Mr President,
Distinguished Members of the Executive Board,
Colleagues,

Thank you, Ambassador Park, for chairing this session. And thank you, Tege, for those introductory remarks.

The ties that bind UNCDF and UNDP are more important than ever. Our work together at the country, regional, and headquarters levels builds on our distinct collaborative advantages.

Working around the world we are empowering women, tackling climate change, and accelerating inclusive growth. We see results in these areas thanks to our efforts to expand access to financial services; to support local governments as engines of transformation; and to pursue partnerships with the private sector that encourage investment flows aligned with the SDGs.

We are always expanding our partnership base, both inside and outside the UN, in order to bring ever greater commitment to the goal of making finance work for the poor.

We will now show you a video about our work supporting agricultural transformation in Uganda.

This project is an excellent example of how we are helping underserved regions in LDCs to benefit from changes emerging in the development finance landscape.

In many cases, these changes are bypassing the most vulnerable countries. If we look at blended finance, OECD data shows that only 7% of private finance mobilized by official development finance is going to LDCs.

To help LDCs march towards graduation with inclusion, we must change the status quo. We need to be experimenting more, creating demonstration effects, and getting all stakeholders – public and private – to make finance work for those being left behind (and this challenge is equally applicable to excluded areas of MICs).

Our results in the last strategic framework are showing how some financing models can help make that happen.

These results are positioning us to take our work into the next generation – through more strategic and robust deployment of our financial instruments, new partnerships, and new technologies to connect finance to the real economy, where women and men, local governments, and small businesses put it to work for development where they live and work.

Let me highlight some of our results. Among the 47 development effectiveness indicators, 38 have reached their target, and 9 have been partially achieved, in most cases owing to the effect of a decrease in regular resources.

First, on local development finance.

During the Strategic Framework period, UNCDF supported over 800 local governments to utilize localized finance transparently and accountably, and complete nearly 5,000 localized investments – in infrastructure, equipment and training. We helped Governments adopt 30 national strategies, policies or regulatory changes for local development finance, 43% of which have a clear gender focus.

Currently, this area of work has three priorities.

First, municipal and local public finance. Local governments in intermediary cities play an essential role in delivering the SDGs, and face pressures from growing urbanization, yet continue to face serious shortfalls in their financing.

Even when government transfers are predictable and generous, they rarely fully cover major infrastructure improvements. Perceived risks and market failures may keep private capital away. This is a problem for all of us. We need empowered local governments to meet the SDGs and the Paris Agreement.

Building on 25 years of experience, UNCDF is working to raise the confidence of the public sector and of private investors in local economies.

This includes trying to help municipalities expand their financing options, including through exploring sequenced approaches to structuring public-private partnerships, bonds, eco-bonds, and deployments of own-source revenues. In Bangladesh, we helped secure credit ratings for 10 local governments. We are also exploring with regulatory authorities the scope for a possible eventual bond issuance. This approach has real potential in LDCs and MICs.

UNCDF has joined with the United Cities and Local Governments in a coalition to promote a financial ecosystem that works for cities. We are working with them on a municipal investment fund to provide support to sub-national transactions that demonstrate what can be achieved at the local level.

We are also helping public and private actors to unlock private financing – especially from domestic banks - for smaller-size projects which are perceived by many investors as being especially risky, yet which can have transformational impacts on local economies.

Getting such projects to the stage where they can attract private financing often involves us first helping to structure projects to become commercially investable, and then later using grants, concessional loans, or guarantees to share risks. To be ready for greater deployment of SDG-positive investments, UNCDF is establishing a rigorous appraisal of project impact, alongside assessments of financial additionality and sustainability. Through this “dual key” approach, we are showing how blended finance can work for the “missing middle”.

We are building on our years of work in fiscal decentralization. A longitudinal study of 10 countries recently drafted by an independent consultant found that – taking into account country by country variances - UNCDF investments in early stage local development funds – frequently in close collaboration with UNDP – were leveraged more than 60 times through follow-on donor resources, IFI loans to governments, and eventually own domestic resources from national governments, over the last 15 to 20 years. For instance, a local development fund initiated in Nepal in 1999 covering eight districts with a budget of $5 million has grown to a programme of $128 million in block grants to local governments, 80 percent of which comes from government resources.

While we continue to apply this approach in Somalia and a small handful of other countries, we are increasingly helping governments adapt these fiscal decentralization models to new challenges, such as local climate resilience.

This brings me to our second priority: local climate resilience finance. Local governments need more resources to address local vulnerability in the face of climate change.

We are demonstrating how performance-based grants channelled through existing fiscal transfer systems to local governments can be an effective instrument for national governments to achieve their adaptation targets under the Paris Agreement. This work can be further mainstreamed through direct access to climate funds, and UNCDF is supporting processes that could lead to local governments gaining direct access to such vertical funds as the Green Climate Fund.

In 2017, this work supported 68 local governments representing over 5.5 million people.

Benin, Cambodia and Mali have submitted proposals to the GCF to use this approach. With adequate funding, we aim to expand this work to 20 countries.

In partnership with the Commonland Foundation, we will be supporting local and regional governments and the local private sector in developing land restoration investments. An example is the Kalemawe Dam project in Tanzania. Here too we are challenging the status quo by showing the feasibility of investing in underserved sectors in LDCs. Based on the lessons we learn, we can see how to adapt such models to other sectors.

Third, women’s economic empowerment. In a joint initiative with UN-WOMEN and UNDP, we have developed a women’s economic empowerment index, to assess relevance and viability of investment projects - including businesses and infrastructure projects - from a woman’s economic empowerment perspective. The tool ensures that priority local economic development projects specifically meet the needs of women in all aspects of their real lives, including personal security, transportation and access, economic agency, and child care, to name a few dimensions. This is the first such standard for evaluating and vetting project pipeline that we are aware of. In 2018, by using the index, UNCDF is disbursing grants of $1.5 million to unlock $6.2 million in domestic resources from local financial institutions and private partners to promote women’s economic empowerment in Bangladesh, Uganda, and Tanzania.

Now, I will turn to financial inclusion.

UNCDF’s focus remains on progress toward expanding usage of an ever wider and more tailored range of financial services for poor and excluded populations. About 1.7 billion adults are still unbanked. Women in developing economies persistently remain nine percent less likely than men to have a bank account.

Many public and private investors are wary of expanding the frontiers of finance without demonstration examples to pave the way.

Through our technical assistance, policy support, and financing tools we mobilize finance and stimulate product innovations that reach underserved populations, especially women, youth, smallholder farmers, and agriculture value chain actors. Since 2013, UNCDF supported 138 financial service providers that achieved a net increase of 6.5 billion dollars in deposits mobilized, and we piloted 161 new pro-poor financial products that directly benefitted 4.3 million new clients, 53% of them women.

Let me highlight five ways in which we work.

First, getting the ecosystems and enabling environment right can spur creativity and mobilize resources into financial inclusion. UNCDF uses data-driven diagnostics to help governments develop financial inclusion strategies. Between 2014 and 2017, we influenced 29 national financial inclusion roadmaps through supply and demand side surveys.

In ASEAN, we help stimulate business innovations and regulatory reforms to advance financial inclusion and accelerate economic opportunities for low-income groups, especially women.

This work is laying the foundation for us to support the creation of inclusive financial markets.

Second, digital tools can massively ramp up financial inclusion, particularly for women. But getting these services and business models applied to underserved market segments often requires our support.

We deploy our technical support; loan and guarantee instruments; or challenge funds and performance-based agreements to incentivize financial service providers to expand access to digital financial services.

Between 2014 and 2017, UNCDF supported financial service providers in reaching 18 million clients to use digital payments, from Zambia to Senegal and Lao PDR.

Our flagship joint programme with UNDP on financial inclusion in the Pacific has supported the enrolment of 1.7 million people for savings, loans, mobile wallets, micro-insurance, or remittances, mainly through digital channels. This represents 29 per cent of the total adult population in that market.

We will be using these experiences to help regulators shape regulation around digital financial services, and to share lessons with peers and investors about how digital tools can work for underserved markets.

Third, we are using digital tools to improve agriculture productivity, support SMEs, and expand access to clean energy. We provide financial and technical support to companies that are showing promise to reach poorer households at scale, but lacking the resources to do so. We work with energy service companies to expand access to efficient cook-stoves and solar home systems through ‘pay-as-you-go’ models. By 2020, we aim to set 500,000 people on a clean energy pathway.

We are also exploring how to apply ‘pay-as-you-go’ models to other goods and services, putting our work at the nexus of financial services and the real economy.

Fourth, we are creating demonstration effects that show how financial inclusion can tackle challenges related to empowering women, young people, refugees, and migrants.

Since 2013, we have supported financial service providers to offer formal accounts to 900,000 savings group members in six countries. This has led other providers to expand their services to low-income and rural populations, especially women. We are now developing country strategies in five LDCs to enhance women’s and girls’ access to, usage of, and benefits derived from financial services.

On youth finance, as of December, our Youthstart programme worked with FSPs to reach over 820,000 youth, 44% of them young women, across eight African countries to access savings-led financial and complementary non-financial services. Going forward, we will be taking these lessons and connecting financial inclusion with youth economic opportunities and supporting school-to-work transitions.

We have also supported Fiji to become a world leader in financial literacy, with financial education fully integrated into the national curriculum from grades 1 to 12. We believe this kind of approach can create a generational shift in perceptions about women’s financial agency, as girls and boys see one another applying practical skills in school related to financial planning and management.

We are expanding financial inclusion for forcibly displaced people and host communities, initially in three countries in Africa. Based on this work, we have begun a partnership with UNHCR to expand such solutions to nine African countries.

We are working with governments and service providers to formalize remittance channels, lower costs, and link remittances to other financial services.

Finally, we continue to facilitate South-South knowledge exchanges, including with Middle Income Countries.

Supporting peer exchanges is a core feature of all UNCDF’s work. The Better Than Cash Alliance, which UNCDF proudly hosts, now has over 60 governments, major companies, and international organizations as members, each of which has made concrete commitments to further digitize payments to reduce costs, increase transparency, advance financial inclusion– particularly for women– and drive inclusive growth. The Alliance continues to grow in influence and reach, as clear evidence that the shift from cash to digital has strong momentum across the spectrum of actors in LDCs, MICs and the public and private sectors.

Expanding financing innovation

Throughout, we work closely with the private sector and draw on our strengths as a hybrid development and financing agency to bring the perceived risks of investors more closely in line with the actual risks.

Take for example our work around pipeline development, for which there is very limited early stage finance in LDCs (and in many localities in MICs too).

This pipeline development work aims to occupy the crossroad of ODA and commercial finance. By identifying pioneering projects with development impact that cannot get financed without grant or concessional support – perhaps they are using new technologies or new business models, and lack a track record - we are helping them get ready to access more sources of finance.

The aim is to demonstrate that underserved markets can be opened for business. Our theory of change is that with strong partnerships and strategic demonstration effect, coupled with well vetted and high impact project pipelines, these markets could attract more finance at scale. By addressing this “missing middle” of finance, domestic banks, DFIs and eventually private investors will begin to see the value in moving finance further into local economies, creating greater inclusive pathways and diversifying portfolios that are actively searching for new markets.

Therefore, a growing part of our work is to use our own financing instruments – notably more loans and guarantees alongside grants - to help local economies grow and become commercially attractive. Our LDC investment platform has matured into the third pillar of our organization. It rests on a strengthened due diligence process, financial modelling, and credit scoring capacities. Since the introduction of our more robust approach in 2017, we have approved seven new capital transactions (loans and guarantees), with 10-15 more in the active pipeline for 2018. With the right resourcing, this line of work is poised to grow and can also constitute a service offering to the wider UN system.

We are preparing a flagship report looking at the conditions under which blended finance can best work in LDCs. We have held two very exciting and informative consultations with a range of experts. We look forward to sharing the findings with you later this year.

I also want to highlight a couple of exciting initiatives with the private sector.

First, we have launched an expression of interest to develop a partnership with a third-party fund manager to have an investment vehicle structured, marketed and managed, strongly focused on advancing SDG-positive investments in LDCs. The Fund would be capitalized via a combination of concessional, philanthropic, semi-commercial, and commercial sources and receive pipeline opportunities vetted by UNCDF. This could also allow for investments from other UN agencies to be channelled to the fund via an agreed vetting process.

Second, we are in discussions with a non-profit fund manager which will launch a socially responsible Exchange Traded Fund. The idea is to create a liquid investment index vehicle for investors, that is aligned with SDG-positive work in LDCs, while also supporting UNCDF’s work through a sharing of the fund management fee.

We are committed to continuing to explore the frontiers of partnership innovation around finance, and will look forward to sharing other possible innovations with you as they evolve.

Evaluation and evidence

UNCDF continues to invest in our evaluation function. This is central to our ability to capture lessons from our innovations. Last year we completed three mid-term programme evaluations – on the Local Finance Initiative (LFI), on the Local Climate Adaptive Living Facility (LoCAL), and on CleanStart. These were the subject of our informal briefing to the Board yesterday, where we highlighted how management is responding to all the recommendations made.

On LFI, the evaluation found the programme to be highly relevant to mobilize private capital for missing middle projects, including those that empower women. Partly in response to its findings, the programme has expanded its use of financing instruments to crowd-in private sector finance and is establishing national platforms to ensure sustainability and improve enabling environments for private finance.

On LoCAL, the programme was assessed to be very relevant to global and national priorities on financing climate change adaptation, and very cost-effective, particularly in its use of national fiscal transfer systems, which augurs well for scale up. In response to the evaluation’s recommendations, the programme now has a greater focus on urban areas and private sector resilience finance.

And on CleanStart, the evaluation found the programme to be nimble in adapting to different country contexts and efficient in experimenting with different models to provide access to clean energy for underserved households. We have taken on board the recommendation to improve monitoring systems, expand knowledge sharing and outreach, and to include new partners in the programme board.

We have also begun other mid-term evaluations, including looking at mobile money for the poor and our work supporting financial inclusion for women in ASEAN. In addition, as part of the services we provide to the Better than Cash Alliance, we are also supporting an evaluation of their performance at the mid-term.

The resources dedicated to evaluation made up just over 1 per cent of total UNCDF programmatic resources in 2017. This is fully in line with the target set out in the UNDP evaluation policy.

As in previous years, UNCDF continued in 2017 to benefit from the support of UNDP’s Independent Evaluation Office. This included support to the development of our Strategic Framework, and full quality assessment of our evaluations between 2014 – 2017, which broadly confirmed their high quality.

UNCDF’s evaluation plan for 2018 – 2021 includes provision for a total of fifteen evaluations. This includes two thematic evaluations intended to capture evidence of the longer-term impacts of UNCDF work on policy and market systems, and on the lives of the beneficiaries that are impacted by these changes, especially women. We seek the support of partners who may want to help us conduct and finance these two important evaluations.

Institutional effectiveness

Of the 33 IRRM indicators related to institutional effectiveness, 24 reached the targets set in the last Strategic Framework.

We are driving a decrease in our management costs ratio, from 14% in 2014 to 9% in 2017. We are enhancing our capacity to identify, monitor, and mitigate risks associated with our capital investment mandate, in close cooperation with UNDP.

We have had unqualified audits for the last four years in a row, and have significantly improved our implementation rate of audit recommendations.

We have improved our performance under the UN System-Wide Action Plan on Gender Equality. We met or exceeded 80% of indicators in 2017, up from 40% in 2014. At the same time, we must do more to reach parity in the P-4 and higher categories. The last two senior level recruitments in HQ were women.

UNCDF is committed to promoting gender equality in all that we do. We are already developing our new gender strategy 2018-2021 to align fully with the UN SWAP 2.0.

Collaboration with UNDP and other UN agencies has increased, with resources from pooled funds and joint programmes more than doubling from $20 million in 2010-2013 to $45 million in 2014-2017.

We are ensuring that our operational reserve requirements under the new methodology approved by the Board last year are fully maintained.

Total expenditure in 2017 was $68 million, $1.2 million higher than in 2016. We remain very concerned that core resources have dropped from $18 million in 2014 to $13 million (including UNDP’s contributions to BSB and programme) last year. This seriously constrains our ability to invest in new innovations, and places significant downward pressure on the number of LDCs we can serve.

Because of the down-turn in core, we have not been able to meet our target of committing 40% of resources to capital investments for the second year in a row. Under the ideal scenario in our new Strategic Framework, we need annually $25 million in core, $75 million in non-core, and a $50 million LDC Investment Fund.

We are especially grateful to those donors who stand with us as champions and provide us with our core resources. I also thank those donors who provide multi-year funding. Core is the bedrock of our work.

We also thank our many non-core donors. Between 2014 and 2017, we were able to deliver on our development outcomes in part because we made significant progress in mobilizing non-core resources from private sector and non-governmental partners. This is evident in the 314% overachievement against that resource target for the Strategic Framework period.

We are working hard to diversify our donor base, including with programme countries, traditional and emerging donors, family offices, and the private sector. We count Bhutan, Lao PDR, and Myanmar from the LDC group among our core contributors, with China, Thailand, and Vietnam rounding out core funders from the Group of 77 and China.

I thank all Member States for your support to UNCDF.

With more resources, with a bigger country presence, with more capital to build pipelines, to innovate, and to invest in programmes of tomorrow, we can help make finance work for more people.

Together, we can help underserved families, communities, local governments, and small businesses access the finance they need for a better future.