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Do social funds reach the poor?
2006-06-04 15:20:35
By Rayner Ngonji
Social funds represent a departure from traditional approaches to development led by the central government, according to a recent report by ’Outreach Development’ magazine on donor funding practices and their impact.
It says social funds encourage communities and local institutions to take the lead in identifying and carrying out small-scale investments, generally in social infrastructure such as health clinics and water and sanitation systems.
Social Funds appraise, finance and supervise these grants, which then may be managed by a wide range of actors including local governments, NGOs, ministries, community groups, and local project committees.
The initiative bear its name in Bolivia where a little over a decade ago, social funds have now absorbed close to US$ 10 billion in foreign and domestic financing globally, and represent international financial institutions most comprehensive experience with community led development initiatives.
Although conceived to address the social costs of economic adjustment, social funds have more recently been used as a tool for reaching populations that public investment programs have historically undeserved. Most social funds now explicitly aim to reach poor communities, though they do not target specific households.
Most engage in geographical targeting, with preference for proposals from poorer communities or national allocation targets to poorer areas based on poverty maps.
Many also try to limit the types of programs financed to menus of sub-projects likely to be needed by the poor and to have positive welfare impacts.
Despite the popularity of social funds, their effectiveness as a mechanism for reaching poor populations and improving their welfare has remained largely unmeasured and hotly debated.
Many have questioned social funds’ ability to reach poor communities and households given their approach that relies on demand being generated from communities, while other debates have focused on their institution role and influence over central and local governments, the report says.
A cross-country analysis of Community Investments that represents the first attempt to conduct a systematic, cross country impact evaluation of social funds using household and other types of survey data and accepted evaluation methodologies.
The evaluations were conducted of social funds in Armenia, Bolivia, Honduras, Nicaragua, Peru and Zambia where their investments had been concentrated in education, health, water and sanitation sub-projects, the report points out.
Each evaluation reviewed the social fund’s poverty targeting, sustainability, welfare impacts, and costs.
Some of the findings were that social funds are effective at reaching the poor and extremely poor communities and households. To assess whether social funds reach poor communities, the six country study reviewed the distribution of social fund investments over time and across communities ranked by their poverty status.
The data show that geographic distribution of social fund expenditures was progressive in all countries studied, with poor districts receiving more per capita than wealthier districts, and the very poorest districts receiving shares exceeding their shares of the population. Geographic targeting has improved over time in all six social funds.
The high levels of investment in some of the poorest areas refute the idea that such communities are systematically incapable of accessing resources from demand driven programs.
Looking at household level targeting results, the study used household survey data to measure income or consumption levels of a representative sample of social funds beneficiaries then compared their poverty rates to national poverty distributions based on the same metric.
The study found that in most cases the overall distribution of resources at the household level was mildly progressive, including among the very poorest.
Yet, there was considerable variation across countries, reflecting the different policy orientation of the six social funds in the sample which ranged from largely urban post earthquake reconstruction in Armenia to a concentration on poorer areas by the four Latin American social funds.
Within communities, social fund investments disproportionately reached poorer households, reflecting a demand from poorer house holds even within mixed income communities.
Targeting results also varied considerably by type of sub-project. Across countries, positive discrimination towards poor households was best reached by latrine and health projects and reasonably reached by education and water projects, while sewerage projects clearly benefited the better off.
Finally, comparisons with other programs showed that social funds’ geographic and household targeting generally compared favorably with that of other targeted social programs general social spending and municipal level transfers.
In Peru the social fund had the most pro poor geographic distribution of expenditures among the three programs compared the social fund, another national social infrastructure program (INFES), and a targeted national nutrition program PRONAA).
In 1995 the social fund allocated 20 percent of its resources for educational infrastructure to the poorest district decile, compared with about 8 percent for PRONAA and 7 percent for INFES.
In Bolivia where the social fund now serves as a co-financing agent to municipal governments, the social fund had a pro-poor expenditure pattern, while general municipal transfers were concentrated in the better off municipalities.
The poorest municipalities, accounting for 42 percent of Bolivia’s population, received 63 percent of social fund expenditures in 1993 – 99 but only 22 percent of total municipal expenditures in 1996.
In Armenia, several social programs including child allowances and disability benefits were better targeted than social fund investments, though other programs such as student stipends and humanitarian aid were less well targeted.
Beyond results on poverty targeting, the research showed that utilization increased following the social fund financed investments in infrastructure.
In health centres, increases were often found for overall levels utilization or occasionally concentrated among particular types of services, notably for maternal and infant health care.
This increased utilization translated into a range of improved health outcomes in many, though not all, cases.
In Bolivia, the only country where the evaluation was able to assess the social fund’s impact on mortality, the social fund investment resulted in large, statistically significant reductions in infant and child mortality of close to 50 percent over a 4 year period in communities with social communities that did not benefit from social fund projects.
Positive health outcomes were also found for investments in water and sanitation across a range of countries and types of investments.
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