A social investment fund is an organization, generally in a developing country that provides grants for small-scale social investments intended for fulfilling the requirements of the poor. For the multilateral agencies, the concern for indigenous poverty is comparatively a new issue. This concern can further be claimed to have emerged from two different areas. The first is the requirement to justify the impact of projects financed by banks, primarily energy, transport and integrated rural development projects. For the banks, this has been a crucial concern in the past as well as in the present economic scenario. The second area is rural development, which up to a few years ago was focused on agricultural development among smallholders, both indigenous and non-indigenous. These projects were not either sensitive to socio-cultural issues or focused on specific ethnic group.
Even though integrated rural development does not hold the earlier position of a valid paradigm, but at the same time this area has not been taken-over by any new rural development model. The closest models are the sustainable development projects that focus more upon the management of natural resources. But these projects include productive constituents for both indigenous as well as non-indigenous people.
In a scenario devoid of rural development projects, funds are channeled to the rural poor through social investment fund, education and health programs and micro-enterprise. Social investment funds and micro-enterprise were not originally created to address rural poverty.
Micro-enterprise funding was set-off in urban areas to provide short-term and small loans at interest rates that were quite below those charged by usurers. This finance was channeled into commercial and service activities and in small-scale manufacturing.
The first introduction of social investment fund was to mitigate the influence of policies implemented for economic stability. The earliest of these programs, the Fondo Social de Emergencia was introduced in Bolivia in 1986. It was primarily a scheme designed for employment creation. The objective was to offer work to miners who had lost their jobs due to the restructuring of COMIBOL, the State Mining Corporation. The consequent programs laid more emphasis on infrastructure investment, but almost all were considered as temporary measures that would be taken-over once the stabilization policies enabled greater economic growth. Even though, the majority of these social investment funds were not successful in making significant impact on employment, they have been implemented in almost all the Latin American countries and adopted in the entire developing world.