A social investment fund is an organization, usually in a developing country, that provides grants for small social investments designed to meet the needs of the poor. For the multilateral organizations, the concern about indigenous poverty is comparatively new. It can further be argued that this concern arose from two distinct areas. The first is the requirement to justify the impact of projects funded by banks, particularly energy, transport and integrated rural development projects. This has been a key concern for banks both in the past and in the current economic scenario. The second area is rural development, which until a few years ago focused on agricultural development among indigenous and non-indigenous small farmers. These projects were not socio-culturally sensitive, nor did they focus on specific ethnic groups.
While integrated rural development no longer occupies its former position as a valid paradigm, this area has not been adopted by any new rural development model. The next models are the sustainable development projects, which focus more on the management of natural resources. But these projects contain productive components for both indigenous and non-indigenous peoples.
In a scenario with no rural development projects, funds are channeled to rural poor through social investment funds, education and health programs, and micro-enterprises. Social investment funds and micro-enterprises were not initially established to alleviate rural poverty.
Micro-enterprise financing was netted in urban areas to provide short-term and small-scale loans at rates well below those of usurers. This funding flowed into commercial and service activities and small-scale industry.
The first introduction of social investment funds was to mitigate the impact of policies implemented for economic stability. The earliest of these programs, the Fondo Social de Emergencia, was established in Bolivia in 1986. It was primarily a job creation program. The aim was to offer work to miners who had lost their jobs due to the restructuring of COMIBOL, the State Mining Corporation. Subsequent programs placed more emphasis on infrastructure investment, but almost all were viewed as temporary measures that would be taken once stabilization policies allowed for greater economic growth. Although most of these social investment funds have not had a significant impact on employment, they have been introduced in almost all Latin American countries and have been adopted in all developing countries.