«Social Funds and Reaching Proceedings from an international workshop organized by the Poor The World Bank and Experiences and AFRICATIP La Red Social de ...»
• Internal Audit, Contracts, and Legal Affairs Department—This department, responsible for the internal audit of all activities of the SFD, checks on the efficiency of accounting, the financial and operational internal control system, and monitoring of environmental impacts. It examines assets, liabilities, and results; takes the necessary steps to ensure that programs and projects are effective and efficient; and guarantees compliance with national and international obligations and regulations.
• International and Public Relations Department—This department is responsible for the publications of the SFD, including the procedures of programs and periodic newsletters, advertisement campaigns, media relations and releases, press conferences and television interviews, and conferences and seminars. It organizes and manages a series of regional, national, and international exhibitions that give SDF beneficiaries the opportunity of exporting their products and of gaining marketing experience.
The SFD’s Management Structure The SFD is a quasi-governmental agency subject to auditing by the government of Egypt, as well as to evaluations by its 17 donors. Its board of directors is chaired by the prime minister, thus ensuring political support at the highest level. The ten ministries on the board of directors allow the SFD’s plans to be synchronized with the plans of relevant executing agencies. It includes six public personalities that represent concerns of the private sector and the community, thus ensuring the responsiveness of the SFD to their respective needs. The executive committee is authorized to make decisions on behalf of the board of directors, within wide mandates, thus authorizations are made without delay. The managing director has a wide latitude of discretionary authority commensurate with his responsibilities, so that ordinary operations are carried out with minimal external interference and promptly enough to respond to beneficiaries’ needs and sponsoring agencies’ requests. The five general directors, one for each major program, have enough delegated authority to manage their respective affairs without the continual direct intervention of the managing director. This provides for flexibility and accountability.
Achievements of the SFD The chief accomplishments of the SFD fall into the areas of poverty alleviation, beneficiary targeting effectiveness, and creating employment opportunities.
Poverty Alleviation: Measurement and Targeting Equity, efficiency, and cost-effectiveness are the guiding parameters for the choice of targeting mechanisms. The SFD uses three different mechanisms for targeting benefits to beneficiaries.
The first one involves individual assessment methodology: eligibility of individuals and groups is determined by case workers on the basis of wealth, income, family size, and means tests. The Community Development Program often relies on this method of targeting. The second one, the self-targeting method, is often used by the Public Works Program: it requires beneficiary contributions of about 10 percent of project cost, as does the Community Development Program. Eligibility requirements for programs and projects may include beneficiary participation in self-help community projects or labor-intensive infrastructure projects. Geographic targeting is the third targeting mechanism used by the SFD. It is based on poverty maps that are constructed using information on income, household characteristics, employment, access to basic services, and housing conditions. Social dimension of adjustment surveys are used to produce single or multiple indices of poverty to facilitate prioritization of intervention locations. Poverty profiles are prepared to define poverty, because it is a multifaceted phenomenon that cannot be captured by 164 Original Workshop Papers a single indicator such as income or wealth. Often a more advanced technique of the poverty profile method known as the absolute versus relative poverty is adopted, using indicators of household size, occupation, educational level, nutrition status, health, and access to safe water and sanitation. This defines poverty in relation to the mean income or expenditure in the country and therefore varies over time and across locations.
Assessment of Targeting Effectiveness Planning for the second phase of the SFD’s program was based on the social impact assessment of the first phase, which used various indicators for different programs.
• Community Development Program—The degree of service utilization of the education, literacy, health services, and income-generating programs; the economic impact of making loans to generate income; the impact on self-esteem and peer esteem among beneficiaries; the impact on employment opportunities and perceptions of same; impact on savings by income-generating loans; and the level of satisfaction with services delivered.
• Enterprise Development Program—Loan size; type of enterprise; level of partnership in the enterprise; sector and employment opportunities used by the enterprise; financial, technical, and marketing assistance needed by the enterprise; and the perception of wellbeing among beneficiaries created by their participation in projects supported by the SFD.
• Public Works Program—The length of employment provided by the public works projects;
wage differentials; and improvements in income levels and living conditions in the vicinity of the projects.
The overall assessment of the effectiveness of targeting was positive. For example, 93 percent of the beneficiaries reported that literacy training had made their daily lives easier, and 90 percent of the beneficiaries of the Public Works Program reported improvements in their income levels, with 90 percent benefiting from temporary employment. The incidence of child labor varied according to location, average dependency per household was very high, and access to electricity was not considered a proxy for welfare. Ninety-five percent of the beneficiaries reported that their self-esteem had improved as a result of their participation in programs supported by the SFD.
Creating Employment Opportunities for Targeted Groups During the first three years of its operation, the SFD contributed significantly to the alleviation of unemployment problems in Egypt. The Public Works Program generated less permanent employment, but benefited the highest number of individuals. The Community Development Program generated the greatest number of both temporary and permanent jobs, but benefited fewer people when compared with the number of beneficiaries of the Public Works Program. It has been estimated that the SFD provides about one-third of the new job opportunities needed for development in Egypt.
Financial Resource Mobilization for the SFD Guaranteeing international financial resources did not pose a problem for the SFD’s first phase, in large measure due to the leadership of the World Bank. Other international donors volunteered to finance the first phase. The second phase was relatively easier to finance, most notably because of the achievements of the first phase, which were documented by numerous auditing missions from donors and the World Bank. Transparency of policies and procedures and their application, the advanced and accurate management information system, and timely financial reports were other factors that contributed to securing financial support from donors for the second phase.
Financial Resources Mobilization for Social Funds 165 Planning and developing programs and subprojects that impact the effectiveness of a social fund can be inhibited by the opportune or inopportune disbursement of funds, as well as by the predictability or uncertainty surrounding the steadfastness of funding. In principle, financial support from the national budgets, regardless of their size, is an indicator of a government’s commitment to a social fund.
In the case of Egypt, the government doubled its contribution in the second phase, a clear indication of its satisfaction with the performance of the SFD, as well as a signal of its continued support. This signal is important to the international donors and their constituencies.
SFD budgets entail large sums of money from national and international contributions. These funds must be disbursed to achieve the goals of the programs. The challenge is to disburse the
funds, provided that three prerequisites are satisfied:
• The funds should reach only those who are targeted beneficiaries and who deserve them.
• They should be disbursed via agencies with experience in dispensing funds at reasonable cost and through available outlets.
• The funds must be accounted for and, in the case of loans, be reimbursed by the beneficiaries.
Synchronizing the receipt of funds from donors with the disbursement of funds to intermediary implementing agencies often poses a problem, especially in the case of large projects, such as public works programs or health projects that require sizable amounts of funding.
Another problem is monitoring disbursement of funds from intermediary agencies to beneficiaries to ensure that the intermediaries are implementing projects effectively and to ensure that all the funds have reached the ultimate beneficiaries as scheduled. It is not common practice for commercial banks to lend to the poor who have no collateral to guarantee their loans.
This is a dilemma that the SFD is still grappling with: how to balance the requirements of commercial intermediaries so that they can assist needy individuals for whom social funds were set up in the first place.
Issues for the Future Considerations for the future of the SFD include the problem of its financial dependency on donor agencies and the discrepancy between the objectives of these donors and the government of Egypt. These are the same problems faced by all social funds in some measure.
The Dependency Syndrome Social funds are generally supported by international donor agencies through grants and soft loans initially for about three years, with the expectation that emergency assistance will not be warranted thereafter. Experience shows that the success of the first phases of the social funds normally leads to a replenishment of funds for the second and even the third phases to transition the social funds from emergency to long-term objectives and to expand program coverage.
As the people in the country become accustomed to the funds, local governments use these resources to supplement their budgets, and the social funds themselves are transformed into permanent quasi-government structures. This scenario creates a perception of indefinite dependency on international financing agencies, which risks structural adjustment programs by postponing the implementation of much needed structural reforms.
These risks can be managed by establishing the duration for each phase of the social fund with no guarantee of an extension unless the donor community gives the fund meticulous performance reviews and a plan is implemented to phase out the fund’s activities.
Donors should also appreciate that structural adjustments are not a panacea for all economic woes and that it is therefore unrealistic to expect a social fund to solve structural, social, and economic problems.
166 Original Workshop Papers The Lack of Congruence between Goals of Donors and Borrower Countries A lack of congruity in the goals of the national governments and of the donors can result in complex conflicts, especially when numerous donors support a social fund, each with its own perspective and priorities for assistance. The SFD avoided many of these conflicts through intense negotiations, which led to agreements with bilateral and multilateral agencies that gave the SFD’s management wide latitude in the allocation of resources within broadly defined objectives. The SFD, on the other hand, gained the trust of donors by adopting refined and accurate accounting procedures to generate reports to their satisfaction. Site visits were arranged on short notice to show donors that all their procedures were being followed scrupulously. It was ultimately the transparency of operations and procedures, the accuracy of information provided, effective reporting mechanisms, and the autonomous organizational structure of the SFD that helped minimize incongruence between donors’ goals, as well as those of the government of Egypt.
Social Funds: An Expanded NGO Critique by Jane Covey, Executive Director, and Tim Abbott, Research Assistant, Institute for Development Research, United States Foreword In order to understand better the role of social funds in social policy reform, how they work, and whether they offer meaningful opportunities for stakeholder participation, this paper seeks an expanded definition of those key characteristics that constitute a social fund. It reviews the development of social funds from their inception as emergency relief measures to mediumterm instruments of social development. The assumptions that guide the activities relating to social funds are also questioned from the nongovernmental (NGO) perspective. These critiques and the data available on individual social funds may provide a clearer vision of the constraints and resources under which social funds operate and may indicate possible directions for policy dialogue and change. Due to resource constraints, the scope of this paper is limited to World Bank-sponsored social funds, although those initiated by the Inter-American Development Bank in Latin America and the Caribbean are of equal interest to NGOs.
During the last decade, social funds have emerged in an increasing number of developing nations as a decisive instrument of social policy. A number of stakeholders are keenly interested in social funds’ development. The World Bank envisions social funds as an efficient response to negative effects of structural adjustment in borrower nations, with the added advantage of generating visible benefits. As intermediary financing institutions with decentralized delivery systems, social funds are more flexible than most regular, bureaucratic structures and can fund projects more rapidly, prompting some government ministries to investigate and even adopt strategies pertaining to social funds. Civil society and NGOs look to social funds as funding mechanisms that focus on the needs of the poor and that actively solicit the participation of local interest groups in microproject planning and implementation. The most optimistic scenarios envision local communities receiving social funds’ financing for small-scale projects that they propose themselves, resulting in beneficiary ownership and greater sustainability.
Much like the parable of the blind men and the elephant, social funds represent different things to different stakeholders, yet often the innovative qualities that make the concept of social funds attractive to so many groups are either of low priority or absent in existing social funds.
Much of the World Bank’s literature on social funds refers to general, defining characteristics of social funds, despite the fact that individual social funds differ widely in both form and content.
While some funds, such as Zambia’s social funds, actively seek to increase community participation, others work only with government contractors. The macrodesigns and the priorities involving social funds vary according to country-specific constraints—political, social, and economic— as well as the capacities of both governmental and nongovernmental institutions. Although 168 Original Workshop Papers individual social funds are designed with well-defined goals and strategies, NGOs express concern that the priorities of the designers may not be those of the poor in beneficiary communities.
Structural Adjustment and Its Effects An economic development model that equates growth with increasing national assets and considers social expenditures nonproductive has guided the World Bank for most of its history.