in Latin America they continue to be heavily donor dependent.
Social Funds and Social Protection Social funds have proven to be practical and effective responses in a wide variety of situations, including economic crisis and transition, natural
disaster, resettlement, post-conflict, and in addressing chronic and acute poverty. The ability to target benefits geographically makes them a relatively efficient means of concentrating resources in particularlydistressed areas. Within a target area, active promotion and outreach isrequired to ensure that poorer and less vocal communities are notexcluded. The efficiency, effectiveness, and accountability achieved by establishing
social funds outside mainstream administrative structures and procedures, with accountability to the highest level of government and to donors, have produced clear benefits both for target communities, and for governments anxious to be seen to be delivering results.
(iii) The coverage achieved by the short-term labor element of social funds creation is considerably less than for well-managed public works schemes.
(iv) The impact and sustainability of public infrastructure provided through social funds with effective procedures for local selection which engender real sense of local ownership, appear to be considerably better than for traditional line agency programs. To the extent that improved social and economic infrastructure and services achieve a sustainable improvement
in living standards over time, social fund investments have a preventive and mitigating role, in addition to the coping benefits flowing from short-term labor creation.
(v) In supporting farm and non-farm enterprise development, the impact of social funds depends on the existence of experienced and effective providers of credit, training, extension and other business development services. Social funds are financing agencies, not implementers, and in
the absence of suitable credit and business-support intermediaries, social funds are faced with either supporting infrastructure facilities alone or diverting resources to strengthening the capacity of local agencies to provide other services.
(vi) Social fund methodology offers a potential means of strengthening the skills and experience of private construction firms.
(vii) Locating social funds within local government, together with systems development in relation to participatory planning, implementation and accountability, provides a means of piloting decentralized systems for planning and implementing capital schemes and strengthening local governance institutions.
(viii)Social fund methodology brings significant additional benefits in building social organization and civil society, although these are difficult to quantify in terms of social protection impact, and are highly dependant on the intensity and quality of the methods of participation adopted by the fund.
WHY ARE SOCIAL FUNDS SO POPULAR??
The information is from the chapter 14 written by Judith Tendler (Department of Urban Studies and Planning .Massachusetts Institute of Technology)
Roughly one-third of SFs go to economic infrastructure; another third to education , health, nutrition, and population activities; and another third to miscellaneous activities such as microfinance, training, and environmental interventions.
At the start, donors and the borrowing governments viewed SFs as a safety net for ameliorating the harsh effects of structural adjustment on the poor . More recently, SFs have also come to be seen as refreshing new model of service delivery for poor communities, with their more independent project agencies or units and their involvement of beneficiary communities in choosing , monitoring, and financing projects.
The Claims “the majority of SFs do not formally devolve power and responsibilities to the local governments.” As agencies of the central government, they try to reduce their overhead and personnel costs by deploying some of their staff outside the capital and devolving some responsibility to community groups and local providers. But this is described more accurately as “deconcentrating” rather than as ”decentralizing” responsibilities and finances. Deconcentration, of course, shares some of the traits and purported advantages of decentralization. But “deconcentration” does not have the cachet that decentralization has: It does not fit the image, now so popular, of “taking power away” from central government, of moving from a “ top-down” to a “ bottom-up” stile.