Over 2 billion people continue to live on less than a dollar a day, and while absolute levels of poverty are falling, inequalities are increasing.
Natural disasters, climate change and globalized economic relationships threaten the resilience of communities to external shocks. Local development is a targeted approach to achieving sustainable and equitable growth as it leverages comparative advantages of localities and mobilizes indigenous resources. It ensures that growth and benefits of social and economic activity reach all regions in a sustainable way, thereby contributing to the achievement of the Sustainable Development Goals. For Least Developed Countries, local development is instrumental to their sustainable graduation from least developed country to middle-income status.
UNCDF's work on Local Development Finance aims to ensure that people in all regions and locations can access investment resources to benefit from development. This means dealing with specific local challenges of peri-urban areas and remote rural locations. It means re-investing international and domestic resources back into the local economies and local services through fiscal decentralization, climate finance and project finance.
UNCDF invests its seed capital and technical assistance to promote increased capital flows to the local level, reducing inequalities, improving services and increasing opportunities for sustainable economic development – all contributing to sustainable and equitable local development.
UNCDF does this through innovation and testing of new public and private financial systems that mobilize, allocate and invest additional resources, and promote transparency and accountability in their use.
UNCDF seed capital is invested through three main modalities: the Local Development Fund and Performance Based Grants; Project Finance and Small-Medium Entreprise Finance, and innovative approaches for Municipal Finance (including bonds, remittances, access to loan and project finance). UNCDF leverages a variety of blended finance instruments; grants, guarantees, reimbursable grants, loans for subordinate debt, bond purchase, and partnerships with lenders and guarantors (primarily domestic) to support domestic resource mobilization and local economic development.
UNCDF applies its Local Development Finance approach and instruments in areas of decentralization and local development; climate change and clean energy; food security and land restoration; women’s economic empowerment; and local and cross-border economic development. UNCDF has the capacity to intervene in posts-conflict and more developed environments.
To learn more about UNCDF's approach in Local Development Finance and its investment instruments, please download our Local Development Finance Brochure.