The United Nations Capital Development Fund (UNCDF) and the Prime Minister’s Office- Regional Administration and Local Governments (PMO-RALG), hosted a two day Local Development Finance workshop designed for Directors of Local Government Authorities (LGAs) in Tanzania. In addition, representatives from the government and select LGAs in Uganda, Senegal, and Benin also participated bringing the total number of participants to 110 people. The objective of the workshop is to demonstrate successful models used in Tanzania and Uganda by local governments to develop and finance commercial economic infrastructure projects, share lessons learned and set stage for replication by others nationwide.
Speaking at the opening, the Permanent Secretary of PMO-RALG, Mr. Jumanne Sagini, praised the work of the Local Finance Initiative (LFI), under the leadership of its Secretariat, for its innovation in unlocking the flow of capital to invest in economic development projects sponsored by local government authorities. He further assured the commitment of the Tanzanian government to institutionalize and support the adoption of the UNCDF local development financing approach and risk reduction strategies by all local governments, and to include similar investments in their annual investment plans.
Highlighting the importance of this workshop, the guest of honour Mr. Alvaro Rodriguez, the UN Resident Coordinator and UNDP Resident Representative in Tanzania, commended the government of Tanzania for its commitment to adopt the UNCDF local development finance approach of promoting investments of commercially viable local infrastructure projects that results in achieving significant transformative impact in local communities.
He stated that “scaling up the UNCDF LFI approach in all local governments is the best way to create sustainability and replication of successful investments nationwide. The LFI programme has been implemented in Tanzania for over three years and the impact on the lives of local communities of this very country cannot be underestimated. The attitude of community ownership must be embodied to realize the full potential of the investments.” “UN Tanzania through UNCDF will continue to work with the government of Tanzania as we believe in poverty eradication through the transfer of investment capital to the local level to invest in local development.”
The workshop is a continuation of the capacity development and knowledge sharing events conducted by UNCDF to support public and private developers of economic infrastructure needed to accelerate local development. The first day of the workshop is dedicated to showcase local government sponsored projects from the Busia Municipal Council in Uganda who developed a cross boarder multipurpose lorry park, customs and trade facilities, and the Kibaha Town Council in Tanzania for their public service delivery infrastructure projects (modern market and bus terminal). The UNCDF technical team will train participants in Day 2 on project development and financing phases with specific focus on risk mitigation strategies.
Emphasizing on the relevance of the workshop, Head of UNCDF in Tanzania and the Manager of the Global LFI programme, Mr. Peter Malika said, “The workshop offers a unique opportunity for local governments and other participants to learn new and innovative ways for localities to access domestic capital markets for financing their local economic infrastructure projects needed to create opportunities for trade, entrepreneurship, empowerment, employment, improved people’s lives, revenue collection, service delivery .”
The two days’ workshop is among many of the UNCDF initiatives in building capacities to the Local Governments so as to realize the sustainable impact to the communities, in which the UN organization and the government are working together towards ending poverty.
About UNCDF’s Local Finance Initiative (LFI) programme
The LFI programme, which is currently being implemented in Tanzania and Uganda and will extended to Benin, Senegal and Bangladesh in 2015. LFI is providing skills and capacity development to local project developers to ensure that their approach to bankers and investors is timed correctly and productive. The programme is designed to promote sustainable, inclusive and equitable growth by developing local investment opportunities that can deliver transformative impact and support the projects to get financing through the private sector and preferably domestic capital markets.
The risks that are present at all stages of project development (pre-feasibility, investment, construction, implementation and operation) require significant capacity and experience of the developer in order to be properly managed and mitigated for investors, lenders, contractors, and other third parties. LFI provides this capacity through specific support activities (e.g., project structuring, financial evaluation and structuring, investment memorandum preparation and introduction of risk mitigation strategies) that help projects to reach financial close. Additional support is provided in the form of grants for technical studies, seed capital, subordinated debt, credit enhancements and options that reduce transaction costs at the last mile of project development phase. The non-recourse project finance approach, as one example, has been deployed successfully in developed countries to access long-term private finance for infrastructure projects, yet is not widely applied for small and medium infrastructure projects in Least Developed Countries (LDCs). UNCDF’s use of this approach is a critical element to leverage limited public funds needed to unleash private capital to scale up local development.
The UNCDF delivers the LFI approach and its methodologies to select group of projects and their developers through development and financing stages. In other words, projects that are otherwise un-bankable are de-risked and taken to an investment ready stage where they are prepared to access commercial capital. Selection of projects is based on a) impact to local communities; b) potential for commercial viability; c) priority infrastructure areas e.g. energy, agro-processing, public facilities infrastructure, and other traditional and industrial small and medium size infrastructure; d) UNCDF’s thematic intervention such as Gender and Women Economic Empowerment, Environmental and Climate Change, Food Security, and Cross Boarder Investments .