Social Investment Fund

A social investment fund is an organization, usually in a developing country, that provides grants for small-scale social investments aimed at meeting the needs of the poor. For multilateral agencies, concern for indigenous poverty is a comparatively new issue. It can also be said that this concern arose from two different areas. The first is the requirement to justify the impact of projects financed by banks, mainly energy, transport and integrated rural development projects. For banks, this has been a crucial concern both in the past and in the current economic scenario. The second area is rural development, which until a few years ago focused on agricultural development among smallholders, both indigenous and non-indigenous. These projects were not sensitive to socio-cultural issues or focused on a specific ethnic group.

Although integrated rural development does not occupy the former position of a valid paradigm, at the same time, this area has not been absorbed by any new rural development model. The closest models are sustainable development projects that focus more on the management of natural resources. But these projects include productive components for both indigenous and non-indigenous people.

In a scenario devoid of rural development projects, funds are channeled to the rural poor through social investment funds, education and health programs, and microenterprises. Social investment funds and microenterprises were not originally created to address rural poverty.

Microenterprise finance was offset in urban areas to provide small, short-term loans at interest rates well below those charged by loan sharks. This financing was channeled to commercial and service activities and small manufacturing.

The first introduction of the social investment fund was to mitigate the influence of policies implemented for economic stability. The first of these programs, the Emergency Social Fund, was introduced in Bolivia in 1986. It was primarily a scheme designed for job creation. The objective was to offer work to miners who had lost their jobs due to the restructuring of COMIBOL, the State Mining Corporation. The subsequent programs placed more emphasis on investment in infrastructure, but almost all of them were considered as temporary measures that would be resumed once stabilization policies allowed for greater economic growth. While most of these social investment funds failed to have a significant impact on employment, they have been implemented in almost all Latin American countries and adopted throughout the developing world.