Poverty alleviation and social investment funds

Abstract

Most Social Investment Funds (SIFs) in Latin America were created to alleviate the impact on the poor of the reduction in income and employment caused by the debt crisis and the structural adjustment measures taken to lay the basis for renewed growth. The traditional social sector ministries were ill prepared for this task. Many SIFs have been transformed into permanent or semi-permanent entities to finance infrastructure and social service projects targeted to reach the very poor. Furthermore, most SIFs in Latin America have been characterized as effective financial intermediaries. The main attribute of SIFs is the high degree of autonomy achieved through choice of private sector managers with no salary limitation, and exemption from Government's annual budget cycle as well as from bureaucratic procurement and disbursement procedures. A computerized information system, frequent audits and a high degree of beneficiary participation and transparency have also ensured rapid and efficient execution of projects. This discussion paper reviews the experience of twelve SIFs created in Latin America since 1986. It attempts to identify best practices and lessons learned and to analyze policy and operational issues related to the use of SIFs as financial intermediaries for small-scale, multisectoral investments aimed at alleviating poverty among targeted population groups. It also attempts to analyze the future perspectives of SIFs.