The Impact and Targeting of Social Infrastructure Investments: Lessons from the Nicaraguan Social Fund

The benefit incidence and impact of projects financed by the Nicaraguan Emergency Social Investment Fund are investigated using a sample of beneficiaries, a national household survey, and two distinct comparison groups. The first group is constructed on the basis of geographic proximity between similar facilities and their corresponding communities; the second is drawn from the national Living Standards Measurement Study survey sample using propensity score matching techniques. The analysis finds that the social fund investments in latrines, schools, and health posts are targeted to poor communities and households, whereas those in sewerage are targeted to the bet- ter-off. Investments in water systems are poverty-neutral. Education investments have a positive, significant impact on school outcomes regardless of the comparison group used. The results of health investments are less clear. Using one comparison group, the analysis finds that use of health clinics increased as a result of the investments; using both, it finds higher use of clinics for children under age six with diarrhea. With nei- ther comparison group does it find improvements in health outcomes. Social fund in- vestments in water and sanitation improve access to services but have no effect on health outcomes. Social investment funds have quickly gained in popularity because of their ca- pacity to carry out community development projects rapidly and with broad participation. An alternative to strategies led by central governments, social funds allow communities control in determining investment priorities. This model, widely implemented in a short period, has been the basis for the World Bank's first large-scale experience with small, community-led projects. The first social fund was created in Bolivia in 1987; today almost all countries in Latin America Impact Evaluation of Social Funds