Financial Tools

UNCDF relies on more than two decades in the development of managing tools for public finance in LDCs to introduce new methods of funding local development, inducing a leverage effect on the local economy and thus earning more and more the trust of the development actors.

To secure their food security, LDCs must considerably increase their agricultural production and productivity with sustainable arrangements. Investments must be made at several levels and the environment for these investments must be supported by adequate public policies, better access to financial services, better management of outcomes and reducing the volatility of agricultural prices.​

These investments must also come hand in hand with sustainable management and complementary and innovative financial mechanisms must be implemented to promote the development potential of Local Food Systems. Relying on the correlation between agricultural productivity, hunger, poverty and populations resilience, investment (public and private), in the strengthening of food production systems constitutes the cornerstone for the local development strategies of UNCDF.

Indeed, UNCDF invests its seed capital and its technical assistance to favour the increase in the flux of capitals aimed at the local level, reduce inequalities, enhance services and open perspectives for sustainable economic development. Thus, it develops tools to stimulate public and private investments in local development, in particular, investments relevant for food and nutritional security. One of the main goals of the F4F program is therefore to support the durability of local funding through the implementation of relevant fiscal and para-fiscal mechanisms. The question of the financial participation of beneficiary communities is, of course, a crucial condition for their ownership. The F4F program builds on the adaptation of existing funding mechanisms and the development of innovative tools to fill-in the gaps in the existing financial systems and support the multi-actor approach of the local food system.

Mixed and Innovative Financial Mechanisms

Investing in the missing links has multiplying effects at many levels: this stimulates local food value chains, the increase of revenues for local communities, the creation of a local cycle connecting the famers to the markets, while improving the food availability and accessibility. Well targeted social transfer programs also strengthen social security nets. The role of UNCDF is thus crucial because it provides the necessary analytical tools as well as the advice services to identify catalytic investments. Equipped with a toolbox full of flexible instruments, F4F customizes its interventions to specific situations and local conditions, thus maximizing its impact depending on the country and situations.

​As a multilateral institution for funding development and thanks to its own expertise and the diversity of its financial instruments, and via the sharing of its competences, UNCDF makes available to its partners an important experience capital. All the F4F investments rely on a well-established management system, with a clear definition of the institutional roles of the concerned actors, on which necessary practices for financial durability will develop. The multi-actor arrangement system already starts during the planning stage; regular exchanges between actors and periodic workshops assessing results, contribute to the acceptance and good functioning of the governance system. By considering the type of investment at hand, the three main actors (the public sector, private sector and households) play complementary roles and the choice of the funding mechanism is crucial. On this note, we can name two different modalities allowing UNCDF to invest its seed capital:

Local Development Fund (LDF)

Local Finance Initiative (LFI)

Those two mechanisms possess powerful synergies with other specialized instruments operated by UNCDF, such as the Local Climate Adaptive Living Facility (Local) who is a UNCDF fund which allows to locally invest in climate change resilience.

Stories from the Field