Financing Productive Assets in Social Funds and CDD
Financing private productive goods, an exploration of options
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.