Social funds: evidence on targeting, impacts and sustainability

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<ul><li><p>Journal of International Development</p><p>J. Int. Dev. 14, 627642 (2002)Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/jid.900</p><p>SOCIAL FUNDS: EVIDENCE ONTARGETING, IMPACTS AND</p><p>SUSTAINABILITY</p><p>JULIE VAN DOMELEN*</p><p>Social Protection Unit, Human Development Network, World Bank, Wishington DC, USA</p><p>Abstract: Impact evaluations show that social fund resources are pro-poor, and that targeting</p><p>has improved over time. Despite the leakage which occurs to better-off areas and households,</p><p>social fund performance compares favorably with other public programmes. Investments</p><p>largely reflect community needs and priorities and have increased access to, quality and</p><p>utilization of basic social infrastructure. These benefits have generally translated into</p><p>improvements in the health and education status of households, though specific impacts</p><p>vary by country, region, and sector. The vast majority of facilities are operating several years</p><p>after completion, but long-term sustainability of water systems is particularly problematic</p><p>given insufficient cost recovery. Copyright # 2002 John Wiley &amp; Sons, Ltd.</p><p>1 INTRODUCTION</p><p>Social funds channel investment resources to local needs. Since their beginning in the late</p><p>1980s, social funds have expanded rapidly to over 60 countries, and have gained wide</p><p>support from donors and Governments. Social funds differ from many traditional</p><p>development programmes. They fund proposals for small-scale investments generated</p><p>from the local level rather than pre-identifying projects or locations to receive investments.</p><p>They have therefore received the label demand-driven. An incentive structure is</p><p>established that allows open access by communities to a list of eligible types of projects.</p><p>A broad range of actors are typically involved in presenting proposals, including direct</p><p>requests from community groups, which is often a novelty in these countries.</p><p>After more than a decade of implementation experience in many countries, several key</p><p>questions about social fund performance remain. Various myths have evolved, largely</p><p>untested by empirical evidence. Social funds have been successful in delivering results</p><p>on the ground, but good information on who is reached by these programmes, the</p><p>Copyright# 2002 John Wiley &amp; Sons, Ltd.</p><p>*Correspondence to: Julie Van Domelen, Social Protection Unit, Human Development Network, World Bank,1818 H Street, NW, Washington DC 20433, USA. E-mail: jvandomelen@worldbank.org</p></li><li><p>sustainability of these local investments and the ultimate impact on improving household</p><p>welfare has been scant.1</p><p>In order to address these questions, a cross-country research effort was undertaken by</p><p>the World Bank, other donors, Governments, and national and international researchers.</p><p>Six case study countries were chosenArmenia, Bolivia, Honduras, Nicaragua, Peru and</p><p>Zambiabased on having a sufficient number of completed community investments and</p><p>an impact evaluation planned or on-going that allowed for representative sample sizes and</p><p>robust evaluation methodologies.2 The research focused on the developmental impact of</p><p>social funds, namely: (i) do social fund interventions reach the poor, both in terms of</p><p>reaching poor districts, as well as reaching poor households?; (ii) do these investments</p><p>reflect community needs and priorities?; (iii) have these investments increased access to,</p><p>quality and utilization of basic services? ; (iv) what impact have these investments had on</p><p>improving living standards?; and (v) how sustainable are these basic services?</p><p>The research compared welfare outcomes for communities that undertook social fund</p><p>investments with control or comparison groups constructed using propensity score</p><p>matching and matched comparisons.3 Bolivia is the only case with both baseline and</p><p>follow-up data available, as well as using an experimental design based on a randomized</p><p>control group, which has rarely been applied in evaluating development programmes.4</p><p>Over 21 000 household surveys were applied in communities benefiting from social</p><p>fund investments. National household surveys, with a sample size of over 46 000 house-</p><p>holds, were used to create control groups. In all cases, the household data are representa-</p><p>tive of social fund beneficiaries in that country. Over 1200 facilities surveys collected</p><p>information on the staffing and operation of schools, health centers, water and sanitation</p><p>systems, both social fund as well as comparator matched facilities. Qualitative assess-</p><p>ments using both household surveys and focus group interviews were implemented either</p><p>in conjunction with the impact evaluation or as free-standing beneficiary assessments to</p><p>provide further insights.</p><p>The results from six social funds are not necessarily indicative of the universe of social</p><p>funds, particularly social funds that do not focus on social infrastructure (e.g. programmes</p><p>in Argentina &amp; Chile) or have other goals. Because the main focus was on measuring</p><p>impacts and sustainability, the sample frames assess projects that concluded between</p><p>199499, and so may not represent the more recent efforts towards community capacity</p><p>1One such myth concerns the institutional role of social funds. This is not discussed in this paper, but seede Haan, and Carvalho et al. in this issue.2This article draws on the main results of that research. The cross-country analysis is presented in a forthcomingWorld Bank publication, Communities Take the Lead: Evaluating Social Fund Performance Across Countries byRawlings, Sherburne-Benz and Van Domelen. The full study also includes analysis of the cost efciency ofsocial funds versus comparator mechanisms. Due to space constraints, this topic has not been includedhere. The following evaluation reports carried out in the case study countries served as the principalbackground studies used for the cross-country analysis: Armenia: Chase (2001); Bolivia: Newmanet al. (2000); Honduras: Walker et al. (1999); Nicaragua: Rawlings et al. (2000); Peru: Instituto Apoyo(2000b); Instituto Apoyo. Alcazar and Wachtenheim (2000a): Paxson and Schady (1999); Zambia: Chaseand Sherburne-Benz (2000). Unless otherwise noted, all statistical ndings cited on specic countries aredrawn from these reports.3The counterfactual applied is what would the state of households been in the absence of the social fundintervention. In most cases, control group households already had access to basic services like primary schools orhealth services that may or may not have benefited from recent investments by other agencies like line ministries,local government or NGOs. So, the impact evaluations measure the net social fund effect.4The Bolivia impact evaluation only evaluated results in rural areas.</p><p>628 J. Van Domelen</p><p>Copyright# 2002 John Wiley &amp; Sons, Ltd. J. Int. Dev. 14, 627642 (2002)</p></li><li><p>building and training, linkages with local government, or some of the sustainability</p><p>measures taken in recent years.</p><p>2 DO SOCIAL FUNDS REACH POOR AREAS AND POOR HOUSEHOLDS?</p><p>A myth has developed that demand-driven programs are incapable of reaching the poor</p><p>because the poorest communities and households are not organized, motivated or capable</p><p>of effectively expressing their demands (Stewart, 1995; Tendler, 2000). To assess targeting</p><p>results, the research looked at two levels: the degree to which resources were focused on</p><p>poor areas and the level of poverty of people that benefited.</p><p>As shown in Table 1, the geographic distribution of social fund resources has been</p><p>generally progressive in all cases. Poorer districts and municipalities have received more in</p><p>per capita terms than better-off areas. The cumulative distribution of resources since</p><p>inception, which includes the early years of emergency objectives often focused in urban</p><p>areas, shows that the poorest 30 per cent of districts have received between 35 per cent</p><p>(Zambia) and 66 per cent (Peru) of social fund resources.5 Looking at data only for the more</p><p>recent years, targeting has improved over time, in some cases substantially. In Bolivia, the</p><p>share of resources going to the poorest 30 per cent increased from 13 per cent in 1991 to 58</p><p>per cent in 1998. In Nicaragua, the figures are 28 per cent to the lowest 30 per cent in 1991,</p><p>increasing to 51 per cent in 1998. And in Peru, the share of total funding allocated to the</p><p>poorest 30 per cent of districts increased from 43 per cent in 1992 to 79 per cent in 1998.</p><p>Improvements in geographical poverty targeting over time can be explained by a</p><p>number of factors. On the supply side, a more aggressive policy of targeting poor areas,</p><p>proactive outreach, including information campaigns and technical assistance to poorer</p><p>areas, and the establishment of regional offices has helped focus efforts on poor areas. On</p><p>the demand side, studies have shown that communities often mobilize based on word of</p><p>mouth and visits to other communities (Owen &amp; Van Domelen, 1998). More risk averse</p><p>and remote communities may begin to seek programme resources slightly later, after</p><p>seeing the benefits in more dynamic communities. And in the case of Bolivia, significant</p><p>fiscal decentralization in 199495 appears to have enabled poor municipalities to increase</p><p>their demand for social fund financing.</p><p>Data from household surveys shows that social fund beneficiaries are concentrated</p><p>among the poor. The percentage of beneficiaries beneath the national poverty line ranged</p><p>from 71 per cent in Zambia to 55 per cent in Nicaragua (Figure 1). Comparing these</p><p>outcomes with the national incidence of poverty and extreme poverty, the share of social</p><p>fund participants is equal to or surpasses the national population, depending on the</p><p>country, both for the poverty line and extreme poverty line. In Peru, Nicaragua and</p><p>Honduras, the poor and the extreme poor account for between 6 and 45 per cent more than</p><p>their representation in the national population. In Zambia, the incidence of social fund</p><p>beneficiaries mirrors the high level of poverty (over 70 per cent) at the national level.</p><p>Despite this neutral distribution of beneficiaries compared with the national poverty line,</p><p>5The most progressive overall geographical targeting appears in the Latin American examples. The Peru socialfund, FONCODES, has the most progressive distribution of resources geographically, largely due to thepredominantly rural focus of FONCODES. In the Zambia case, given the broad sweep of poverty in the country,the social fund sought a relatively equal distribution across districts. In Armenia, additional priorities, likefocusing investments in earthquake reconstruction zones, have tended to dilute the poverty criteria of investmentallocation.</p><p>Targeting, Impacts and Sustainability 629</p><p>Copyright# 2002 John Wiley &amp; Sons, Ltd. J. Int. Dev. 14, 627642 (2002)</p></li><li><p>Tab</p><p>le1</p><p>.G</p><p>eog</p><p>rap</p><p>hic</p><p>ald</p><p>istr</p><p>ibu</p><p>tio</p><p>no</p><p>fso</p><p>cial</p><p>fun</p><p>dre</p><p>sou</p><p>rces</p><p>sh</p><p>are</p><p>of</p><p>exp</p><p>end</p><p>itu</p><p>res</p><p>by</p><p>geo</p><p>gra</p><p>ph</p><p>ical</p><p>pover</p><p>tyd</p><p>ecil</p><p>e1</p><p>Arm</p><p>enia</p><p>Bo</p><p>liv</p><p>iaH</p><p>on</p><p>du</p><p>ras</p><p>Nic</p><p>arag</p><p>ua</p><p>Per</p><p>uZ</p><p>amb</p><p>ia</p><p>Mu</p><p>nic</p><p>ipal</p><p>19</p><p>96</p><p>9</p><p>9A</p><p>SIF</p><p>19</p><p>91</p><p>9</p><p>81</p><p>99</p><p>81</p><p>99</p><p>1</p><p>19</p><p>98</p><p>19</p><p>99</p><p>19</p><p>91</p><p>9</p><p>81</p><p>99</p><p>81</p><p>99</p><p>2</p><p>98</p><p>19</p><p>98</p><p>19</p><p>91</p><p>9</p><p>8S</p><p>RP</p><p>or</p><p>dis</p><p>tric</p><p>tII</p><p>11</p><p>dec</p><p>ile</p><p>1</p><p>po</p><p>ore</p><p>st</p><p>11</p><p>12</p><p>11</p><p>91</p><p>51</p><p>51</p><p>52</p><p>02</p><p>53</p><p>21</p><p>08</p><p>21</p><p>31</p><p>21</p><p>43</p><p>21</p><p>11</p><p>31</p><p>41</p><p>62</p><p>12</p><p>51</p><p>11</p><p>3</p><p>31</p><p>21</p><p>31</p><p>51</p><p>71</p><p>11</p><p>41</p><p>31</p><p>51</p><p>92</p><p>21</p><p>51</p><p>7</p><p>41</p><p>21</p><p>21</p><p>31</p><p>39</p><p>10</p><p>11</p><p>10</p><p>12</p><p>13</p><p>98</p><p>59</p><p>91</p><p>11</p><p>11</p><p>09</p><p>11</p><p>11</p><p>85</p><p>91</p><p>0</p><p>66</p><p>61</p><p>21</p><p>01</p><p>08</p><p>11</p><p>45</p><p>21</p><p>41</p><p>2</p><p>76</p><p>68</p><p>88</p><p>98</p><p>10</p><p>31</p><p>88</p><p>87</p><p>88</p><p>05</p><p>97</p><p>53</p><p>11</p><p>11</p><p>4</p><p>91</p><p>01</p><p>16</p><p>01</p><p>57</p><p>65</p><p>20</p><p>67</p><p>10</p><p>rich</p><p>est</p><p>14</p><p>12</p><p>31</p><p>67</p><p>54</p><p>10</p><p>93</p><p>1In</p><p>each</p><p>cou</p><p>ntr</p><p>y,m</p><p>un</p><p>icip</p><p>alit</p><p>ies</p><p>or</p><p>dis</p><p>tric</p><p>tsw</p><p>ere</p><p>ran</p><p>ked</p><p>fro</p><p>mp</p><p>oo</p><p>rest</p><p>tori</p><p>ches</p><p>tb</p><p>ased</p><p>on</p><p>the</p><p>pover</p><p>tyin</p><p>dic</p><p>ato</p><p>rsu</p><p>sed</p><p>inn</p><p>atio</p><p>nal</p><p>pover</p><p>tym</p><p>aps.</p><p>Po</p><p>pu</p><p>lati</p><p>on</p><p>dec</p><p>iles</p><p>wer</p><p>eth</p><p>end</p><p>raw</p><p>n,</p><p>wit</p><p>hth</p><p>ep</p><p>oo</p><p>rest</p><p>dec</p><p>ile</p><p>rep</p><p>rese</p><p>nti</p><p>ng</p><p>10</p><p>per</p><p>cen</p><p>to</p><p>fth</p><p>en</p><p>atio</p><p>nal</p><p>po</p><p>pula</p><p>tio</p><p>nre</p><p>sid</p><p>ing</p><p>inth</p><p>ep</p><p>oo</p><p>rest</p><p>dis</p><p>tric</p><p>ts.</p><p>Sources</p><p>:A</p><p>rmen</p><p>ia</p><p>Soci</p><p>alIn</p><p>ves</p><p>tmen</p><p>tF</p><p>und</p><p>dat</p><p>abas</p><p>e,B</p><p>oli</p><p>via</p><p>S</p><p>oci</p><p>alIn</p><p>ves</p><p>tmen</p><p>tF</p><p>und</p><p>dat</p><p>abas</p><p>e,H</p><p>ondura</p><p>sS</p><p>oci</p><p>alIn</p><p>ves</p><p>tmen</p><p>tF</p><p>und</p><p>dat</p><p>abas</p><p>e,N</p><p>icar</p><p>agua</p><p>E</p><p>mer</p><p>gen</p><p>cyS</p><p>oci</p><p>alIn</p><p>ves</p><p>tmen</p><p>tF</p><p>un</p><p>dd</p><p>atab</p><p>ase,</p><p>Per</p><p>u</p><p>Pax</p><p>son</p><p>and</p><p>Sch</p><p>ady</p><p>(19</p><p>99),</p><p>Zam</p><p>bia</p><p>:S</p><p>oci</p><p>alR</p><p>ecover</p><p>yP</p><p>roje</p><p>ctd</p><p>atab</p><p>ase.</p><p>630 J. Van Domelen</p><p>Copyright# 2002 John Wiley &amp; Sons, Ltd. J. Int. Dev. 14, 627642 (2002)</p></li><li><p>the Zambia social fund was effective in targeting resources to the poorest of the poor, with</p><p>15 per cent of beneficiaries drawn from the lowest ten per cent of the income distribution.</p><p>How do these results compare with other programmes operating in the same countries? In</p><p>terms of geographical distribution of resources, social funds appear more pro-poor than other</p><p>government programmes, although data on other programmes is fairly limited. In Peru, the</p><p>social fund has the most pro-poor geographical expenditure distribution of three targeted</p><p>social programmesthe other two studied include a similar national school and health</p><p>center construction programme and the national school feeding programme (Paxson &amp;</p><p>Schady, 1999) and compared favorably to the generally regressive per capita student</p><p>expenditures by the Ministry of Education (Hentschel, 1998). In Bolivia, a social fund</p><p>expenditure was three times more likely to reach a poor municipality than general fiscal</p><p>transfers to local governments (World Bank, 2001). Results were similar at the household</p><p>level. In Armenia, although the social fund household targeting was relatively neutral, the</p><p>social fund performed in the mid-range of eight national social assistance programmes</p><p>analysed (World Bank, 1999), including programmes that screen by household means</p><p>testing. In Peru, the social fund had the most pro-poor distribution of beneficiaries of the three</p><p>types of support generally available for local school infrastructure. In Nicaragua, social fund</p><p>targeting is more likely to benefit the poor than expenditures made through the ministries of</p><p>health and education. Therefore, despite their limitations, social fund targeting appears to</p><p>have improved resource flows going to poor areas and poor households.</p><p>Figure 1. Percentage of social fund beneficiaries below the national poverty lineNote: The household incidence of beneficiaries could not be measured in Bolivia for lack of anational household survey, and the national poverty line had not yet been established from the recenthousehold survey in Armenia.</p><p>Targeting, Impacts and Sustainability 631</p><p>Copyright# 2002 John Wiley &amp; Sons, Ltd. J. Int. Dev. 14, 627642 (2002)</p></li><li><p>3 DO THESE INVESTMENTS REFLECT COMMUNITY NEEDSAND PRIORITIES?</p><p>Based on household surveys and focus group interviews, community members report that</p><p>the projects selected correspond to important needs of the community.6</p><p>* In Armenia, 79 per cent of community members interviewed reported that the</p><p>implemented micro-project had solved the most important problem in the community,</p><p>17 per cent thought that while the problem addressed was important more important</p><p>ones remained, and only three per cent answered that the problem addressed was not</p><p>important at all (Development Programs, 1999).</p><p>* In Honduras, in communities that implemented water, education and health</p><p>investments, these were the top-ranking investment priority...</p></li></ul>