Disasters are increasingly recognized as a threat to sustainable development, poverty reduction, and achievement of the Millennium Development Goals. Poor households are particularly vulnerable to negative shocks arising from disaster events for a number of reasons: the poor own fewer productive assets; are more likely to reside in hazardous locations and in substandard housing; and are primarily dependent on their own labor to meet their livelihood needs. Such risk profiles give them fewer options to cope with and recover from the loss of assets, or the death or disability of household members in the event of a disaster.

When a disaster occurs, communities are typically the first line of defense for poor households. Social Funds have been at the forefront of helping build community resilience to shocks through a wide range of social protection interventions. These include provision of productive infrastructure (e.g., small-scale irrigation, feeder roads), livelihood support, and provision of microfinance services, for risk reduction and mitigation. Social Funds have enabled risk coping for poor households through innovative community-managed safety net programs (e.g., cash for work programs, conditional cash transfers). Social Funds’ key contribution to social risk management, however, is in the form of their investments in local institution-building over the long term, investments that spring into action when disasters strike and communities need to target assistance, rebuild damaged infrastructure, and link to other forms of government support, in a transparent and efficient manner.

The design characteristics and the institutional set-up of Social Funds, including organizational presence at both local and national levels, offer significant advantages for responding to both rapid and slow-onset disasters. A landmark evaluation of the Bank’s experience in disaster management entitled Hazards of Nature, Risks to Development (2006), found that Social Funds have been among the most flexible and innovative instruments available for both responding to natural disasters and reducing disaster risk through the use of community-based approaches.