Honduras is the third-poorest country in the Latin America and Caribbean Region: over half of Honduran households live in poverty, and almost one-third in extreme poverty. The majority of the poor and extremely poor live in rural areas and lack consistent access to schools, health centers, and infrastructure services.
The Honduran Social Investment Fund (FHIS) projects were designed to increase access among the poor to small-scale social and economic infrastructure, to develop social assistance programs for disadvantaged groups, and to contribute to the prospects for sustainability of such investments. FHIS passed through five different stages since its 1990 launch.
- Initially viewed as a compensatory social program to mitigate the effects of structural adjustment, it changed in 1994 to focus on reducing poverty by building social infrastructure and social capital.
- During the FHIS 2 period from 1994-98, targeting of program resources to the poor improved noticeably.
- The FHIS 3 period from 1998-2002 focused on strengthening the commitment and participation of municipalities and communities.
- FHIS 4 resources were used for reconstruction efforts, following Hurricane Mitch devastation in November 1998.
- FHIS 5 extended support for a social investment fund to finance community-driven development projects. It also promoted participatory Municipal Development Plans, which now include most of Honduras’ 298 municipalities. Nearly half now take the lead in project identification and supervision, with FHIS staff assuming a technical support function.
Almost 2.5 million people benefited from investments made by the Honduran Social Investment Fund (FHIS) in a total of 2,888 subprojects: Investments particularly benefited the population in poor and very poor municipalities; per capita investment in the poorest municipalities was four times higher than in the less poor ones.
Highlights:
- 1,446 rehabilitated schools, almost 700 new schools, 163 new health centers, 347 small water and sanitation systems, and 461 latrines.
- Impact evaluation found that 100 percent of children in communities with a FHIS project attended primary school in 2004 compared to 93 percent in control group communities (from a 1998 baseline of 89 percent in both types of communities).
- The number of children enrolled in the grade corresponding to their age increased by 19 percent, and school assistance of students between 6 and 12 years old increased by 9 percent between 1998 and 2004.
- The number of people facing a severe health problem who sought assistance from a health center increased by 14 percent, a substantial increase in the number of patients who received care.
- The number of pregnant women who made check-up visits to a health center increased by 11 percent.
- 92 percent of households in FHIS communities had running water, compared to only 36 percent of households in control communities.
The project demonstrated that participatory planning empowers communities and gives them a voice in setting local development priorities. As a result, FHIS received national approval by the Social Cabinet and is now implemented throughout Honduras. The project introduced a new methodology for community project implementation. For more than 200 subprojects, funds were channeled through local governments, which then contracted the work in compliance with FHIS standards.
Total project cost was US$137.48 million, of which IDA provided US$63.64 million. The Inter-American Development Bank provided US$43.8 million in credit, Germany provided a grant of US$8.7 million, and the Government of Honduras provided US$21.3 million. It is worth noting that FHIS receives substantial funding from additional sources, which is not reflected in the actual project financing figures, including bilateral support from USAID, Spain, Taiwan, and Japan (all grants, some technical assistance), and multilateral support from the European Union (a grant of US$106 million).
This is the fifth IDA-supported Social Investment Fund operation in Honduras, and it benefits from the long-term engagement between the country and IDA. IDA brought to the project its extensive expertise with similar projects worldwide, as well as its substantial analytic work on poverty and vulnerability issues in Honduras. IDA provided extensive technical assistance to municipalities in participatory municipal planning, subproject management, and the organization of preventive maintenance.
Honduras continues to face major challenges in the area of poverty reduction and local development. The future role of FHIS in Honduras’ poverty alleviation efforts is expected to focus increasingly on decentralized operations, namely empowering local governments and communities to carry out their local investment needs. The line ministries, however, continue to exhibit considerable capacity constraints in efficiently implementing small-scale investments. Importantly, donors recognize FHIS’ experience, and continue to charge FHIS with projects focused on social infrastructure and local development. As a result, several initiatives are in the works, including the establishment of a fund to provide loans to municipalities for key investments; and the establishment of a national database of contractors and consultants to support municipalities and communities in their subproject management.
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