The Local Development Fund is a financial instrument meant to support the budget of partner municipalities of the UNCDF projects in order to fund public, socio-collective and economic investments in the area of development and poverty reduction in the rural world. It is global subsidies (financial ease) aimed at stimulating the performance of local authorities and Inter-village commissions for the management of soil, encourage institutional development and contribute to the capacity building of local actors in order to allow them to achieve their identified local micro-projects more efficiently.
It is therefore a fund which can adapt to the realities of the field and which offers a funding ease managed according to mechanisms of decentralized management.
LDF is a financial tool that has several merits:
- Integration to the public finance circuit of each country to familiarize local governments with financial and accounting procedures prescribed by the laws on decentralization;
- Funding system with a lever effect;
- Incentivize the mobilization of local financial resources;
- A multi-task tool focused on socio-collective services, local economy, the management of natural resources, food security, alleviation of women’s activities, strengthening capacities of public and private actors involved in local development.
Determining the size of the LDF
The size of the global LDF allocation is based on the population size, geographical considerations (remoteness and enclosure) and a base per capita amount valid for all the localities of a same area of intervention. Some projects have established, additionally from these criteria, a nominal bonus system added from a flat amount or bonus based on the mobilisation of local resources, for example. The allocation of resources to each local entity is based on a funding matrix setting the financial commitments of each side (local authorities, the population, the State, developing partners, etc.)
Eligibility conditions for the LDF
The eligibility of a local government to the LDF relies on legal and regulatory conditions as well as financial conditions. These conditions are part of a progressive and sequential approach. Their degree of application also depends on the motivation of the local elected representatives, especially of the mayor and the socio-political context of the country.
Three windows to support structuring projects:
- A socio-collective investment fund for the construction, rebuilding or rehabilitation of social infrastructures;
- An inter-municipal fund or a fund targeted at the management of natural resources granted to the achievements of cooperation between partner municipalities in the project and to the management of shared natural resources, the protection of the environment and to the inter-municipal infrastructures (rural roads, etc.);
- A subsidy to support local economic initiatives targeted at helping activities generating revenues and to fight against monetary poverty.
The three funds are registered in the municipal budget for direct support and then, the subsidy to local economic initiatives is allocated in certain cases by the municipality to a financial institution following a convention in the form of a credit line and/or guarantee funds for loans to local economic promoters or directly managed by the council.
With the implementation of decentralization in many African countries, LDFs experiment the real time implementation of a budget transferring model to the municipalities based on a programmed use, a transparent allocation and a rapid disbursement through the public treasury circuit or by the channel of the agencies investing in development or directly in the bank accounts for the local governments or finally to be managed by the project teams if there are no local authorities and financial institutions
Procedure for funding investment on the LDF
LDF transfers capital towards the local governments’ financial systems, either directly or through relevant channels of public funding. They can be of specific use or not and fund all stage of development of local food systems, from studies and planning until the review assessment, while passing by the co-funding of investments and capacity building. For each investment to achieve, the adopted approach contains several stages:
- Inscription of the municipal consideration on the funding plan;
- Inscription of the municipal consideration on the local budget;
- Mobilization of the public treasury consideration by retaining a part of the resources transferred by the State;
- Mobilization of the counterpart by the public treasury;
- Inscription on the local budget and implementation by the municipality.
Tools and methodical approaches
Certain basic conditions are applied for all projects. These concerns, among others:
- The prior signing of a partnership convention and a co-funding convention of the LDF between the municipality and the project;
- The existence of a local development plan and a multi-annual investment plan designed on a participative approach and adopted by the municipal council with a statement of discussions and an act of approval by the supervising authority (quitus);
- Implementation of a control panel to guide the annual activities of the local development plan and adoption and setting up of awareness campaign, notably for the population;
- Funding objects that are part of the competences of local governments or rural socio-professional organisations, compatible with the fight against poverty;
- A significant proportion of local projects initiatives to the benefit of women groups;
- Existence of a basic technical staff, in this case the secretary general and the tax collector, for the implementation of administrative, financial and accounting procedures;
- Existence of settlement protocols with the socio-professional organizations for the management of infrastructures.