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Social Funds Overview Image - Boy playing with water.

Social Funds are multi-sectoral programs that finance small projects targeted to benefit a country's poor and vulnerable groups based on a participatory manner of demand generated by local groups and screened against a set of eligibility criteria.

Social Fund programs are demand-driven and aim to involve the active participation of several local actors (communities and community-based organizations, NGOs, local governments) with the ultimate goal of addressing the needs of poor and vulnerable communities while contributing to social capital and empowerment at the local level.

Social Funds' institutional frameworks, targeting, selection criteria, rules for processing projects and contracting vary greatly. Some SFs are fairly centralized, while others work in collaboration with or through local governments; some give funds to community groups for implementation, other to local governments, and others contract third parties on behalf of the communities.

Social Funds are usually managed by a semi-autonomous government body that appraises and supervises the implementation of subprojects.  In several countries, SFs have served as innovators and demonstrators of new methods of decentralized participatory decision-making, management, and accountability that may be adopted for broader application by public sector organizations.

Social Funds Evolution and Objectives

First generation social funds, launched in the mid to late 1980s, were created to serve as short-term safety nets to soften the impact of structural adjustment policies on the poor. These programs were used in more than 60 countries and aimed at providing emergency relief by creating temporary employment and improving income. These initial programs were assumed to have a short life span.

In recent years, Social Funds have adopted more explicit institutional strategies aimed at empowerment, capacity building, and sustainability goals with a focus on longer-term objectives.  They have played an important role in funding community projects, empowering communities, building linkages between communities and their local governments. More recently, Social Funds have also become valuable instruments in governments’ decentralization processes by giving local governments a greater role in Social Fund subproject cycles.

What are some of the advantages of the Social Funds model?
  • Social Funds tend to improve allocative efficiency by delivering public goods and services in a way that fits local preferences better than centrally implemented programs. Social Funds allow communities to handle their subproject's procurement and financing, which tends to improve supervision and accountability, while at the same time increases local capacity building and production efficiency.
  • The prioritization, design and implementation of subprojects through participatory processes increase the chances that the beneficiaries' needs and priorities are more accurately met. This has special relevance for vulnerable groups as they may be able to better articulate their priorities and demands through participatory processes and by mandated representation.
  • As the benefits and results of Social Funds become evident, local governments may be encouraged to replicate the model and to be more responsive to their constituencies. 
Related Resources

Social Funds as an Instrument of Social Protection: An Analysis of Lending Trends - FY2000-2007 (310kb pdf)
Social Protection Discussion Paper No. 0809; Publication Date: 07/08 . By Samantha de Silva and June-wei Sum

Social Capital in the Operations and Impacts of Social Investment Funds  (193kb pdf)
The World Bank. Revised Version – May 2003.  By Julie Van Domelen. 

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Last updated: 2009-08-11

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