UNCDF in Post crisis and Fragile States: Investing in Local Economic Recovery
  • November 15, 2012

UNCDF’s economic development mandate — building public and private financing mechanisms that catalyze economic growth and improve livelihoods — is especially relevant in post-conflict settings. Together with UNDP, UNCDF is among the first agencies to assist post-conflict or fragile states in their recovery phase, providing capital and technical assistance to re-establish local governments’ capacity to deliver basic services, and helping financial service providers set up their operations to allow poor people and small businesses to begin the process of rebuilding their livelihoods.

Historically, UNCDF has always had a special commitment to countries emerging from conflict or crisis. In 2011, almost one third of UNCDF’s investment portfolio was in LDCs that have recently emerged from conflict. Currently, UNCDF is active in Burundi, the Central African Republic, the Democratic Republic of Congo, Guinea Bissau, Haiti, Liberia, Nepal, Sierra Leone, Somalia, South Sudan and Timor Leste.

UNCDF’s approach in post-crisis environments is focused on introducing solutions that help build robust government systems and trigger sustainable local development dynamics. That means that funds are delivered through national budgets — not through parallel structures — to help build national systems for public financial management, planning and accountability. When promoting financial services, close attention is paid to the profitability of financial service providers and the quality of their portfolios.

Last year, UNCDF’s contribution to stabilization and recovery was recognized with its first grant from the UN Peacebuilding Fund to implement a livelihoods and local economic recovery project in the Acholi Region in Northern Uganda. Project implementation began in 2011 in close partnerships with the Food and Agriculture Organization, the International Organization for Migration, UNDP, and the World Food Programme.

Although Northern Uganda has been relatively peaceful and many formerly internally displaced people have returned to the region, its economy remains stagnant and heavily dependent on aid. Last year, UNCDF worked with local governments in Kitgum, Lamwo and Amuru to foster an enabling economic environment by defining and implementing conflict-sensitive local economic development plans. Some of the issues that the plans aim to address include natural resource management, cross-border trade with South Sudan and commercial farming.

Across the border in South Sudan, UNCDF has been supporting post-conflict reconstruction by enabling financial service providers to set up operations in Africa’s newest country. Kenya’s Equity Bank initiated operations in Juba, South Sudan, in June 2009, with funding from UNCDF’s MicroLead initiative. The bank now has over has 37,000 depositors and is projected to reach 132,000 depositors by the end of 2013. Approximately 20 per cent of its clientele are women, which is significant since in South Sudan there are inherent cultural issues which hinder women from actively participating in economic activities.

Equity Bank’s operations became operationally sustainable within nine months despite a challenging country context where operating expenses are extremely high. This is because all construction materials must been trucked in from Nairobi or Kampala, the legal framework is still evolving, parts of the country remain in conflict, and the road network is almost nonexistent. Nevertheless, Equity Bank has to date opened three branches in Juba and Yei, while additional branches are under construction across the country. Furthermore, to deepen outreach among rural communities, the bank has procured leases for branches in Nimule, Torit and Bor. With the addition of these branches, country coverage will be approximately 45 percent, allowing many South Sudanese to rebuild their lives after decades of instability and conflict.