Direct Financing of Communities

Participatory, demand responsive projects aim to achieve sustainability of services at the local level by incorporating institutional mechanisms that ensure community control of decisions and resources during all stages of the subproject cycle. These projects can be broadly classified as local infrastructure (e.g., schools, health centers, water supply and sanitation, electrification, local roads, small bridges), social services (e.g., day care centers, orphanages, schools, health posts) and productive subprojects (e.g., small-scale community agro-processing, communal tractors, minor irrigation schemes).

This section focuses on the design of programs providing direct financing to communities.  It describes one particular set of arrangements – those where the responsibilities for managing financial resources and contracting service providers is vested in community organizations.

Direct financing of communities is a process by which a funding agency (e.g., social fund, sector line agency, or local government) provides funds directly to communities responsible for managing the implementation of subprojects.  A community includes groups of individuals living in close proximity to each other and/or other social groups, grassroots entrepreneurs, or associations able to identify a need and come together to access project funds. The size of the community varies depending on the type of subproject and includes people from all areas that make direct use of the subproject.  The community is usually represented by some form of community-based organization or local project committee.  Therefore it is not the “community” per se that enters into a contract with the funding agency, but the group representing that community.