The UN Joint Programme on Local Governance and Decentralised Service Delivery for Somalia is a 5 year Programme of ILO, UNCDF, UNDP, UN-HABITAT and UNICEF. The Programme is aligned to the programming frameworks of the Somalia Reconstruction and Development Programme 2008-2012 (target outcome of ‘Decentralised service delivery achieved in all of South-Central Somalia, Puntland and Somaliland’) and the UN Transition Plan 2008-2009 (outcome 2 ‘Local governance contributes to peace and equitable priority service delivery in selected locations’). The Programme is also is designed to contribute towards MDGs 2, 3, 4, 5, and 7.

It is envisaged to achieve as wide coverage in Somalia as resources and conditions allow with a comprehensive approach to rendering local governments as credible and professional service providers, increasing public investment in basic services, and strengthening civic awareness and participation in local decision-making and development. The strategy pursued will comprise:

1. Policy and legal frameworks for decentralisation, local government, service provision and land,
2. Institutionalising local government systems, vertical and horizontal inter-government linkages and civic education initiatives,
3. Investment in public services and goods through testing the Local Development Fund model, direct service provision and promotion of public-private partnerships, and
4. Processes and systems for housing, land and property disputes and resolution. Throughout the Programme, strong emphasis will be placed on gender and women in local government, human rights and local governance, and good governance principles of transparency, accountability and participation.

The concept of a joint project or programme on local governance and decentralized service delivery for Somalia is not new. For the last three years, UNDP, UN-HABITAT, UNICEF and ILO have been pursuing joint programming for the urban sector – governance and urban services – through the Urban Development Programme for Somalia. Since October 2006, the same organizations have been developing a joint concept specifically on local governance and decentralized service delivery and had numerous discussions and exchanges in the process. This year, UNDP and UNCDF fielded a consultant to design a Local Development Fund mechanism for the Somali context, which is deemed to be fundamental for improving service delivery and increasing fiscal transfers for local development, and UNICEF has fielded consultants to develop strategies for expanding and improving education services within a decentralized framework.

Given the complex environment in Somalia and the diversity of its political and social characteristics, the Joint Programme will need to be flexible to accommodate realignment/s of its strategies and investments. Prevailing local conditions, levels of Somali and international engagement and support and success in early activities will generally determine the pace and progress of Programme implementation.

The Programme will ultimately cover all regional and district Councils in Somalia where conditions permit. To achieve the geographical coverage envisaged, the Programme will adopt the model of training of trainers and a cascading system of assistance based on performance. In providing assistance, the Joint Programme will adapt to local needs and priorities as far as possible, although some activities will be generic, such as trainings in participatory planning and operation of the Local Development Fund. The Programme will be prioritised in locations where it will actively contribute to peace and equitable, priority service delivery. There will be flexibility for districts (urban and rural) to advance at their own pace, however by the end of the Programme period it is expected that all districts across Somalia should have achieved some minimum standards of performance, even if some have exceeded. According to the phased approach, all Councils once formed and that are accessible will receive a minimum package of orientation training, basic civic education, infrastructure support and capacity development. It is the ambition to pilot the Local Development Fund in 20-25 districts during the first 2 years of the Programme.

The Programme will undertake a substantive review at the end of each calendar year so that the findings feed into the annual work planning exercise for the following year. During phase I of the Programme, these reviews will feed into the higher level outcome reviews of the UN Transition Plan and reporting on Somalia’s progress towards the MDGs. In 2009, at the end of Phase I of the Programme, an independent comprehensive mid-term review of the whole Joint Programme will be undertaken.

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In line with the timelines of the UNTP 2008-9 and the RDP 2008-12, the Joint Programme will be rolled out in two phases over a period of 5 years 4 months:

Phase I: September 2007 to December 2009. This phase will entail two parts:

• September 2007 to December 2007: A transition period for the participating UN organisations to phase out their existing projects related to local governance, urban development and services and phase in to the Joint Programme by 01 January 2008. Preparations for establishing the Joint Programme in time for the UNTP.
• January 2008 to December 2009: Rolling out and implementation of the Programme according to the respective Annual Work Plans with a blanket target coverage of 46 districts by end of 2009 (i.e. 50% of rural and urban districts). Focus will be on founding and/or strengthening a local governance system and technical support in mechanisms and processes and investment in projects for delivering basic services.

Phase II: January 2010 to December 2012: Consolidation and implementation of the Programme according to the respective Annual Work Plans with a blanket target coverage of all remaining regions and districts by end of 2012 (i.e. all rural and urban districts), resources and security conditions permitting.

The overarching goal of the programme is to contribute to the achievement of the MDGs, in specific the goal of cutting absolute poverty by half by 2015, by increasing sustainable access to financial services for poor and low-income people in Somalia. The programme will contribute to this goal by contributing to the development of an inclusive financial sector that provides access to financial services to poor and low-income people in general and micro and small businesses in particular. This 5 years programme will in particular:

1. Develop a national policy/vision statement of inclusive finance and prepare the next phase of the national strategy;
2. Provide capacity building and training to key policy-makers responsible for removing policy constraints;
3. Put in place a framework that allows the government and donors to coordinate funding based on best-practice microfinance from the start, minimizing potential harm to the credit culture;
4. Build the supportive infrastructure (service provider networks, partnerships with cell phone companies, audit, training institutes, statistics/data) necessary for the sector to develop;
5. Bring immediate benefits for recovery, contribute to a competitive financial sector while identifying potential market leaders that could dramatically scale up activities as the peace is fully consolidated.

Global experience has demonstrated that sustainable microfinance can be successfully implemented in post-conflict situations. To the necessary extent, all of the essential and preferred conditions are sufficiently present to allow for a sequenced approach to restarting and gradually expanding microfinance services in Somalia. However, the financial sector in Somalia is disjointed. Although the remittance sector serves approximately one-third of Somali households transmitting $1 Billion per annum, the availability of savings, credit and insurance products is virtually non-existent. At present, the Somali financial sector is comprised wholly of the Somali Remittance Companies (SRCs) as they are the only financial services providers in the country for the majority of households and for the whole of the private sector. There are no commercial banks operating in the country, and after eight years of piloting NGO-financial service providers remain at a very nascent stage.

In regard to the macroeconomic policy framework under pillar 1 of the Reconstruction and Development Programme, the proposed key short to medium-term policy priorities for ensuring macroeconomic stability are to (a) maintain macroeconomic stability through balanced budgeting; and (b) mobilizing public revenues. Furthermore, to create an enabling environment for private sector-led growth to expand employment and reduce poverty, pillar 3 of the RDP calls for the expansion of financial services. Donor funded support to microfinance has been limited to date, and includes the European Union support to the two NGO-MFIs and IFAD’s support to Financial Services Associations. The current proposed UNCDF programme could help to fill the gap regarding the lack of professional Financial Service Providers (FSPs) that the FSAs could link up with; and further expansion into rural areas. There has been no other significant donor support to microfinance.

The programme is a "Joint Programme" in line with UNDG guidelines:

• the fund management option chosen for this programme will be a combination of “parallel funding” (whereby UNDP and UNCDF manage their respective core funds through their separate business units) and “pass-through” (whereby third party co-financing funds will be transferred to each of the two agencies according to their budget management responsibilities as detailed in the budget, through the intermediary of an Administrative Agent);
• UNDP will act as Administrative Agent on behalf of both agencies, according to UNDG rules, and this will be reflected in (a) an inter-agency Memorandum of Understanding to be signed by both UNDP and UNCDF, and by other UN agencies which opt later to support the programme(s), and subsequently (b) the Letter of Agreement signed between the Administrative Agent and co-financing partners.

Potential leaders of the microfinance industry, including remittance companies, commercial banks, Non-Bank Financial Institutions, Financial Service Associations, Credit Unions and NGO-MFIs

The programme is subject to an independent mid-term and final evaluation, managed by the UNCDF Evaluation Unit

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• Implementation of the programme and focus on Resource Mobilization