"Social funds have proven to be a highly creative complement to "top down" economic programs that have been a mainstay of Bank development thinking for so long," says Lynne Sherburne-Benz, a Lead Social Protection Specialist in the Human Development Network, with operational experience in designing social funds in Africa and supporting task teams in other regions in the design of their social funds. One of the co-authors of a new Bank evaluation of social funds called Letting Communities Take the Lead, Sherburne-Benz says " social funds have been popular because they use a grassroots approach to fund local improvements and because they're proven to be relatively quick and agile at getting development seed money to poor and vulnerable groups."

Social funds may well have captured the imagination, some would even say the passion, of many in the world development community, but how well do they actually work? Do social funds reach the poor? How have they improved living standards?

Using rigorous evaluation methodology, Letting Communities Take the Lead, written by Sherburne-Benz, Laura Rawlings, Julie Van Domelen, marks the first attempt to conduct a systematic, cross-country, rigorous analysis of social funds. Building upon extensive collaboration between social fund staff, World Bank teams across networks, and national and international researchers, the study examined the track record of social funds in Armenia, Bolivia, Honduras, Nicaragua, Peru and Zambia, and concludes that social funds have achieved the broad objectives they were designed to address and have made important contributions to improving human welfare.

"My colleagues and I were impressed with this review, how Bank management had nurtured some very effective projects, and how these were a strong example of how social funds can be used to expand community-driven development," says Patience Bongiwe Kunene, Advisor to the Executive Director for Africa Group 1 countries, such as Angola, Burundi, and Mozambique, who attended a recent session of the Committee on Development Effectiveness (CODE), which discussed the new report and a new OED assessment of the Bank's work in social funds." We were also impressed that OED had rated 96 percent of the Bank social fund projects in its review (some 26 projects, a sample of roughly a third of the Bank's social fund portfolio) as "satisfactory," well above the Bank average for project effectiveness. This was impressive."

Findings

Based on extensive primary data from more than 65,000 households and 1,200 facilities, the study offers three primary findings:

Do social funds reach poor regions and households? The report finds compelling evidence that social funds reach a broad range of communities and households, including the poorest people in the countries studied. As with any program that builds community infrastructure that is not designed to exclude the non-poor, social fund projects also benefited better-off people. For example, while latrine and health clinic projects are more strongly serving the poor, piped sewerage projects tended to benefit richer households that had running water and other amenities.

Do social funds investments have an impact on living standards? According to the evidence, yes. Social funds have expanded people's access to and use of basic health and education services in each of the six countries studied. School enrollments expanded, people visited social fund-supported health centers more frequently and used services such as pre-natal care for their babies and having medical staff on hand during their subsequent deliveries. Access to and availability of water improved in every country following social fund investments in these areas.

These investments have also tangibly improved welfare in each of the countries studied, although impacts vary. For example, in rural Bolivia, primary education enrollment rates did not increase markedly. However, in Nicaragua, Armenia and urban areas of Zambia, enrollment rates increased significantly for households benefiting from school improvement investments. In Peru, those districts that received the most social funds for school improvements achieved the largest gains in primary school enrollments, although in rural areas these gains were found only among the poorest populations. In Honuras, there are indications of a positive impact on enrollment, but the sample was not large enough to confirm this impact.

Social fund investments in primary health centers achieved a dramatic reduction in infant mortality in Bolivia, the one country where this could be assessed. Infant deaths dropped from about 60 deaths per 1000 live births to 30 in social fund communities versus an increase from 60 to 67 in the comparison group. According to Julie Van Domelen, Coordinator of the Social Funds Thematic Group and co-author of the study, "the magnitude and strength of the findings that infant mortality in rural Bolivia was significantly reduced because of improved health facilities is a hopeful sign of progress towards the meeting of the International Development Goals."

Social fund water and sanitation projects also improved household living standards. Significant health gains also came from expanding people's access to water supply, particularly in rural areas. Social fund water investments halved child mortality rates in Peru and Bolivia relative to comparison groups and there were likely reductions in diarrhea in most countries studied.

Are social funds delivering sustainable investments? These findings show that communities can use social funds to build quality infrastructure, and coordinate with local government, central ministries, and other groups to sustain these projects. Latrine projects, schools and health centers were generally well-constructed and maintained. Low connection rates limited the health impacts of sewerage projects, though they operated well with adequate maintenance. Community-managed water systems presented the most technical difficulties, although the vast majority of systems were found to be operating between one to four years after completion.

Even well-built social fund infrastructure cannot improve living standards unless other sectors complement these investments. For example, new health clinics require medical staff and medicines. Expanded schools require new teachers and books. This study found that social fund projects succeed in mobilizing complementary inputs in most cases. Schools and health centers alike that had received social fund investments had equal or better availability of staff and key non- infrastructure inputs, such as medicines and textbooks, than comparator institutions, even several years after the initial investment. Social fund health facilities also often benefited from more community volunteers than comparators.

Room for improvement?

The report is quick to point out that while social funds are certainly a dynamic model for community-driven development, they are still only one tool in the repertoire of proven anti-poverty measures. As the report puts it, "they cannot substitute for effective development policy or meet all of the investment needs of poor communities…social funds can be an effective poverty reduction tool, but they need to be used as part of a comprehensive development effort to maximize their effectiveness."

At the recent meeting of CODE, Executive Directors and others made the same point that as successful as they obviously are in driving community development, it was important to understand what they can and cannot do in a local setting. Social funds cannot supply all local investment needs and therefore in going forward, some members called for greater interaction and coordination with local government and line agencies, as well as the broader Poverty Reduction Strategy (PRSP) and Country Assistance Strategy (CAS) processes.

Pieter Stek, the Chairman of CODE, and the Executive Director for Cyprus, Israel, and the Netherlands, had both praise and constructive advice for the Bank's work in social funds:

"There is incredible enthusiasm in developing countries and the Bank for social funds, given the fact they're working directly with local people to make tangible results happen. There's a freshness and directness to social funds work which makes these projects so different from anything else the World Bank does. The next phase of social funds should be to continue the trend towards working more closely with local and national efforts to reduce poverty and improve human development. You see all these wonderful results on the ground locally, but the challenge now with social funds is to marry them with broader national impact."

Stek's fellow CODE observer, Patience Bongiwe Kunene also saw a need to take the powerful grassroots impact of social funds and see how it could benefit local government in particular:

"The Bank's program is well-managed, so what we need to do is take the "best practice" lessons we've learned from running social funds well, and see if they can help local government become more effective and accountable."

For those who remember the quality of their lives before the arrival of social funds in their towns and villages, the proof that this form of community development really works is obvious when they use their nearby water pump or take their children to the newly built schools, financed by social funds and local resources.

Amplifying the benefits of social funds at work in his particular area, a community leader in La Empalizada, Honduras had this to say of the funds-supported school in his neighborhood: "Well, I think that the children study today in a better environment and because they are in a nice classroom, they put more care into learning, they are freer to do that. Before, they used to walk in tight groups and now they move about more freely and go out happily to play. The classroom looks nice and it stands out in the community. It is a good piece of work, yes… In the old school there were a lot of dropouts among the older kids, now all the children are still coming. About 30 adults are attending the literacy course."