ABSTRACT
Donors have lauded social funds for making two important contributions to development. First, as part of the arsenal of safety net instruments, they reduce poverty by creating employment and by extending services and public works projects to poor communities. Second, social funds are considered an exciting and interesting new model of service delivery that works better than traditional government because it is more demand driven and decentralized. Social funds present an empirical window on the workings of a set of issues that are currently of great interest to the development community. Some shortcomings of social funds, also noted in donor evaluations, are surprisingly similar to those of traditional government. Social funds are like parastatals and state enterprises, many of which were created in the 1960s with donor encouragement and financing. Social funds represent an important experiment in contracting out to private actors part of what government usually does itself.
