UNCDF has been at the forefront of developing and piloting innovative approaches to financing local service delivery over the past decades. In many least developed countries (LDCs), UNCDF has continued to develop new approaches to local government finance, for example, in the areas of climate adaptation, local economic development and municipal finance.

The signature product designed by UNCDF since the 1990s – the Local Development Fund (LDF) – was able to generate billions of dollars for local social and economic development in the LDCs through piloting and national scale-up.

The LDFs leveraged UNCDF’s initial investment of millions to generate billions in sustainable and institutionalized flows of funds to the local level through national fiscal transfer systems and follow-on financing from the World Bank and others. These Funds significantly contributed to fiscal decentralization and the expansion of local fiscal space and local fixed capital formation – two prerequisites for economic transformation.