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«Social Funds and Reaching Proceedings from an international workshop organized by the Poor The World Bank and Experiences and AFRICATIP La Red Social de ...»

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Institutional autonomy frees the social funds from bureaucratic constraints often found in line ministries, but does not necessarily lead to community-based, demand-driven projects. A review of the Guatemalan social funds shows that they approved proposals months ahead of normal bureaucratic channels and built five times as many schools as the government was able to do in the same period. The key to meeting these goals was a decentralized delivery system, which utilized the skills of private contractors and the capacities of local institutions. Yet in 1994, a Center for Democratic Education evaluation of Guatemala’s social funds underscored 172 Original Workshop Papers the lack of community or NGO participation in the design or management of the social funds themselves, even in cases where the funds profess community ownership of the funded community projects. A second study in 1996 found that community-based demand continues to be constrained by application procedures that exceed the capacity of small, local NGOs and popular organizations.

Stakeholder Participation Those who are directly affected by both adjustment policies and aid projects are usually excluded from developmental decisionmaking. The first social funds were established before participation became a mainstream issue within the World Bank. The Bank defines participatory development as a process through which stakeholders influence and share control over development initiatives, and the decisions and resources that affect them. Bank policy identifies levels of participation ranging from information-sharing, consultative, and joint assessment mechanisms—in which participants are asked for their opinions and advice may be sought—to shared decisionmaking, collaborative, and empowering mechanisms where the ability to influence and share control is heightened. Since the 1994 board approval of the Participation Action Plan, the notion that broadened stakeholder participation builds ownership, increases governmental accountability, and aligns projects to the needs of beneficiaries has become official doctrine. Two years later, it is clear to observers both inside and outside the Bank that operationalizing participation requires systemwide change in Bank procedures and culture. By definition, social funds, at least at the subproject level, require stakeholder participation and as such are one laboratory for learning how to mainstream participation.

Advocates of popular participation see social funds as a means of engaging the poor and other marginalized groups in the development process and making aid more relevant to authentic needs. How participation actually happens in social funds, who participates, and who benefits are of specific concern. Many in the NGO community feel that the Bank’s recognition of the diversity of project stakeholders should not underscore the importance of the primary beneficiaries of aid and the need for the meaningful involvement of affected communities in decisionmaking in addition to information-sharing. To these organizations, participation “is not simply another ‘component’ of project planning, but rather a fundamental reorientation of the planning process.” Just as NGOs are more than merely efficient service providers, nongovernmental and community stakeholders have greater roles to play than simply acting as informants or low-cost implementers. Stakeholder participation needs to be expanded to include involvement in the design of social funds themselves.

In the view of NGOs, popular participation in social funds needs to be extended to the macrodesign level so that the menu of subproject options, procedures for community involvement, and tradeoffs between immediate assistance and long-term development reflect better the priorities of affected people. More broadly, NGOs contend that where poverty is not differentiated (for example, rural, urban, and gender aspects), local development demands are not factored into the social funds’ macrodesign, and social funds are created outside or in parallel to local development processes, funds are likely to fit the priorities of affected people poorly, to lack synergy with other development investments, and to be unsustainable.

The need to disburse funds rapidly is still a prime motivation for many social funds, but merely targeting regions with a large percentage of poor people does not guarantee that a project will be relevant to their needs. Unfortunately, this is precisely what some social funds have done. Targeting takes time, but as long-term instruments of social policy reform, social funds will need to collaborate on a deeper level with nongovernmental and community-based organizations to develop macrodesign criteria that truly assist those most in need and address their concerns. Some newer social funds are experimenting in this area. For example, the Argentina Social Funds: An Expanded NGO Critique 173 social fund has consulted with selected target communities to define the subproject menu, and NGOs sit on provincial bodies that decide which communities are eligible for social fund assistance. In Jamaica, the NGO council successfully lobbied the Cabinet of Ministers to structure the seven-person Social Investment Fund Board with two seats for representatives nominated by the NGO council.

A 1996 World Bank study also supports involving NGOs in the design phase of social funds.

According to this report, the latest generation of social funds has had a greater developmental orientation and has included procedures and resources for NGO promotional and capacity building functions (Comoros, Kenya, Madagascar). If these procedures truly foster NGO participation in macrodesign, they represent a promising development that warrants monitoring to determine whether they become institutionalized outside the Africa region.

Civil Society Roles in Anti-Poverty Lending Priorities and objectives for a social fund are generally set during consultation between the World Bank and the borrower government. Often, the creation of a social fund is a precondition of continued aid disbursements, as was the case with Mexico’s Fondos Municipales de Solidaridad and Guatemala’s Fondo de Inversión Social (FIS). World Bank financing of a social fund depends on the types of loans for which the borrowing nation is eligible. This is a critical consideration. Understandably, a borrowing government responsible for loan repayments may be leery about disbursing funds in a decentralized manner through NGOs, or about increasing its debt burden. According to sources at the World Bank NGO Unit, the government of Nepal recently rejected a proposed social fund for this very reason.

Often governments are nervous about stakeholder involvement in microproject design and project implementation. Where the state has the exclusive mandate for development planning and social sector services and where popular democracy has not been practiced, it is likely to have even greater difficulty accepting stakeholder involvement in macrodesign. But without community involvement in shaping the goals and priorities of a social fund, its criteria and guidelines may fail to address the needs of the affected poor.

Most social funds provide some mechanisms for demand-driven funding, thereby responding to requests generated by local groups, such as community organizations, governments, and NGOs, rather than identifying projects themselves. As such, they rely on collaboration between national governments and other stakeholders, including NGOs. These relationships have the potential for friction. Bank evaluators cite rivalry for resources; reluctance to work with governments, which is an area of mutual distrust; and the sheer number of NGOs claiming to be legitimate representatives of stakeholders as obstacles to collaboration.

Social funds such as the Bolivian Emergency Social Fund may strengthen some of the institutions with which they work and help establish government-NGO relations. On the other hand, World Bank staff sometimes feel that the selection of subprojects may not be rigorous enough to guarantee that only the best are picked and note that some coordinating NGOs, lacking implementation capacity, require assistance by fund staff. Many Bank concerns about cooperation with NGOs arise from the limited institutional capacity of many of these organizations. Local institutions often lack the ability to effectively propose and reliably implement projects. This is precisely what the funds are supposed to improve, but most social funds lack a mechanism for enabling NGOs and other local organizations to upgrade their capacities. To date, recognition that intermediary institutions need strengthening has not led to more proactive institution-strengthening investment policies.

To this list of conflicts, NGOs might add limited levels of stakeholder participation, a funding process still dominated by government interests, and a tendency for funding to go to governmental or private contractors. In a positive response to this last issue, the Bank has suggested 174 Original Workshop Papers a cap on funding to public agencies, proposing that a minimum of 33 percent of funds be earmarked for private voluntary organizations and NGOs, in order to reduce public reliance on the social fund for off-budget financing. Both the Bank and the NGO community seem to be in agreement that the patronage issue—the use of funds by government leaders to further their own political careers—needs to be addressed.

Operationalizing Social Funds—Private Contractor and Community-Based Models Judging from social fund criteria evident in the available case studies, it seems possible that distinct social funds trends or models are emerging as social funds proliferate beyond their Latin American origins. According to this hypothesis, the adaptation of one type of social funds over another reflects institutional priorities, as well as regional constraints and assets. We offer this idea in the hope that it may elicit additional evidence indicating changing patterns in the evolution of social funds, for example, whether a shift in emphasis away from infrastructure projects toward human capital formation or economic projects is a growing trend.

Thinking of models for social funds is only useful if it helps to guide analysis. The distinction between social funds that favor private contractors and those that are community-based is not essentially regional in nature, although the operational details of specific projects may be.

Some social funds, their operational criteria reflecting the constraints and resources of the host government, tend to favor implementation by private contractors rather than development of the capacities of local community institutions: Senegal’s AGETIP and the Bolivia Emergency Social Fund were, for example, implemented by private contractors. These implementers represented a number of stakeholders, some within the community, but more commonly from the more developed private sector of the country. The Bank feels that such funds are best suited for civil works projects, where roads, schools, and housing schemes require a fairly high level of technical skill and institutional capacity. Other funds have relied on contractors from outside the affected communities to implement their projects. In rare cases, such as the pilot flagship social fund in Armenia, a social fund is administered in partnership with an outside NGO, the Armenian Assembly of America. Social funds’ designers considered this a necessary step, due to the lack of local institutions and the diminished capacity of the Armenian government to manage the social fund on its own.

The contractors whose proposals received funding in Guatemala tended to be those whose institutional capacities were already well developed. Applications were written in difficult language and were not easily available to the public. Members of former state security forces and construction firms from urban areas possessed the technical knowledge required to submit fundable projects, while community groups often lacked such skills. Such evidence from the Guatemalan case illustrates the risk in private contractor-based projects that the poor will not have a high level of participation or be the real beneficiaries.

Evaluators from the Center for Democratic Education found that the Guatemalan social funds are typically controlled by elements from the business community, which have no relationship with the general population, and have no concept of the real needs of the people. In one social fund dealing with agrarian reform, non-Bank donors actually expressed reservation about subsidizing the rich through selling land to the poor. Other NGO criticisms of social funds are that funds predictably go to contractors rather than really helping local communities.

The social funds do not fund preinvestment costs, which the authors of the Center for Democratic Education study find can be prohibitively expensive for some bidders.

A community-based model may be represented by the Zambia social fund; in the implementation of typically small infrastructure and social assistance projects, the major partners in the Zambia social fund are the communities themselves. These projects are less concerned with temporary employment generation or social infrastructure and instead focus on what is called human capital formation, which includes extending coverage of health, education, water and Social Funds: An Expanded NGO Critique 175 sanitation services, and training to the affected communities. Some observers attribute the Zambia community-based model to the significant involvement of the European Union in its design.

Other examples of community-based social funds may be the Nicaragua and even the Bolivian fund, which involved a wide array of stakeholders. The current social fund in Honduras employs a wide variety of organizations—community-based, governmental, and private sector— in project implementation.

Goals of Social Funds Social funds have evolved since their inception and continue to adapt to changing realities. A review of existing social funds and attention to the start-up of new funds attests to their great variation and flexibility. This review indicates that many social funds have chosen to adopt a short-term welfare agenda, instead of addressing the longer term employment needs of affected communities and local level capacity building. NGOs and others take issue with this approach when social funds are mid- to long-term interventions rather than emergency measures as originally conceived. In Latin America in particular, NGOs call for a greater financing of productive projects, which may channel assets to the poor through measures such as land reform and credit.

In the Bolivian Emergency Social Fund and in many subsequent social funds, it is clear that economic and social infrastructure projects rather than credit schemes and microenterprise development received the bulk of the funding. Only 10 percent of overall funds in Guatemala, and none of the World Bank resources, are allocated to income-generating activities. NGOs and external evaluators overwhelmingly recommend increasing the amount of funding for microenterprises and income generation. The Bank’s own assessment of microcredit and banking activities is that, while these may be important, they should be managed as proper loan programs, because creditworthiness analysis and other banking functions are outside the scope of social funds. The World Bank believes such activities are better managed by existing financial institutions or by separate entities such as the Grameen Bank. Social funds do make some loans, but most have found their microcredit efforts less successful than their other projects.

Community and Institutional Impacts of Social Funds One goal of social funds is to promote local institutional capacity. However, a study of the Guatemala social fund found that it generated community divisiveness and that social funds procedures provide no mechanisms for communities to decide jointly which project is most important to them. Rather than encourage local organizing and priority setting, the social fund is perceived to penalize such tendencies.

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