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86 were ousted reform, but the reformers 29. Russia attempted radical reforms took hold.

See Anders Aslund, the from the government before from Post-Com Johnson, Why Stabilize: Lessons (1996). Peter Boone, and Simon 1 Papers on Economic Activity, no. in situations munist Countries, Brookings have lost elections primarily 30. Ibid. Radical reformers Communists. And less united than the former reforms have where pro-reform forces were case, as in Poland and Estonia, even where this has been the
pretransition not been reversed. reflect the extent to which 31. Some of the decline may Graham of Johns am grateful to Dr. George statistics were not reliable. I this point. Econo Hopkins University for raising Old and Unaffordable, The

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Safety Nets and Service Delivery: What Are Social Funds 1 Really Telling Us?

1992. See system, for ex 32. These figures are for implicit debt of Ukraines pension Italys debt, at mist, 30 April 1994. The Among OECD countries, only percents and ample, is 214 percent of GDP. is 144 Hungarys is 172 percent, Japans Ukrainian Pensions 242 percent is higher. See Kane, Notes on the the United States is 89 percent. The MicroecO System. Belka, and Stefan Krajewski, Enterprise Re 33. See Brian Pinto, Marek Poland: A Survey of State nomics of Transformation in World Bank, June 1992, mimeograph). issue in the sponses (Washington, D.C.: (health and pension) was a major received a 34. Social-welfare reform 1996. While Klauss party parliamentary elections in June of versus 42 per than it did in 1992 (44 percent higher percentage of the vote the Christian De parliamentary seats, which went to Surprise, The cent), it received fewer regions. See Czech Republic: mocrats in three industrialized EconomiSt, 8 June 1996. zero in 197981 Chile increased from nearly 35. Private-sector saving in Giancarlo Corsetti and of GDP in 199092. See Research Work to an average of 17.1 percent Reform and Growth, Policy Klaus Schmidt-Hebbel, Pension D.C.: World Bank, June 1995) ing Papem no. 1471 (Washington, Jose Pinera, Minister of Labor and Social 36. Authors interviews with implemented; Washington, D.C. and San was Security at the time the reform tiago, juneJuly 1996. Safety Nets 37. For examples, see Graham, transition econ of this dynamic in one 38. For a detailed description Political Sustainability Strategies for Enhancing the (Washington, D.C.: omy, see Carol Graham, PSP Discussion Papers, no. 50 of Reform in Ukraine, World Bank, January 1995).

Judith Tendler

Social Funds (SFs) have drawn widespread enthusiasm and support from the international development community in recent years. They are said to reduce poverty and unemployment and to bring ser vices and small works projects to myriad poor communities in a way that is decentralized, demand-driven, participatory, low in cost, and fast-disbursing. In Latin America alone, the World Bank, the InterAmerican Development Bank (1DB), and the European Community have expended more than US$2 billion on eighteen social funds since the late 1980sthe 1DB leading with Us$1.3 billion. There is no sign of slackening, and proposals for SFs have even figured prominently in recent donor reform packages for the crisis-afflicted Asian economies. Strangely enough, however, the numerous studies of SFs carried out or funded by the donors themselves provide more grounds for skepticism than for enthusiasm. This chapter explores this conundrum and suggests a way out. Donors view the 5Fs as a breakthrough in providing poor com munities in developing countries, mainly in rural areas, with works projects and some services. Roughly one-third of the funds goes to economic infrastructure; another third to education and health, nu trition, and population activities; and another third to miscellaneous activities like microfinance, training, and environmental interven 2 The 5Fs, with their more independent project agencies or tions. 3 are described as an imag units and their demand-driven features, inative effort to make government actions and resources more bene ficial to the poor. They are said to show considerable potential as instruments of collaborative partnership between public-private com They are re munity sectors for sustainable service delivery ported to succeed, often, in targeting the poor and in providing

SAFETY NETS AND SERVICE DELWERY SOCIAL POLICY 88 public sector agencies y and speedily than basic services more cheapl functions. 4 been charged with these SFs provided by that have traditionally mainly on evidence about This chapter, drawing ed greater de questions about the presum donor evaluations, raises government supply, or alternative to traditional ast Brazil, northe sirability of SFs as an fieldwork on four SFs in evidence. reformed versions of it. My of the 5 reinforced this interpretation also seeks to con as reported elsewhere, SF projects, this chapter Through the lens of the decentralization, par debates around issues of tribute to the broader e the quality of public other attempts to improv tial privatization and acclaimed strengths of ping countries. The arguments about service delivery in develo of on a more general set SFs, after all, are variations n public service ntralized and supply-drive decentralized and the problems of overce superiority of more provision and about the demand-driven approaches. has interpreted the the donor community With some exceptiofl5 te, which categorizes a rather ill-fitting templa SF experience through privatized and there decentralized, partially it as demand-driven, represent the opposite ways, for example, SFs fore good. In certain centralgoVernme1t agen They are run by of real decentralization. by their association or newly empowered cies, either newly created support from the coun donors and with strong with international ver, they do not de majority of cases, moreo trys president. In the ments. When they do, sibilities to local govern volve power and respon intergovernmental trans of a larger reform of this is usually not part sometimes even works at g measures, and SFs do try to re fers and other decentralizin that reforms. To the extent cross-purposes to such l part of their oper not power) of the centra deconcentrated duce the size (though accurately described as ation, they may be more . viewed, the ex rather than as decentralized h which SFs are usually Without the template throug which to build a less interesting evidence on encourages the perience could yield some for reform. This chapter SF-type models limiting view of opportunities expand its thinking beyond development community to that may not be as new government performance to ways of improving defects than the SFs. have shown no more of the SF ex and different but that to be a thorough review What follows is not meant this, the reader for and against SFs. For perience or of the arguments reviews of the evi comprehensive donor-funded can turn to several of SFs by social sci of other excellent studies dence and a handful arguments that follow in the endnotes. The entists, all referred to or demand-driven ap a brief against SFs approaches. I will also do not constitute in favor of supply-driven proaches in general or REFORM IN LATIN AMERICA

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argue not that SFs are performing poorly, but that the donors own other evidence does not demonstrate that they are clearly superior to I approaches to improving government services in a sustained way. them therefore question the large amounts of funding dedicated to deliv and the importance attributed to them as a new approach to ering services and reducing poverty.

Social Funds and Their Strengths

6 Since the late 1980s, the two largest donors have spent roughly US$2. in billion on SFsUS$1.3 billion by the 1DB on eighteen social funds Bank sixteen countries of Latin America, US$1.3 billion by the World ), and in thirty-four countries (mainly in Latin America and Africa combined. Social roughly that same amount by the European donors 6 rary Funds started in Latin America, according to the lore, as a tempo ms on antidote to the adverse impact of structural-adjustment progra countries. The Latin American experience came the poor in various 7 ally, SFs to be the reference point for SF promotion elsewhere. Origin proj were meant to provide quick employment through public-works lieu of the ects and emergency social services in rural areas, partly in ries. increasingly faltering presence of fiscally strapped line minist caused by Some were designed explicitly to compensate for layoffs downsizing of the public sector and its parastatals. ve After three or four years, donors judged the SFs to be so effecti of pub at temporary relief, and so appealing as an alternative model g to lic-sector service delivery, that they provided follow-on fundin also several SFs and elevated some to more permanent status. They times, came to see the SFs not just as a temporary measure for hard zed, but also as an attractive modeldecentralized, partially privati small and demand-drivenfor the delivery of some services and works projects, particularly to the poor and in rural areas. the Though SFs vary widely across countries, they tend to have le following common components: (1) grant funds are made availab of to communities or municipal councils who choose among a menu re possible projects (a well, health center, school, grain mill, road and pair, etc.); (2) project design and construction are decentralized , or partially privatized, involving local actorsprivate firms, NGOs and local governments; (3) community groups make contact with r, contract the design or construction firm or equipment supplie monitor project execution, and/or take responsibility subsequently for operations and maintenance; and (4) a local contribution is often required, roughly 10 to 15 percent of project costs.

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90 es of these demandemphasis on the virtu the SF In addition to their features, donor evaluations portray of the ized just the opposite driven and decentral characteristics that are disbursement, rates of 8 success in terms of agency_flamelY rapid unit inistration, and low typical government due to lean adm and other flexibility, low overhead posts, road repairs, like schools, health documents on costs for projects in the numerous these works. As depicted considered key to standardizable 9 or organizational features semiaUtOnomous units social funds, the they are run by ed sometimes newly creat achievements are: (1) outside line agencieS (2) they ; dent presi agencies operating the countrys ct to the to the office of and often close particularly with respe service regulatiofls are often work outside civil (3) their managers hiring and firing; ent in agem setting of salaries and experience with man outside and have sent the recruited from the staff members repre while many of their salaries; (4) the private sector, SFs by the higher ent sector, lured to the government procurem best of the public in operating outside sped up in a way that has they have succeeded simplifying procurement (5) they use regulations and and, as a result, small works projects; hence are more the execution of overdimensiofled and that are not said to be design standards contributing factors are areas. Other t face; appropriate for rural competition they mus contractors and the ct execution the use of private communities in proje and the of beneficiary the involvement , labor, and cash; of management time inefficient through contributions comparison to their project staff in high dedication of s departments. rnment public work counterparts in gove How to Solve It The Problem and der set of SF design is a broa niza acclaimed features of the traditional orga Underlying these problematic nature of al they are overly centr arguments about the programsnamY that for per tion of government costs are high, mostly supply-driven; their These ized, inflexible, and encumbered and slow. pace of work is and polit sonnel; and their ture in economics ly on recent litera n, and argumentS based main ized, demand-drive that more decentral aspects ical science, suggest y of the undesirable provision reduces man ts about partially privatized Because the argumen the sta rnment provisioning. and have attained of traditional gove now quite familiar here. decentralization are by summarized only briefly provision truths, they are government service tus of self-evident is nature of much of y, but one that The problematic not just as a monopol arise from its position
d n

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lem is similar to that of unregulated. In this sense, governments prob as public: It is over-centralized any other monopoly, private as well eness to consumer pref and inflexible and suffers from low responsiv ed by competitive erences and other inefficiencies that go unpunish ce these problems, pressures. Decentralization is thought to redu surrogates for them. It partly by introducing competitive pressures or s in new providers locates service provision more locally and also bring s and nonprofit or from outside governmentmost importantly, firm s and NGOs are ex ganizations. Operating at more local levels, firm more capable of cre pected to be more flexible than government and cular will be more ating locally tailored solutions; NGOs in parti rnment. For these committed to working with the poor than gove , it should be noted, decentral pressures and incentives to bear fruit and-driven. izing programs need not necessarily be formally dem reports have be For decades, donor monitoring and evaluation centralized govern moaned the problems associated with overly ning of projects, and mentexcessive standardization, overdimensio of these failings in unnecessarily high unit costs. The sorry results tenance (O&M) and clude, particularly, faulty operations and main other operational the shortage of financing for recurrent costs and led to the current support. It is exactly these kinds of problems that with sustainability preoccupation of the development community fers the process of and ownership. In that decentralization trans live, this is expected project choice and design closer to where users ts. Providers will be to lead to lower costs and more customized resul good part of the re more vulnerable to pressures from users, and a users themselves. sponsibility for O&M can be handed over to the ized and demandToday, these linked arguments for decentral ous sense. At the same driven service delivery seem to make obvi from previous think time, they also represent a refreshing departure ion. They deny, often ing about planning and government organizat of scale and of stan only implicitly, the importance of economies provision of smalldardization and specialization, particularly in the to the poor. The ar scale and local-level infrastructure and services execution by agencies guments suggest that planning, design, and s simply do not work with functional expertise and responsibilitie use something gets under a wide variety of circumstances. This is beca s of scale and stan in the way that prevents the traditional economie dardization from materializing. s the process of The demand-driven approach, in contrast, start ions by planners project design and implementation not with decis munity. Govern but with choice by the usernamely, the com ider of the well or ments role is not to be the sole designer and prov

92 which it offers ject, but to lead a process by power hookup or other pro e communitys ich people can choose. Th an array of options from wh project by a ply trigger provision of the choice, in turn, does not sim design, con itself. Rather, the tasks of specialized agency or the SF ried out as well, purchase can now be car struction, and equipment government or behest, by private firms, non and at the communitys governments. ganizations, or municipal r choice is ization to work properly, use For the logic of decentral ir rights and op d information about the key. Users must have goo gaining access to ed of the procedures for tions; they must be inform dissatisfactions, ring their preferences or service providers, for registe projects and pre must know how to design and, in the case of SFs, lude public in r this reason, many SFs inc sent them for funding. Fo have drawn at is not only the donors who formation campaigns. It users. The last of providing information to tention to the importance d much greater nsactions costs has devote decades literature on tra the concern about is includes, in particular, attention to the issue. Th n in the transac etries that are so commo the information asymm ir providers. ject beneficiaries and the tions between intended pro Acclaim and Evidence by development SFs carried out or funded The numerous studies of te. But cer no2 end on an enthusiastic 1 institutions usually start and in sections related the middlesometimes tain findings reported in s for skepticism. sprovide serious ground to problems or issue drawn for their ers on social funds have Even two quite critical pap ents, or on re se very same donor docum supporting evidence on the rs. 3 dono search funded by the 1 porary em the purpose of creating tem Social Funds started with through small, y thereby reducing povert ployment for the poor and seeming success ts in rural areas. With the decentralized works projec see Social Funds ca, the donors came to early on in Latin Ameri serving poor rural model for permanently more broadly as a good ing the building with works projects, includ communitiesnot only of other services ics, but also with a variety of schools and health clin rough the years, microfinance programs. Th like day care centers and on the claim about to place more emphasis the donors have tended on and poverty re about employment creati service delivery than that t instruments in still appear as importan duction; nevertheless, SFs The findings of net policies for the poor. the donor arsenal of safety re to the claims ed elsewhere, also relate mo my own fieldwork, as report

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about SFs as an alternative way of organizing service delivery than to ts. Unfortunately, there has been more sys their strength as safety 1 ne4 tematic and quantitative empirical research into the claims about em ployment creation and poverty reduction than into the alleged superior performance of SFs as a model of public administration. In what follows, the evidence for each of the two claims is dis cussed separately_poverty reduction and employment creation, as distinct from the new model of organizing services and works pro jects. The evidence is drawn mainly from four recent multicountry reviews of the SF experience by the Inter-Americai, Development Bank, the World Bank, and UNICE in addition to some studies by Outside researchers. 15

Reducing Unemployment and Poverty

With respect to the claims about employment creation, the SF reviews reveal that these programs have created relatively few jobs and reached only a small fraction of the labor force (in the Latin Ameri can case, less than 1 percent at best).16 They devoted only 30 percent of their expenditures to labor costs, a rather low share for programs I provided by the SFs were s n. b tio dedicated to employment 7 o crea J temporary, of low quality, and provided no training. Most of the bet ter jobs went to skilled laborers brought in from elsewhere by outside contractors; 42 percent of labor expenditures in the Nicaraguan SF for example, were for skilled labor.1S Several employment creation programs that antedated the SFs created significantly more jobs, em ployed a more significant share of the labor force,19 and elicited sig nificantly greater budgetary resources from their respective govern ments. In comparison to the demanddrjven SFs, these programs were SUpplydrjven and mainly not funded by donors (at least initially). Wages paid by Social Funds, although often set at the legal min imum, were nevertheless typically lower than subsistence, and some so. The wage in the Nicaraguan SF for example, times significantly 20 represented 57 percent of a basic family food basket. Granted, wages are often set this low in employmefltcreating programs so as not to draw labor away from privatesector employers and to keep the nonpoor from applying for these jobs. At the same time, however, the lowerthansubsistence level plus the temporariness of the jobs adds up to a weak instrument for a more Sustained reduction of poverty and unemployine,t. In the same vein, the voluntary labor often re quired of communities for SF projects, although meant to serve the goal of reducing costs and eliciting ownership of the project, rep resents a regressive tax on the 2 1 poor.

96 emerges for SFs funds. Surprisingly, however, no clear superiority still concludes on from this comparison, even though the evaluation model. The 1DB evaluators, also a positive note about the SF as a 37 reviewed was concluding positively, reported that the evidence they SFs have actually not sufficient to form a judgment as to whether ic and social ser made a difference in the availability of basic econom operate. In addition, vices in the various communities where they 38 of the SFs were they found that the most successful and innovative (Chile, Costa those conceived without donor input and financing typical SF in im Rica, and Guatemala) and were different from the ways. (This is discussed in more detail below.) portant 39 express consid Relations with line ministries. The donor evaluations much energy and erable concern about the wisdom of investing so ment instead of resources in creating new structures outside govern ment institutions. more directly supporting reform of existing govern take attention The World Bank review warned that SFs should not fundamental fiscal or institu away fromor work counter to systemically. Cautionary ex that address poverty 4 tional reforms ment explicitly amples were that of Egypt, where the central govern of the expected cut back allocations to local governments because allocations for inflows from the Social Fund; and Honduras, where same time that the ministries of education and health declined at the result of the SF local governments began receiving more funds as a there. 41 nature A variation on this problem, related to the grant-funded ted to other gov of the SFs, was the unfair competition SFs presen ing loan fi ernment agencies. While these latter agencies were provid projects, SFs nancing to municipalities or communities for similar mes hap were offering more attractive grant funding; this someti agencies, urged pened, moreover, at the same time that the non-SF difficult transition by donors themselves, were trying to make the nities for appro from providing grant to loan financing to commu and loan financ priate projects. When able to choose between grant understandably ing, of course, the communities or municipalities even funded preferred the free funding of the SFs; sometimes, SFs funding on applications that existing agencies had rejected for loan les of two technical or other grounds. The World Bank gives examp Bolivia. I also heard such cases, one in Senegal and the other in 42 mayors who complaints of this nature in Brazil from modernizing d only com had introduced new loan-funded programs and receive free funds from plaints from their constituents, who pointed to the the SF.
. . . . .

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The 1DB evaluators dubbed the tendency to create Social Funds, rather than attack problems directly, as funditis. For example, the 1DB reported that if the ministries of health and education in various countries had not been subject to the budget constraints of fiscal aus terity programs, a good part of the replacement and upgrading of schools and health posts would normally have been undertaken by these ministries, rather than by SFs. 4 The evaluators worried that the SFs would become shadow governments. They warned that SFs should not replace the public sector in tasks that are the govern ments inherent responsibility and that this could undermine ongoing public-sector reforms and institution building programs. Noting that most SFs were not subject to ordinary government legisla tion with respect to salaries and procurement_one of the acclaimed strengths of SFs emphasized in the donor studies_the evaluators cau tioned that the goal should be to improve the laws and regulations under which the line ministries work, rather than to get around them. Similar concerns were expressed by outside researchers.45 Donors and outside critics seem to agree, then, that Social Funds can jeopardize the larger task of reform of the public sector, or at least distract attention from it. The particular problems they point to, ironically are grounded in the same mode of operations that is said to account for the SFs acclaimed strengths. None of the evalua tions face this particular conundrum, expressing confidence that the problems can be fixed.

...,

Sustainability. Both major donors gave distinctly low marks to the So cial Funds for sustainability and ownership.46 There were fre quent reports of health clinics without refrigerators for vaccines, school buildings without textbooks, wells that were not maintained More generally, the evaluators admitted to finding little evidence re garding sustamability and ownership, and in this sense were not able to back up the claim that SFs are a better alternative that merits per manent funding. Where they did find evidence, it was mixed. The World Bank evaluators could find no data on the extent to which SF projects were being operated and maintained.47 An ap proach that aims for user ownership of operations and mainte nance (O&M) or pressuring of local entities into providing it, the evaluators noted, often requires different technical design, at least for economic infrastriictire But a large r numbe of the SFs were found to have been designed without issues of ability in sustain mind.48 It was not clear if communities even knes what the O&M costs and responsibilities would be, according to the evaluators, be fore they chose their project. And only a small percentage of the SFs

98 utions, even required community contrib turned out to have actually World Bank sented for approval to the though the SF projects pre ed an esti isal reports) always includ board of directors (the appra follow-up ons from communities. Little mate for upfront contributi le. 9 availab utions was 4 information on such contrib clinics, activitiessuch as schools, Social Funds financed many nistries or tained support from line mi waterthat would need sus either no nt, once completed. However, other agencies of governme t were made made, or arrangements tha formal arrangements were e es, no operating funds cam respected. In many cas were not 5 s and ool enance, particularly for sch through for staff and maint ts, this for some types of projec h. In theory, and at least 1 healt 5 demandblem. The decentralized and should not be a serious pro y to owner believed to lead inexorabl driven features of the SF are ore take projects, and they will theref ship by communities of the new es, or they s and maintenance themselv responsibility for operation ed above, nts successfully to do so. As not will pressure local governme least, little pened in practice, or, at the however, little of this has hap to support this claim. evidence has been gathered ipients neither the donors nor the rec If as the evaluators report, n it is not fair h sustainability in mind, the created these programs wit themselves t criterion. But the donors to judge the programs by tha , on the these programs as successful have made strong claims for led the SFs ement. Indeed, they have hai grounds of community involv the quotes ice delivery, as attested to by as models of sustainable serv cited above. ective sustainability relates to the eff Another observation about al poor. Much ching wide swaths of the rur ness of Social Funds in rea uction of t costs involved in SF constr has been made of the low uni existing gov in comparison to those of buildings and other works e to reach , this would make it possibl ernment agencies. Presumably with the same nities more cost-effectively larger numbers of commu donor eval government agencies. The amount of funding as existing schools and es, however, in which new uators reported various cas n of existing structed when rehabilitatio health centers were con l for various riate. This is not unusua 2 approp structures was more 5 uliar to SFs. ms, so it is certainly not pec types of government progra e it assumes ts begs this question becaus But the focus on low unit cos tion in this osed to less costly rehabilita that new constructionas opp first place. examplewas needed in the re macrO ility and ownership at a mo With respect to sustainab the fact that. and the World Bank lament level, finally, both the 1DB continue to rs after they were started, most SF programs, ten yea

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dependent for most of their financing on outside donors.53 After noting that most Latin American 5 governrnen with SFs have fi nanced less than 20 percent of their SF operations, the 1DB evalua tors warn that [dlonors cannot claim that the funds are successful and sustainable until countries make a greater contribution. [Djonors cannot be expected to provide 8090 percent of the cost of fund operations indefinitely. 54 At least with respect to the findings on sustainability and owner ship, in sum, the Social Funds do not seem to do much better than the older programs on which they were supposed to improve.

Nongovernme; 5 7 organizafjo in the new space. At ious nts, the var poi donor evaluations noted, sometimes with Puzzlement, that 5 NGO were either not present in the program area or were associated with re. 5 disappointing results when they 5 we5 NGO turned out to account for no more than 15 percent of expenditures by most Latin Ameri can SFs.56 Reddys review for UNICEF noted that ff]avouritism in the disbursai of con tracts to 5 NGO was a serious issue in various countries, as was the proliferation of NGOs of dubious grassroots credentials as a result of the new availability of SF funding.57 The 1DB review reported that the recurrentcost problem was most acute in the case of 5 NGO a study of the Bolivian S for example, ; showed 5 NGO to be disproportionatejy represented among the pro jects that were least likely to be sustained.58 The World Bank found that religious, and other grassroots organizati were found not to operate in the poorest regions because of their lo cation in cities and tOWns, in and close to which they seemed to con centrate their work.59 With respect to the microfinance components now gaining Popularity in the SFs, moreover the World Bank evalu ators found that 5 NGO had not shown an ability to incorporate best practice lessons learned from the microfinance experience around the world.60 These scattered reports, though perhaps not conclusive, do raise questions as to whether 5 NGO are present enough, or well enough suited, to play the role required of them for the decentralized and demanddrjven model to work. It may be, moreover, that the time, funding, and attention needed to get them up to speed would be Substantial

Community choice and rapid disbursement In the donor portrayals the SF approach combines flexible and umbered disbursement enc Un with a demanddrjven style. These features, ever, are often at log how rhea with each other. For example, some SF 5 ge managers expressed

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100 pro sometimes discouraged, genuine a distaste for, and therefore they said, ing. These processes, cesses of community decisionmak managers disbursement so prized by these slowed down the rates of liked the eligibility cri Other managers actually 6 and their donors. gave them slowing down disbursement, teria which, even though 62 The re against political interference. some kind of protection more earlier supply-driven programs, searchers comparing SFs with than the actually disbursed more rapidly over, found that the latter also pointed the SFs slower disbursement SFs. Their explanation for best, it re if taken seriously and at its to the demand-driven design: decisionmak process of organizing and sulted in a timeconsUming these reports municipal councils. Although ing by communities or ver nature of the evidence on fast reveal the somewhat contradictory the prob are consistent in pointing to sus slow disbursement, they model_between in the demand-driven lematic tradeoff_inherent expression of user voice. quick disbursement and the organize for purposes of own The requirement that communities They particular toll on poorer communities. ership seemed to take a agents, promotional visits of government are more isolated from the that handicapped by the requirement NGOs, and firms, and they are 63 Even when the pro acceptable project. they prepare and present an poverty and deficiencies of social ject agency painstakingly mapped SFs_considered one of their impor services in the region served by advan not counteract the comparative tant achievementsthis could munici within the poor-designated tage of better-off communities 64 In the education competition for funds. palities or sub-regions in the example, the programs requirement projects of the Mexican SF, for school effectively functioning solidarity that a community have an per was said to explain why fewer committee before seeking funding compared indigenous communities as capita funds went to poor 65 to others. above does not necessarily add In itself, the evidence presented disappoint It does, however, reveal some up to an indictment of SFs. These kinds contradictions within the model. ing results and serious new ap the teething problems of a of problems, after all, are not of for some time in donor evaluations proach. They have cropped up have for prior to them. Indeed, they programs other than SFs, and written by of boilerplate in the narratives some time gained the status evaluation consultants returning project supervision missions and roads large donors have been financing from the field. For as long as super developing countries, for example, and other infrastructure in the failure the lack of maintenance and vision reports have lamented . But for operations and maintenance to generate or allocate funds
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these kinds of problems are exactly what the incentives and pressures of the SF approach were supposed to reduceat least for programs serving poor communities in rural areas with a variety of works pro jects and services. Given this evidence and the unsettling questions it raises, the So cial Funds seem to have emerged remarkably unscathed. The World Bank evaluation concludes that the SFs probably surpass other sector portfolios in the cost and speed of service delivery, success in reach ing the poor, and extent to which they respond to community initia tives (italics mine) 66 It is surely difficult to draw any such conclu sion, however, given the evidence laid out above. The most one can say is that SFs and SF-like programs have not proven to be consis tently and sustainedly better than the more traditional supply-driven programs or the reformed versions of them. This does not amount to an indictment of SFs, but it certainly is a far cry from the enthusias tic support they have been accorded by donors.

The Fixes

Why do the owners of these negative findings continue to be so en thusiastic? Is this simply a question of choosing to view the glass as half full rather than half empty? I suggest that the difference be tween the two views lies elsewhere. The donors see the SFs short comings as eminently fixable, as requiring the fine-tuning of an otherwise preferable model of public service delivery. I see the prob lems, however, as inherent in the SF model itselfparticularly when operating in rural areas and serving poorer populationsexactly the situations to which the model is thought to be eminently suited. In addition, the proposed fixes would have the SFs improve their oper ation in ways that would make them more like the traditional agen cies from which they are supposed to differ so markedly. Although the fixes prescribed by the donors seem perfectly rea sonable, that is, they also require just what the SF model is trying to get away fromadditional presence, effort, and resources from an agency of central government. A representative sampling of the most common fixes appearing in the donor reports includes more moni toring and supervision, more transparent and objective selection criteria for projects, more training, more public information cam paigns about project choices available to communities, more toler ance by project managers for participation, more poor-targeted selection criteria, more demand orientation and community par ticipation in helping communities to choose their projects, and, that

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102 l with line agencies and their sectora old chestnut, more coordination programs. 67 would require substantially These remedies, if taken seriously, , (for travel, vehicles, and per diems) more time, personnel, resources an yside by the program agency and more presence in the countr The remedies would surely in agency of the central government. reduce their strong disbursement crease the SFs low overheads and They would move these programs ratesthe models pride and joy. drather than closer to the deman back in a supply-driven direction, demand-making, partially privatized driven models vision of citizen The government at the local level. provision and more active its model, after all, is supposed to be strength of the demand-driven that, such problems. It is these forces reliance on local forces to solve and planning of more centralized in substituting for the presence down costs, improve quality, please agencies, are supposed to bring financing. arrangements for upkeep and users, and elicit ownership vely, fixes could be carried out effecti Even if one assumes that the tra as much effort as reforming a moreover, this could well require of improving the capacity of a set ditional supply-driven agency, or g the problem of lack of owner local governments or even reducin efforts. ship by rewarding local tax-collecting get with the fixes, in sum, seems to Putting together the findings bind. A striking example is donor the donors into something of a have in working with line ministries concerns about the difficulty SFs that es. The 1DB evaluators warn or following their sectoral prioriti instead e the planning process but SFs should not operate outsid be more responsive to local needs should teach line ministries to health clinics out efficiently. To build schools and and build more 68 e, purpos of the line ministries for this side a functional allocation of new outcomes like the construction the evaluators say, leads to where rehabilitation of old ones schools and clinics, as noted above, condemn such outcomes as a fail would have been sufficient. They process. ure of the planning 69 about a model whose strength is This is a surprising conclusion rather than bureaucrats decide said to lie in having communities planning and execution by central what they are to receive. Sector been defined as the problem, not government agencies, after all, has and meaning to, then, the critiques the solution. Without perhaps the evaluators seem to undermine the suggestions of these donor above e: they identify shortcomings very model of which they approv rec were supposed to rise, and they which demand-driven programs supply-driven sectoral planning. ommend fixes that smack of

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Whats wrong here? The model itself? Or the fixes? This bind may be actually of the donors own making. A close reading of the evalua tions themselves provides some clues for getting out of the bind.

Conclusion: Getting Out of the Fix

As portrayed in the donor evaluations, some of the stories about bet ter Social Funds or better-performing aspects of them appear to con tain possible lessons about how to reform existing government agen al, cies, in contrast to the SF agency or unit itself. This materi however, has not been sufficiently mined to draw any firm conclu sions, although it raises intriguing questions that merit further ex ploration. One example is the Chilean FOSIS noted above, which er worked more closely with line agencies than the typical SF. Anoth is the Peruvian fund FONCODES, which has started evolving toward more coordination with the line agencies on works projects. FON CODES will finance only those works-project proposals that are in ac ng cordance with sectoral policies and norms and for which operati guaranteed. revenues are 7 The Chilean FOSIS is not only among the more successful of the it Social Funds. It is also notable for, among other things, the ways differs from the typical SF model or experience: (1) created by the Chilean government in 1990, it started with only 20 percent donor SFs, funding, in contrast to the 8095 percent range of most other and by 1997 it had no more than 11 percent donor funding; (2) it now raises 40 percent of its funding not from a guaranteed allocation of of the national budget but by competing for service agreements fered to it by regional governments with newly acquired federal revenue transfers; (3) national procurement laws are observed rather than waived; (4) staff are paid the same salaries as in the line min istries, rather than the higher salaries that characterize most SFs; and ionals (5) much of its founding management and staff were profess et who came from the NGO sector that emerged during the Pinoch a period, who share a strong commitment to poverty concerns and long history of experience in this area. (This last trait contrasts, by the way, to the emphasis of the SF studies on private-sector, or pri vate-sector-like management.) Finally, the Chilean FOSIS is more integrated into the line min ry istries than almost all the SFs. It is directly dependent on the Minist of Planning and Coordination rather than standing outside the line k of agencies. Ministry support has been key in setting up of a networ

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regional FOSIS offices, and FOSIS works through collaborative An outside research 7 agreements with various other line agencies. study comparing FOSIS with the Venezuelan SF, by Angell and Gra ham (1995), cited this unusual integration of the Chilean SF with the 72 line ministries as an explanation for why it was more successful. The unusual success of the Chilean Social Funds raises questions about the models assumed key featuresthe waiving of procure ment regulations, the paying of higher salaries, the importance of private-sector-like management, the disentanglement of the stand alone SF unit from traditional bureaucracy, and the resulting rapid rates of disbursement. With respect to rapid disbursement, for ex ample, the 1DB evaluators report that the pressures for rapid dis bursement tend to conflict with the very interaction with line min istries that was so important to the performance of cases like Chiles 73 The Chilean case, in short, begs for an explanation as to FOSIS. why and how procurement regulations, civil service salaries and reg ulations, and close involvement with line ministries were not a prob lem. Though many would respond that Chile is a special case or that Chile is doing everything right, this is to dismiss the opportunity to learn the more generic lessons that such a case, when combined with others, has to offer. Another intriguing item of interest requiring further exploration is that both the 1DB and World Bank evaluators note a certain pat tern of performance with respect to some types of projects as against others. They found that sustainability was more likely in education and health than in two other important project typeseconomic in frastructure (roads and road repairs, irrigation, water, etc.), and mi 74 In contrast to these other sectors, they said in explana crofinance. tion, the education and health components tended to have line ministry involvement in the approval of projects and to be more 75 Indeed, because compatible with broader policy in these sectors. many of the task managers for the SF projects at the donor agencies actually came from education and health ministries, this made them more sensitive to and knowledgeable about issues of sustainability 76 when project proposals came up in these particular sectors. Both the World Bank and 1DB evaluators attributed the greater likelihood of sustainability in education and health types to the greater standardizability of design in these sectors. Standardization made it possible to create project prototypes that, with computergenerated designs, have been helpful in establishing costs and de 77 One wonders if the greater possibility of creating a standard signs. ized language and procedures for dealing with project design and approval might have laid the groundwork for an easier relationship Notes

between the SFs and the line ministries in the education and health sectors as opposed to the others. Whether or not this interpretation is accurate, it is not clear how to reconcile the positive role of stan dardizability alleged here with the negative traits of on as standardizati portrayed by the same donors in their critique of the supply-driven model. Exploring these kinds of findings further might reveal more about how to improve traditional line ministries and other agencies than about the desirability of a demand-driven model run by a semi autonomous government unit. At this point, however, the donor eval uations themselves do not provide us with enough information to un derstand lessons of this nature. Focusing on the SF experience itself and trying to fit the findings within the confines of the current claims about SFs, the donor evaluations do not seem to scan the ex perience broadly enough for clues about improving government per formance in general. One of the more important lessons to be learned from the SF experience may be that it contains lessons about possible pathways to reform in line ministries and other agencies, and about providing succor to reform advocates within their ranks. The donors, in sum, do not seem to have made a convincing case for the superiority of Social Funds as a model of service delivery and asset creation, let alone for reducing nt unemployme or poverty, notwithstanding their assertions to the contrary. The focus on the demand-driven logic and on other traits of the SF model, moreover, has distracted attention from the lessons to be learned about reform of traditional government agencies, as well as other matters like strengthening local government. In addition, the conceptual di chotomy between en demand-driv and decentralized as good, versus supply-driven and centralized as bad, probably obscures more than it illuminates. Trimming our expectations of SFs down to size is not to say that traditional supply-driven agencies are necessarily better. Rather, if SF experiences and those of the traditional line agencies could be looked at with a more open and curious mind, it is quite possible that more constructive lessons could be drawn from both.

1. This chapter is based on a longer monograph prepared for the Divi sion of Management Governance and t Developmen of the United Nations Development Programme. See Judith Tendler (with the assistance of Rodrigo Serrano), The Rise of Social Funds: What Are They a Model Of?, De partment of Urban Studies and Planning, Massachusetts Institute of Tech nology, monograph for the United Nations Development Programme

106 (UNDP), draftJanuary 1999. I thank the following institutiOnS for support ing the research and/or writing: the United Nations Development Pro gramme, the Massachusetts Institute of Technology, the Latin American Pro gram of the Woodrow Wilson Center, and the state governments of Cearf and Maranho. None of these institutions is responsible for or necessarily agrees with the analysis and opinions reported here. I am particularly grateful to Mick Moore for discussing these ideas with me at length, and for providing me with excellent feedback on an earlier draft. Anu Joshi provided valuable editing and substantive comments. 2. Portfolio Improvement Program Review of the Social Funds Portfo lio, The Working Group for the Social Funds Portfolio Review, headed by lshrat Husain (PREM) (forthcoming as World Bank Technical Paper) (Wash ington, D.C.: World Bank, May 1997), p. 5. 3. Not all SFs are explicitly demand-driven. A recent World Bank review reported that between 10 percent and 40 percent of the SFs use demand-dri ven mechanisms. (Portfolio Improvement Program, p. 24). The narratives about SFs and their strengths nevertheless often describe them as partici patory, if not demand-driven. 4. The first quote is from Margaret Goodman et al., Social Investment Funds in Latin America: Past Performance and Future Role, Evaluation Office, So cial Programs and Sustainable Development Department (Washington, D.C.: 1DB, March 1997), p. 71, and the second from World Bank, Portfolio Im provement Program, p. vi. 5. Tendler, Rise of Social Funds. This monograph goes beyond this chap ter to explore certain dynamics of SFs at the field level: how communities decide on one project option over another; how partial privatization actually worksnamely, how the newly included private-sector suppliers operate in complementarity with public bodies; how the political opportunities opened up by highly distributive programs like SFs influence, together with corre sponding political costs, the shape of these programs and their outcomes; and how the bureaucratic challenge of rationing the excess demand com ing from myriad communities clamoring for projects influences program outcomes. 6. World Bank data for end-fiscal-year 1996 (World Bank, Portfolio Im provement Program, p. vi); 1DB data reported in March 1997 in 1DB, Social investment Funds, p. 10, table 2.1. 7. Nora Lustig, in Coping with Austerity: Poverty and Inequality in Latin America (Washington, D.C.: Brookings Institution, 1995) and The Safety Nets Which Are Not Safety Nets: Social Investment Funds in Latin America, draft (Washington, D.C.: 31 October 1997), quite persuasively contests this statement, which has been frequently repeated in donor documents. With respect to the Latin American SFs, at least, she shows that donor-funded SF projects were actually under way before the structuraladju5tme1t programs began to show any hint of adverse effects on the poor. 8. The evidence on quick disbursement is actually somewhat mixed, as reported by Frances Stewart and Willem van der Geest, Adjustment and So cial Funds: Political Panacea or Effective Poverty Reduction?, in Frances Stewart, Adjustment and Poverty (London: Routledge, 1995), chap. 5, pp. 108137); the World Bank study of three social funds in Latin America Thomas Wiens and Maurizio Guadagni, Designing Rules for Demand-Driven Rural investment Funds: The Latin American Experience, World Bank Technical

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Paper no. 407 (Washington, D.C.: May 1998), p. xvii; and in the complaints of project-agenc manag y ers about the way comm unity decisio nmaki ng slows down the rate of disbursement. The World Bank report attribu tes the slow disbursement delays to by the central govern ment in provid ing counte rpart funding to the projects. Stewart and van der Geest (Adjustment and Social Funds) attribu te the proble m to the deman d-drive structu n re itself, which results in a time-consuming process of community- and munic ipal-level or ganizing and decisio nmaki ng. They also point to the concer n of project agencies about clientelism and political meddling in project selecti on and location, which causes agency manag ers to impose criteria and require ments that slow things down. Their concern about reducin g delay is odds at with the World Bank study, Portfo lio Improv ement Progra m, which suggests that more time and attention be paid to imposing project criteria that assure better participation and inclusion of the poor. 9. For example, the World Bank K. Subba rao, et al., Safety Net Pro grams and Poverty Reduction: Lessons from Cross-Count ry Experience (Wash ington , D.C.: World Bank, 1997), p. 104reports saving s of 3040 percen in t school construction in Mexicos SF, PRONASOL; and savings of up to 35 percent in Mexicos Mendoza Provincial Program for Basic Social Infrast ructure (MENPROSF). (PRONASOL is one of the SFs initiated withou donor t assis tance, and to which the Mexican govern ment has commi tted more funds than all of the Latin Ameri can SFs combi ned.) Some SFs, it should be pointed out, do not include their own overhe ads in reporti ng unit costs; for Peru, see Norber t R. Schady Seeki , ng Votes: The Politic al Econo my of Ex penditures by the Peruvian Social Fund (FONCODES), 19911995 (Prince ton University and the World Bank, 1998) p. 5. The World Bank itself also spends less on SFs for project prepar ation and superv ision than on other project s run throug h existin g minist ries or agencies in education and health, econom ic infrast ructure and , targete d or participatory povert project y s. The cost World of Bank input into the SF pro jects varied from 39 percent to 85 percent of equivalent costs for comparator projects. (World Bank, Portfo lio Improv ement Progra m, p. 42, and calcu lated from data in Table 6, 43). These lower costs, howev p. er, do not seem to be related to the SF model in itself, but to the fact that the World Bank does not make disbursements on SF loans contin gent on policy condition ality, which can slow down disbur semen ts on these other projects substan tially. World Bank, Portfolio Improvement Program, p. 42, and note 55. 10. Subbarao et al., Safety Net Programs, pp. 1051 06. 11. The bad rap acquired by standa rdizati on in the hands of govern ment actuall y goes well beyond the mainst ream develo pment commu nity. It is the centerpiece of a recent historical analysis of the ills of govern ment by the politic al scienti st James Scott. Scott points to the inevita ble need to standardize as the central root of govern ments mistrea tment of citizen s throughout history In . so doing, of course , goes he substan tially beyond the donors critiques of developing-c ountry govern ments. Indeed , Scott and others writing in this vein would probab ly even treat donor propos als about improving government through decentralization with equal skepticism. (Other studies that take a negativ e stance similar to Scotts with respect to government interventions in develo ping countr ies, includi ng donorassisted ones, have appeared in development anthropology, particularly but not ex clusively among the post-modern anthropologists.)

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12. The study written for UNICEFSanjay Reddy, Social Funds in Devel oping Countries: Recent Experiences and Lessons, UNICEF Staff Working Papers, Evaluation, Policy, and Planning Series no. EPP-EVL-98002 (New York: June 1998)is the least sanguine in this sense. 13. Lustig, Coping with Austerity and The Safety Nets; Stewart and van der Geest, Adjustment and Social Funds. 14. Tendler, The Rise of Social Funds. 15. (1) World Bank, Portfolio Improvement Program; (2) Goodman, Social Investment Funds, and Dagmar Raczynski, Chile: Fondos de Solidari dad de Inversion Social (FOSIS), Informe de la Consultora, Evaluation Of fice, EVO (June 1996), in Social Investment Funds in Latin America: Past Per formance and Future Role, A Joint Project Between the Evaluation Office and the Social Programs and Sustainable Development Department (Washing ton, D.C.: June 1997), chap. 2; (3) a chapter on SFs in Subbarao et al., Safety Net Programs; and (4) a review by Sanjay Reddy for UNICEF, Social Funds. All four studies, together with a more recent one on three SFs in Latin America (Wiens and Guadagni, Designing Rules) are thoughtful and candid attempts to review the SF experience. To the extent that half of the Latin American SFs are funded by both the World Bank and the 1DB (9 out of 18), there is a significant overlap in the experiences on which they both report. 16. Goodman, Social Investment Funds, p. 71. Lustig reports that even the best known, oldest, and most highly praised Latin American SF, the Bolivian Social Emergency Fund (started in 1986), employed roughly only 68 per cent of workers in the two lowest income deciles. The Honduran Fund em ployed only 7 percent of the unemployed (19901995), the Peruvian fund, 2.7 percent (19911995), and the El Salvador fund, 2.5 percent (starting in 1990). (For the Guatemalan fund, no data on employment generation were even gathered.) Data are from Lustig (The Safety Nets, pp. 45), citing as sources the World Bank (Portfolio Improvement Program) for Bolivia; and 1DB-funded studies by Cisneros (1996) for El Salvador and Guatemala, and Moncada (1996) for Honduras. 17. Goodman, Social Investment Funds, p. 71. In a study of the employ ment-creating works programs in various developing countries funded out of U.S. agricultural surpluses, John W. Thomas in Food for Work: An Analysis of Current Experience and Recommendations for Future Performance, De velopment Discussion Paper no. 213 (Cambridge: Harvard Institute for In ternational Development, Harvard University, 1986), p. 26, reports an aver age 52 percent of total expenditures on labor, with a maximum of 77 percent. Joachim von Braun, Tesfaye Teken, and Patrick Webb in Labor Intensive Public Works for Food Security in Africa: Past Experience and Fu ture Potential, International Labour Review 131, no. 1 (1992):1934, stipulate at least 60 percent for labor expenditures as desirable for African programs. Studies of the Maharashtra Employment Guarantee Scheme in IndiaE. Costa, An Assessment of the Flows and Benefits Generated by Public Invest ment in the Employment Guarantee Scheme of Maharashtra, Working Paper no. 12 (Geneva: International Labour Organisation/Worid Employ ment Programme, 1978); E. H. DSilva, Effectiveness of Rural Public Works in Labour-Surplus Economies: Case of the Maharashtra Employment Guar antee Scheme, Cornell International Agricultural Monograph no. 97 (Ithaca: Cornell University, 1983)_considered to be among the best in the worldshow how labor intensity varies with the kind of project, water projects

using the largest percentag e (80 perc ent) and road proje cts the lowest (55 percent). More recently, the Maharashtra Schem e has required that at least 60 percent of total costs be spen t on unsk illed labor. Anil B. Deolalikar and Raghav Gaiha, What Determines Female Parti cipation in Rural Public Works? The Case of Indias Employment Guar antee Scheme (University of Washington and the University of Delhi, April 1996). 18. Goodman, Social Investm ent Funds, 22, 71. The evaluators also pp. note that estimates of SF job creation are often overestimated, because of the large amount of temporary employment that usually lasts only a few months (p. 22). 19. In reporting these finding s, Stewar t and van den Geest (Adjustment and Social Funds) note that these unimpress ive outc ome for benefits are s partly a result of the fact that gove rnme nts in SF coun tries committed more resources to these non-donor-funded programs than they did to the SFs. But even if SF countries had com mitte d more resou rces, they say their calcula tions show that the SFs would still have reached only a smaller share of the unemployed in the lower deciles because of their greater difficulty in tar geting 126). (p. 20. Goodman, Social Investment Funds, pp. 2223. 21. Ibid. 22. For example, the 1DB review of SFs foun d that, for all but one of the countries (Peru), it was not possible to deter mine the extent to which those employed by SFs were poor. (In Peru , an unre lated survey from the ongoing World Bank Living Standards Measurement Proj ect had included a question about employment in the SF; 36 percent of the SF jobs went to the extremely poor, and 57 percent to the poor. Ibid., 32.) p. In most cases, the evaluators foun d it imposs ible to determine whether poverty had been reduced or income increased in the regions served by SFs; or, even when such changes were detec ted, it was not possible to determine whether they were attributable to the program. Ibid., p. 15. The 1DB study noted that baseline data are not availab le for emp loyment and income in the regions served by SFs, making the estimate of changes in poverty and in come not possible. (Data have been colle cted in several cases, however, on the employment and income generated by the projects themselves, their benefits, and surveys of proje bene ct ficia ries. ) [Wje have no way of comparing, a World Bank study concludes, how well DRIFs target poverty com pare d with othe r programs. Wiens and Guadagni, Designing Rules, p. xvi. (DRIFs are a subspecies of SFs called Demand-Driven Investment Funds that, acco rding to this classification, sup port mainly productive infrastructure and natu ral resource management.) The study reports on three DRIFs in Latin Ameri cain Mexico, Colombia, and Brazilthe latter being the same prog rams looked at in Tendler, The Rise of Social Funds.) 23. As reported by the World Bank, Portfolio Impr ovem ent Program, p. 18; Wiens and Guadagni Design , ing Rules, xv; Goo p. dma n, Social Invest ment Funds; Lustig Coping , with Auster ity and The Safety Nets; and Stewart and van der Geest, Adjustment and Social Funds. In its study of four coun tries with SFs (Bolivia, Egypt, Sri Lanka, and Zambi a), the World Bank study found that, the higher the povert y head coun t inde x of the province, the lower was the actual per capita Social Fund expe nditure it received; or the actual expenditures lagged behind allocation s in the areas with the highest

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poverty index while they far exceeded allocations in areas with low poverty indices. Subbarao et al., Safety Net Programs, as cited in World Bank, Port folio Improvement Program, p. 18. For the 19901992 period with respect to Mexicos PRONASOL, Cor nelius et al. reports that middle-income states received more funds per capita than poor states (as measured in terms of indices of poverty and un derdevelopment). Wayne A. Cornelius, Ann L. Craig, and Jonathan Fox, Transforming State-Society Relations in Mexico: The National Solidarity Strategy (San Diego: Center for U.S.-Mexican Studies, University of California, 1994), pp. 2223. Carol Graham, in Mexicos Solidarity Program in Comparative Context: Demand-Based Poverty Alleviation Programs in Latin America, Africa, and Eastern Europe, in Cornelius et al., Transforming State-Society (1994), chap. 15, pp. 309328, reports that, more generally, none of the poverty alleviation programs in Latin America, Africa, or Europe have been particularly successful in targeting the poorest members of the population. The 1DB study points out that even using its own calculations, it is very dif ficult to determine targeting from the data, which does not distinguish be tween rich and poor within municipalities or between some administrative units and higher-level ones from which the data were drawn. Some of the studies show that whereas the SFs did not reach the poorest communities, they often reached communities that, though poor, were not among the poorest. The 1DB study found that the poorest-decile municipal ities received less than the others, but that the non-poorest poor received more than the best-off. A study of the Peruvian SF FONCODES (Schady, Seeking Votes), found that poorer communities actually get more SF fund ing per capita. These somewhat conflicting results have to do in part with inadequacies of the data, commented on by most authors of these studies; they also relate to the different politics at particular moments in different countries. Presi dent Fujimori of Peru clearly relied on a strategy of reform that alienated urban and middle-class sectors, and he vigorously and explicitly courted the rural poor through FONCODES to compensate. Kenneth M. Roberts, Ne oliberalism and the Transformation of Populism in Latin America: The Pe ruvian Case, World Politics 48, no. 1 (1996): 82116. Complicating these outcomes even further, the intensity of political courtship through SFs varies from one period to the next, depending not just on the electoral cycle, but on many variables like the strength of each opposition party at a particular moment and how much of a challenge it rep resents, on whether the elections are midterm or not, on the balance struck between rewarding loyalists, punishing the opposition, or courting fence-sit ters. Schady, Seeking Votes; Cornelius et al., Transforming State-Society; Theda Skocpol and Kenneth Finegold, State Capacity and Economic Inter vention in the Early New Deal, Political Science Quarterly 97, no. 2 (1982): 255327; and Carol Graham and Cheikh Kane, Opportunistic Government or Sustaining Reform? Electoral Trends and Public-Expenditure Patterns in Peru, 19901995, Latin American Research Review 33, no. 1 (1998): 67104. 24. Lustig, The Safety Nets, p. 5, citing K. Subbarao et al., Safety Net Programs. 25. K. Subbarao et al., Safety Net Programs; Goodman, Social Investment Funds. Based on studies of the Bolivian and Honduran SFs, Stewart and van der Geest (Adjustment and Social Funds) reported that poorer communities

present fewer proposals for funding than richer communities (p. 128). Sim ilar results were found for India by Raghav Gaiha, Do Anti-Poverty Pro grammes Reach the Rural Poor in India? (New Delhi: Faculty of Manage ment Studies, University of Delhi, May 1998). 26. In a review of the Latin American SFs, Lustig (Coping With Austerity, p. 31) noted that they compare unfavorably with these programs (she is considering only the direct-transfer aspects of SFs in the comparison). Lustig, a researcher at the Brookings Institution at the time of her study, drew on various SF evaluation studies by the donors. 27. Goodman, Social Investment Funds, pp. 22. 28. Ibid., 71. p. 29. Lustig (The Safety Nets, and 24 Coping With pp. Austerity) and Stewart and van der Geest (Adjustment and Social Funds) arrive at similar conclusions, in a study including African as well as Latin American countries. 30. Goodman, Social Investment Funds. The citation (p. 16) comes from a December 1996 version of this report, as cited in World Bank, Portfolio Improvement Program, 47, note 58. p. 31. World Bank, Portfolio Improvement Program, p. 47. 32. These arguments can be found in various donor documents. See, in particular, Subbarao et al., Safety Net Programs, pp. 93116; World Bank, Portfolio Improvement Program. 33. World Bank, Portfolio Improvement Program, p. 47. 34. Lustig, The Safety Nets, p. 6, and Coping With Austerity. 35. Stewart and van der Geest, Adjustment and Social Funds. 36. Alan Angell and Carol Graham, Can Social Sector Reform Make Ad justment Sustainable and Equitable? Lessons from Chile and Venezuela, Journal of Latin American Studies 27, no. 1 (February 1995): 202203. 37. World Bank, Portfolio Improvement Program. The evaluators also pointed to the inability to truly compare the demand-driven SFs to other programs, due to the lack of or poor quality of the data, the classic applesand-oranges problem of such a comparison, and the limitations of their data and methodology. The sample size was small (ranging from eight to sixtynine); they did not compare SFs to non-Bank-funded programs (as Stewart and van der Geest did); and they were not able to separate out, on the SF side, the sectoral piece of the SF program that corresponded to the com parator project in a functional ministryhealth, education, water, roads, etc. (They also did not rank the kinds of impacts of unemployment and poverty reported above.) 38. Goodman, Social Investment Funds, 68. The p. study notes that this is because of the reliance on follow-up beneficiary s for these questionnaire evaluations, and the lack of baseline data prior to funding. The report does mention, however, that the impact evaluations are a valuable source of in formation on whether projects are operating, and whether selection and construction were satisfactory. 39. Ibid., 6, 46, 73. The evaluators pp. attributed this finding to the in flexibility of the donors and their rules and limitations, which inhibited the ability of local officials to experiment with innovative solutions. One in teresting example of this donor inflexibility related to the use of private contractors for works projects. In trying to serve the poverty-reducing goals of the SFs, donors typically emphasized works projects that trained and em ployed local people, even when private contractors preferred bringing in

112 their own workers from outside, particularly for skilled work, and com plained that hiring unskilled laborers locally would compromise their effi ciency. In focus group meetings convened by the 1DB, however, mayors and community representatives expressed more concern for project quality than for local employment, and therefore preferred that contractors use their own skilled labor. With respect to inflexibility, then, the 1DB evaluators were making the same critique of the donors that the latter had been mak ing of line ministries. 40. World Bank, Portfolio Improvement Program, p. 47. 41. Ibid., p. 47, note 59. 42. In Bolivia, a municipal development bank (FNDR) financed water and sanitation systems through lending, while the SF financed these same in vestments on a grant basis. In Senegal, a Municipal and Housing Develop ment project provided credit through a municipal credit fund for financing income-generating projects; at the same time, these municipalities could re ceive free funding from the SF (an AGETIP) for roadbuilding. Ibid., p. 32, note 34. 43. Goodman, Social Investment Funds, pp. 4445. 44. Ibid., p. 72. The following three quotations in this paragraph are from the same source (pp. 4445, 72, and 72, respectively). 45. Social Funds and other social safety-net programs really leave un evade the more [and] touched the problems of the mainline services. difficult challenges of institutional reform, because they operate outside mainline ministries, use flexible procedures avoiding existing problematic regulations for civil servants and for procurement, and resort to nongovern ment organizations at the local level. Joan Nelson, Reforming Social Sector Governance: A Political Perspective, paper prepared for a conference on Governance, Poverty Eradication, and Social Policy, Harvard University, 1214 November 1997 (Washington, D.C.: Overseas Development Council, 7 November 1997), p. 5. These modes of operation, of course, are also sup posed to be the source of SF strength. Nelson also mentions the explicitly temporary nature of the funds (albeit now no longer the case); and the fact that some of the programs are used as the direct instruments of particular political leaders or parties. (She cites Perus FONCODES and Mexicos PRONASOL as examplesthough Mexico, less clearly so.) Similarly with respect to the Latin American SFs, Angell and Graham (Can Social Sector Reform, pp. 202203) reported that they diverted re sources (both human and physical) and shifted public attention away from problems in the line ministries, thus making more difficult the process of reforming these ministries. 46. The World Bank review of African and Latin American projects re ported concerns about sustainability, particularly with respect to the eco nomic infrastructure and microfinance components of such projects, noting that such concerns had been raised in other reviews as well. World Bank, Portfolio Improvement Programs, p. vii. Another World Bank study (Wiens and Guadagni, Designing Rules, pp. xviixviii, 46) found that none of the three Latin American projects (DRIFs) it reviewed performed particularly well in achieving sustainability, and that information from local or partial surveys suggests that a high proportion of subprojects may not be sustain able. A World Bank appraisal report for a Senegal SF/AGETIP, noted that the sustainability of many AGETIP investments is uncertain, due to a lack
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of ownership and participation in the project identification and preparation phase and in the post-project operations and maintenance phase. World Bank Senegal PAR Public Works and Employment Project, 1996 draft, page 2 notes, as cited in World Bank Portfolio Improvement Program, p. 15, note 9. The 1DB came to similar conclusions in Goodman, Social Investment Funds, pp. 3541, and an earlier 1994 1DB study cautioned that, sustainability remains a potentially serious problem. Glaessner, Lee, SantAnna, de St. Antoine, Poverty Alleviation and Social Investment Funds: The Latin American Experience, p. 22, as cited in World Bank Portfolio Improve ment Program, p. 15. One exception came from a 1990 survey of the Bolivian SF, which showed 95 percent of the social infrastructure projects still operating, and 80 percent of the social assistance projects. The survey was conducted, however, only one to two years after project completion (Goodman, Social Investment Funds, p. 41). The survey also concluded that the projects most likely to be sustained were those where users participated most actively, where the re questing agency had had previous experience operating this type of project, and where the requesting agency had a stable source of financing for recur rent costs. 47. World Bank, Portfolio Improvement Review, 1997, p. 31. 48. Eighty percent of the project descriptions did not mention sustainability or concern themselves with its three key components: (1) evidence of demand (range of options offered, information made available, evidence of commitment through contribution in cash or kind); (2) appropriateness of technical standards; and (3) soundness of arrangements for operations and maintenance. World Bank, Portfolio Improvement Program, p. 30. 49. Ibid., pp. 3031. 50. World Bank, Portfolio Improvement Program, 1997, pp. 1516, note 9. The World Bank evaluators reinforce their concerns about sustainability with citations from their sister SF-financing institution, the 1DB, and from other reviewers within the World Bank itself. They also question whether SF designers and managers even thought about project designs and technical standards that would be more likely to elicit user maintenance and financing for recurrent costs. They point out, it should be noted, that their findings relate more to likely, as opposed to actual, sustainability, because only a limited number of the individual country evaluations it drew on in volved SF projects with long-term objectives (p. 4). 51. World Bank, Portfolio Improvement Program. 52. See, for example, World Bank Honduras PAR Report No. 13839-HO, 1994, para. 4.15, as cited in World Bank, Portfolio Improvement Program, 1997, pp. 1516, note 9. 53. Goodman, Social Investment Funds, p. 74. In Latin America, out of six teen countries and seventeen SFs (Guatemala has two), Chiles FOSIS has the lowest level of external financingil percent. The next lowest are Guatemalas FONAPAZ (12 percent), and Colombias RED SOLIDARIDAD (20 percent). (The 1DB evaluators, as noted above, ranked these three as the most successful in terms of innovative practices.) For the rest, external fi nancing ranges from 58 percent to 94 percent, with only three countries being between 60 percent and 80 percent (Peru, Uruguay, and Venezuela) (ibid., p. 10, table 2.1). The Mexican SF, PRONASOL, is also one of the SFs

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most owned by its government. It was initiated by the Mexican government without donor funding and is one of the largest in terms of absolute re sources, share of the budget, and coverage (Cornelius et al., Transforming State-Society, p. 14). It does not appear in this particular table of the 1DB be cause it is currently not receiving donor funding; it has received funding from the World Bank in the past. 54. Goodman, Social Investment Funds, pp. 64, 74. 55. The studies report little of this problematic nature with respect to the new role of private firms, though this may have been due to a simple lack of analytical interest in this matter. See Tendler, Rise of Social Funds, sections 3 and 4 for case evidence and discussion of the private firms. 56. Ibid., p. 39. In many communities, the report said, NGOs are not very active. In addition, NGOs tended to specialize more in training and commu nity development programs than in managing the construction projects that constitute an important activity of many SFs. In the SFs where NGOs played a greater role, then, it was because the program did not focus on building in frastructure (like Chiles FOSIS). Other exceptions were cases in which the government was institutionally extremely weak to the point that NGOs had more capacity to generate projects than government (Haiti) and, in general, because the SF was formally required to use them. The usual tension that ex ists between NGOs and government also seemed to get in the way. The NGOs disliked being the mere executors of a paternalistic government program, and wanted to participate more in early phases of the project cycle. SF man agers and staff, presumably, were not anxious to do this. 57. Reddy, Social Funds, p. 58. 58. According to a Project Completion Report cited in Subbarao et al., Safety Net Programs, p. 107, the projects were in health and education, and the study was conducted one to two years after completion. This same find ing was cited in Goodman, Social Investment Funds, p. 41. Lower performers on the sustainability measure also included projects requested by regional government institutions as opposed to central-government institutions. 59. Subbarao et al., Safrty Net Programs, pp. 101, 109. 60. World Bank, Portfolio Improvement Review, 1997, pp. 3839. The report suggested that microfinance components are best administered by an existing agency as an apex institution because [e]xperience shows that NGOs, generally, are not capable of providing the range of financial ser vices required by the poor on a sustainable basis (particularly deposit ser vices). (p. 39) 61. World Bank, Portfolio Improvement Program; Goodman, Social In vestment Funds. 62. Stewart and van der Geest, Adjustment and Social Funds. 63. Goodman, Social Investment Funds, pp. 15, 43. There may also be an inherent tendency for exacerbation of this problem in that the better-off communities that are successful in getting one project will come back for subsequent ones and prepare them better, while communities that are turned down or have a difficult time will become discouraged and desist, a point made by Schady, Seeking Votes. 64. Goodman, Social Investment Funds, p. 15. 65. Alec Ian Gershberg, Distributing Resources in the Education Sec tor: Solidaritys Escuela Digna Program, in Cornelius et al., Transforming State-Society (1994), pp. 249251.

66. World Bank, Portfolio Improvement Program, p. 47. 67. For example, ibid., pp. vii, ix, 15. 68. Goodman, Social Investment Funds. 69. World Bank Honduras PAR Report No. 13839HO, 1994, para. 4.15, as cited in World Bank, Portfolio Improvement Review, 1997, pp. 1516, note 9. 70. Goodman, Social Investment Funds, 3536. 71. Ibid., p. 34, and Raczynski, Chile: pp. Fondos 3876, particularly pp. (pp. 46, 48, 73, and 74). Also different, the Chilean government viewed FOSIS as a permanent program from the start (it was created during a time of high eco nomic growth of 7 percent a year); this contrasts with the temporary status of the majority of Latin American SFs and the origins of most SFs in tem porary periods of low growth, high unemployment, and structural-adjust ment or other crises. 72. Angell and Graham, Can Social Sector Reform, p. 203. They at tribute this greater integration in Chile to the fact that a whole series of new safety net programs undertaken during the Pinochet governmentparticu larly public employment programswere integrated into the line ministries and hence did not create a separate and competing bureaucratic layer. Also, these sectors had been historically relatively efficient and had pro vided widespread coverage 203). (p. 73. Goodman, Social Investment Funds, pp. 3536. 74. World Bank, Portfolio Improvement Program, pp. 28, 3435, and executive summary; Goodman, Social Investment Funds, 43. A similar finding p. was reported by Angell and Graham (Can Social Sector Reform), namely that SF project units were strongest in the area of health and education. 75. World Bank, Portfolio Improvement Program, p. 35. 76. Ibid., p. 28. 77. Goodman, Social Investment Funds, p. 43; World Bank, Portfolio Im provement Program, p. 28.

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