How can social funds (SF) best be adapted to decentralised institutional environments? This paper from the Development Studies Institute (DESTIN) examines the implications of decentralisation for the design and implementation of SF projects. Evidence indicates that SFs can increase their effectiveness and the sustainability of their investments by taking advantage of the political and civic institutions that emerge as a result of decentralisation.
SFs directly finance small community-managed projects, helping to empower the poor and vulnerable by allowing them to become involved in their own development. They are typically organised as autonomous public entities outside existing line ministries or public work agencies. More than 60 countries across Africa, Asia and Latin America have introduced SFs over the past two decades.
The initial centralised nature of SF project design posed an obstacle to decentralisation by excluding local governments from meaningful participation in projects. However SFs have recently begun to delegate more management responsibilities to local stakeholders. In well-advanced decentralisation systems, many SFs now give local governments command over fiscal resources. In less-advanced decentralisation systems, they continue to manage fiscal resources within the project.
A project cycle review indicates that decentralisation processes have positively impacted SF project identification and implementation:
- Because decentralisation processes require participatory local planning, many local governments are now capable of conducting project identification processes independent of close SF management.
- The introduction of municipal development plans as a result of decentralisation processes has decreased the need for SFs to conduct independent needs assessments for project approval.
- Many SFs now tailor implementation responsibility according to local government capacity. For example, small, relatively simple infrastructure projects are well suited to local contracting and implementation in less-advanced decentralisation contexts.
SFs can be compatible with, and beneficial to, decentralisation. Democratic processes which may emerge as a result of decentralisation can improve the chances of long-term SF project sustainability. A number of lessons have emerged from SF projects that have adopted decentralisation approaches throughout their project cycles:
- Community participation at each stage of the project cycle uses local knowledge in project design and implementation stages and encourages local commitment to a successful project.
- Operation and maintenance of a finished project will be enhanced by providing direct technical, capacity building assistance to local authorities throughout the project cycle.
- Building working relationships with responsible ministry and line agencies will help ensure that completed infrastructures will be properly staffed and equipped.
- Conducting on-going investigation of the success of completed projects will improve the quality of future SF projects.
