There is growing consensus that democratic governance creates the conditions for sustainable development and poverty reduction. Similarly, it is increasingly understood that achieving the Millennium Development Goals (MDGs) and eradicating poverty needs to be done at the local level and thus requires the involvement of local authorities. Local authorities can play a major role in this effort by ensuring more effective and accountable local infrastructure and social service delivery for the poor and by improving the dialogue among the state, citizens, their communities, civil society and the private sector. Too often, however, sub-national levels of government are not involved in consultations on national poverty reduction strategies or sector policies. Nor are they given the mandate or institutional and financial capacity to plan and deliver local development interventions such as social services and local infrastructure, local economic development initiatives and natural resource management.

By promoting institutional reform and policy change, building local capacity of local governments to plan, budget, implement and monitor local development activities, and, in the Least Developed Countries, providing grant-funded investment capital, local authorities can be capacitated to fulfill this potential. Participatory planning and budgeting systems need to be introduced and supported at the local level.  These systems need to ensure a voice for women and other disadvantaged groups in local public decision-making and accountability of local governments to their citizens.

UNCDF believes that donor-funded support programmes to local authorities should work within, and support, the national system of central-local government institutional and fiscal relations and reform with a view to establish an appropriate balance between centralized and decentralized decision-making and delivery of social services and pro-poor infrastructure tailored to the legal set-up, traditions and conditions of each country. In this way, support programmes to decentralization and local governance could be designed in a way so as to assist national Governments to develop national programmes or strategies for decentralization and local development. With the appropriate political and donor support, such national programmes can act as mechanisms for cross-sector donor coordination and alignment in line with the vision set out in the Paris Declaration on Aid Effectiveness and with the overall objective to localize the MDGs.

The Approach

UNCDF’s approach to poverty-reduction through local development is built upon:

• the need for substantial improvements in basic public infrastructure investment and service delivery for the poor, especially in the rural areas of Least Developed Countries.[1] This requires increased financing, but it also demands major improvements in the policy and institutional framework for delivery, for more effective use of funds allocated.
• the potentially key role of effective local government in promoting and improving dialogue and partnership between the state, citizens and their communities, civil society and the private sector in local planning and service delivery.
• the need for local capacity building and institutional change, and for national decentralization policy reform in Least Developed Countries (LDCs) in order to fulfill this potential.

UNCDF’s strategic and flexible programming tool, the Local Development Programme (LDP) combines technical assistance with development budget support to local governments and:

• pilots both national policy changes and institutional innovations at the local level.
• provides training and advisory support for institutional change and local and central levels.
• provides financial resources to be managed through improved local institutions, thus allowing for the local financing of development plans and to establish the framework for fiscaltransfer mechanisms.
• leverages the lessons learned through its pilot approach, to promote national decentralization and local governance policy reforms.
• contributes to the reduction of poverty through the delivery of basic infrastructure and services, and the introduction of more sustainable natural resource management practices.

Activities

The main features of the LDP approach are:

• a sub-national focus: Supporting sub-national governments and community organizations and promoting relations between them.
• an emphasis on local-level institutional development: Improving procedures and practices for local-level resource mobilization and public expenditure management (including strategic planning, investment programming, annual budgeting, procurement, implementation, asset management and internal controls) to enhance the effectiveness, efficiency and accountability of local bodies in poverty reduction-related activities.
• a performance-linked funding facility: Providing local governments with general-purpose development budget support for sustainable local investments in social and economic instrastructure. This support is linked to agreed measures of local performance and serves as an incentive for local capacity building.
• a national policy relevance: Piloting national decentralization policy changes (of political, fiscal and administrative nature), demonstrating their feasibility and promoting the “scaling-up” of their adoption country-wide

UNCDF has continuously developed the LDP approach since the early 1990s, testing decentralized/ local planning systems and funding mechanisms. The approach has received widespread recognition in a series of independent evaluations. Its success forms the basis of a growing record of achievement in promoting decentralizations and pro-poor policy change in LDCs, and an increasing number of partnerships and co-financing arrangements (with UNDP, the World Bank, other bilateral donors as well as national governments).

In collaboration with UNDP and other partners, UNCDF is currently financing LDPs in about 20 LDCs, mainly in Africa and Asia. The entire portfolio is benefiting about 25-30 million people, with a total cost of about US$ 160 million. A few examples:

Bangladesh

Mali

Uganda

Mozambique

UNCDF is engaged in researching and disseminating practice-based lessons in local development and decentralization policy from its LDPs, and promoting cross-country learning and exchange. The lessons learned from its operations are fully documented and analyzed and have an impact on policies, by preparing, publishing and disseminating documentation.

In response to a growing external demand, UNCDF is providing technical advisory services on a cost-recovery basis for the design and backstopping of local governance and decentralization support programmes, primarily although not exclusively in LDCs.

UNCDF provides its technical advisory services to UN agencies and other multi- and bi-lateral institutions as well as to Governments. The services are provided within the framework of the following policy objectives: (i) strengthening the capacities of local governments in planning, budgeting and implementing basic infrastructure and service delivery; (ii) supporting central governments to formulate policies promoting administrative, political and fiscal decentralization, to foster enabling legal and administrative environments, and to strengthen local economic development; and (iii) empowering the organizations of local civil society, particularly women’s associations and users of natural resources.

Looking Ahead

Realizing the Millennium Development Goals
UNCDF is taking concrete steps in order to contribute to the realization of the goals and indicators related to the MDGs in Least Developed Countries. UNCDF stresses the importance not only of the financing requirements, but also of the need to promote more effective local institutional and policy frameworks for delivery in order to improve access by the poor to education, health, water and other basic infrastructure and services.

Adopting and testing poverty reduction strategies
In line with the Poverty Reduction Strategy (PRS) guiding principles, by not imposing a ‘blueprint’ for poverty reduction strategies, UNCDF stresses the crucial role of a process that should reflect local context. Its approach reflects the three key steps indicated by the PRS for effective poverty reduction: (i) adequate diagnostics; (ii) participatory planning mechanisms and procedures; and (iii) definition of a set of appropriate indicators to monitor and track the progress of governance and the reduction of poverty. UNCDF focuses on identifying and supporting a more effective role for local governments in the formulation and implementation of the national poverty reduction strategy and on ensuring sustainable investments at the local level.

Focusing on local economic development
UNCDF is embarking on an important applied research exercise into Local Economic Development (LED), under the assumption that a rural local government can substantially enhance the prospects for economic development and poverty reduction within its territory, particularly through local strategic planning exercises and the related build up of partnership arrangements with community and private sector organizations. Within this framework, UNCDF is exploring ways the private sector can more effectively contribute to improved livelihoods in LDCs.