Financing Productive Assets in Social Funds and CDD

This presentation explores the following topics:

• Need for social funds (SFs) and community driven development (CDD) operations to have components aimed at financing productive assets;
• Principal financing options depending on whether the asset is private or productive;
• Issues surrounding the provisions of grants for private goods;
• Whether loans are the best option for financing private productive assets;
• Financing private goods: when grants are an acceptable option;
• Grants to the very poor for income generating activities (IGAs): key considerations;
• When a combination of grants and participant savings makes sense;
• General principles to overcome constraints of grants programs for income generation;
• Group ownership and management of an asset or an enterprise;
• Importance of financial services for the poor;
• Importance of sustainable microfinance for SF/CDD projects;
• Way by which SF/CDD projects can build sustainable institutions serving the poor;
• Pros and cons of 'reaching down' versus 'linking up'.

The presentation makes the following conclusions:

• Improving access to financial services has grater impact than one-time grants to the poor;
• Preferable strategy is to support formal financial institutions to 'reach down' to the poor;
• If this is not possible, it is preferable to support the efforts of communities to organize themselves to 'link up' to the formal sector.

The presentation ends with a case study that discusses 'reaching down' versus 'linking up' strategies for a post-conflict rural irrigation project.