We are pleased to present UNCDF’s 2007 Results-oriented Annual Report (ROAR). The ROAR is produced each year as part of UNCDF’s strong commitment to resultsbased management and accountability, and our ongoing efforts to improve the way we do business, with a view to meeting the needs and aspirations of the governments and people we serve in the Least Developed Countries (LDCs). The ROAR assesses UNCDF’s performance, both in terms of development results in its two practice areas, local development and inclusive finance, as well as its management results. This 2007 ROAR will be presented to the Executive Board in June 2008 and will be made available in all six official UN languages.

Highlights 2007

2007 was another excellent year for UNCDF with regards to its programme, management and financial results. In line with its ambitious vision of expanding its geographical coverage to 45 LDCs by 2011, UNCDF provided investment and technical support to 31 LDCs in 2007 and formulated new programmes that would extend its interventions to 39 LDCs by the end of 2008.

Reflecting its risk-taking nature, UNCDF formulated new Local Development and Inclusive Finance Programmes in a number of post-crisis countries in 2007, including the Central African Republic, the Democratic Republic of Congo, Liberia, Nepal, Sierra Leone, Solomon Islands and Somalia. Within its new Inclusive Finance programmes, UNCDF continued to invest primarily in emerging Microfinance Institutions (MFIs) - a high risk niche where UNCDF has delivered strong results for a number of years.

Through innovative approaches in countries as different as Yemen, Bangladesh and Benin, UNCDF took the forefront among development partners in promoting the principles of the Paris Declaration on Aid Effectiveness in the decentralization and local development “sector”. UNCDF’s sector development approach to inclusive finance has also facilitated the alignment and harmonization of donor support towards building inclusive financial sectors, that subsequently gain access to commercial sources of funding.

UNCDF’s approaches and programmes also continued to be successfully upscaled and replicated by development partners, including the shift to national decentralization programmes, in – among others – Bangladesh, Nepal, Mozambique, Timor-Leste, Yemen, Benin and Senegal and the adoption of national microfinance strategies in, for example, Sierra Leone and Madagascar.

Furthermore, during 2007, evaluations of UNCDF local development programmes underscored UNCDF’s focus on managing for results and its notable successes in piloting and upscaling of UNCDF’s approach to local development through local authorities. Similarly, UNCDF volunteered to participate in the 2007 microfinance donor agency rating (SmartAid for Microfinance Index) conducted by the Consultative Group to Assist the Poor; the Fund was rated as one of the top performers among participating microfinance donor agencies.

In line with the new Strategic Partnership with UNDP and with a view to promoting UN reform, all new 2007 UNCDF local development initiatives are formulated as joint programmes with UNDP and other UN-Agencies, including UNIFEM on Gender Equitable Local Development. UNCDF has also entered into joint programmes with ILO on micro-insurance and with IFAD on remittances and technical support in West-Africa, representing new models of UN agencies working together at regional and global levels.

While expenditures continued their upward trend, largely due to the launch of many new programmes, donor contributions to UNCDF’s regular and other resources increased as well by almost 30% in 2007 compared to 2006 levels.

Strategic Partnership with UNDP

2007 saw the finalization of the Strategic Partnership between UNDP and UNCDF, bringing the two organizations closer strategically, operationally, and financially and thereby allowing each institution to focus on its respective mandate and comparative advantages. Expected outcomes of the partnership are greater coherence, simplicity, and harmonization within the UN system and improved efficiency and effectiveness of both organizations leading to enhanced development results. The Guidance Note signed by the UNDP Associate Administrator and UNCDF Executive Secretary a.i. in late 2007 detailed the modalities for how the two organizations will work together at country, regional and headquarters level.

Outlook for 2008-2011

Moving forward, UNCDF is committed to continue the delivery of strong development results on the ground in a growing number of LDCs. The implementation of the UNCDF 2008-2011 Investment Plan, which envisages an extension of UNCDF’s services and investments to 45 LDCs by 2011 and a growth in the average size of UNCDF investment per LDC, will, however, require a continued increase in donor contributions to UNCDF regular and other resources. Based on the excellent 2007 development and operational results, UNCDF is confident that these ambitious yet realistic growth objectives can be achieved. We look forward to working closely with the Executive Board and a variety of development partners, including foundations, to achieve our mission: Investing in the LDCs to achieve the Millennium Development Goals.

Henriette Keijzers
Executive Secretary, a.i.
United Nations Capital Development Fund