Corporate Policy Papers
Taking Risks
1 - Background — past efforts and new directions
In 1995 UNCDF issued a policy paper that outlined its strategy for future programming. The ultimate aim of this strategy, consistent with the specific mandate of UNCDF and the broader mandate of the United Nations Development Programme (UNDP)—of which UNCDF is a part—was to reduce rural poverty in least developed countries. This goal was to be achieved by providing support to local institutions of governance. Two programming instruments were central to this strategy: local development funds and eco-development projects, with microfinance and more conventional infrastructure projects as supporting interventions.
Seventeen local development funds (worth $93 million) and eight eco-development projects ($48 million) have been launched worldwide and are at various stages of implementation (tables 1 and 2). The share of UNCDF resources devoted to such projects has risen dramatically, jumping from 20% of annual projects approved in l995 to 84% in l998 (table 1). Today local development funds and eco-development projects account for 37% of UNCDF’s cumulative portfolio (table 2). (1)
| Table 1 - UNCDF eco-development projects | ||||
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Burkina Faso Guinea Lao PDR Madagascar Mali Mauritania Niger (Mayahi) Niger (Nguigmi) |
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During this period UNCDF has produced detailed technical documents to guide the design and implementation of both types of projects. Several international workshops and seminars—drawing on a wide range of external opinion and input—have been held to discuss early experiences with these programmes.
UNCDF has also devoted considerable effort to close and independent scrutiny of its policies on local governance and poverty, continually assessing the assumptions and concepts behind the design of local development funds and eco-development projects. These activities include:
• Commissioning case studies on the design of five early local development funds (1995).
• Contracting independent consultants to perform technical reviews of local development funds and eco-development projects (1995–98).
• Organizing workshops and seminars (in Entebbe, Arusha, Glen Cove, Saly and Rome) to gather critical assessments from independent experts and practitioners (1996–98).
• Inviting recognized authorities on decentralization and poverty to discuss the relevance and feasibility of UNCDF policy.
• Hiring independent experts to perform midterm reviews of local development funds and eco-development projects (1997).
| Table 2 - UNCDF local development funds | |||||
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Bangladesh Bhutan (a) Cambodia Ethiopia Haiti (a) Malawi (b) Mali Mozambique Palestine Senegal (a) Senegal Tanzania Uganda Vietnam Zambia |
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(a) These local development funds involve a large number of natural resource management activities and elements of former eco-development projects, which tend to increase per capita costs. (b) In six districts in Malawi an initial
phase was followed by a second phase, upscaling nationwide. |
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• Launching a corporate action plan and task force in response to midterm findings (1998).
These efforts have provided an unusual level of independent and critical review in a short period—particularly for an operational agency undertaking a number of other corporate reforms. But ongoing review was essential given the innovative and risky nature of the pilot projects being attempted and the need for project strategies to evolve quickly in response to early findings.
In l998 UNCDF formed a policy task force consisting of a large number of senior staff assisted by external experts. The task force’s mandate was to synthesize lessons learned from the midterm reviews and implementation experience since l995 and to prepare an updated policy for poverty reduction and local governance. This report is the outcome of the task force’s work.
The following sections summarize the broad goals set out in the l995 policy paper and describe the main features of the local development funds and eco-development projects launched at that time. Lessons learned are reviewed and a revised UNCDF policy on poverty reduction and local governance is presented, offering a unified framework for future programming. Major areas where policy has changed or will be further developed are presented, along with implications for corporate practice.
The annex contains a detailed conceptual rationale for the policy presented. A series of working papers prepared by UNCDF staff which is published as a companion volume to this text, also addresses a number of themes in greater depth. These working papers provided the background for task force deliberations.
It is worth noting that this report mainly formalizes changes in policy and practice that have been taking place since l995. Pilot projects need a tight feedback loop between learning and action and are constantly adjusted in response to field experience. Thus while this report lays out new directions for UNCDF, it is much more a validation and formalization of changes already internalized and of UNCDF’s commitment to their consistent application across programmes. (return)
The 1995 policy paper consolidated the work and thinking of UNCDF as it had evolved since the early 1990s and gave direction and focus to future programmes. (2) The paper sought to establish UNCDF’s niche as a piloting agency and presented a policy for supporting poverty reduction and good local governance. The paper also represented a significant break from previous UNCDF programming strategy and practice. Putting the 1995 policy into practice has led UNCDF to reconceptualize much of its assistance as strategic support to institutional innovation in decentralized planning and financing for rural service delivery, with considerably fewer resources allocated to unconnected capital projects. Because the basic argument underlying this policy was not explicitly laid out in the 1995 paper, it is worth restating here.
Reducing poverty. Since the early 1990s there has been broad consensus that effective poverty reduction requires several complementary efforts. One essential component is promoting labour-based growth that supports household incomes and sustainable livelihoods. Another is improving poor people’s access to basic services (health, education, water) to improve the quality of their lives and allow them to take advantage of economic opportunities. It is also widely agreed that increasing the supply of basic economic and social infrastructure is a necessary—though insufficient—ingredient for both approaches, especially in the rural areas where most poor people are concentrated.
Supporting local government. The nature of this economic and social infrastructure is such that government must usually take a leading role in its supply. UNCDF believes that there are strong arguments for assigning a major role to local government—rather than to central agencies, nongovernmental organizations (NGOs) or project agencies—in planning, financing and overseeing basic small-scale rural infrastructure and services (though usually not in implementation). With adequate financial and technical resources, local governments can better ensure that supply matches demand and can balance any local variations, that staff and contractors perform their duties, that local departments coordinate and that maintenance is performed.
Promoting local governance. In other words, and despite their shortcomings, local governments possess a comparative advantage in providing basic investments and services. There is considerable exchange between local elected officials and the public on local problems and needs, and these officials are often subject to intense pressure to respond to these priorities. True, these linkages are often weak. But UNCDF believes that they can be strengthened by providing development grants and building capacity in innovative ways—by improving participatory planning procedures, financial management and audits, communication with the public, contracting procedures with the private sector, collaboration and consulting arrangements with local civil society organizations and so on. By providing such support, UNCDF believes that two complementary outcomes are achieved:
• The comparative advantage of local governments in investment and service delivery is better realized, enhancing the effectiveness of poverty reduction efforts.
• Broader governance benefits are also realized. There is more interaction between the public and local government, greater participation in and knowledge of public affairs, increased scope for accountability of elected politicians and civil servants, and more collaboration between local institutions (public, private, community and civic). These benefits have value in themselves—as political and social goods—and strengthen poverty-reducing service delivery.
Since 1995 political trends in most least developed countries have reinforced the rationale for this policy. Many least developed countries have moved ahead with democratic decentralization, creating or assigning greater responsibilities to local elected authorities. Though this trend is often hesitant, with occasional reversals, it remains discernible.
Furthermore, local policy-makers in a number of least developed countries are experimenting with innovations—whether in participatory planning, financing or service delivery—in the development and implementation of decentralization policy. In a number of countries UNCDF has been asked to collaborate in these efforts, which appears to confirm the validity of the policy direction that UNCDF adopted in 1995. (return)
The lessons learned since 1995 require a rethinking and further development of certain aspects of UNCDF policy. Still, UNCDF maintains an unwavering commitment to the corporate development objectives and strategy outlined in the 1995 policy paper. UNCDF will continue to:
• Focus on local development and poverty reduction as its ultimate objective—by supporting better local services and infrastructure and, where appropriate, sustainable natural resource management.
• Strengthen the capacities of local governments and other local institutions to undertake these poverty-reducing activities, while also supporting mechanisms that encourage local public involvement, (3) community empowerment and democratic accountability in these activities—in short, supporting decentralized structures and better local governance
• Devise innovative ways of supporting local governance that can serve as models for wider replication by national authorities and other development partners.
The conceptual rationale for maintaining this strategy—which was only broadly spelled out in the 1995 policy paper—is detailed in the annex. (return)
Some significant aspects of UNCDF policy on local governance have changed or will be further developed. As noted, most of the policies being described here reflect current practices and programming strategies at UNCDF. The character of pilot projects has evolved quickly since l995, and comparing earlier projects to those approved today shows more attention to:
• Analysing institutional and other risks.
• Making connections between local or pilot efforts and the national context.
• Developing participation strategies.
• Diversifying financing approaches and institutional partnerships.
• Monitoring and evaluation.
In addition to consolidating the many changes in project design and corporate practice that are already under way, this report formalizes a change in UNCDF’s institutional strategy and introduces additional financing and programme instruments.
A unified institutional approach. Maintaining two distinct approaches to rural development based on local governance—local development funds and eco-development projects—allowed for much early innovation. But it also led to fragmentation in programmes and inconsistency in policies. Dual strategies may have been justified in early years, when many countries where UNCDF operates did not have viable local governments. But recent advances in decentralization and local democracy have rendered this dualist approach redundant. UNCDF will adopt a unified institutional strategy to support poverty reduction efforts that are sustainable in physical, financial and institutional terms. A premium will be placed on national ownership of these programmes and practices.
Instead of funding separate local development funds and eco-development projects, UNCDF will consolidate the best features of each within a single overarching local development programme. Local development programmes will offer a unified and sustainable institutional strategy that links national and local government structures and builds on the lessons of local development funds and eco-development projects.
Local development programmes. Local development programmes will follow a consistent institutional strategy whereby:
• All local project activities—particularly financing channels—are anchored in local institutions and procedures.
• Institutional partnerships are encouraged, with functions assigned based on comparative advantage and subsidiarity (moving decision-making on priorities and implementation as close to the local level as possible).
• Financing is scaled to sustainable levels and allocated primarily through block grants tied to performance conditions.
• All project activities are devised to monitor and develop their lessons for policy, in partnership with national authorities and other stakeholders.
The broad activities of local development funds and eco-development projects will be maintained: planning, financing and delivering basic social and economic investments and services and (where appropriate) supporting better natural resource management and sustainable agriculture. But these activities will no longer be established under separate institutional arrangements.
In short, local development programmes will comprise a core set of capacity-building activities focused on basic infrastructure and service delivery, allied with an unconditional block grant funding mechanism. Depending on needs, their efforts may be complemented by other capacity-building activities or by conditional grants to support natural resource management, key economic activities or strategic infrastructure development. Details on local development programmes and the additional financing options are found in the section on new directions. (return)
Before reviewing lessons, it is useful to revisit the key elements of local development funds and eco-development funds at the time the 1995 policy paper was published (boxes 1 and 2).
Four years of review of these programmes have generated positive and negative feedback. UNCDF has been lauded for its risk taking and its piloting niche. Substantial endorsement has come from midterm reviews as well as from other development partners for UNCDF’s role in developing replicable pilot programmes for better local governance and, specifically, for its focus on local government as a keystone for this strategy.
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Box 1. Basic elements of early local development funds • Local development funds were designed as pilot projects to test practices and policies for planning and financing basic infrastructure and service delivery. The funds were to channel grant funds and technical support to subnational authorities-mostly at the district and subdistrict levels-for public investments in social and economic infrastructure. These investments were to be made in accordance with a local planning process that stresses public participation and transparency throughout the various steps of the investment cycle-project identification, prioritization, selection, budgeting, appraisal and implementation.
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This encouragement has been amplified by the considerable interest other donors have shown in replicating local development funds. (4) Despite the current popularity of decentralization and governance themes for development assistance, few agencies have taken on the challenges—and risks—of entrusting funds directly to local governments while using these experiences to engage central governments and influential donors in a policy dialogue about decentralization. (In this area partnership with UNDP is key, given UNDP’s strong role and comparative advantage in "upstream" policy dialogue with central governments and the donor community.)
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Box 2. Basic elements of early eco-development projects Eco-development projects were designed for ecologically vulnerable areas where population growth, rural poverty and environmental degradation threaten the survival of local communities. They aimed to:
The cornerstones of eco-development projects were short- and long-term action plans that were to be identified and prioritized by local communities and eco-swaps in which communities were asked to consider long-term conservation activities in exchange for short-term investments in productive activities and basic infrastructure. Other key features of eco-development projects included:
A basic eco-development project had four phases. In the first phase village-level data (social, cultural, economic and historic) were collected, analysed and stored in a special project data bank. In the second phase land tenure arrangements and boundaries were mapped using a geographic positioning system (GPS). These maps were discussed with the community to identify land use and tenure patterns. In the third phase mediators helped communities appraise their development problems and identify possible solutions. Finally, in the fourth phase a one-year plan was approved, with individual contracts prepared for each activity stipulating the partners' contributions and responsibilities as well as the terms and conditions of their engagement. |
But independent midterm reviews raised questions about both the local development funds and eco-development projects. While there was growing concern among UNCDF staff about implementation problems in eco-development projects, the midterm review raised more fundamental questions about the basic concepts underlying the eco-development strategy. While the conceptual model of the local development funds generally received strong validation, external and internal reviewers have pointed to the need for better adaptation to local contexts and greater flexibility in project design and for more concerted effort to promote the pilot and learning role of these projects. (return)
Notes
1. Annex tables 1 and 2 provide detailed information on current local development funds, eco-development projects and other UNCDF activities. (back)
2. "Poverty Reduction, Participation and Local Governance: The Role for UNCDF", l995. (back)
3. UNCDF sees local public involvement as institutionalized participation that extends beyond voting in periodic elections or occasional consultations on projects. It seeks to maximize opportunities for the poor and socially marginalized groups to influence policies, resource allocation and programme design by creating opportunities and resources in the local environment for the poor to have structured and meaningful interaction with local government officials and decision-makers. (back)
4. Local development funds have been or are being replicated or upscaled by governments or other donors in Cambodia, Malawi, Mozambique, Palestine, Uganda and Vietnam. (back)
