«Social Funds and Reaching Proceedings from an international workshop organized by the Poor The World Bank and Experiences and AFRICATIP La Red Social de ...»
Typical Bank policies—establishing market-driven economies, privatizing state-run industries, and removing government subsidies from protected sectors—frequently neglect their social costs. When structural adjustment became a precondition of debt restructuring and continued aid disbursements in the early 1980s, cuts in low-cost housing, health, education, and social welfare had severe social consequences for the poor in borrower nations. In the well-documented case of Bolivia, privatizing the state-run mining company entailed massive layoffs that cost more than 20,000 families their primary sources of income. The process of curbing inflation and making Bolivia more attractive to transnational investors devastated entire communities.
Many NGOs have long asserted that sustainable growth in the developing world is only possible if the basic needs of vulnerable populations are met. Critics of adjustment claim that its impact on the poorest social sectors and significant contribution to the widening gap between rich and poor outweigh the benefits of stabilizing developing economies. The foundation of World Bank development theory remains rooted in establishing export-oriented, market-driven economies, increasing national assets, privatizing state-run industries, and removing government subsidies from protected economic sectors. Over the past few years, however, the Bank has acknowledged that the results of adjustment policies have been unsatisfactory. A growing body of documentary evidence from the World Bank’s own internal evaluations underscores the need to mitigate the adverse effects of structural adjustment. Addressing the October 1995 meeting of the Nongovernmental Organizations Working Group on the World Bank, Bank President Wolfensohn indicated that he is happy to reassess structural adjustment, but some sort of economic planning is needed to tackle inflation and inequitable distribution (NGO–World Bank Committee Meeting, Washington, D.C., October 23, 1995).
Social Investment Funds and Macroeconomic and Social policy Social funds started as emergency relief measures and were intended as temporary institutions. But just as structural adjustment programs are not a quick economic fix and have evolved into longer term features of national development, so are social funds used over a long term to support development in the social sectors and facilitate poverty reduction. What originally was a short-term response to economic crisis evolved into an instrument for longer term, social-economic development.
Bank promotion of social funds does not represent a fundamental change in position away from structural adjustment; rather, social funds are instruments of social policy that support adjustment strategies. Some critics hold that the primary utility of social funds is to make structural adjustment more politically palatable. Others contend that as long as structural adjustment policies continue to exacerbate poverty and create newly poor groups, the beneficial effects of social funds projects will be undermined. Finally, critics worry about the erosion of universal social sector services, such as primary education, in countries undergoing structural adjustment, and warn that social funds should not be seen as an adequate instrument of social policy for the 1990s. Additional measures must be taken to reverse the effects of the disinvestment in the social sector of the late 1980s and early 1990s.
delivered. The World Bank defines a social fund as a mechanism through which resources are channeled, according to predetermined selection criteria, to demand-driven subprojects proposed by public, private, or voluntary, formal or informal organizations.
Most social funds appraise projects for funding using strict selection criteria, supervise their implementation, and monitor their effectiveness. According to Bank evaluations, a qualified microproject should be relevant to community needs and foster a commitment to sustain activities beyond the life of the fund. Instead of fund managers predesigning and implementing projects, a wide range of stakeholders submit proposals. Significantly for NGOs, applications for funding are usually restricted to government agencies. In theory, the demand-driven nature of social funds represents a funding window for NGOs and other community representatives who, because the World Bank makes loans exclusively to governments, would otherwise not be eligible for direct funding.
Objectives and priorities continue to evolve over time, but the three general aims of social
• To mitigate costs associated with recession and structural adjustment
• To improve living conditions by rapidly providing basic social services
• To enhance and strengthen decentralized delivery systems by supporting both governmental and nongovernmental organizations that are responsive to community needs.
The first two objectives reflect the reactive nature of the early emergency funds, while the third holds the most promise for social capital investment over the long term.
The evolving guidelines, priorities, and criteria of social funds include a number of measures designed to make project activities more relevant and sustainable. Depending on the country-specific conditions they are designed to address, funds may place more emphasis on some
of these objectives than on others, but the following goals generally apply to most of them:
• Attracting substantial foreign funding and creating a workable channel for funneling large quantities of foreign and central government funds to small projects. The Bolivian Emergency Social Fund was particularly successful in this area.
• Increasing the participation of beneficiaries in cost-sharing. In lieu of providing additional funds, local contributions often take the form of labor.
• Heightening beneficiary participation in identification and implementation of microprojects.
• Providing funding to local institutions, such as community-based groups, NGOs, and local governments in a more flexible, transparent, and rapid manner. The Bank currently estimates that between 15 and 20 percent of resources involving social funds flow through NGOs.
• Improving the technical and institutional capacities of local organizations.
• Ensuring that the poorest sectors of the population benefit from and participate in social funds-sponsored projects.
In addition, social funds sometimes create temporary employment activities. The Senegal Agence d’Exécution des Travaux d’Intérêt Public contre le Sous-Emploi (Agency for the Execution of Public Interest Works Against Unemployment, or AGETIP), for example, is primarily a response to widespread urban unemployment. Social funds also can be used to build political support for economic adjustment programs, although some critics express concern that funds may have been used to finance government favors.
The most far-reaching effect of the first social fund, the Bolivian Emergency Social Fund, was that it provided the impetus for the World Bank and other agencies to experiment with new kinds of projects concerned with the social costs of economic crisis and adjustment. Bank evaluators considered its qualities of flexibility, learning by doing, and focusing on small-scale, technologically simple projects worth replicating in future social funds. Streaming from Bolivia’s experience, a number of social funds currently in operation are autonomous government structures reporting directly to the borrowing country’s president, while others act as private associations contracted by the government to plan and implement services.
170 Original Workshop Papers An Examination of Key Social Funds Characteristics Social funds studies by World Bank evaluators tend to focus on “lessons learned,” judging social funds by how effectively they meet their stated goals and principal objectives, rather than by whether these aims are the most responsive to genuine beneficiary needs. As long as social funds meet their predefined goals, the World Bank considers their flexibility an asset and is less concerned by variations between the macrodesigns of individual social funds. Others in the NGO community view such “ends/means” justifications with concern (NGO–World Bank Committee Meeting, Washington, D.C., October 23, 1995). They claim social funds that do not conform to their own defining criteria may preclude meaningful beneficiary participation, a key characteristic that makes social funds attractive to NGOs.
In an effort to isolate the qualities that are essential components of social funds and inherent to their definition, this section explores those attributes that the Bank ascribes to social funds in general. In this way, individual social funds may be assessed, not only by whether they meet their specific goals, but also at a more fundamental level, by whether they meet the definition of social funds. This is a significant consideration, because available evidence suggests that a fund lacking any of these key characteristics might meet its specific objectives, yet still preclude meaningful stakeholder participation and fail to address the genuine needs of the poor. The following sections examine institutional autonomy, the demand-driven nature of project proposals, and broad stakeholder participation as key characteristics of social funds.
Autonomy Social funds are frequently created as new agencies within a host government, enjoying varying degrees of administrative bureaucratic autonomy from regular, ministerial structures. Social funds are often more effective and flexible when they are free from government procurement procedures and can offer private sector salaries to their staffs. A recent World Bank report stresses that political and institutional autonomy is critical to maintaining consistent, transparent, and objective criteria for allocating project funds. The research contends that from the outset, autonomy has been an important component of many Latin America social funds, but has been a more recent development in Africa. In part, this may be due to the success of the Bolivian Emergency Social Fund, which influenced a core of Bank personnel who now specialize in social funds and move from project to project, taking their original model with them.
This study identifies four components of social funds’ institutional autonomy: (a) legal status, (b) the legal authority to approve projects, (c) exemptions from civil service salary schedules, and (d) exemptions from the government’s procurement and disbursement schedules.
The choice to locate a social fund within a government ministry or to create a separate entity seems to be made by fund administrators for regional as well as institutional reasons. For example, regional World Bank staff in both Sao Tome and Principe and in Guinea were against new bureaucracies outside centralized governmental control. In Egypt’s case, the government itself was reluctant to coordinate with nongovernmental and private sector organizations.
Social funds’ autonomy can still be high when the fund resides in a government ministry, as in the case of Zambia, as long as political authorities understand the need for the fund’s autonomy and commit to it. As a general rule, however, a higher degree of institutional autonomy is usually achieved when the fund exists separately from regular government structures.
Social funds’ political autonomy is a concern of Bank managers and NGOs alike. Independent analysis of the social funds of Sri Lanka and El Salvador, for example, points to the vulnerability of social funds to political manipulation. In Sri Lanka, the concern centered on the use of a social fund, the Janasaviya Trust Fund, for political patronage. In 1995, El Salvador’s president appointed a close political ally, the head of the National Secretariat for Reconstruction (SRN), to head the social fund. Before the end of the year, actions to merge the social funds with Social Funds: An Expanded NGO Critique 171 the SRN led to social fund employee strikes and an uneasy standoff as they contested the reasons for reorganization. It was widely believed that the ruling party sought this merger to control all development funds before national elections. The relationship of donors to national governments makes intervention to prevent or correct such occurrences delicate and complex.
NGOs contend that if measures such as stakeholder participation were mandated features of social funds, as well as governance at both national and local levels, stronger public accountability mechanisms would help protect the political autonomy of social funds.
Demand-Driven Projects The demand-driven aspect of social funds also seems central to their definition, and a key quality distinguishing many social funds from similar programs. Demand-driven means that a social fund relies on outside organizations, both governmental and nongovernmental, to propose projects for funding. A social funds microproject is ideally generated by stakeholders, with funding granted to those proposals meeting specific, preestablished criteria. This characteristic distinguishes social funds from social action programs, used as multisectoral investment projects in African countries. Project components of social action programs are designed upfront by social action programs development professionals within the program. The demand-driven nature of social funds is crucial to a capacity-building agenda that fosters stakeholder participation by local institutions and NGOs. Because they solicit proposals from many stakeholders, social funds have the potential to fund projects that address genuine community needs.
The demand-driven nature of a social fund is an essential, defining characteristic; however some social funds, such as the Sao Tome and Principe Social Infrastructure Fund, dropped their demand-driven mandate and instead preappraised a set of projects to meet specific basic needs.
According to Khadiagala’s research, Sao Tome ranks among the lowest of the African social funds in both autonomy and demand-based proposals; Bank appraisals stress that while not in ideal condition, the operation of the Sao Tome fund depends on adapting to a country-specific reality, where local institutions are either nonexistent or have an extremely limited capacity.
Such deviation from the intrinsic definition of a social fund, however, calls into question the overall purpose of Sao Tome’s fund and limits its goals to providing services rapidly rather than to enhancing local capacities.
There is a significant correlation between social funds’ autonomy and demand-driven approaches. The first Bolivian Emergency Social Fund provided a model for other autonomous, demand-driven social funds in Guatemala, Honduras, and Nicaragua. There are a few noteworthy exceptions. Zambia’s Micro Projects Unit is contained within the finance ministry, but retains control over demand-driven project selection. The Senegal AGETIP, considered by the Bank to be an autonomous institution, until recently would accept proposals only from government ministries and municipalities. Excluding nongovernmental participants from submitting projects in this case meant that the fund failed to increase service delivery to traditionally marginalized groups. It is plausible that funds lacking community-based, demand-driven project proposals will fail to enhance and strengthen decentralized delivery systems—one of their principal aims. Although more research in this area is needed, some of the Bank’s own evaluations support a link between increases in social funds’ institutional autonomy and higher instances of demand-driven function.