social funds: evidence on targeting, impacts and sustainability

Journal of International Development

J. Int. Dev. 14, 627–642 (2002)

Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/jid.900

SOCIAL FUNDS: EVIDENCE ONTARGETING, IMPACTS AND

SUSTAINABILITY

JULIE VAN DOMELEN*

Social Protection Unit, Human Development Network, World Bank, Wishington DC, USA

Abstract: Impact evaluations show that social fund resources are pro-poor, and that targeting

has improved over time. Despite the leakage which occurs to better-off areas and households,

social fund performance compares favorably with other public programmes. Investments

largely reflect community needs and priorities and have increased access to, quality and

utilization of basic social infrastructure. These benefits have generally translated into

improvements in the health and education status of households, though specific impacts

vary by country, region, and sector. The vast majority of facilities are operating several years

after completion, but long-term sustainability of water systems is particularly problematic

given insufficient cost recovery. Copyright # 2002 John Wiley & Sons, Ltd.

1 INTRODUCTION

Social funds channel investment resources to local needs. Since their beginning in the late

1980s, social funds have expanded rapidly to over 60 countries, and have gained wide

support from donors and Governments. Social funds differ from many traditional

development programmes. They fund proposals for small-scale investments generated

from the local level rather than pre-identifying projects or locations to receive investments.

They have therefore received the label ‘demand-driven’. An incentive structure is

established that allows open access by communities to a list of eligible types of projects.

A broad range of actors are typically involved in presenting proposals, including direct

requests from community groups, which is often a novelty in these countries.

After more than a decade of implementation experience in many countries, several key

questions about social fund performance remain. Various ‘myths’ have evolved, largely

untested by empirical evidence. Social funds have been successful in delivering results

on the ground, but good information on who is reached by these programmes, the

Copyright # 2002 John Wiley & Sons, Ltd.

*Correspondence to: Julie Van Domelen, Social Protection Unit, Human Development Network, World Bank,1818 H Street, NW, Washington DC 20433, USA. E-mail: [email protected]

sustainability of these local investments and the ultimate impact on improving household

welfare has been scant.1

In order to address these questions, a cross-country research effort was undertaken by

the World Bank, other donors, Governments, and national and international researchers.

Six case study countries were chosen—Armenia, Bolivia, Honduras, Nicaragua, Peru and

Zambia—based on having a sufficient number of completed community investments and

an impact evaluation planned or on-going that allowed for representative sample sizes and

robust evaluation methodologies.2 The research focused on the developmental impact of

social funds, namely: (i) do social fund interventions reach the poor, both in terms of

reaching poor districts, as well as reaching poor households?; (ii) do these investments

reflect community needs and priorities?; (iii) have these investments increased access to,

quality and utilization of basic services? ; (iv) what impact have these investments had on

improving living standards?; and (v) how sustainable are these basic services?

The research compared welfare outcomes for communities that undertook social fund

investments with control or comparison groups constructed using propensity score

matching and matched comparisons.3 Bolivia is the only case with both baseline and

follow-up data available, as well as using an experimental design based on a randomized

control group, which has rarely been applied in evaluating development programmes.4

Over 21 000 household surveys were applied in communities benefiting from social

fund investments. National household surveys, with a sample size of over 46 000 house-

holds, were used to create control groups. In all cases, the household data are representa-

tive of social fund beneficiaries in that country. Over 1200 facilities surveys collected

information on the staffing and operation of schools, health centers, water and sanitation

systems, both social fund as well as comparator ‘matched’ facilities. Qualitative assess-

ments using both household surveys and focus group interviews were implemented either

in conjunction with the impact evaluation or as free-standing beneficiary assessments to

provide further insights.

The results from six social funds are not necessarily indicative of the universe of social

funds, particularly social funds that do not focus on social infrastructure (e.g. programmes

in Argentina & Chile) or have other goals. Because the main focus was on measuring

impacts and sustainability, the sample frames assess projects that concluded between

1994–99, and so may not represent the more recent efforts towards community capacity

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 efficiency 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 findings cited on specific 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.

628 J. Van Domelen

Copyright # 2002 John Wiley & Sons, Ltd. J. Int. Dev. 14, 627–642 (2002)

building and training, linkages with local government, or some of the sustainability

measures taken in recent years.

2 DO SOCIAL FUNDS REACH POOR AREAS AND POOR HOUSEHOLDS?

A myth has developed that demand-driven programs are incapable of reaching the poor

because the poorest communities and households are not organized, motivated or capable

of effectively expressing their demands (Stewart, 1995; Tendler, 2000). To assess targeting

results, the research looked at two levels: the degree to which resources were focused on

poor areas and the level of poverty of people that benefited.

As shown in Table 1, the geographic distribution of social fund resources has been

generally progressive in all cases. Poorer districts and municipalities have received more in

per capita terms than better-off areas. The cumulative distribution of resources since

inception, which includes the early years of emergency objectives often focused in urban

areas, shows that the poorest 30 per cent of districts have received between 35 per cent

(Zambia) and 66 per cent (Peru) of social fund resources.5 Looking at data only for the more

recent years, targeting has improved over time, in some cases substantially. In Bolivia, the

share of resources going to the poorest 30 per cent increased from 13 per cent in 1991 to 58

per cent in 1998. In Nicaragua, the figures are 28 per cent to the lowest 30 per cent in 1991,

increasing to 51 per cent in 1998. And in Peru, the share of total funding allocated to the

poorest 30 per cent of districts increased from 43 per cent in 1992 to 79 per cent in 1998.

Improvements in geographical poverty targeting over time can be explained by a

number of factors. On the supply side, a more aggressive policy of targeting poor areas,

proactive outreach, including information campaigns and technical assistance to poorer

areas, and the establishment of regional offices has helped focus efforts on poor areas. On

the demand side, studies have shown that communities often mobilize based on word of

mouth and visits to other communities (Owen & Van Domelen, 1998). More risk averse

and remote communities may begin to seek programme resources slightly later, after

seeing the benefits in more dynamic communities. And in the case of Bolivia, significant

fiscal decentralization in 1994–95 appears to have enabled poor municipalities to increase

their demand for social fund financing.

Data from household surveys shows that social fund beneficiaries are concentrated

among the poor. The percentage of beneficiaries beneath the national poverty line ranged

from 71 per cent in Zambia to 55 per cent in Nicaragua (Figure 1). Comparing these

outcomes with the national incidence of poverty and extreme poverty, the share of social

fund participants is equal to or surpasses the national population, depending on the

country, both for the poverty line and extreme poverty line. In Peru, Nicaragua and

Honduras, the poor and the extreme poor account for between 6 and 45 per cent more than

their representation in the national population. In Zambia, the incidence of social fund

beneficiaries mirrors the high level of poverty (over 70 per cent) at the national level.

Despite this neutral distribution of beneficiaries compared with the national poverty line,

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.

Targeting, Impacts and Sustainability 629


Tab

le1

.G

eog

rap

hic

ald

istr

ibu

tio

no

fso

cial

fun

dre

sou

rces

—sh

are

of

exp

end

itu

res

by

geo

gra

ph

ical

pover

tyd

ecil

e1

Arm

enia

Bo

liv

iaH

on

du

ras

Nic

arag

ua

Per

uZ

amb

ia

Mu

nic

ipal

19

96

–9

9A

SIF

19

91

–9

81

99

81

99

1–

19

98

19

99

19

91

–9

81

99

81

99

2–

98

19

98

19

91

–9

8S

RP

or

dis

tric

tII

11

dec

ile

1–

po

ore

st

11

12

11

91

51

51

52

02

53

21

08

21

31

21

43

21

11

31

41

62

12

51

11

3

31

21

31

51

71

11

41

31

51

92

21

51

7

41

21

21

31

39

10

11

10

12

13

98

59

91

11

11

09

11

11

85

91

0

66

61

21

01

08

11

45

21

41

2

76

68

88

98

10

31

88

87

88

05

97

53

11

11

4

91

01

16

01

57

65

20

67

10

–

rich

est

14

12

31

67

54

10

93

1In

each

cou

ntr

y,m

un

icip

alit

ies

or

dis

tric

tsw

ere

ran

ked

fro

mp

oo

rest

tori

ches

tb

ased

on

the

pover

tyin

dic

ato

rsu

sed

inn

atio

nal

pover

tym

aps.

Po

pu

lati

on

dec

iles

wer

eth

end

raw

n,

wit

hth

ep

oo

rest

dec

ile

rep

rese

nti

ng

10

per

cen

to

fth

en

atio

nal

po

pula

tio

nre

sid

ing

inth

ep

oo

rest

dis

tric

ts.

Sources

:A

rmen

ia—

Soci

alIn

ves

tmen

tF

und

dat

abas

e,B

oli

via

—S

oci

alIn

ves

tmen

tF

und

dat

abas

e,H

ondura

s—S

oci

alIn

ves

tmen

tF

und

dat

abas

e,N

icar

agua

—E

mer

gen

cyS

oci

alIn

ves

tmen

tF

un

dd

atab

ase,

Per

u—

Pax

son

and

Sch

ady

(19

99),

Zam

bia

:S

oci

alR

ecover

yP

roje

ctd

atab

ase.

630 J. Van Domelen


the Zambia social fund was effective in targeting resources to the poorest of the poor, with

15 per cent of beneficiaries drawn from the lowest ten per cent of the income distribution.

How do these results compare with other programmes operating in the same countries? In

terms of geographical distribution of resources, social funds appear more pro-poor than other

government programmes, although data on other programmes is fairly limited. In Peru, the

social fund has the most pro-poor geographical expenditure distribution of three targeted

social programmes—the other two studied include a similar national school and health

center construction programme and the national school feeding programme (Paxson &

Schady, 1999) and compared favorably to the generally regressive per capita student

expenditures by the Ministry of Education (Hentschel, 1998). In Bolivia, a social fund

expenditure was three times more likely to reach a poor municipality than general fiscal

transfers to local governments (World Bank, 2001). Results were similar at the household

level. In Armenia, although the social fund household targeting was relatively neutral, the

social fund performed in the mid-range of eight national social assistance programmes

analysed (World Bank, 1999), including programmes that screen by household means

testing. In Peru, the social fund had the most pro-poor distribution of beneficiaries of the three

types of support generally available for local school infrastructure. In Nicaragua, social fund

targeting is more likely to benefit the poor than expenditures made through the ministries of

health and education. Therefore, despite their limitations, social fund targeting appears to

have improved resource flows going to poor areas and poor households.

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.



3 DO THESE INVESTMENTS REFLECT COMMUNITY NEEDSAND PRIORITIES?

Based on household surveys and focus group interviews, community members report that

the projects selected correspond to important needs of the community.6

* In Armenia, 79 per cent of community members interviewed reported that the

implemented micro-project had solved the most important problem in the community,

17 per cent thought that while the problem addressed was important more important

ones remained, and only three per cent answered that the problem addressed was not

important at all (Development Programs, 1999).

* In Honduras, in communities that implemented water, education and health

investments, these were the top-ranking investment priority of community members.

However, latrine and sewerage investments did not reflect the felt needs of the

communities where they were implemented (Table 2) (ESA Consultores, 1999).

* In Nicaragua, 72 per cent of respondents answered that the FISE projects were those

that most benefited the community out of all investments implemented recently

(IDEAS, 1999).

Table 2. Honduras: Community investment priorities

Type of project actually chosen by the community

Expressed CommunityPriorities

Health Education Water Sewerage Latrines Average*

Options on the FHIS

Menu

Health 35 11 3 18 6 15

Education 1 47 1 6 5 12

Water 4 7 64 10 23 22

Sewerage 9 3 3 4 5 5

Latrines 6 1 1 0 7 3

Options not on the FHIS

menu

Electricity/Public 13 0 3 1 15 7

lighting

Roads and bridges 8 11 5 28 6 12

Secondary education 8 0 0 0 0 2

Pre-school 3 0 0 1 14 4

Other 8 10 6 19 7 10

Don’t know/no opinion 5 9 15 13 13 11

Total 100 100 100 100 100 100

*Numbers may not add up due to rounding.Source: ESA Consultores, Ex-Post Evaluation of the Honduras Social Investment Fund (FHIS II), May 1999.

6In the case of Armenia and Peru, data was obtained through beneficiary assessments, with sample sizesrepresentative of completed projects and respondents randomly sampled. In Honduras, the questions wereincluded in the impact evaluation survey, also randomly sampled and representative at the national level. InNicaragua and Zambia the findings should be treated as indicative due to small sample sizes. In Zambia, althoughonly 12 project communities were visited, an in-depth methodology was used that involved deploying teams tospend one week in each community, using rapid rural appraisal techniques, including community workshops,focus group discussions and individual interviews.

632 J. Van Domelen


* In Peru, when asked if the project selected was the one that the community most

needed, 90 per cent responded that it was the highest priority investment. 92 per cent of

women queried responded similarly. Overall, 58 per cent of community members

interviewed judged the project as ‘very necessary’, 40 per cent as ‘necessary’ and one

per cent as ‘not necessary’ (Instituto APOYO, 1999).

* In Zambia, based on an intensive ranking process, for ‘new’ projects—where the

community had either only recently applied or begun activities—83 per cent

corresponded to the top community priority. For ongoing or completed projects, 67

per cent ranked the investment as the top community priority (Milmo, 1994).

The qualitative assessments point to several factors that affect whether a community’s

top priority is met. For example, the Zambia research concluded that in the few cases

where schools or health centers were constructed even though they were not the top

priority of the community, this may be due to the fact that these facilities ‘are run by

people that know where to go when they want assistance’ (Milmo, 1994). In Honduras,

focus group interviews in two communities where lower priority projects were selected

revealed that, in the village of La Empalizada, men would have preferred a water project,

but the initiative was blocked by the refusal of a neighboring village to share its water

source, and women would have preferred a health center, but the Ministry of Health would

have to be lobbied to provide personnel. The teacher of the deteriorated school was able to

mobilize broad community support for a school rehabilitation project. In the community of

Morales, a sewerage system was chosen largely in order to take advantage of additional

resources from a foreign donor, which were limited to this type of project (ESA

Consultores, 1994).

4 HAVE SOCIAL FUNDS INCREASED ACCESS TO, QUALITYAND UTILIZATION OF BASIC SERVICES?

Social funds have largely achieved their primary objective of increasing the availability

and quality of basic social infrastructure, and that this has increased utilization of these

services. The following section presents findings on schools, health centres, and water and

sanitation projects.7

4.1 Education

Social fund investments improved the quality of school infrastructure. Social fund schools

had more and better classrooms than comparators (Table 3). In all cases, students had

better access to latrines and toilets. School fund schools had better access to safe water in

all cases but Honduras. The availability of desks was typically better (in many cases the

social fund investment included provision of student desks). In Armenia and Bolivia,

social fund schools had a consistently better supply of learning materials (books, maps

charts) even though these inputs were not financed by the social fund.

7The impact evaluations focused on these sectors as they account for between 62 and 100 per cent of theinvestments made by the social funds in the six case study countries. However, not all sectors are covered in eachcountry.



Social funds typically require that prior to investing in schools, the line ministries

guarantee the provision of an adequate number of teachers. The outcomes of these

agreement have never been systematically analysed and much speculation has arisen about

the potential risk of ‘empty’ classrooms. The impact evaluations found that, on the

contrary, a rise in staffing accompanied the improvements in infrastructure in all cases. In

Nicaragua the number of teachers in social fund schools rose by 20 per cent after the social

fund intervention. In Zambia, Peru, and Armenia additions to teaching staff were observed

as well. In Honduras, student–teacher ratios remained constant in spite an increase of 40

per cent in the number of students enrolled, implying an increase in teachers.8

This improved infrastructure and staffing led to an increase in the size of the student

body in these schools. In Zambia, applications to social fund schools outnumbered those to

control group schools (514 versus 259). In Honduras and Nicaragua, schools grew by 40

and 20 per cent respectively; and rural schools in Peru saw an average increase of 34

students. Increases observed in schools in Bolivia and Armenia were not significantly

different from control group schools.

4.2 Health Centres

Overall, social fund-supported health centers had better physical conditions after the

intervention than comparators. Table 4 shows that social fund facilities were more likely to

be in average or better condition, not surprising since the investments were largely targeted

at improving infrastructure. In Zambia and Bolivia, there was a significant expansion in

the number of medical and delivery rooms available. In all country cases, sanitation

Table 3. Improvements in physical aspects of primary schools following a social fund investment

Social fund schools Non-social fund schools

Percentage of classrooms in good physical condition1

Bolivia 58 27

Honduras 44 38

Peru 68 44

Number or net increase in Classrooms

Honduras Net increase of 2.5

Nicaragua 6 4.5

Peru Net increase of2

1Engineers’ assessments rated classrooms as good, normal or bad.2In Zambia, although physical condition was not measured, classes were more likely to be held outside innon-social fund schools (24 per cent) than in social fund schools (12 per cent).

Table 4. Percentage of health facilities in average or better condition

Social fund facilities Non-social fund facilities

Honduras 97 62

Nicaragua 70 25

Zambia 94 71

8Studies found no evidence of a decrease in the levels of staffing in comparator schools. Conclusions regardingthe impact of social fund investments on the overall distribution of teachers with the education system in casestudy countries cannot be drawn from the data available.

634 J. Van Domelen


services were better in social fund-supported health centers than in comparator facilities,

although improvements in water supply to health facilities varied by country.

Project proposals are submitted to the line ministries for their approval, including an

upfront agreement to provide for any recurrent cost obligations. Surveys of the availability

of medicines and supplies in social fund-supported and comparator health centres found

that in most cases the social fund centre had better availability. For example, in Bolivia,

social fund health centres experienced an increase in the index of available medical

supplies of 62 per cent between 1993–97, versus an increase of 23 per cent in control

group facilities. However, both social fund and non-social fund facilities were far from

having a full complement of needed medicines and supplies. For example, in Zambia and

Honduras, about 20 and 60 per cent of all facilities lacked certain essential medicines,

respectively. So while a social fund intervention may improve availability, there is

evidence of continued weaknesses in the national distribution systems of essential health

inputs to all heath centres.

The story is similar for the provision of staff. Social fund supported health facilities

were as well or better staffed than comparators, although for both there is evidence that

staffing is below ministry norms in some countries. In the three countries with data—

Honduras, Nicaragua, and Zambia—social fund facilities were more likely to have both

professional staff (doctors, nurses and nurses aids) and well as non-professional staff

including community volunteers.

These improved facilities attracted significantly higher use by community members

(Table 5). In Bolivia, although the likelihood of using a public health facility was the same

between social fund and control group households, the percentage of women attending

prenatal controls as well as the percentage of births attended by trained medical personnel

increased significantly due to the social fund investment. In Honduras, households were

more likely to seek attention for a medical problem than control groups. In Nicaragua,

Table 5 Impact on household utilization of health facilities

Social fund Propensity match P-valuemean control mean

Bolivia (Post-intervention¼ 1997/8)

Use of Public Health Service (unconditional on illness) 0.067 0.061 0.56

Use of Public Health Service (conditional on illness) 0.37 0.37 0.95

Per cent of women with any prenatal control 61 38 0.001

Per cent of births attended by trained personnel 18 14 0.04

Treatment of diarrhoea 0.26 0.17 0.09

Treatment of cough 0.25 0.31 0.41

Honduras (per cent) (Post intervention¼ 1997/8) na

Seek medical attention at health post when 51 41 na

have health problem

Attended social fund health center 35 4 na

Attended other ministry health center 6 29 na

Total Attended ministry Primary Network 41 33 na

Attended ministry of Health Hospital 2 3 na

Attended Private Provider 6 4 na

Nicaragua (Per cent) (Post-intervention¼ 1998)

Visitation Rate 10 6 0.000

Visitation rate children <6 23 6 0.000

Visitation rate children <6 with diarrhoea 43 10 0.000

Pre-natal care 76 87 0.034



overall visitation rates as well as visitation rates of children under 6 increased substantially,

although prenatal check-ups were less likely in the social fund health centres. In Zambia,

the picture is less clear. In general, control groups were more likely to seek treatment if

sick, but were more likely to go to hospitals rather than primary health care centres, whereas

in social fund communities the sick were more likely to go to health centres.

4.3 Water and Sanitation

Social fund investments in water resulted in an increase in direct access to piped water in

all countries with data.9 In Armenia, 93 per cent of households reported access to running

water compared with 87 and 72 per cent in the various control groups constructed. In

Honduras, access increased to 92 per cent compared with 87 per cent in control groups. In

Nicaragua, the percentage of households in social fund communities that have access to

piped water increased from 57 per cent in 1993 to 85 per cent in 1998, while control

groups saw an increase from 52 to 57 per cent. In Bolivia, where the survey only included

rural areas, access rose from between 44–49 per cent to 54–67 per cent depending on the

region. This increased access was matched by more reliable supply than comparator

systems, although in many cases supply remained seasonal or limited to specific hours

during the day.

The majority of systems appeared to be relatively well constructed and operating

adequately, though selected quality problems were reported. In Peru, 86 per cent of

community respondents felt the systems were functioning well or with minor problems,

7 per cent cited major problems and 7 per cent said the system was not functioning

(Instituto APOYO, 2000b). In Honduras, which concentrated on rehabilitating urban

networks, comparator systems tended to be better built and 23 per cent of households

queried declared the quality of works as ‘poor’ in the social fund projects (but only 6 per

cent were judged as poor in a review by engineers).

Sanitation investments included both latrines and household sewerage systems.

Sewerage systems showed relatively low connections rates, with overall rates reported

at 44 per cent in Honduras and 61 per cent in Nicaragua. High costs of connecting to the

system and of acquiring and installing a toilet were cited as the main reasons for low

connection rates. Systems generally operated well and quality of construction was

considered good where surveyed.

Latrine projects were widely used by community members, with utilization rates ranging

from 89 to 100 per cent in the countries with data. In Honduras, the only case that did a

technical review of construction quality latrines, original construction quality was deemed

good in 95 per cent of social fund latrines versus 45 per cent in the control group.

5 WHAT IMPACT HAVE THESE INVESTMENTS HAD ON IMPROVINGHOUSEHOLD LIVING STANDARDS?

Beyond the benefits of increased access and utilization, the impact evaluations measured

changes in the likelihood of a household sending their child to primary school, infant

9The water system investments made by social funds cover a wide range, including rehabilitation of exiting urbannetworks, as well as the new household connection systems and public standpipes in both rural and urban areas.

636 J. Van Domelen


mortality rates and other indicators of improvements in the condition of household

members.

5.1 Education Investments

Improving school infrastructure may increase the likelihood that parents decide to send

their children to school, resulting in an increase in the primary education enrollment rate.

In Armenia, Nicaragua and Zambia, significant increases, by between 5 and 8 percentage

points, were observed over control groups. However, disagreggating between rural and

urban areas showed significant improvements only in the urban areas. In Honduras and

Bolivia, no significant changes in enrollment rates were observed.10 In Peru, two studies

came to different conclusions. At the national level, increased primary school enrollment

was positively correlated to the amount of social fund resources a district received. In the

rural impact evaluation, social fund investments increased the probability of primary

school enrollment, but coefficients were not statistically significant. These cross-country

findings suggest a tendency for generating enrollment impacts mainly when investments in

schools are urban based. This is consistent with capacity constraints in peri-urban

neighborhoods; whereas demand side factors may present a greater constraint in rural

areas.

The impact evaluations included variables on education attainment, as measured by age

for grade and accumulated years of education. As the more years of schooling a person has

is directly correlated with future earnings, this indicator can point to future poverty

reduction. In the countries with data—Nicaragua, Peru, Honduras and Zambia—

educational attainment indicators generally showed improvements as a result of social

fund school investments. In Zambia and Peru, these impacts were limited to rural areas.

This finding may suggest that in rural areas the impact is more likely to be on having a

child who is already enrolled remain in school, particularly since many of these

investments allowed an additional grade to be added to the school. In Bolivia, the only

case to administer academic achievement tests in the impact evaluation, no significant

improvement was found in test scores.

5.2 Health Projects

Bolivia was the only country able to collect robust information on mortality rates

stemming from investments in health infrastructure. Results show significant declines in

infant and child mortality rates attributable to the social fund intervention (Figure 2).

Infant and child mortality rates dropped by about 50 per cent in the period between the

baseline and follow-up surveys in communities that had social fund health interventions,

in comparison to increases of over ten per cent in the control group households.11

Reductions in mortality rates were correlated with families that used the health facilities.

10In Honduras, sample sizes may not have been large enough to detect statistical significances due to high overallenrollment rates. The household enrollment rates did increase and the size of the student body in social fundschools increased significantly.11The findings control for the age and education of the mother, family per capita consumption, availability ofpiped water, adequacy of water throughout the day and year, distance to water source, adequacy of sanitationfacilities and the presence of non-social fund water or sanitation improvements.



A further indicator of future health outcomes is the vaccination rate. In Zambia,

significant increases were found in rural BCG, DPT and polio vaccinations in social fund

communities, though measles were somewhat lower than control groups. In Nicaragua, no

significant differences were found between social fund and control groups, but overall

vaccination rates are uniformly high in both groups.

5.3 Water and Sanitation Projects

Households benefited from water investments in two ways. First, in all country cases with

data, there was a significant decrease in the time and/or distance to the water source. This

time saving effects the household directly in terms of reducing the effective cost of water

collection, and easing access and perhaps promoting greater consumption.

Significant reductions in child mortality were observed in the two countries where this

could be measured—Bolivia and Peru. In the study of rural areas of Peru, deaths of

children under five were 33 per 1000 for households benefiting from a social fund water

investment versus 60 per 1000 in control group communities. Of note in explaining these

results, community training included orientation in water use and hygiene, and significant

reductions in the incidence of diarrhoea were observed. In Bolivia, deaths to children

under five were reduced by 41 per cent as a result of improved water systems. No

significant impact was found on the overall incidence of diarrhoea, but the data point to

possible improvements in the duration of diarrhoea. Results in Nicaragua suggest an

Figure 2. Impacts of social fund health investments on infant and child mortality rates in Bolivia

638 J. Van Domelen


improvement in children’s health status, but results on the incidence of diarrhoea are not

statistically significant. In Armenia, household surveys report that social fund water

investments resulted in less frequent incidence of illness and less likelihood of reporting

inactivity due to illness compared with control groups. In Honduras, no measurable

impacts on incidence of diarrhoea were discerned, largely explained by the concentration

on rehabilitation of existing urban systems.

Household impacts of sanitation investments varied between sewerage and latrine

projects. No health impacts were detected at the household level as a result of sewerage

investments, perhaps reflecting the relatively incomplete connection rates.12 Latrines

reduced the incidence of diarrhoea in Honduras and Peru.

6 SUSTAINABILITY

Sustainability of service delivery depends on a host of factors, including initial technical

quality, community participation and commitment, on-going provision of key inputs and

personnel, capacity of local organizations to run facilities in cases of community

management, and so forth.13 The vast majority of social fund investments surveyed are

functioning and delivering benefits several years after completion of the initial investment.

This section reviews evidence from some of the factors affecting sustainability not

discussed in the previous sections, namely community participation, maintenance and

local financing.

Evidence from household surveys suggests that there was significant community

participation during the identification of investments. The form and level of community

participation during execution varied by country, and in some cases between rural and

urban areas. The proportion of household reporting that they had participated in execution

ranged from about one-third in Armenia to two-thirds in Peru. This initial involvement

appears to have carried through to some level of continued community support during

operations, which manifests itself through several channels. In Honduras 92 per cent of

schools had formed specific maintenance committees and in Zambia 50 per cent of

communities had health centre maintenance committees. Local financial support was more

likely in social fund-assisted facilities, including greater likelihood of providing financing

to parent–teacher associations in Zambia, more active fundraising efforts in Nicaragua,

and additional financial support from 15 per cent of households in Armenia.

However, one area that appears particularly problematic is the collection of fees to

finance local water systems. In Honduras, even though revenues collected for social fund

water systems were found to be almost twice those of control group facilities, these were

typically insufficient to fully cover operational costs. In Nicaragua, half the sampled water

systems (also urban based) reported that revenues were not adequate to meet costs. In rural

areas of Peru, half of community members reported paying for water, though this figure is

affected by the inclusion of public standpipe systems. The existence of a local water

committee was critical for fee collection in these rural areas. In communities with

established committees, two-thirds of household reported paying for services, versus

only one-third in communities without committees (Instituto Apoyo, 2000b).

12Studies have found that sanitation coverage of 75 per cent or more in urban communities is needed beforea health impact is apparent (Hogrewe et al., 1993).13See Carvalho et al. in this issue for an alternative approach to analyzing sustainability.



7 IMPLICATIONS OF THE FINDINGS

The evidence on targeting, impacts and sustainability illuminate the debate about the

development effectiveness of social funds. The failures of social funds expressed by critics

do not seem to stand up to closer inspection. But nor do any claims of perfection. More

important than coming up with a ‘thumbs up’ or ‘thumbs down’ judgment on social funds,

the empirical findings highlight many of the challenges and tensions, as well as clear

benefits, of channelling public development assistance to the local level.

In terms of reaching the poor, there is no evidence of systematic bias against access by

the poorest districts or households, contradicting the ‘myth’ that the weakest areas and

households are incapable of benefiting from demand-driven programs. And while

‘leakage’ of benefits to better-off areas and households is significant, compared to other

programmes with available evidence social funds typically present a more attractive

alternative. The ability of social funds to positively discriminate towards the poor to the

exclusion of access by the non-poor may be limited given the community-wide nature of

the social infrastructure constructed. No screening is done at schools, health centres or

water systems to ensure that only the poor access these improved services. Income

heterogeneity within districts and communities will inevitably lead to leakage of benefits

to the non-poor. The usefulness of geographical poverty maps is limited. Inclusion of

urban areas automatically worsens targeting—whereas many programmes have goals of

national coverage—and most maps are not disaggregated enough to provide assurances

that only poor communities will be reached. It may be possible to introduce better

mechanisms for identifying the poorest communities within districts, but this relies on the

development of better and more disaggregated poverty data.

There may also be tensions between national objectives and community preferences.

For example, a community may want to improve the physical space of their primary

school, including better ventilation and lighting, improved sanitary facilities and so on,

without necessarily expanding the primary enrollment rate—which may be the over-

arching national education priority. Similarly, a community may prioritize investments in

a local water system in order to increase convenience and availability of water, without a

specific goal of reducing infant mortality. Community-based programmes will need to

balance how much weight should be given to communities’ stated priorities as measures

for success versus external social planners’ indicators of success.

The impact findings point to significant achievements in improving the access to,

quality and utilization of basic social infrastructure. In addition to these improvements,

households benefited from improvements in their health and education status. However,

these household level impacts varied by sector and country and point to the need for a

more comprehensive and circumspect understanding of the conditions under which public

investments in different types of social infrastructure lead to poverty reduction.

The sustainability of these services appears strongest for education and sanitation

investments. Health investments delivered significant improvements in services and

impacts, despite less than full provision of essential inputs. In the water sector, particular

attention needs to be paid to improving the financial basis for sustained service delivery.

Blanket approaches to sustainability will not work—strategies need to be designed that

are sector and country specific.

It is also clear that these community-level investments should be viewed as a

complement to, rather than a substitute for, effective sector policies. Much of the impact

and sustainability of these investments rely on the performance and policies of other

640 J. Van Domelen


institutions, namely line ministries and local governments. Social fund cannot substitute

for good policies for staffing and provisioning public primary schools and health centers.

Instead, synergies should be sought that can help to solidify these gains achieved in

improving the well-being of the poor.

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social funds: evidence on targeting, impacts and sustainability

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