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FINANCIAL WATCH:How efficient are social funds in addressing poverty reduction
2005-09-14 07:59:45
By Mireny John
Social funds were first introduced by the World Bank in the 1980s to address the social and economic crises then afflicting Latin America.
Government layoffs and budgetary setbacks aggravated high unemployment and poverty and depressed the already unstable economic situation.
Social funds were then implemented to mitigate the negative impact of structural adjustment programmes on the poor.
They were, and continue, to be used to respond to emergency situations such as natural disasters, economic crises or conflict.
In Africa, the first social funds introduced in 1991, were aimed at poverty and human development. The Tanzania Social Action Fund (TASAF) is one of such products.
Since then, social funds have targeted risk reduction, poverty reduction, employment creation, infrastructure development and decentralization modeling.
We have witnessed in Tanzania the emergence of similar social funds, although not funded by the World Bank, but almost working on the same model.
Social funds, also known as Social Investment Funds, Social Action Programmes and Social Emergency Funds, are investment mechanisms by which resources are channelled into local development projects.
The projects are chosen by private or community groups according to specific predetermined criteria for the development of their area. This approach emphasizes local participation for poverty reduction and sustainable livelihood improvements.
Participatory methods are used to empower marginalized groups by giving them a voice in the decision making process and facilitating community representation in local government.
Social funds are considered an apt approach to encourage the participatory and decentralization process, through its
focus on building local and community capacity to move people out of poverty.
The basic premise of a social fund is to supervise and appraise project design and implementation; it does not, however, implement or propose specific projects.
Funds are channeled towards sanitation works, education, health care and infrastructure to manage the social and economic risks of natural disasters, conflict or fiscal crises, all of which have deep bearing in poor areas.
Typically, social funds are financing mechanisms used for community development.
They are not considered direct sources of investment, but ’’second tier’’ agencies used to finance, appraise and supervise investment carried out by NGOs (non-governmental organizations), local governments and line ministries.
Funds contribute to increased input by the poor, empowering decision-making and the ability to create community groups.
Further, funds can be used as examples of how partnerships between the community and [local] government can result in better poverty targeting and demand driven development projects.
The key advantages of social funds in alleviating poverty are their size, their flexibility and their relationship with local government.
By focusing on infrastructure and employment, training and productive projects, they encourage a demand-driven, participatory approach to project selection.
Social funds target the poor by building social and economic capital, delivering services and projects in a decentralized, cost effective structure. Some funds focus on specific marginalized groups and encourage their input and participation in the project cycle.
This process enables them to improve their livelihoods, contribute to their community and develop a permanent voice to influence their futures.
The degree of success is a culmination of effective targeting, needs based projects and proper implementation and management.
Ownership, participation, sustainability and partnerships between local governments and communities are also indicators of social fund success. Yet many social funds are criticized for their focus on short-term provision rather than long-term sustainability.
Other critics suggest social funds are more likely to improve non-poor living standards than those of the poorest because of ineffective targeting practices.
Aware of such criticisms, the World Bank carried out a research on ’’Evaluating Social Funds: A Cross-Country of Community Investments’’, World Bank Regional and Sectoral Studies, 2004, with a focus on how such funds could best reach the targeted poor.
Strategies for targeting poor, such as poverty maps, tailored menus, and promotion campaigns exhibit a more progressive distribution of social funds investments.
That means, there has to be enhanced pro-activity in terms of promoting social funds’ availability in poor communities and setting targets for investments in poor areas.
The danger of using more open menus instead of the restricted one may allow better-off households and communities to capture the benefits.
On the other hand, the use of more restricted menus could constrain the freedom of choice by communities.
The introduction of data on income levels as a screening criterion has the potential of circumventing leakage of the benefits to non-targeted rich communities.
In addition, the study reveals that there is a need to exploit complementarities among social funds, demand-side interventions, and more targeted social assistance.
It cites an example of social fund intervention that could complement a demand-side subsidy enabling the very poor parents send their children to schools as well as support their nutritional supplements through health centres.
In fact, access to quality supply-side investments are said by the study to be the prerequisite to the provision of more effective demand-side approaches, ’’with the latter being able to directly target resources to households or individuals, complementing the former’s provision of broad community benefits’’.
Some means of improving the poverty maps could be worth exploring, particularly the inter-district targeting in more heterogeneous urban areas.
A greater geographical disaggregation to engaging community members could help identifying the poorer beneficiaries.
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