52 * . PSP Discussion Paper Series 20840 Social Funds: Strengths, Weaknesses, and Conditions for Success Lynn S. Khadiagala January 1995 Poverty and Social Policy Deparment Human Capital Development The World Bank PSP Discussion Papers reflect work in progress. They are intended to make lessons emerging from the current work program available to operational staff quickly and easily, as well as to stimulate discussion and comment. They also serve as the building blocks for subsequent policy and best practice papers. The views expressed here are those of the authors and should not be attributed to the World Bank or its Board of Executive Directors or the countries they represent. SOCIAL FUNDS: STRENGTHS, WEAKNESSES, AND CONDITIONS FOR SUCCESS Contents CONTENTS ................................................... i ABSTRACT .............................................. vi ACKNO WLEDGEM S .............................................. vii ACRONYMS .............................................. vii INTRODUCTION. A. Establishng a role for social funds. B. Orania1cofhe report ....................... 2 C. Ihe sapnle ...............................................3 L PA.E NS AND TRbDS IN aNSTlTUxONAL DS ..............................................D..5 . SOal fids as ontere ..............................................5 B. Ihenipal and pocl aut.............................................. n. SETTING AND MEIiNG INE OBIECTOVES .DESIG.................... ....................9 B. ina fdshe ay ofarsocia s.vics1 2.............................................. 12 C. Financing cdit program ............................................. . 13 D. Icrasing and divifg institutioal capacity ............................................. 14 iii m. CHALLENGES FACING SOCIAL FUNDS ............................................................. 20 A. Limntations to tagefing trough a social fimd .......................................................... 20 B. Financing recurrit costs.22 C. Quality of utoutputs.23 IV. CONCLUSION: STRENGTHS, LIMITATIONS, AND CONDMTIONS FOR SUCCESS ............... 25 A. Te sttmgths of social fimds ............................................................. 25 B. Te limitations of social fimds ............................................................ 26 C. Factors that conbute to a successful social fund ........................ ................................... 27 REFERENCES ............................................................. 29 iv List of Tables TABLE 1. Basic Data m Social Funds ............................................................... 4 TABLE 2. Degrees of Istitutional Automy and the Use of Danand-Based Appraches ............. ............. 7 TABLE 3. Sector lnvstm t as a Share of Total Sub-Project Costs as of June 1993 (In Percent) ............ 10 TABLE 4. Magntde and Costs of Emplomit Crated in Bolivia, Hndwras, Nicagu and Sae ............................................................... 11 TABLE 5. Distnibution of Project F iancig by Type of Sponsormg Orpaizt in Bolivia andHondras ............................................................... 16 v Abstract Socal fimds have become an important mechanm for channelin government and donor funds. They are quasi-financial mter iaies iat finance projects in multiple sectors and mobilize and disburse finds quiddy to community ornits, ncm-governental organiaons, and government ageces. Their snupicity, flexibilty, and low cost have contrlbuted to their appeal to goverments undeakmg econmic and political refons. Socil fimds help to cushion the poor durmg the refbrm peiod by chaneli resources to projects thad directly provide benefits to low-mcore conmunties. This paper exainmes the institutional desi, objectives, and accom ls of soci finds in elevm countries m Latin America, Sub-Saharan Afiica, and Southeast Asia to detemi what types of objectives social finds can and cannot achieve and wha institinal anangnents withm a counry best fcilitate a fund's meing those objectives. As more and more governments have set up socil fimds, the body of litear on social funds has prolffrated as welL Much of this literature has focused on one region rather than taldug a more global, cmss-regmal approach. lle advantage of a global approach is that t better captures the institutional varato amog social fimds that bave emeged because of difces m social, political, and economic context. his study suggests that the insutinal fiatures of social fiunds are the lincpin to u ng what types of objectives social fimds can adive and what thir short- and lmog4erm roles might be. Social funds dearly have a role to play in econouc developet stategies but to use then effectvly, polimaks must be cognizant of teir stnths and weknss and the conditicos that facilitate or hinder tweir pfnan . By fcsing on teir instituonal dcarctristics, this paper attempts to offer insights into the implications of di&ft instioal designs for the performance of social fiuns. Ihe resuk is a set of core principles around which soci fimds should be organized. But it is critical as well to undertand that each of these principles getes both stengtgs and weaknsses. Ihis study attempts to illuminate these aspects and their implicatis for the objectis and roles of social funds. is paper viws the eprc with social fimds upported by the World Bank. It highi successe and failes and provides a paica guide for the desig and implemetation of fiture social finds. The paper is divided into four scti the irst lays out fte Wtnal dcaraistics of social fimds and ther short- and log-nm objeciv; the seond rmews the aMxences of social finds to date in achiing thidr specific goals; te third presents t persistent chalnges ficing socl fiuds, policymakers and dnors; and the fourth acniudes with a smmy of the stegts and weaknesses of social finds and reconuneds cnditic s tat facltate thir qations. vi Acknowledgements I wouwld lile to thank Ha Ribe fr ha invaluable guidance mn this projecL I would also like to exq,ess my apreciaion to Steen Jorgasen, Mamy Jrme, Carol Graham, Saniya Caz,n o, David Steel, Alexd Mrc, and Jula va Dcxea for radn and cmnng on an earlier dr4 to Melinda Salata for editig the par, and to Maria Paz Felx for tmical assista. Not to be left out are the Bak staff who work on social finds. They provided craical docmit and insights into dteir projects and I apprecite, vely mch tbhir coopeation m ihis mdeavor. vii Acronyms Countic and Sodal Funds Bolivia FzE:m cy Social Fund (ESF) Boivia Social Invstmet Fund (SIF) Egypt Social Fund fir D cveopmen (SFD) Guatuala Social Invesmnt Fund (SIF) Guina Socio-Fxonoin Delopment Support Piroject (SEDSP) Guyana Soca nact Amdoraim Program and Agency (SMP) Honduras Social lmvestnct Fund (FHIS) Niaaa Social 1nemt Fund (SIF) Sao Toxne & Pnincipe Social and 1frastmcr Fund (SI) Senegal Ag4mce dtx6wtion des TrAvux d1at6t& Public cote le Sous-Emnloi (AGETIP) Sri Lanka Janasaviya Tnst Fund JTF) Zambia Social Rcwvcay Fund (SRF) viii SOCIAL FUNDS: STRENGTHS, WEAKNESSES, AND CONDITIONS FOR SUCCESS Introduction A Estblishing a role for social funds Soal fimds are quasi-finacial intermiaries that finance projects m mulple sators, mobilize fuds fim both doo an govmnt budgets, and gway aim to disburse te fiuds qiidy to comunity orgaizaiosns, _ I oraniatims (NGOs), and govenmcnt ageces. Soci finds exist in Lin Amrica, Afica, Asia, and now, Eastern Europe. Their simplicity, flexnbilty, and low cost as well as thir ability to genate visible benefits rapidly have coributed to their appeal to goverments undertaking comic and pol refi rms. Goeme have used social fimds to cushion the poor during the nform period, rcg thc ossbly tha political resistance deail reforms. Socal fimds have also aimed to increasei communty in development effrs and to improve the technical and mstitutial capacity of local-level organ s nm both the public and private sectors. This paper examines the erences of social funds mI 11 couties. The purpose was to ascmtai what types of objecfives govmmts set for social fimds and the fimds' abiLhty to achive these objectivs under difit coaditions. Directly relaed was the question of what types of instutioal arrangniets best sported the various objecives. One of he iking waraeis of cl fimds is tir msunal fiexiblir: countries can employ social fimds to serve diaif t puWposes depndig on thir sociat, political and economi needs. In Seneal ihe tal objective has been to stigte te capacty of the private sector to deliver same vital public goods and servces. In Zambia the socal find aims to help cmmiunties and local governmns develop thir own istutoal and tecncal capacity. By wovkig with oaanizims includig community grps, privaesc firms, NGOs, and public-sector aecis, social fimds can help to devolve respsibility to local-level organzatis. This instit l febil also eabls a social fiud to sbift goals and stategies over tfme when conditions warant In Bolivia, thead of the econmicm argercy allowed the goverment to exchange its emphasis On rapidly prvidig Utpory ep t oppouniti for a greater focus on mi asig the delivery of socal goods and sevs. In Senel te Agnce dExcubo des Travaux dUlt& Public conte le Sous-Emplk (AGETIP) is anxdg lhe soope of ito activi by wordng with mmunty groups and NGOs. Mbe isuiional feibi of social fiuds, how, does net xempt govemnts and donors from establishig dar gols for therm wihin the brader couary stratgy. An ad hoc approach may reduce dte inMMv to govamnmt to nyV t aitil publicsor refo or to burden successful social fimds with task that ful into tbe jurisdiction of ceanml ministrie and public agecies. The fimds operate with lmied financial aid human resources and wM not sove t late a and peristent iomic and social problms that callenge momt developing cowtries today. But, hy dearly have a role to play in eonic developmnt stratgs. If poiMaks are going to mploy soci funds effiv ly, e mast be cogiznt of th srgths and wekns of the finds and the conditions ta sfliate or hi perfDfmance. The study addresses scine essntl questions that policyinakers and doos should consider. First, based on the eprnc of odher comtries, what objectives can govmmns and donors expect social fimds to auieve? Conversly, what can social funds not accomplish? Secod, given the insutnl qualties and opeatig pmcedures of social finds, what ar their suigts and weaknesses? What conditios are critical for social finds to achieve their objectives? To addes these quests, this study eamies the insttutional design, objecves, an accompishmets of social fimds m Lain Ameica, Sub-Salaran Afiica, and Souteast Asia' lTe instituaional fiatires of social finds are the lincipin to un dig what tyes of objectives social funids can achieve and what eir short- and kngterm rles might be. Coumies have adopted dirent institutional variations whiw o5r sone insits into the mplicaos of institmal desi fDr the pefmance of soial fimds. Ererging out of the experiences to date is a set of core priaciples amod which social fimds should be organized. But it is critical as well to ustand that each ofthese priniples geAtes bth stngths and weknse. The inte of this study is to iLlmate tese aspects of socil fimds and their Implications for the objectives and roles of social fids. B. Organizaion of the ,port 1h repoft is divided ito four seos. Part one lays out the socal finds' institutional aracteists and their vamus short- and king-nm objoctives. Expeences with differn iostitu l desigs suggest hat ctain principles are key to a soci Wids abity to carry out its objectives. Part two rviw the experiences of social finds to date im aevg thir speific goaLs. While socal fimds have bee« able toprxie significant amni of tmpoary fMplomnt and reabiltte or build public infiastrucure m the process, ty have encouterd difficults whm punsug ksas discte objectives. The third section exanines fr persistent allenges facing social fimds, poiymake and dmnors. In codusion, the fourh secton sunanizes the stegts and weaknse of social fimds and idntifies the canditions that inhbit or facilitate their oprations. This report is the first phase of a lag, ogoing effort to undestand the role of social funds in economic devepnt statgi, to asceti wha es of objectives social fimds can best achieve, and to miprove ir insitonal deig for meeing fose objectiv . 'llc purpose of the ongoing wcmd phase is to promide specific lssos to Bank sta socil finds staX and couny poysake for miprmvg the desig of social fnids. To accmpipsh tis, we are focusing on t rdated compo t that inuenice th ability of social fimds to ahieve their objectives. FMst, we will iden* the dffnt actors tat participate in socal fimd proects, their functions, roles, and r and their rlaonshi to odw acts. Scond, we wlU examine the prj cycle of the sci find - protio, project idtificatiom and design, appraisal, ftncal mpersvion, mniormg. omiplion, and aAtio By sBin fou from th cmneptal s underyn somal fimds to spcific opeaional nmecbaiuns, we hope to specf more cearly the reationships among concmuc political, and socal condios, istutonal desig, and the ability to fill objecives. 'Tr we veral studies that rvw social funda For an in-dpth analys of the Emergency Social Fund m Bolivia, se Jorgensen el al. (1991). For a conrehensive reviw of social fiuis in Latin America, se World Bank (1994) and for social fimd.s in Afica, wee Marc et aL (1994). Gopal et l.. (1994) review pWcurcncnt and disbursement issues as they mlate to commnmity-based projects. 2 C. The sample The data fr this su were collected in June 1993. Two dors influnced te coce of socal fimds to iclude in the sample. First, a key objective of te sud was to capture the tutional divrsiY Of soci fimds rtherhan to attmpt an exhaust and comple stu of all social finds curraly financed by tx World Bak Seconud, the qmulty, unt, and availability of data varied wily a countries. Ths has resuhod m uneven tratmt among socal finds withi the discuss. Bohva, Hondas, SegaL and Zambia receive more fiequet and in.depth attenton becuse of the greater availability of quantiative data, in th field rpors, and more eeice on the part of tese somal fimds with disburslns to sub- projects. Staff Appraisal Repots itviws with Bank st4 and project files, iding supervisim and consuant repos, provided primary sources of inrhrmatio. Mid-term reviews, where available, provided valuable infmatio n accnlishmi , stregths, and weaknesses of a social fiud. Mid-tem reviews for the Elernc Social Fund (ESF) and the Social lnvesmt Fund (SIF) m Bolivia, the socal fimd in Honduras (km n by its Spanish acoym FHIS), and the AGETIP m SenegaL and two reports on te Zanimn socal fid provxdd valable data Intervew with ts nmange wem very useful in drawg at on to specific con s t at contuibuted to or impeded progress, the underig philosophis guiding the desig ofte social fixd, andte lessons that have bem leard "on the grond.4" lie sample drws o the exnces of 11 countoes m four regios (rable 1). Sane countries, such as Bohvi, Honduras, and Sao Tonm have iniated secd leans or credits t wir social fimds. Bolvia is the only contry tt has undertak two diff t typs of oprata. The first, the Emgenc Social Fund (ESF), was an emagncy opeatio designed to genrt mplnot qo runte rapidy during a period of eariic cnsis and adstnnt. Subsequat to dlosig the ESF, Boivia established a socal fimd tD focus o longer,-term pohicies to reduce povty. Th crdit and loans range in six from te S140.0 milli lan to Egypt to the $5.0 milion credit to Sao Tune (Table 1). Except for Egypt, lan or cret to social fimd are srei mualL The avuAg size ofa loan or credit was $27 millon. Wut Ept inthe sample, tde aver s fills to $20.5 millim Counties have been atrcted to social finds for tihir ravy rapid disbursement sdules (Table 1). On average, these credit or loans ate scheduled to be isbursed wihin fDur years in cotst to the avege of sea years for odir Bank koams or crais. But progrs m disbursg finds varis. Disbrs ts to Boalivia's ESF I and SI I, Hnduras' I;HS I we completed on scheduk. Zambia's SRF is dbursing up ahead of schedule. Bolivias ESF I and Senega's AGETI I took an addilonal year to oepkit. Oqping &6bumements social fiuds in Egypt, Guatemala, Guinea, Guyana, Nicaragua, Senegal (AGEIIP I), and Sn Lanka we all eeiencing at lat a 50 percat lag. Since coting the data for tis uy in June 1993, sne of the social finds have insiutd iqiuti dag. For eample, i June 1993, disuemet of toe Egyp{ social fimd were laig beind sc1hdul due to seval fa . Over the cour af the year, howev, as the social fimd roved many of fr inmpdimat and begn to finm wncenuniy develpmetand public works projects, cedit disbursements hv progressed. In Zambi mund review ad beneficiay ab esm provi&d consrudiv fcack to the staff of the socal find a thy used tD imprve operapo. Tb cangs, howe, do mm akerde main mes and s ofthe study. 3 Table 1. Basic Data on Social Funds Planned Actual IDA/IBRD disb disbursemnt Disburseme Approval credit or loan schedule schedale progessc Social find date ($US millions) (m yearsr (in ) b (in peent) Bolivia, ESF I 6/87 10.0 1.1 1.1 - Bolivia,ESFII 3/88 112.0 2.5 3.3 - Bolivia, SIF I 4/90 20.0 3.3 3.3 - Bolivia, SIF II 6/93 40.0 3.7 - (200) Egypt, SFD 6/91 140.0 5.3 - 60 Guatnala, SIF 11/92 20.0 4.0 - 100 Cufnea, SEDSP 3/89 9.0 5.0 - 61 Guyana, SIMAP 4/92 10.3 3.3 - 59 Honduras, FHIS I 6/92 10.2 2.3 2.3 - Hcdwras, FHIS II 2/91 20.0 2.1 - 14 Nicaagua, SIF 11/92 25.0 2.4 - 60 Sao Tame, SIF I 6/89 5.0 6.7 - (16) Sao Tme, SIF I 6/91 6.0 4.0 - 4 Swapega] AGET]P I 12/89 20.0 2.6 3.5 - Segal, AGEnipII 5/92 39.0 3.5 - 84 Sri Lanka,1TF 4/91 57.5 5.1 - 78 Zanbia, SRF 6191 20.0 5.7 - (40) Planned disbursement schedule is the period fian date of dffecIivess to &rmal closing date as reported in StaffAppraisal Reports. b Only fiv kas be bem fidly disbu lew numbas indicat how many years it actally took to disburse the tire loan c For loans stfill beig disbursed, this cobum indicates w }her disbursents are behnd or ahed of the schedule established in each Staff Appraisal Repor Numbs without parnthse indicate a lag in disbursements while fihse with para s indic that disbursenIs are ahed of schedul. A lag is that share of a loan or credit scheduled but not disb d For example, while 60 percent of Egypt's scheduled disbursant were not rsed, 200 perot of Bolivia's fimds for SI II were released ahead of scheduile. Ihis data was takn from the supevisrcpart available as of Septen*r 1994. res: Statecnt of Developmcnt Cedits or Statanw t of Dcavopnet Loan, July 30, 1993; Staff Appraisl Reports; Supervisin Reports available as of SqAnbe 1994. 4 1. Pattems and Trends in Institutional Design Socal fimds differ fin govemrt ministries and public ag on vto Ley aspects. First, social fimds finance but do not mnkplnet projects. Th1y terre rdly n te oganizins and conrunitiis to propose, plan, and ikplmat projects. Using public and privae orias to initiate, desig and mpmt projec has helped to keep administrati coss lw. Scod, most social finds enjoy s=ne degree of political ad infstitional autmy fri ctral govemmt auhoiy thrby bypassin eing govennt regulan and procedures. Autonmy critical im sevral ways but owe of the hallmafl of socl fimds has been to aocate fimds accordng to preablised criteria Exriece in E Gunea, and Sao Tane, whe autony was eiher m granted or not respected, has led to increased recognin tat prsri the mstitutional and political a tnmy of social fimds is critical to the abilty of social finds to med their o*actives. Wher atmcy is lmw or absent, political actors have greatr opptnties to interfre in the alocati of social fids resources. Ihis is not to my that social fimds costtte a bhoogenous group. The are variaims among countries m the degree and tnpe Of insutol aummty, the types of actors that participate, and the exent to vdh they rly on odler orai to gerate project proposals. A. Social funds as Intewmdlarles As financial ias, social finds amploy the organzatLomal capacity of a variety of pnvate- and public-sector orgaizaios to design and imlement projects. This dectalized approach make social finis dependent o estmg instiuoa capacy in the short run but ideally gives the finds the f9exibility to exloit the divese tdial satregb of difi t acors, to bene fitrm the geographical coverage that mutple orgnizas might be able to pm ide and to finance projects siusin multiple sectors. Social fimds difk, howev, i t reliamce on this approach (Table 2). Boliviaes ESF and the subsequent Bak-finnced social himds a Hiondrs Nicaagopa, and Guamnala have rlied beaviy m odt oranizatns, boh public and privat, and on comiutes to propose, plan, and iniplernit projects. Seegars AGEIIP, which finances public wois proct uses a dmanad-dn approwh but only acpts proj-c prposls from muicplti and coalminiSie 2 Instutna ccity (bOth pic and pvat) at is weak or largy abset semusly cadngs a fincs abilty to m'plemet projects usmg localornzatn. Under thes conditions, a tradeoff emerges betwee meeting social neodsi tbe short m and buldig up the isttiona capacity requied m the ong rum. This was the case in Guinea and Sao T e wie the limi isttiona capacity and the urget need to med snie basic needs R, d the socal fimds to pEeapprise a sd of projets rate than relying o ot}= organizatiis to gome demand fi sorcal fimd financing In Sao Tmne, the social fimd, m consultation withdie am and dnors devoped a st of prorty projet for urban and rural aras. As eseti basic -o ma and indsicl capacity and divarsity mcrase, Sao Tome plans to shif toward smallr- scae projec and eoad the pricaon f cnunity gus and NGOs.3 2 _&bmipamt tDis sudy, Semplh bn moward iNcMptiNGON inWt&eAGEIP PM 3 blaeview, Je 1993. W a*igtoi, D.C.; Ba*4iffi= pt, Femmy 1992. S Ii Iii a~~~~~I I it ~ ~ ~ ~ t illili. I I F~~~~~~~~~~I'II'~~ ; I ~It1 FaI The degree of msutiza and poltca autxny has differed across socal fimds as wel as withi ididual counes over time (Table 2). Whib autonomy has been a cenal feature m Latin American social finds firm the beg , its importance has nse morerecatly amcg Afican social fimds, with the ex ai of the AGETIP model m which amtmmy has always been a prmint feature. In Guinea and Sao Tome, reste amnmg Bank staff to establish new bureaucracies with autonomy from ctal governmn authority rulted m the placament of tese social fimds wihi govenmt ministrie. The resuk m Guinea was to expose the socal fimd to polti pressures to disregard establshed project approval criteia. In Sao Tame, eceive control over ecutive decsion by top poliical officials bampered the abiity ofthe social fimd staffto make and caffy out deciions. Pysical location oftbe social find, however, does not essaily mply greater or leser autom, if poltcal aithorties are ommited to the insti mintry of te social fimd, auoomy is feasible. For example, even tIough the SRF m Zambia resides withm ite Ministy of Fmance, political authonrites are committed to the Unit's autncmny. This icldes usig technical crituia fr project approval and upholding the Unit's exeniptions from government prret and disbursemcnt regulations. Tbe trmd toward polical and insiunl autnOMY fDr social fids has beome increasingl evidt over time, both m iLatin Amrica and Afiica, The exnce m Afiica, especially, has led to a groing awa ssaŁ of the vital conection between autnomy and fimd perxrance. Because poifical interferec impeded imnt of the social fimd, Sao Tome insituted lega changes to ee great inenal control ov the fimrs oprtons. Tte proposed social fimd in Bunmdi, representt of the trend twward geate autmcY, has the legal iss akin to a NGO. Enuring ptwcal and instiutional autonoy has been a major challng m Egypt Governmnt officials control 50 percent of the seat on the Board of Ditors and dt also reaim the most powerid Positon. Interference by politia officials in the project approval procms, combined with a lgstanding rluctance o the part of public officia to coopat with private.sco organi s, has resulted in the diversion of soci fiind monies to govement agnes that may nEt necesarily meet fr prqect criteria of the social fimd7 'ERk-tO.ce rqx. Jul 1992; intvew, hJ 1993, WaAigta., D.C. 7 Table 2. Degees of Ilstitutonal Autcmnv and the Use ofDemand-based Approaces -Highdegme iModerate Lowdegme AUTONOMY Bolivia ESF Zambia Microprojects Guinea SEDSP Unib Bolivia SIF Sao Tome SIF Hlndaras FPHS Egypt SFD Glatemala SIF Niaraga SIF Guyana SNAP Sri Lanka JTF Saegal AGETIP 1, DEMAND-DR1VENd Bolivia ESF Boivia SIF Guinea SEDSP Hondua FHITS Guyana SMAP Sao Tome SIF Guatmala SIF Sri Laika kTF Nicaraga SIF Egypt SFD Zambia SRF Smnegal AGFZIP ŁAntonoi cnsists of dn : 1) leg saus; 2) Vh lea auhoity to approvI projeDs; 3) aMtIM fim cvil sevice salay seikes; 4) ccPtics firm The govarmenes prormxmt and disbw-mstprocedures. b MM Zambian M irs T is loced whin te MiStry Of Fiance but appears to reaia cotol Om its prject seleto proess. r In July 1993, Sao Tone inopoatd lgal coangs to gi e social i m moe atnmy. ' emn-drivm refers to the degree of relinc by th soia fimd om odw orgniaton to initate requsts fir projec financing ' Se I and II accept prject pposals fi mn pl and ctal ministries r, plans to integrate NGOs into AGETIP ratio are unmway. Sesr: StaffAppraisal Reports; inteviews, June 1993, Washington, D.C. 8 11. Setting and Meeting the Objectives Soci fiuds m to reduce poerty by financmg progms tha directly befit t poor. The do so by cating anloymcot adq incme oppoUmites, riabiltting an costructig socia and ecacic infrsue, ipoving and epnding social services, establshing small-scale credi programs, and buding institutional capcity. In addition, effctive social fimds can help build politcal support for economic adjusnimt prgms by increasing accs to basic goods and services. Setting objectives fDr a soca fmd and allocatig its resources across sectors dlepeds partially the econoni and poltical coditis and the insutal and techncal capacity of a county. Same objectives address shortterm social, polta and economic needs, stich as creating temporary anploym opportmitb, while others address logerterm needs, such as builig instunal capacity. Tlis sectim ammmes te objees of soca finds, thi abit to reach te goals, and the facts ha promote or inhibitir t succe. Soca fimds have been most mccessfu i buldig infiastucur, prviding tampoay employmcnk and disbursing fimds rlate quicky. They have be less suessful in genraing demand for social servics and cmd projects. Wbile comunity grups and NGOs are willig to and capable of buding or rchbiitig shoo and health dlinics, ty have shown less capacity to absorb finds for the acmpying services, equipmcn, and supplies. A Crating employment qppormanes Crating emplotnat rapidy is a priy objective of most social finds, especially m mtrie epiencing a sev commic crisis where t risk of widespread social uphmeaval from stuctural adjustment polcies is great, as was dIe ase m Boivia in 1987. Socia finds create e bulk of their employment poruni fr low-icome and unkiled labor by financing labor-intensive pubLic works or nflsftcte proects a For example, i Boivia, t ESF g_ datd 96 pect of is emplymnit t ugh pubfic woir prects.' Infiastruct projes incude buidn or ricabilitating ecnomi and social infrrasucture, such as mrads, bigs schools, heath diises, and odhr public ciies and utilies, such as wate and sanitation sana. Socal fimds i Bolvia (SF) Honduras, Senea, and Zamba each disbursed at la 80 peret of their project fimds to a coabintim of ocial and econmii infiastructure (rable 3). Of the S190.8 milic iested m Bolivia tough te ESF, 88 pmt was ditribted alm6ot evely betw socal and conomi infiastrcture prqects.1 Data for Hmoras do not distinuh b*wm commie and scial iasucue, but o , the FHS afloed 79 peret to infrasucue prcjects, such as coftcftg or rehabilitating wat and seww e nssm and pimary sdus. Snegal mvted by high lvls of Innwpomt in wban waes, has financed inftud projec in he main ur.bn ents as a means of ceating mploymnt oppoqniti while builng _say ifiastuctue Sao Tane, with cxtm y dire i ca sdto and limited tdmcal and istutio capacity, differs fiom the other early social fimds m that it proposed a relatively equ distributo b*wen iuuare and sci srvices. Faced with critial needs in boh tbuidg infastructure nd prvidg socia seics Sao Tones initial projects fbcusod on bilin wate and ectricity infrastructure and prviding textbooas and esseal mndicl drugs. M Tis as md tde cos VW mol AM& fi..h cuMzuminy adfcs lp prct, *m in Zambi. CmmA _ a cm ze their labor to w'psot 'i BoiaESFId%cjeinC=0eionRq.t, DLp. 'BdihPr6EtCwzfiESFkldqxme 1R9p,p 7. 9 Table 3. Sector Invt as a Share of Total Sub-Project Costs as of June 1993' (in e) Elnomic Social Credit Cawnty infa Infi senic schemes Total BoliviaESF I,I 43 44 9 4 100 BoliviaSIFIl - 47 53 - 100 Egypt SFD 13 - 27 60 100 Guyana SIAPC - 54 46 - 100 Guatena SIF 21 49 20 10 100 HondwrasFHISId 79 - 14 7 100 Ncaagua SIF 24 55 21 - 100 SaoTomeSIFI LH 42 11 47 - 100 Senegal AGEF PI 86 14 - - 100 SriTanmkalFd 26 - 34 40 100 Zambia SRF 6 91 0 3 100 Data for Bolivia (F), Egpt, Honduras, Senegal, and Zambia rlect ac t patns as of June 1993. Data for al otih social fimds rdlect planned alocatio as p_setd in Staff Appraisal Reports. Economic ncludes rebabitatg or constucting roads, bridgs, and other public wi, soia infrtucture ncludes schools, health cincs, and day care -s; soca services include payments for sales equipment, and otle supot to scbools and cinics credit refors prmariy tD rotg crSdit s s t pport small-scale Egypes Categories do not fail into h tradital o used h Pulic works and public ht p are clasfied as economic infiastructue cnmmunty developmnt as socia servic and entepis development as credit Food costs absorb 38 per of all proe fimdL d Tmere IS no diMsinC made betweMe social and C isucue in prject doments Sorves: Bolivia SIF IL Staff Appai Repot, 1993, p. 29; Egypt, iVew, Washing D.C, June 1993; Guteala, Staff Appaia Rpt, 1992, p. it Guyan, Staff Appaisal Rport, 1992, p. 76; Honduras, Mid-tem Review, 1992, pp. 5-6; NIcaagua, StaffAppraisa Repot, 1992, p. 12 Sao Tome I, Staff Appraisa Report, 1991, p. 45; Sri lanka, Staff Appraisal Repot, 1991, p. 30;,ZAmbia, Annml Report and Adi, 1993, p. 3. Social fimds try to dmam te amaout of anployment a project gmerates by mosing certain require ts on the th fat sposor dte prces. Senegal and Sri I nka require coactaors to use laborintve oasbuctim tenqes and to spxnd at lkst a specified minimum pertantag of project costs an wags."' In Senal labor cost constit abot 20 pernt of ttal projeat coos fir road comsuction or nelnabiit , bdween 25 to 30 percet for rehbitin buildings, and more than 30 perm for str and draiae eaning prjects. In Sri Lania, ural public wades prjects awe required to sped 50 per of total ots an labor.2 WheV Iodig at de total i mesboat and administraive coot of gmeating oaw pesonmonth of mployment. the figums for the ESF im Bdivia, the FHIS in Honduras, and the SIF in Nicrgua are fairy comparable at $276, $320, and $286, respecivelY. 7be AGEniP in Senegal has a slighy high rate at S357 per prson-oths of ployment geatd (rable 4).D "See Secand Public Wa& and a ePt, StaffApjaiu Rept, 1992 1Sri Ianka, StaffApaial Repmt, 1991. '3 COs patin Only to admnisbiuve and iject mts. Tfl ohd does no ad&= te mie of6xxtummty costs. 10 Table 4. Mani1tude and Costs of Emao Created in Bihva Hnu. Nimm . and Bodivia Hoduas Naagua Senegal ESF FHIS Sli AGETIP Total costs' 201.7 33.5 21.0 33.9 ($US m)ion) Total emplomnt gerad 731,000.0 104,400.0 73,500.0 95,09.0 (Person-months) Costppersn-month 276.0 320.0 286.0 357.0 Of emploYmect (S) TSme petiodb 48.0 6.0 18.0 41.0 (moAs) Person-month of 15,229.0 17,400.0 4,083.0 2,322.0 per month Admnisative costs (percent Of tal costs) 5.5 9.0 6.5 5.0 * Toal co include s oject Co qeatigcos of the oci fd, special studies, and technical assiance b The data cvethe fillowingtme peds: BoliviaSF, Nmber 1987 to Ociber 1991; Hndas FHES I and I, APril 1990 to JanUMy 1992; Nicragua SIF, Feruary 1991 to July 1992; Senegal ACETIP, Mari 1990 tD August 1993. Source: Bolivia ESF L 114 Prjec CamleoRpoR, 1992, p. iii HODas FIS, MidTerm Review 1992; icaragua SIF, Staff Appaisal Repott 1992, p. 11; Senegal AGETIP, Pan, 1993 and addidonal correspondence. Adrins e costs as a shae oftal o are radvely equal across the fur projects, wih fte excptK of Hduas. Tbe AGETIP m Senega intained administme costs beow 5 pere of total project costs.4 Administie costs as a sam ofttal camnitrne in Bolivia ove the life of the ESF were 5.5 peCFCt Niaraga Ov the first 18 mmths of qw:aticus, was sedig about 6.5 percent of total ccxmnmis an adrninistrative costs; and Hnuas, after hs of opeain, reported adnistrative costs as 9 pert of toda c8 . 5itxts." Senql was th on couny to provide data ccxang th perfmance of e social fimd to da Of m t programs. Cmpared with odw anlymet sdxmes i Senegal, AGETIP appeas to be a mor efficit nie12aniSm. One scnme spOred by the pv=nmd of Saegal incured a cost of Si 1,000 per job reatedI lTe AGEIIP was also able to achie unk prim 5 to 40 perces lowr than govaenn programs." ' Senpl, AGEIIP BL SwffApxi Rat, May 1992, p. 6. 3Bohivi ESF, Psojec Campletm Repcxt, 1992I Nua, StffAppxiid1Rqpvt 1992, ;HKMAk, Mi&4amRiw, 1992. l' Senegal, Secmnd Public Wrks d Ep tProjec Staff Appanu Rqxurt, May 1992, pp 2,8 11 B. Improving the delivwy of social swices The secxd objecti of many socal finds is to miprove the dehveuy of prmary heal mntrition, and educational SeVice to law-mcnce aeas. hi most developing counties, govemnmIts have limited capacity to deliver basic public goods and sevices outside of kmy urban areas, and social finds have attptd to fllthis gap. Projects icl s mplon feding schmes, comnty child care progans, family plning proraMS, prveniv helth and =utritim prgams, education, and Staff trining. Experience mthis area, however, has been limite to date with the exceptim of Balivi, Honduras, and Sao Tomne. Many socal fimds allocate less than half of thei rources to socil service projects. The priority fDr the ESF m Boivia was to gerate mploymt rAer than to prvide social servces. As a result, the ESF spelt about only 9 percent of total project fimds on soial services mcluding programs for meals, moculatins, and staff taig. Socal assin projects reached 230,000 persons comared to the 1.7 miflion persons who benefited fimn ecoumnic infiastructure projects.7 Te SIFm i Blivi in contras, aims to allocate more rsources to social services ta the ESF. This reflects a dhange in objectie fiun short-term eonmic crisis managemnt to longer-emr poverty reducio strategies. The SF intends to allocate 47 percent of its toal project fids to social eifiusructur and 53 percat to socal services with no esoures alloated to ecmnic infiastuce (Table 3). As a rt, dun the first two years, the SIF delivred benefits to appromatey 24 percent afthe population, or 1.6 millitn persons, tiwugh it healh and educatiob prqjects, compared to fte 230,000 persons under the ESF." Honduras al ted 14 percat of toa projet fimds to basic needs, such as mutrito programs, trAing of primary heallh care st4 and provio far hea ii di and schools. About 62 percat of te finds allocated to basic needs, howev, suppored a shool-desk program Because schools desks are rlvively ow GtD ma n e tmand distbute widy, this projec supp the FHSs initial goal of demonstrating its institutional cqa ity to dlie benefits t a laWe portin of dte targed ppulation in a sho peod. Bginning wh simple poets also affod the FHS time to develop i instiu al procedurandbu credibilitywhNGOs." Sri Lanka and Guyana, by design, npasz soal srices, albcating 37 and 46 percent of their fimds, respecively, to social sevces (rabe 3). In Sn laina, the social fimd fic a nutio program ta ams tD reduce modrate and swe nultutwi in nild uxler thre years of age, lwer the incidence of low birt weight, and decrease, the pravalence of maternal nralmtritim and itn deficiecy ancmia` The social find also cs taiing fr NGO peonud, eosis of mniring progrns, evaluai and spea stus, eowpmet fir health pouts6 and dr oxrts cot of*pte nuti Pra=. Itu ig IDunote to fit U mi of ~banwmu cm be rniamdig b=in im&AWl maby zuomv w a *il baafit Wbm pwopi bme&fit Awn pemuljeLta, fe toI munbu clwibi m inm gmv toe misleing inpms wi the asmci find baw adeved wid woeagef Ibe pqiula& N= ie uf Ibmurm mwc* e otrid to reclie dhis robln to give a mom -k iim tM ofat p_ if tWe aMep_im uuwed beits Ansocma fiad1jrctL 'Bolivi SlF, M&zm ,eyiew, 1993, p6. "Hdm FHS, M4amReview, l9,p 6. 3Ssri Lanm, staffApma.Rqut. 1991,p.27. 12 The socil fimd in Gua, ti Soci Impact Amelioration Prom and Agency (SIMAP), finc te reiabilitatico of prmary health care f&cilities, chid care c,ter and water and sanitation systers, as vxwl as nutrItM smueillnce, education, and food distntion, programs. By targetg young childn and prgnant and lactting woe, SIMAP Is attantrg tD reduce the incidence of malnutriton, and low birth weight m Guyana. The experience in Zambia highlis the difficulies of expanding social services thugh a social fund. The SRF diffm from othe social hinds in tha it does BOt aHIm to generate embplomet opportunties thugh publc woks projects. Istead, t SRP fin small-scal projects ta mes the needs of each camunity requesting *inds. The ial allocatim of finds for socil sevices was 10 pecent of total costs. During 1992, howev, the soial fimd recived proposals for social seices, and as a result, some of the fimds allocated to this categoty we realocated to self-help civil works projects.2" Sao Tmce, an d odher hand, p-apprLaised a set ofprojects tD mat tai vital basic needs. Two of the more succssl projects wme the distr&ibon of essental drugs and texbooks. The project distng books reched 81 pmary and secondary scools (almost 30,000 students) t, prior to the project, had no textboks. C. Rnancing credit programs Credit progms aim to provide _ Sortunities to snmll-scale tVrreus by establshng revolv fiinds or othr credit Iasrgment2 As the data in Table 3 indicate, most social fimds allocate less than 10 p at oftheir potio to credit activite. For exampil, Bolivia ESF, Hours, and Zambia have disbursed 4, 7, and 3 pert, respectively, of their prjed finds to credit progms. Two exceptions are Evpt and Sri Lanka Egypt disbursed 60 pct of its fimds to cedi schemes as of May 1993, tough upcoming idiaite teat te sare otreso alocated to crdit projects will deie as public works and commity dmvlqpmet pgram got undeway.tm Sn Lans JTF allocated 43 percent of its total project fimds to edit CO Atis. Socal finds shy away frm credst opeain fir ser reasons. Tbe pcpto among Bank staff is that social fids are quick-disbursing no tble wi t a which requr cefiil and oflen apprasl beixc ptig fimds. Social fimds also do rxS have the staff resources or leV oftdu apeis required to assess lie risk ad viability of sosoring organzaos and credit opea . In addkit credt progm do not ddeiver b as rapidly a irt,esn in infiasctu or social Mrices.- 2tZabia. Amal Rgpwt ad ArI, 1993, I 10. f For a and =azt a1*s .f liug fr mul ad omod atupiu, see Wbe et mL., 1994. 2hitrview, June 1993, Wa_.gkux D.C. 24SeeWebsuetad, 1994. 13 Ancdx resu ta socal fimds have not ivested i credit programs is that dt progrars are hily depaMI X on insteial capacity to support entrenr. Where successful credit progrms aledy exist, the social find is more lik to use its resours to help expand the progrAis mto new regions. This was the case m Hoduras, where partcip g NOOs had to have at least five years of exp)enrce m providig credit to ural and urban i rs. Entpreurs qualified for loans based on their projects' viability ratw ta on te abiity to provide collateral; moral guarantees trogh solidarity group leding provided a substut fiwr collaterl. At the nid-term rviw, Hondas had alocated 7 percent, or $2.1 nilio to infimal sector projects. Twelve NGOs with past exeience i managmg credit opeations or rvolvi hinds iniplem d the proc. Based on arrears, Hondiras has bem vey successfil: anrars loans have been less than 5 percnt In thir idterm rview, Bank staff idenfied sever fictors that cibuted to the success of the program. The socal fimd used qualified NGOs to admiister the program, the NGOs charged nakct itest rates to boawes, and the NGO assmd all credit risk vis-i-vis the revolg fiun This iduced the NGOs to evahlate businss proposals carefilly, build solid r=overy mechanisms, and ensure adequate capitaliza of the volvg fimds. In addition, the FH[S financed technical assistance to etre rs, whii helped tD icrease loan recovery rates. A variety of problems can hine social finds from insting succesful credit programs. Sn Tanka onmitted 43 percent of proect fimds to crdit operations but disburements have been slower than cxpected2 Politcl problkms arising between fte govmmet of Sri Tanka and the NGO community, poor aof the 1TFis and the need to establish new elilty citera for the sponsorng oanizations have al cntbutd to slow dnburSmMtS2 Most im tan Sr anka's expence ates he neod to coordate credit progrms of social fimds with gov=nent programs. Ibe skw- tan-expe disuxuemt of fimds m Sn Lanka also resl fian te availability of subsidized credit firm gover age s discourage NGOs or finamncial oaniz frm participating in the JTF programs.2 This will rernam a citical obs unti the government of Sn Lanka establishes policy guieliesan subsiding crdt D. increasing and diversifying nstitWonal capacity Msany countries estish sia xins to fil an instituionawl gap lft by weak public an private sectors. At the same time, socil fimds zey heaviy o th abilty of a variety of organiatn to pln and implmet firwprojects. Icasing and diversin intituionl capaciy of prticipatig oganiioons, public acies, and camuity groups is va to the social fimids abily to have an connic and social impact both in the shit- and log-n. Weak or absPt istiu capacity, as m Sao Tnec and Guinea, hins the social fimds fiun dsbursing ourees rapidly. This gmeraft a pott tradeoff betwee nwting sbut-nm objedivM wsc as piding taMormy empkiymmt qortmies, and building up local capachy lthe log nmL 3This s cm dumim &aa hu flre Hmhum FED, Mid-tam Raviw, iy 1992, p. 6. 3&Sri Tk Ai_nnmiM Dombar 1992, I 7. "7i IAk, Aib_aairD ecr 1992, p. 5-7. 3lbid,Pp.6. 14 Socal fids contribute to instu building m two ways. First, the provide tecbnical assistance to imrove th aity of Participating orgazatis to plan, impleet and sustai projects. Such assistance ranges fm teaching basic financial managmnent or record-kaeping skils, belping c_umuitis o ixnslves, to provxiig an egneer to help design a project. Second, socil funds also catibut to a ccumt)9s institinal capacity when they main t mplita standards and pcrmmacc critea for partciatng oaniatns, icluding govm ext minstries and public agencies. Socal fimds that cut off access to resources for oganizations that do n coopewa help to establish inceuives to follow standard opeating prcdures. The role of social fimds m deelopnmg instittial capacity and the need to refom public-secor agecies and ministries is too ofte ovedooked by dmors and polimakers. Countries are tenpted to use social fimds to finance tradiicmal public-sector goods and services wihout paying sufficient anenio to public-sector refo There are dangers m havig social fimds finance public goods and servces cm a pemnanent basis. First, social finds may provide countries with an excuse for delaying public-sector rrms. Ideally, social finds should provide taporary rlief to public agencies by financing priority projects while public agces reorganize. Secod, social finds can madvetenty become a coveient off- budget financing nhamsm for mefficint mini or public agmces. This is a majo concern in Egypt where public-sector agces have sponsored the majoity of social fimd projects. To coraect 1is, the Bank has suggested placing a cap o the amnont of fimds available to public agenc and renmunded earmarkng a minimum of 33 percent of fimds for NGOs and private volunteer organiation (PVOs) as a means of reducing public reliance on fhe socil fimd for off-udget financi2g.9 Social fiuds vary in tr nrliance on public-sector agci to implnt projects. Zambiaes stress on cmumunity selfhelp projec elim_inates cental govenmt ages fin participating in SRF programs. In contrast, Sgl's AGEIP uses only govnment agncies as spwasors bcause of its focus mn publc wos projt hat will be legally owned by governnt agencies, hough the find br private-secdor Contacos to implemtthe waO Mare typICal, howev, are Boivia and Ho ras, where a wide varty o organizations partict m social fimd projects. Even so, the bulk of funine goes to pubc-sector agencies, deostating the need to supplment social fiud activies with public-ar refiom (Table S). in Boivia, public-secor e pred 74 peret of all project finds and caried out 66 percent of all projacts; rigies orniz NGOs, and grassroots organitos reoived 19 percent of prject finds and impleend 27 percet of all projects. In Honduras, govenmxit agencies Or ministris also roived the bulk of project fins, gaining 79 percet of funds and umpleneting 85 percent of al projec; ngbhood orgnization, NGOs, and rigius goups recived 20 percet of fi ns and imp_n.tid 15 percuit ofŁte projects. EV*, Bac"4ffic Rqx, Octobw 1992 l Ibe --A Pb&W of tbis Ped PIs to crxt NWO md _mmuy ups en a *nadl-le, 1rial bi 1S Table 5. Distnbution of Proiect Yiancinvz by Tve of SDonsaring Onanizatio in Bolivia and Hondums Bolhvia ESF I and II Agency Number of projects Peent Of tDa SUS mlon total Pee of total City govermcnt? 538 17 32.0 17 Governnntagencies 578 18 43.2 23 Developnt= copowaions 493 15 33.6 18 Rihgious orgaizatos 421 13 15.7 8 DepaUnenmigoalvnments 327 10 10.0 5 NGOs 220 7 11.5 6 Grasoots organzatkrs 219 7 10.2 5 Govenment minisries 205 6 22.1 12 Othleb 216 7 12.5 6 Total 3,217 100 190.8 100 * bInudea both dqwUaruentpals and non-capital& b Iludes scols coeats, hosptalS and diCi, UNICE, ad othr ueCMified iSuo. Source: Bolvia, Second ESF Projet Compko Repo 1992, p. 28. Hbdur FMB Agency Numbe of projects Prnt of tot SS Mllin totl PCnmt of ota Municipl goernmen 1,625 79 17.4 61 Neigh orgqauniatiam 194 9 2.2 8 NGOs 60 3 3.4 12 MlnistiyofEdocation 57 3 1.0 3 MnistyoffHealth 55 3 1.7 6 Reigious onrgizatios 42 2 0.1 0.3 Othergovemnent 11 0.5 2.6 9 Other 12 0.5 0.2 0.7 ToWt 2,056 100 28.6 100 So: HEudas, MRlS, fid-nm Reviow, 1992 16 1. Impong public-sector capacity Many social fimds rely eavily mn public-secto agencies to implarM[t projects, thius, the public sector reans a key player m the efforts of social fimds to meat their objectives. Local and regional gov t in Latin Ameica oftn play an active role m social fimd projects. In Guatnala, ihe social fimd intds to work clsely with municipal govements an socil projects because local govrnments, as the legal owners of public assets, are responsible fDr m teance after project financing is complete. Where local goverments have the authority to rAise reue through taxes or user fees, tW play a critical role m nutaiing public works. Socal fimds can influence he performance of public-sector agencies m two ways. First, lie oher participating ornizas, public-sector agencies must conply with the operating procedures and implentatim standards of the social fimd. They must submit to peoc audits ta social finds conduct as well as comply with record-keeping, disbursbnt and procurerent procedures. Such compliane has had a visible effict on the quality of proje spnsored by public agencies m Honduras, Sao Tome, and Egy,pL31 Secod, socal fimds c ifluec partciptig organizations by developing and transfemig mox effecti methods of planning and implaneating projects. In Honduras, the Ministy of Educatio, aftr lerig that the FMlS was building five imes more schools m a year than the Ministry itself initited a stdy of the socia fund to mcoxporate social fimd produres intO the Miists operations.t Donors and pohcymakers often overlook the oppority dat social finds provide to xeiment with new instutional frmat and proceues that could be adopted by public-sector agecies and ministi. Most countries aked explicit plans to tansfr reevat les to odE public-sector organits. The AGET1P m SenegaL for example, has dennsUated that is procurant and disbursmit proce ae more ediciemt and effeive than those curretly used by t govmlent, but there is no plan to restrucr the gDven s procedures." Socal fimds could begi transfiring skins to public-sector amcies by focusig on a few basic areas, such as naagacnt infm syems, prclnt, ad dsbursment. For example, in Bolivia, before dissolving the ESF, fte staff trned mems of ohe publi agencies to use the ESFs managexet information systm Govmct sbhiol give serious coideatinto the appliability of oher operating procedures to public agencies, sum as prcunt and disrsement pmcedures or the development of project financing criteria. 2 Increasing commwtitypartipation nternatinal donors hae becom increasbgly awar of he positv relationship between axmumity patcpatio and projec ustainbility. GiviOn canmrm more resonsility for project aseectin sup o, consructon, and m a has sved advantages, at least m t y. Fis, it the possibity thlat proj will match the need of fte c uty era than rcflectig dte ririis of a gvmmmnat aWy. Scond, w}e cmimme develop a s.w of owneship toward a project, teir anmitnat to sstaining efi projt may be g er. hid, owmity invov e educes dendncy on support fm outsieaencis. 3'bkMa % Jume 1993, Wu_,gtmz D.C 3sHm ;s, FHS,M d.mReirw, 1992, p. 14. 3 31teniew, Ji 1993, Wabigtm, D.C 34Sce Buoen d de Fait, 198; mdWilim, 1992 17 Rebing soldey on cmnity organizations, though, does nat ncssai guaratee that all critical needs of a cmmunity wil be represented. In Zambia, where project a explidy favors small-scale, self-elp cmmunity projects, the rative abilities of nmmumity organizations to wnte acceptable project proposals have resuled in a skewed sectoral distnbutim of fands. Becmuse parent-eacher associations are better organized and more x er ed m witng fundiig prposas, almost 90 percent of all applications received and more than 70 percent ofthose approved were for educatio projects.35 Socal fimds hat fian community-based projects oft induce pby rairing communities to provide labor, cash or inkd contibuti. Thir willingness to coantibute is one rough measme of its commitment to a project Communiti ofien provide firm 5 to 20 percent of project funding. Guatmala, however, plans to use a sliding scale tat takes into account the pnority of the project and the ability to payY If a community is very poor or a project has high priority, the social fimd will lower its conterpart requrmnents. Wilngness and abiliy to pay vanes across cinmunties and sectors. lbe ability of poor comnmuties to pay is very diffiauk to assess, but reomit stdies have shown that the willgess to pay for projects is a fimction of more than income. The willingness of commun ies to pay for goods and services may be hIger than expecte as kag as the goods and seruces are somehng importat to the conity and reprents an miprovement over past goods and services. Several ictors that contibute to a conImis willgss to pay and pacpate icd perceived benefits, alue of tme, level of service, extng resources, and the credibility ofthe cmnal fnding agcncy Conmunity oraniions also have aiticBl role m organisg maitanance acivites and collectig user fes. One of the problms social fiinds have wretled with is how to maintain ivetme m infiastructume after social fimd financing is complete. Hnduras has expiled the possibility of community ogizatin workng with loal public water ilits to manage water and sewage infiastuctu. With the help of an NGO, the FHIS is oanizing acmiittee in local commities, wic, togehe wih the public water authority, will set usr fies and establish codle and mteance produs. 3. Working with NGOs Incorporating NGOs into social find aciviies has the pottial to generate benefi for both NGOs and social fimds. NGOs assist social finds in their objectives by poviing a link betwe the funds and the cm uties involved, helping socia hinds to &stribute nuoures widely, to rmch the lowest mcame areas, and to generate cmmunity prtcipa Qualified NGOs can also reduce the administative burdie on social funds by assisting wth prect msviin In tur, NGOs benefit by gammg access to interationl door fimds and nrovig elatio with the govmt Whie the popular mage of NGOs tbat hy am more k le about commuity noeds, are more successful at motivating wcmmuity pmtcpaou, and ane key providers of goods and sevices to poorer areas necd by gm t agenc tis is not always the case. NGOs represnt a diverse collection of some sm wheco pwrfoinm better tdan othe The ability of NGOs to carry out di&et objectives also vanes couiiderably. bZmibia,A--lIR4pxt.ld Audit, 1992, p. 3. Gudtn, ala, StaffAppui t, 1992, p. 22. BriaweaddeFrrntdc, 1988. :hid, p. 14. 3btenIw,ue 1993. 'Fr a thm anaIys oftc Baak aepuio &imho, wse Pa mdlkal e ., 1991. On Zambia7, Chasr, 1993. 18 Workig wih diffrt orgnzaucms is part of the soci hinds' strategy fir distrbting resources widely and paimng access to low-income areas. In one of the key fimdos, NGOs act as mdiarie betwe onmuities and social fimds m planninmg, impn &, and sustang projects. Whe cmmmntes are not able to put togher an acceptable project proposal, NGOs can assistL Where counties requir project spsars to have kfral lega status, ccmamunity-based oganza niay need to pair up with NGOs to obtam fimds. On the other hand, NGOs do not necessarily service the poorer regions, and most socal fimds have had to devise incen to induce NGOs to move out of urban or pen-urban areas and into fhe poorer, less accessi-ble rur areas. i he higher costs of redang some of the more rmote and poorer locations, social hins m Honduras and Guateala are considering partally subsidizing administ costs fir NGOs willing to work i underserviced areas." The SIF m Bolivia is also devisig incenives to encoug NGOs to exqm tr covrage into lwer-m areas. NGOs do not always eworage cmudity pariciatio In Zamnbia, a preliinary study of 60 projects suggests that itmatia NGOs and church grups prefe to hire silled profionals to work on projectstD ensure the qualty of the finshed product.' In the kxg-nun, hower, this approach undemines the wilines ofthe coynumity to maintain a project Adequate spevision and temical asistan helps to mininiz poil tradeoffs bcween the quality of projects and klog-trm sustainability trough conity partciao Supe n, however, has bem a weak link in social find opratios due to a ladic of staff rwesrces. Superisig projects consumes a lare poti of resourc fir all socil fimds; where savel i difficul and te cory i lae, the tme and cos of sprvision is ev greater. By subconactig pr espibilies to qualified NGOs or local governmtsn socal hinds can liit ther adminstrive cost. In Ept socal hind bunle togete smaler sets of projects and contacted out thr prvis to quaified NGOs.0 NGOs are a valuable resource in developing counie, but reatios between gover nmt and NGOs are ofte hostile. One ofBte eadiest challentges to social fimds was to establish the credibility with NGOs and the publc. he FH[S in Honduras slected very simple projects, lie the desk n r g progam, twere easy to accomplish, had hg visiity, and wide ditrbutio Establishg credibility iS not always easy, though. In Guyana, dcanging public-private relato after years of corrutom m the public sector has been a slow process and the pivate secr mains skeptical that SIMAP will be able to carfy out its fimctios. In Egypt, dte public s as r nalBy vewed private-sector orgnizations with hoslity, thus inhibitiqg the social fimnds effors to foster a partnship bewee the two soctrs. The social find also has a low lvel of insiutmal and poltca autenmy, givig poltia actors access to the fimxTs resoure. Ibe resul is tha these actors chamnd a lre share of fimds ito finanig public agence and political objectives ra1li than priva ctor organiti. As noted above, the Bank has recmm ded placing a cap on the amount of financing t pub-sector agecies " Intervewsa,Iwie 1993, Wao**x, D.C. Zambia, 'Rept m %lue BueficuyAsy Aut SUdy,' 1993, p. 32. a ntavew, iwe 1993, WaAgin D.C. 19 4. Impving dwperfornnme of te socialind To be effetive, socil fimds must be able to hire and retain qualified a motivated staff and managen, aocate esour according to objective criteria, and have the support and commMnnt of politcal kaders. In Bovia, for example, the ccnmitanct of the president to the objectives of the ESF was findamenl to protecting its poltl and institutional autonmy. Autonmy, m tun, permitted ihe socal fiud to hire and retain the qualiy of staff and manage t necessay for aievig its objectives. Cinmunient among top poltical laders to the instiuional inegrity of the social fiux reved preure o the ESF to allocate mone according to poliical ratl than economic objectives. Where polibcal cxnuneat is weak or absest, staff morale and the quality of opraos is low. In Guyana, poor nteral managent and the lack of politcal support for SlMAPs objectives lowered staff morale and impeded their performance. For example, alhough SIMAP installed a new management informaion system to tak operations and detect problems, the computer system made little differnce because staff mmbs fail to submit tweir data o a tmely and consistent basis, renderng the system inective.4 In Egyt, the upper chelos of govemnet did not have a clar undeswing of the purpose and procedres of the social fund, reden it vulnable to politcal interfifence.4 Ill. Challenges Facing Social Funds Socal fimds face hee significa dalls. First, social funds that rly on ote organizaons to iniae projects may not reach the very poor. Whie this approwh keps administrative costs low, social fimds tat taret the poor ne devise diffet sagies. Sod, social fimds fce a sinifnt challcge i ensurg that commuts, NGOs, and gowrmmt agecies can finano emuet cost of projec. Third, the quality of projects financed by social finds is not always satisfatory. A. Umitautons to targeting Mrough a socral fund Socal fumds, lle odw with scarce resrces, try to maximiz the chaes benfits reach the intded poubtio whil i access by odhrs. At the same tme, soial fimds try to mmize administatie cos by combig seveal low-co tareti ng chansms such as geosraphia and self-tagetig n nchansms. But using a social fixd to reach the poor has sme seius limaons do poliake shoul keep m mid. is scto amie gh experenuces and statepe of socal finds O targeting the poor. The limus to tarng the poor anse out ofthe institioa desigm of social fimds. Spacifcay. the rdiance an ote organzato and coumuniies t initi projes puts the poor at a disadvanmV Poom communities oftm have less abiity to design and miplment prnjects; thy are unlie to e xpe ce woing with itenation dons or knw how to write acceptable resarc propoa. in additon, the morm mote a comnunty is, the less lly it is tat NGOs ae avaiable to apous and evis pjs. 44bhitw. Jne 1993, Washgtan, D.C. 451ntview, Jne 1993, Wa&igton, D.C. 20 Reyig on ote organzations tD ibate projects he to reduce the admmiitatie costs of the soci fimd. There is, however, a tadeoff. Experience m Lain Amni sugests that social fimds may not chanod as many benfits to the poor when proect initatio is decetralizad. The FMm in Hcduras has fiumd a, whie it was able to limt leakage of benefits to the well-off municipalities, the not-so-poor areas (try are re&rd to as regular" ocmanities) were able to gamer more resourcs than itially erarld for than In 1991, 71 percent of the resrces conmitted to the poors 20 percat reaheod them. while the regular cowmnunite received 170 perct of resources initially conmitted to thn On a per capita basis, the poorest 20 perent receved $4.9 per capita while the regulrucipalities received $8.0 per capita.6 Buildig co the eeece of the ESF, the SIF m Bolivia has increased its use of tamg meclanism to ensure hat at least half of its rsour reach the poorest 50 percent of the populaton. In areas without viable institutions or organizations, fte fimd offrs financial support for basic admnistrative infiastructure, p ne, and vdicles to pand coverage into these dficit aeas.'7 Tbe result has bee that, betwe S aber 1991 andApril 1993, the SI apprved 1,311 prjects worth 111 million About 75 perct ofese fimds went to rural aeas in geneal 80 percent of tie fimds were used in areas with the poorest half of te populaon while 55 percat went to the poorest 25 percent ihere are seveal medhnisms that social finds can mVploy to inprove trgetig af the poor. One is geogphical tgg uSiDg povrty maps. The SI in Bolivia uses povrty maps at two points in the project qycl: fist, to assess a proposals eligibility, and subsequety, to montr thie fndWs progrs in distributing resources. Upon reeving a proposal, th staff chks the projeces locain on the map to msue that it fills whn a targeted or prioity area. As the staff mks the locations of projects underway on these povrty maps, the maps provide a quick visa check agnst negectg some areas and favoig ods. Geographical trgdg ecan sms are more refined m Lain Ama han m Afiica becuse tere is more highly diabd data on LtIn American prty. Socal fimnds m Latin America use povety maps to rank geographic areas accordin to aCCss to social sevs such as potable wate, schools, and heal ic. Based on ts inrmation, Blivia Guatemala, Hcmduras, and Nicaagua cate re fimds per capita to thre poorx areas. Areas wih medium degrees of poverty typically i eligbk for projet imds because of the poks of aexrme povety at perist wilhm better-off nuicities. In Aflica, the lak of daile porty data r rs social fimds to rdy on od}r tagetiig mnehaisms. Developmg the datbases for ggmaphic urgcing wi take t fime nai al rouces, and istioio capacity not crmtdy availabe.a In lieu Of died poverty maMs, mo fimds in Africa use a combinatio of odh me3nisms for targeting. Zambia oducs site eval s duing the apprais ste to sue tat conunites fill wihi the tage populi. e evm auabo ypicaly email a visual asessment of social and conditions, such as access to potable wate orthe quality ofhousing mateials. Project eligibility criteria provides mocal fimds with a powrfid tool to trg thir rsor twad low-come grwps. May Latin Amcn fikds, as well as 1th in Zambia and Burundi, have developed ist of specific types of ptect tat ae eligible fr fimn Tbe fimds rank tese prjcts, ivghighbg prIrtyD gods and sevs that mmre i tD tobc in dmand by the poor or that wil have a geater soci and econmnic mpact anl kbnme bouseholds. ,u FMIMiatm REciew, 1992, p.8, Td 2. 4"Boivia SIF L SafApLvRqxt 1990,p. 76. For a good dinsim cm fe approacistD tageting in Afrii, gm Mlin et aL 1993, pp. 71-75. 21 To encourage high pnority projects m poor areas, the Guatunala find reduced the share of financing that cminies and sposorng oranizatioms must ctnIRite to the project and increased tewlnical assistn. Very poor conmuin that decide to impimnit high prioty projects will contributc labor, supplies, or cash equivalcnt to 5 percet of toal project costs. Commties that are bett:r-off or electing to iniplerit a project with low prirty will have to contrte up to 20 percot of the ttal costs.4 Most social assistance projects requi conuuie to contribute 5 percatt infiastruca projects require fium 10 to 15 permat, depoig an the degee of poverty, mivestmts m inccmne-prodicipg actvties or credit schme require lOto20percent Eumanaig fimds for specific aeas or sectos provides usef& guideines but will not guaantee that resrc acualy reac thdir Argcts. The ialkge to social fimds is to gemirate interst in social fimd projects among tarsted conimuties or aao zgano. Many social fimds have realized tiat project pmAmJlt is vital to ucating nmunib and ains about social fimd acivites, the availabiity of resources, and how to paricipt. Both the FHIS m Hodras and the SIF m Bolivia stress project promoion strategies for disting rsmes to taWged areas. In fat, as Bolivia shifted fiom the ESF to the SIF, increasig pmotcm efs became a key angi m the augcting strategy. B. Rnancing recurent costs Financing recurmat costs is a signifia and pistt allpge. This resposibility typically lies with de projects spor. Most socil fimds have sbpulm i hir finaning agreeents thaWt sp ors dmnscrate the caacity to support rnmurt coos befr recvig project appval. WVh projects hill under the juisdicti of a public agecy, the appropriae ministy or gvem ag8 must assmne responsbility for ngoig opations and mawnanc cos. In Zambia, project prposals for halth and education must r approval fiun Povical Planning Ut befire sponors can submit then to the SRF because provinces control buds fir recurrt costs. A review of ESF projems i Bolivia me tD two yars after he completin of ESF financing ccluded tat three fts increased the ans tat a projet would surive: access to stable sources of finanmingt particip;aio of the beneficaies in planning and lmeain; and prior experice of the spo rigagey or ( . his secio looks at tee sourc for financig ru t cos: public revenu user fes, arnd social fad resourem PubLic rven rmins a cical bm of finaning prects, espocially for basic health and educatio infiastructure and services tat mnm high etg cos. 1. study of ESF prcjects found tat protects sPonsord by ctral gvm=t Wg y wC most li*y to surviv whie projects sponsored by a grass-roo orgaizatn were ft least lely to survive. Guaemal StffAppim R4mt 1992, p20. 10BohyaESILPxojKtCCmpltimiu 992. 0. a psitie,efstudyhi I O ofmcmi asgstane pjctsia d95 1t ctn-afcial iafuicu1eprcectsve stlqimaig mtDtwo ye R aw er canpIticm ofESF finaning 22 Restucrn laws dt govan the use of publhc eve may be necosaly m nmny places. In Guatemaa, for example, mmnicipalit derinvest m social servics becus the ransfers dthy recive firn the utral govumnent am lealy lmted to invesmats i physical iastructure.51 In Suegal, the AGEIP has bolstered its monitorig of prqoecs evm af te financing is canplete to ensure that public-secor agpies rmain commted to teir ives ts. Public agaicies that fail to maintain their projects lose their dbility fufizturtef inm User fees are a pottial sowce of revemie when access to benefits can be controlled and mmitored Access to healkh sei or water taps are two examples whee user fies could partaly ofi;et recurrent costs. But coectig user fes frem final bmeficiaries requires a degee of imsutia capacity amog prqect sposors and a finnc abiliy and wilngnm beneficiries to pay. For conmumity-based projects, gcng the cmmunity imvlved m selecting, plannizn and mplementig projects wil increase thi wilinge to support the project afler outside fnncing is ccmplte. Honduras is expimenting with cmmnunty-based water commnm to over water i iastuctur and coUect fees for fiture maintenance. lle Oommittee wail work wih he National Water and Sewage Senrce, the legal ownr of the infatuctue to set wat tarif, collect the fes, and deposit thmin a wevvig fimd tD finance fitumre mainaance.' Irhe FM has contacted an exprnced NGO tD help commiis to establish their cmmite and procedures. Insitutig user fs to finan reurrnt ooasts ofte means coordnating anges at everal lvels. For exampk, under the ssential drugs proje in Sao Tomp, hoptls and dinics are supposed to pay for the medicie distruted by the projec To do so, howev, reqires tat hospitals and clinics mplmt their own cost-rcvey nedam by draring patiets fees fr drugs and srVices.3 For the medil distrttin prgram to succeed, the social fimd wil have to h dlinics and hospials to establish cost s-rtues fOr goods and sermces and to inplkmt cot-rcovery mechanis. Sao Toe fces an addin callenge bese it is in fle process of _ its soia and Cooaizd polic systems. Because the geneal public had become accustcxned to fiee public goods and svces, te mggeso ofr fees has mt with consirable re_sce am govem t officials wix Ear a politica baddasbTM Social fi smetm finanoe rect cost but for a lmitd time cdly. Guatemala decided to finane t salaries on a decining basis to spport i MCGIS in educ;aton iustructurc.-" In Sn Lana, the JTF fi m a cos for c unuity pr*ecs on a deaning bais. It supports 100 perccnt of ma ac osO during the first Yr afer curlicm, 60 peet m the seomd year, and 40 peent i l the hird and final ycar. To reduce cost, the yTF signs maintenance contrac with commuty groups to perfixm paricular tsls. For cxample, farmer.' s help to kep irrigatio systems worling while families or vages help to cear dains ad repat& rd surfices. 5uama, StaC4Ap m Rq 1992, p 11. Hsm,IS,-b&temReview, 1992I. p13. 'SN Tar&DP,,S_1AideM=he9Sq ,zf 192,p. 4. bktriw e 1993, Wdigta, D.C. '5Ouata StbffApjiuRn 1992, p. 13. GUib 1992,p 3. 23 C Quality of outt Concerm for the quality of fimd-financed projects challnges all soal fimds and is a recurrt issue i supio reports. The need to disburse fimdls rapidy and the lack of techical capacity amog project sponsors conribue to the low qualty of projects. Conmunityased oanimzas have the most difficuly ccuilbning to project standards because hy lack the techical skills among thm or camot afford to hire skilled labor. How cl finds desig, implement, supervise, and evaluate projects can fiuec the quality of the final project Socal funds have developed several tehnis to improve qualty. One sategy is to restict the number of tpe of projects elible for financig. Thi limsits the ran of technology and techical expertise a social fimd needs to maintain o staff. Another strat emphaizes fimding simpler projects, such as manuhictring school desks. Hxiams adopted this stty during its first year. Zambia, onduras, and Boiia, adopted a third stategy as well. They distnbute simple, standard desgns for infastructure projecs such as cdassro , htclinics, hosg, latines, wells, and borcholes and provide technical assistance to contactors and sponsorng oranizationsY Standardizatio mean that tcnical supiss do not have to spend their time learning multiple designs. Regular supevisim during prjct implkmentatin is critical to suring good quality of projects but is probably the weakest area for social fimds. Projects are less cosdy and of bettr quality if technical supcrvisos can prevmnt probms II than speding their time fixig errors. In geographically lrge counuies, or whe travel is diffic becau oft tenrain and quality oftrsport iastuctur, the limited staff ruesrces of socal fimds are firdw stai Hoduras and Zamba strengthued supae n by reducing the mmiber of projs assigned to each supers. Estbhing regn offices where personel can make more fiqut visits could also hldp to imp project qualiy. Zambia has instiuted simple measures such as publishig sup sr' tavel scdue and fmn that cinncm it can better organize themselves for sevisin visits. Finally, socal fimds can use evaluatios of completd projects to provide icent to organizations and cotrActon to coform to a fimns standards. In Sega for example, cona s that do not comply risk losing their dig status for fiture projects. Evaatios also provide intimation t the staff of social hinds for improving technical support to project sponsor. If cain problms appear consistely, the staff can adjust thical plans and alet tecal supervis to prvide additional swpport in the problem ara R7nid, p.3 24 IV. Conclusion: Strengths, Limitations, and Condfitons for Success Soial fimds are a valuable in ial resource. They have proven to be a flexble, simple, and straightfrwai~I zceanism fir finacing diffet types of projects. But, to maximize the contributios tat social finds can make to ecoxic deveopment policymakers ms be aware of the sregths and limons of social fimds as well as the conditios ta hixer or fila heir t operatn. While the conies tat have establisbed social fimds are poically, ecoonimcaly, and soialy diverse, hy geate very similar lssons and cbsvation about the strengts and limi of social fimds. This cocudig sectio exanines te comnatlnes and kssons. A. The swngts of social funds 1. Rapidfinanmngfor cnitical economic andsocda needs By designing simple project approvaL procrelt and disbursanmt procedures, social funds can distribte financing more rapidly than od public agencies. Granting political and institutional autxmy to social fimds enables the fimds to desg proees that best serve ir needs. Socal fimds, such as fte ESF Bolivia and AGEIP m S pl, have denostrated the critical iportance of pdtical and instionl a .tomiy Autoomy has enabled these himds to disburse me raly. in contrast, fte low level of autccmy granted to social fimds Egyt, Guinea and Sao Tome has hindered its abilty to develop adeuate procedures and reted m disbursements lling behid sxhele. 2. leidbility Socal finds are hiW flexile meanim because hy finace but do not impleinent projects. They can serve a vaety of objee t , WO w h diff etrtypes of orWnizati, and finance prqaects in oe or mome sectrs dendg an the speific nies of the individual wruy For exmle, gneaig amplymt qo rune is a hg priornty fir the Seziegalese gopmen The AGETp, the, ficuses on public wos prcjects, channeling cntats to pnr conucti firms. in Zambi, reducmng reliance m public reso by prmotng self-h, cynnnty-based projects has been the objective. The SRF, thefr, wo nxe with NUOs and community anizns. 3. L.ow-cow lw-rIskopportwutyforpublic-secwr refiwn, Social finds are a resoe to he sio istuti gaps th at t in lhe public sectors of may developing cunues. They provide gsvarnn with t qpounity tD expeiment with different instuioal procdr such as mana i:natim syn pnrcwrit and disbusmen procdures, and civil service rulions. Senega is a god exmple: by reesging its procurement and disbursen guideline, it has redced sbstntaly t costs of pmkdg emploet opptuities to low- incrne works as compared to govenm pgraga. Equaly mpa is dt poruity for vo ru; to reali de pdtia gas fm e i d tMranacy and accountability. When social finds alcat ruor according to objei critei conumities and NGOs are mare wiig to cooperate wih the finis. Public accouility increases hie possibi at resourc wi reach wir tageed destnatio than being diveted for india or polical purposes. Yet, whie social finds have dernonstated that mr efficit methods are possible, ffDrts to tSfer these lessOns tD d public agenes have been minimal. 25 4. Eanded istribution of resources to poor, rul commnuties Social fnds have been able to disibute resourcs to communit previously underserved by government agencies or privat-s Te i fleb of social fimds, the judiiS use of simple tageting nechanims, and the pronotion of the social fimd to organizations and low- mconx connnities all have helped to cxpand the finds' ggaphic coverage beond the major population centers. 5. Expandedptcipation and cooperation in economic development Social fimds have increased the number of actors involved in ocrmic and social development and proved. a xcoopeati and cood ^in anmg ina±iona donors, locallevel govemrnents, NGOs, private- secr fims, and conmunity orgnuals. In Egp governmet offcils are sowly cangg the atiudes toward working with the private sector. In Honduas, the early successes of the social find in prviig widey visible benefits genwated confidence amoug NGOs, inducing thm to coopeate with the socil fund. In Balivi, Handurs, Segael and Sao Tame, new procarent and disbursent procedur have gsmaller conatr acss to public works conracts. 6. Improved coordination among donors Social fimds prvide an arma in wi donors and govemments can coordiatbe prgrams and el the poteti for conflicting mcenie. The social finds can also reduce rasctio costs for dors at finance prcts m multiple sctors by dm tng he nd to interact with sveral ministies and public agencies. Effmts to initi a credit program in Sri Lanka demaostrated the impotan of increased cooMdination of intes rates. The social fimd, which cwarg niA raes for its oans, has beo unable to atract many boiTwers beamuse the govemncmt atinues to sibsidize creiL a The limftaons of socida funds 1. Socalfwiads at rely healy on othea to genrate demandforprojects will most Ukey not reach the verypoor Analys of the ESF in Boliia caoded tha rei is w-a tadeoff -between relying an otr onitions to prxpose pW*cs and rching fte vay poor. Whe NGOs or gouuit agecies do not reach fte poost eas, tl social fimds must impent more active es to aesure a wider geographical distribution of resources. Impwd targeting, increased pr nmition of the social fimd to commnit and orgnatica, addioa tedinl assisa, and judicis use of financial incentives to qualified NGOs willing to apqand their opeatic int negleced regions ca help to aesure that poor c inie will recve the financing intde for thn and that hey can, in tun, mpemt worthwhile 26 2 Socialfunds have limited resources and therefore must be part of a aIwger, coordinated effort to meet social and economic needs Social fimds are only om mstal mechanism for meng the ecmc, poliicaL and social needs of a counry. Their contibut sh not be costued as a substitute tD refirm public-sector agencies or line ministries. The establishment of a social fimd should be part of a larer plan a delineates and coordinates the roles and ilite of rated publ-soctor agencies and ministries. The of resoues m social seices becmse of the inabilty of coamumies, NGOs, and goveiments to finance recurrent coss very cdeady demomsrates tis point Neidier socdal finds, cental governents, NGOs, or oaennmties can solve this problem on thrr owt. Coordiaticn ang thn, however, coul utilize the stmmgft of each ogamanzatim to tackle the most criucal challeges. 3. Social fwds face a tradeoff between rapd implemenfation ofprojects and bilding instiutional and technical capaity The severiy of this trdeoff depnds on the kvel of aasting instiutil and t Ical capacity. When loal capacity is extauely limted, social finds may need to imvest addinal resources m tis area. This has bee the case m Guinea, Sao Tome, and Guyana, whem the limed local capacity has requied de social finds to pay particular atetio to p g tecbnical assistance to local organizations, public agecie and cmuuity groups to ensre that hy have the ability to undertake prncts. In Sao Tone, wher local capacity is severe limed, tbe socil fimd emplkys inmtraoal conracto to implement proijecs t have prority. Tbe fimd requres itatal contactors to suba to local firms; ftrugh thes pasbi local fimls gam te,bma financi and organzational sills. 4. Socialfids have hadlimitedsuxcess implementing cretprogrms Social finds do nt have the finacial and t cal resources to appri or supevs credit progms. Designed more as rapid financin nbams most social fimds (with the excep of Egjp and Sn Lka) have allocated ls than 10 pem of ber fimds to crdit progras. Credit progms are time-ccuing to establis reur strog insti to support rTrenerrs, and tak ger than infrastuctue or socia servce prjects to deiv isible beHefits. Hondwas has establishd strict criteria for fnancing credit prosrms worked with NGOs thaw have establsed progpam and been able to matai high ecwvery rates, but ir success has not bee dupicted by od social fimds. C Facto, that conribute to a successfslsocal fund 1. Human capital The corned of an effect socil fimd is a quafied and coamitted staff. Good n_aamxr of the fimd lies at the heart of its sws or hiilume. hr itmal organizition of the social find, incabtive lo emplOyees to perform, and staff moak anate mm part fin the qualty of managmndt and 1adeship. lbe ESF in Boivia establisbed a pattrn, Mowed by Hoaduras, Snegl, ad Zambia, of payug aaff salaries eqvalat to the private s d hrs an h tgi diaeor with prvaeector num_m ~cpenmce. Tnimmg staff and ntmin themis ecal to buldg a coh t d cohe insii Wdtst aL, 1994, p. 3 27 2. ihional autowomy lstitifonal and pltical aumny is also esswtal to a successl social fimd. The auity to choose projects withoutifmrce firn the board of directors or politcal entities reduces pressure m socil fimds tD aocae resources accordg to polical criteia Exemptim fiom cil service regulations and pay scbedules permits socal finds to pay competitive wage and attact competeat employees. Finally, auteNny has enabled social fimds to establish procrment and disbursement procedures more conducive to the decetaized and smll-scale natue of thir projects. 3. Polidcal support and conent Comminot mong the ghest pditical authorities is vial to preservirg the aunmy of socal funds and to ensurig objeUve and utnsparet allocations of fimds. Political leadershp cmmntted to the inu l iet oftne fun can lmit the use of social fimds for poltical purposes. in Egypt, where the polhical leadership has not undestood the concept of a socal fimd, the fimd has bem vulnrable to politcal in : mm whe allocatin resou . Evn w}e socal fimds have quasi-prvaw-sector stats, polhical comitment to teir objeciv rmains importt because of the need to coordinate fimd activites wit the pr and objectives ofthe cental govenmnt 4. Coorinaion with line ndnzsfl'es By g with ine miisties and publc agenis, socal fimds can ensure thatthweir objectives compent those of the minstris. Furdier, such coa tm reduces resenent and hotity that might arse toward the speial stats of the social fiuds. Giving othie public instituons a stk m the success of social fimd opwAti - wixhut opardiig the fumd's aubtcxy - may encourage the tansfer of lessons leaned within the fimd to the lie ministries or odtr tocdical agencis. ne ministries in Bolivia and Honduras can veo projecs that do Mt support their policy objec but do not have the audhority to approve Ihis ensures a social fimd support broader objectives but reduces opportunities for political inth :. S. Supernsion and audit Pne svisn of prjects and peiodic au miprove fte quality and integriy of social fund opeions and reduce the p Ial to misuse fimds. Spaviim is stal, aWlough it is ti-consuming qensimv and labor-intes, especially m countres m which gewgaphy and the poor quality of tansport infiastrucu make awl dffck Establisbig rgional offices reduces travl time and deegal ng spvisom to quaified thid tesuhi as NGOs, can decrease th admuristrativ burden om social funds. To make supervion and uiit eftbiv, the fimds also must be willig to nforo their nrles and eilaticns umfol and c_bstm. WTm organitons vilate fimud rulatiaos, social fimds must be wilig to impose an apprmpriate pealty. 6 Erthbhg leardnig necusmsfor tie sodclfimd Periodic a and evawt bolstd public confdeoc m a socal find. But they are also an mwortant mem for social fiuds to iDiproveir opeaftim Critical reviews can rnveal wkns in the fio f wmk and m wWYs ID uxVe Opeao . LmIg to idenify problans and fom now sou cotrht to the soca fimnds ability reach its objectives. For exampk, Zambia cuducts perioc beneficay asesanm to determine the impact of its projets o participatig cumute. This is a valuable to for nci bothe gm and w ma of its opans and designig solutios, whre necesary. Te Banl can play a pivo mle by tmsfing eriences and lesss acrss c tries. The fique ad regular a nge of ideas among Bank sC, poliymkcrs, and fiud staff can facilitate problem solving. 28 References World Bank Staff Appraisal Rports Bolivia, Fmncy Socal Fund Proect, Staff Appraisa Report No. P-4594-BO, 1987. Bolivia, Seod Emergency Social Fund Project, Staff Appraisal Report No. 7066-BO, 1988. Bdiva, Social Ivestmet Fund Project StaffApprisal Rpot No. 8248-BO, 1990. Boivi, Second Socil Inwesftnt Fund Prqject; StaffAppraial Report No. 11927-BO, 1993. Egypt Scial Fund fDr Dv1ominnt Project; Staff Apprasal Report No. 9561-EGT, 1991. Guatnala, Social Invesnmt Fund Project; StaffAppraisal Report No. 1 1060-GU, 1992. 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