Development Funds - Advantages and Limitations

files/images_static/pros.jpg Funds that provide direct financing to communities and community groups contribute to:
  • Empower communities by enabling them to plan activities, design proposals, implement projects, monitor and evaluate their success, report
  • Encourage decentralisation – by channelling resources to community groups social funds can demonstrate feasibility of and potential for participatory planning.
  • Help to restore faith in the ability of public institutions to provide essential services and helps communities to appreciate their own role in the process
  • Set standards for transparency, accountability and quality on the governance outside the social funds.
  • Social fund approach to local participatory planning is limited: there are usually pre-determined criteria concerning eligibility of participants or prioritised projects, making communities bind to a certain range of activities.
  • Close scrutiny of accountability mechanism needed to prevent misuse and misdirection of resources for unintended purposes.
  • Sustainability hinges on the capacity of local implementers to identify own sources of funding and provide skilled staff and undertake routine maintenance. Groups formed only to channel financial support often do not outlast the sub-projects.
  • Not to undermine decentralisation processes: social funds are to be incorporated in local political decision making, but depending on the degree of decentralisation the opportunity of social funds to work with local governments are sometimes restricted.
  • Temporary solution: Bypassing existing structures of governance may present an important temporary solution, but can do harm in the long run as they may displace other sources of funding, as they may side track from tackling tough issues such as accountable and transparent government structures.
  • Framework conditions with regard to legislative settings (taxes, budgeting, involvement of the treasury, state procurement law, etc.) might pose restrictions.