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A social investment fund is an organization, usually in a developing country, that provides grants for small-scale social investment aimed at meeting the needs of the poor. The concern of indigenous poverty is a relatively new issue for multilateral agencies. This concern can further be claimed to emerge from two different areas. The first requirement is to justify the impact of bank-financed projects, mainly energy, transport and integrated rural development projects. For banks, this has been a significant concern in the past as well as in the current economic scenario. The second area is rural development, which until a few years ago focused on agricultural development among smallholder farmers, both indigenous and non-indigenous. These projects were either not sensitive to socio-cultural issues or focused on a specific ethnic group.
Even though integrated rural development does not hold the former status of a recognized paradigm, but at the same time this field has not been taken over 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, money is channeled to the rural poor through social investment funds, education and health programs, and micro-enterprises. Social investment funds and micro enterprises were not originally created to address rural poverty.
Micro-enterprise funding was channeled into urban areas to provide short-term and small loans at interest rates much lower than those charged by moneylenders. This finance was channeled into commercial and service activities and small-scale manufacturing.
The Social Investment Fund was first introduced to reduce the impact of policies implemented for economic stability. The first of these programs, the Fondo Social de Emergencia, was introduced in Bolivia in 1986. It was primarily a scheme designed for employment generation. Its purpose was to provide work to miners who had lost their jobs due to the reorganization of the State Mining Corporation, COMIBOL. The resulting programs placed a greater emphasis on infrastructure investment, but almost all were conceived as temporary measures to be taken after stabilization policies enabled greater economic growth. Even though most of these social investment funds have not been successful in making a significant impact on employment, they have been implemented in almost all Latin American countries and adopted throughout the developing world.
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