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Social Funds : History, Concept, Issues

This article provides a detailed examination of social funds, including their history, concept, and various issues associated with their implementation. It explores the objectives, trade-offs, participation, popularity, problems, impact on poverty, and potential alternatives of social funds.

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Social Funds : History, Concept, Issues

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  1. Social Funds : History, Concept, Issues UN/DESA 15 Oct 2003

  2. SFs, SIFs, MPs : A Methodology • Project Financing Mechanism • Canvass - Select - Finance - Monitor • Local proposals & implementation • By villages, CBOs, NGOs, LGs • Typical projects : small-scale infrastructure, IG and social support • Quasi-governmental • Para-statal, outside ministries & LG structure UN/DESA 15 Oct 2003

  3. History & Geography • Bolivia ESF 1986 - first formal SF • now WB SF’s in 50 countries • many projects have SF characteristics • Latin America • 16 SFs. Big. • Paraguay $31m; Dominican Rep $44m up to • Peru $890m; Colombia$1.25bn. • IADB is main funder • Africa • Growing - post structural adjustment- mainly WB UN/DESA 15 Oct 2003

  4. History & Geography • Europe • Transition & post-conflict countries • Asia : Few and New • World Bank - 8 SFs $660m (o/w Thailand $460) • History of public works and state social protection (esp. Communist countries) • OECD • Private Foundations & Lottery Funds UN/DESA 15 Oct 2003

  5. 6 possible objectives • Short-term labour • Social & economic infrastructure • Non-infrastructure IG & services • microfinance, training etc. (needs intermediaries) • Private sector promotion • construction industry skills, tendering, contracting • Civil society strengthening • community motivation, organisation, contracting • Decentralization • SF linkages to LG UN/DESA 15 Oct 2003

  6. Trade-offs amongst Objectives • Often under-specified in SF design • max job-creation vs. good infrastructure • fast disbursement vs. community outreach • SF independence vs. state-building • infrastructure formation vs. sector strategies and SWAPs • new ‘community’ systems vs. decentralisation • SF Evaluations • What was to be maximised ? UN/DESA 15 Oct 2003

  7. Participation • Who and How ? • adverse selection • elite capture • outreach & project development support : time and cost • Who is not participating ? UN/DESA 15 Oct 2003

  8. SF Popularity 1 • Multi-purpose • post-structural adjustment & ec. crisis • post-conflict & natural disaster • chronic & acute poverty • rural & urban. • refugee resettlement • ethnic minority communities UN/DESA 15 Oct 2003

  9. SF Popularity 2 • Efficient Financial Targeting • Region, district, county, village, quarter • Dependant on poverty/needs data • Participatory • Community selection, implementation, management, o&m • Allocative efficiency • CS Building • Innovation & Modelling • Local choice, participatory, pro-poor UN/DESA 15 Oct 2003

  10. SF Popularity 3 : They Deliver • Governance • Special Board : usually under PM, President, MoF • Management Unit • relative independence • freedom from CS rules • salary, recruitment, procurement, sub-contracting • donor reporting disciplines • larger SFs : local offices • Efficient, effective, corruption-free • But not always.... UN/DESA 15 Oct 2003

  11. Problem 1 : Sustainability • Institutional : modelling for whom ? • Disconnect with ministry/LG systems • staffing, management, planning, budgeting, procurement • Financial : Capital • most SFs highly donor dependant • LM & LG resentment - political opposition • Financial : Recurrent • Disconnect with • national and local revenue flows - o&m • budget formation and execution UN/DESA 15 Oct 2003

  12. Problem II : Governance & ID • Strengthening LG systems ? • Strengthening LM systems ? • Opportunity Cost ? • Diverting political, human, financial capital away from GG & ID ? UN/DESA 15 Oct 2003

  13. Sustained Growth per capita Proximate Cause Investment (Human & Capital) + Technology+ Organisation (Productivity) Deep Causes Institutions (Formal & informal organisations and rules) Colonialism & Leadership History and Geography Poverty Reduction UN/DESA 15 Oct 2003

  14. SF Impact on Poverty • Proximate causes (local demand, clinics, schools, irrigation etc) • Deep causes • Nat/Sub-national Governance & Dec’n ? • Sector planning, financing, Eff&Eff, o&m ? • Capacity draining ? • Political opportunity cost ? UN/DESA 15 Oct 2003

  15. Alternatives : Use SF to strengthen devolved systems ? • Development challenge • poor infrastructure or poor institutions ? • Decentralisation • national & system : political, admin, financial • cf Uganda LG development financing • LGA 1997 & LGFAR 1998 • DDP (UN) & LGDP (WB) • statute-based + performance standards + central monitoring • incentive & penalty systems UN/DESA 15 Oct 2003

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