The LDLD is a national program of innovations for supporting local government and its management, established with support from UNCDF and UNDP. It features the setting up of a capital investment and local development fund, to support Liberia’s efforts in reversing historic tendencies within its centralized system of administration. This national program, based on four strategic focus areas, aims to strengthen policy and strategy development, system and institutional development, while promoting local sector-specific investments, and in the process, shall ensure the effective management of Liberia’s innovations in restoring local government and its. The program will cover four strategic areas of focus:

1. Policy and Strategy development: in which the main output is the adoption and implementation of the decentralization policy and the legal framework;
2. System and Institutional Development: in which the main output is: Establishment and elaboration of procedures, processes and systems for effective public expenditure management and infrastructure/service delivery
3. Sector Investments for Local Development: in which the main output is District and sub district investments are implemented
4. Effective program management in which the main output is the timely provision of inputs and effective utilization of resources for LDLD, given that the LDLD will establish the pilot system on which the national fiscal transfer mechanism will be strengthened.

• Launching the national program intends to prepare Liberia’s departure from short-term relief and emergency programming, currently set against a backdrop of systemic local government service delivery weaknesses. As returnees resettle, their livelihoods partially restored, much needs to be done to meet the growing demand for public services and improvements in management. Community based programs and their implementation require a coordinative capacity in reinvigorating Liberia’s local government management and system of administration.
• Establishing a national decentralization policy will require national consensus building that results in the adoption of the legal and regulatory framework to enhance the functioning of sub national governments. Introducing effective local public management expenditure systems that enable Counties and Districts to improve their roles in delivering basic services and in the coordination and support for local economic development. The program will pilot a local investment package linked to the participatory planning processes, which will form the basis of a reinvigorated developmental local government system. Thus, the LDLD intends to go beyond the scope of supporting basic needs and improve and strengthen capacities for rural and urban development.
• This national program is estimated at $50 million, of which $ 5 million has been committed UNCDF and UNDP, with partial support from the government’s annual allocations to the County, with parallel funding estimated at $15 million over the 5-year duration. GOL has already earmarked an outlay of $ 5.5 million in its annual budgets for 2007 and 2008 for disbursement to the counties for county and district development.
• The expected results include: the full adoption of policies to strengthen fiscal decentralization, administrative and governance systems in Liberia, installation of adequate organizational capacities and systems to promote pro-poor infrastructure and service delivery, local economic development and sustainable resources’ management.

• The LDLD’s management is premised on the strengthening of the center - local dynamics and building capacities of the different layers of government to promote decentralized governance. At the central level the key actors will include all the key national ministries who have to embrace the traditional advantages of decentralization to improve efficiency, transparency and responsiveness of local service provision compared to the traditional centralized arrangement.
• The Ministry of Finance is responsible for the overall budgeting and allocation of resources annually.

• The national program will cover 15 Counties, to support the shaping of policies and systems that underpin decentralization and local development. The program will pilot a local development program, initially based in 3 counties, and shall install a County and District financing facility, intended to demonstrate, through learning by doing, the full cycle of public expenditure management. The three counties will generate lessons that shall structure policies of the national program.

A mid-term evaluation/review (MTE) shall be undertaken within 18 months after the project has been established, to coincide with completion of the first planning and budgeting cycle and partial completion of the second planning and budgeting cycle. The MTE is intended to:

• Assess overall project progress;
• Evaluate and (if necessary) fine tune arrangements for planning and budgeting;
• Financing and implementation of the project;
• Examine project management arrangements to ensure adequacy;
• For consistency with the attainment of assigned project outcomes and
• Implementation of agreed project activities.

• Decentralisation has been extensively discussed and debated as one of the main themes during the formulation of PRSP. The current PRS draft clearly states the GOL’s commitment for an improved system of decentralised governance responsive to local needs and aspirations and to decentralise power, decision making and government authority for better delivery of services.

• GOL has earmarked $ 5.5 million as county and district development fund to be implemented by the county and district administrations for 2007 and 2008. However, there are hardly any systems or capable institutions in place to support this. The absence of a decentralization policy and legal framework also compounds the problem. On the other hand, this could be seen as an opportunity as well to speed up the policy formulation process as well as to support the county administrations to initiate basic planning and public expenditure management. The second challenge is the limited coordination among government agencies and to some extent even international partners.

• Supporting Governance Commission to accelerate the process of policy formulation and legal framework, strengthening the inter-ministerial coordination and supporting the three pilot counties to establish basic systems and procedures and utilise the emerging capacity to extend them to other counties.

UNCDF assists the Government of Liberia in developing an inclusive financial sector that provides sustainable access to a broad range of financial services for poor and low-income people and for small and micro enterprises. The Inclusive Financial Sector Programme, which is implemented jointly with UNDP, was launched at a National Microfinance Stakeholders Workshop organized by the microfinance unit of the Central Bank of Liberia in January 2007. The workshop brought together more than 70 people representing microfinance institutions, commercial banks and representatives from the public and private sectors.

The overarching goal of the Programme is to contribute towards achieving a cut in absolute poverty by half by 2015 by increasing sustainable access to financial services for poor and low-income people in Liberia. The Programme will contribute to this goal by providing the necessary capacity building and capital assistance to facilitate the launch of a competitive and sustainable inclusive financial sector that provides access to financial services to poor and low-income people and micro and small business. This will be achieved through four programme components:

1. Capacity building support and capital assistance to Financial Service Providers (FSPs) with a view to enhance their sustainability and considerably increase their outreach with a broad range of financial services to under-serviced regions, poor households and small and micro enterprises.
2. The establishment and strengthening of strategic partnerships with other development partners and the private sector in a joint effort towards building an inclusive financial sector;
3. The establishment of a Microfinance Unit within the Central Bank of Liberia that is well-equipped and capacitated to lead the work towards developing a conducive environment for the establishment and expansion of an efficient inclusive financial sector in Liberia, including a growing microfinance industry and its eventual integration into the financial system;
4. The development of sound microfinance principles tailored to the Liberian context and that are widely disseminated, accepted and adopted.

If the Government and development partners combine their efforts based on a shared vision towards building an Inclusive Financial Sector, it is feasible that within a period of 6 to 8 years a large and self-financing microfinance industry could be developed. The UNCDF/UNDP Inclusive Finance Programme covers a period of 2.5 years and is designed to immediately benefit recovery and lay the foundation for more dramatic scaling-up of microfinance outreach by means of a truly Inclusive Financial Sector.

• Emergence from Post-Conflict: Because of the 14 years of conflict, Liberia has largely missed the ‘microfinance revolution’ taking place around the world. This presents the opportunity to apply the lessons learned from other countries and move through the process of sector development more quickly, integrating microfinance into the financial sector. Also, because most donors are just starting their recovery programming, it offers the opportunity to develop coordinated policies, and to establish mechanisms for best-practice microfinance from the outset.
• High unmet demand: The gap to be filled of potential demand is high in Liberia. The indicative estimates illustrate the large gap (71,000 households) between the demand (82,000 households) and supply (9,000 households) of credit for micro and small business activities. Entrepreneurial activities are likely to continue to spread as security resumes. The economic activities of potential clients is already quite high in Monrovia, and Harper (Maryland County), and should gradually recommence in some secondary towns (Ganta, Saclepea (Nimba County), Gbarnga (Bong County), Buchanan (Grand Bassa County).
• Supportive government: Although no specific policy is in place as of yet, government representatives were supportive of the development of an inclusive financial sector in Liberia. As noted, the new Executive Governor of the Central Bank has taken some steps toward liberalization. This goodwill will be needed to tackle the policy constraints noted below.
• A range of institutional forms is engaged in aspects of microfinance: A range of microfinance operators (banks, credit unions, NGOs) existed before the most recent spike in the conflict, and with some support, could bring a relatively quick impact within a period of two and a half years, while providing the foundation for future growth.
• Several operators have a clear focus on sustainability and outreach: Although outreach is limited, several institutions are committed to operating in a sustainable manner.

The Central Bank of Liberia will be the Government counter-part of the project. To support the enabling environment, the Central Bank of Liberia will designate a working group from departments within the bank to serve as a permanent focal point for the development of the microfinance sector. The Central Bank of Liberia will integrate the results to be achieved into its work.

The Investment Committee will provide reporting on an annual basis to the Executive Governor of the Central Bank of Liberia on: 1) Investments made; 2) Results achieved by MFIs based on standard performance and financial indicators; 3) Constraints and opportunities for further developing the sector; 4) Policy changes needed to remove the constraints or seize opportunities.