Success Story: from Innovation to Scale in Bangladesh
  • April 27, 2016

Financing the Last Mile in Local Development: Successful Scale up in Bangladesh

Summary: The intervention with the lowest tier of local governments (Union Parishads) in Bangladesh went through three stages:

a.     Sirajgunj Local Governance Development Funds Project

b.     Local Governance Support Project  and Learning & Innovations Component

c.     Local Governance Support Project II and the aligned Union Parishad Governance Project


UNCDF financed Sirajgunj Local Governance Development Funds Project (US$ 8 million), and UNCDF co-financed the joint Local Governance Support Project - Learning & Innovations Component (Project Budget: US$18.11 million; UNCDF: US$ 2.5 million) and the Union Parishad Governance Project (Project Budget: US$18.39 million; UNCDF: US$ 1.5 million)

The World Bank co-financed Local Governance Support Project (US$190 million) and Local Governance Support Project II (US$ 532 million).


First stage: The Sirajgunj Local Governance Development Fund Project (SLGDFP) was among the first series of local governance funds that UNCDF initiated in late 1990’s across Uganda, Bangladesh, Cambodia and Nepal. This first generation pilot, which commenced operations in 2000, focused on just one among the 64 districts of Bangladesh, and targeted the lowest tier of local governments called Union Parishads (81 such local governments in Sirajganj district  with populations ranging from 20,000 and 50,000). The pilot project was derived from UNCDF’s international strategy to support participatory, decentralised planning and financing of development activities through area-based local development funds [1].


The SLGDFP piloted the first direct financing of Union Parishads, which hitherto had no direct financing. Instead, they had been limited to implementing small scale non-tendered investments using funds earmarked for local infrastructure for sub districts managed by the Local Government Engineering Department. By providing financial resources to Union Parishads, these local governments were empowered and capacitated to play a strategic role in facilitating responsive local development investments.


Over 295,000 persons (37% women) used the opportunity to express their “voice” in 1,992 local planning events, where they prioritized 10,556 investment needs. Around 30% of these demands were addressed through actual investments in village roads, culverts, drinking water sources, and the like. Long term gender impact was realized through Women Development Forums which brought together 300 women who had been elected to Union Parishad councils, and empowered to select investments that would be carried out with 30% of the grant funds. SLGDFP demonstrated the capacity of Union Parishads to efficiently manage larger volumes of resources, implement projects with participatory planning and prioritization, manage the completion of projects in a timely manner, and measure up to the requirements of public scrutiny and downward accountability.


When the initial experiences and lessons from this pilot were presented to the Government in late 2003, the Minister for Local Government recognized the transformational impact and political dividend of this initiative. This led to a major policy shift whereby the Government’s earmarked funds for Union Parishads in 2004-05 were, for the first time, transferred directly to local governments across all 64 districts. The Minister also set up a machinery within the government to monitor the utilization of transferred funds, which was essential to sustain this policy initiative.


The Government and UNCDF showcased this initiative with various development partners at different fora, including high level events such as Regional Seminar and Learning Event on Local Governance and Pro-Poor Service Delivery organized by the ADB in 2004[2]. One of the partners who showed interest at this stage was the World Bank, which had not previously supported sub-national government level projects. Given the close interaction that UNCDF had with the World Bank in the context of the scale up of the local governance fund intervention in Uganda, the intrinsic strength of the model and the visible results in Bangladesh provided a strong case for initiating a financing arrangement with the Government of Bangladesh to scale up the Sirajganj pilot through an integrated programme.


Second stage:            The second stage of this evolution came in the form of the Local Governance Support Project (LGSP) with its Learning & Innovations Component (LIC). When the Government decided to substantially scale up the financing of Union Parishads to support local infrastructure development, it required a scale of financing which went well beyond the size of support normally provided by UN agencies. As a result, the strategy proposed was to access IDA credit for the bulk of the additional financing required by the Government, and to use development assistance of the UN agencies to provide the critical technical assistance.


The Government’s LGSP combined its internal resources and the IDA loan to finance the expansion of support to Union Parishads. While the basic grant was a population-based allocation to all Union Parishads in 64 districts, using the Government’s internal resources, the LGSP provided supplementary financing in a four stages, bring around 1,000 Union Parishads under the supplemental financing each year, thereby bringing all 4,500 Union Parishads under the expanded financing umbrella over the four year period. This financing was available to the Union Parishads with deliberately few restrictions on what it could be spent on. This allowed, for example, spending capital or recurrent costs and with no sectoral limitations.


The LIC component, which operated as an integral part of LGSP, was implemented in 6 of the 64 districts of Bangladesh. The LIC component topped up the main grants provided to Union Parishads through the LGSP; in doing so, the size of the LIC grants were on the basis of basic population criteria as well as performance measures. These performance measures included completion of quarterly open community meetings for participatory planning and budgeting purposes; regular disclosure of investments being made on notice boards; timely submission of quarterly reports to community and local government offices/ministry in approved formats; compliance with requirements of Environmental and Social Management guidelines; and compliance with procurement regulations. In addition, LIC put in place supporting mechanisms such as the Ward Development Committee to organize ward level participatory planning meetings; a Scheme Supervision Committee (SSC) which supervised and monitored cost and quality of implementation of approved schemes; and a Women Development Forum to facilitate effective participation of women members of the Union Parishads. In order to support these field level interventions, the LIC also made use of a team of six District Facilitators, who worked closely with the Director of Local Government assigned for the particular district.


The investments through LIC resulted in 10,242 investments at the Union Parishads, which is estimated to have benefited 13.6 million beneficiaries across 362 local government units. Over 80% of these investments went into labour intensive outputs such as rural road construction, drainage culverts and water & sanitation works. Over 465,000 persons were trained, most of who are now able to help prepare the local plans.


Reviews of the LGSP and LGSP-LIC reflected some important lessons[3]. First, the programme quadrupled total resource transfers to Union Parishads allocated on the basis of a simple population-based formula. The effective utilization of these resources reaffirmed that Union Parishads have the capacity to absorb increased levels of funding and use them in a responsive, effective fashion. Second, the programme proved that the performance criteria attached to the grants provided through LIC were an effective incentive for Union Parishads to improve their performance in the area of governance, service delivery, and public resources management. Third, the programme indicated that the performance-based grants must be predictable in terms of their size, stability, and disbursement schedule to achieve their intended purpose. Fourth, it highlighted that the mechanisms introduced were effective in supporting the empowerment of women. Fifth, the institutional and operational arrangements for the implementation of the Union Parishads investments contributed to enhancing participation and ownership, resulting in cost-effective, and better quality schemes. Finally, the presence of the District Facilitator proved to be an effective modality for providing institutional facilitation support to UPs as well as to the implementation of activities.


Third Stage:   The success of LGSP and its LIC component triggered a set of mutually complementary actions by the key development partners – the Government, the World Bank and the UN agencies - to build on the experience and continue the effort to strengthen and expand the effective role of Union Parishads. The close involvement of these three stakeholders in LGSP – LIC made it possible to work closely in designing the third stage of engagement that responded to new needs. First, it was evident that there was a need for a major increase in financing, since all 4,500 Union Parishads had been included in the programme. Second, the institutional machinery at the districts and Union Parishads to mainstream and manage the support system, needed to be strengthened, along with a more inclusive pro-poor planning process. Third, the accountability through independent audits needed to be sustained and reinforced. Fourth, the use of performance-based grants, which had been established in LIC, needed to be scaled up. And finally, the capacity of the Ministry which took overall responsibility needed to be reinforced through an upgraded management information and monitoring system

The design of the LGSP II programme during 2011-12 responded to all the above, supported by a nearly three-fold increase in financing through IDA loans, and envisaged a phased reduction in the proportion of IDA resources used for annual grant making to come down to about 40% over a five year period. In the light of the critical lessons for scale up that were generated by LGSP-LIC which was led by the UN agencies, the Government also encouraged the UN agencies to continue to provide technical support with an aligned project, which was named Union Parishad Governance Project (UPGP). An Instrument of Cooperation was signed between the Government of Bangladesh, UNCDF, UNDP and World Bank to align the UPGP with the LGSP II. Specifically, this enabled the new mechanisms developed by UPGP for Union Parishads - related to performance assessment; training of auditors and performance assessors; participatory planning; local resource mobilization; integrated accounting; and management information systems - to evolve in alignment with UPGP’s performance-based grant to 564 Union Parishads across 7 districts, which topped up the LGSP II grants that was received by these Union Parishads.


To date, four cycles of LGSP II and UPGP grants to Union Parishads have been completed. While LGSP II disburses 20% of the grant funds through performance-based grants, the UPGP disburses 100% of the grant funds on performance basis. A support system is in place in the 7 districts supported by UPGP, consisting of (i) capacity building support to Union Parishads, implementation of performance assessment systems, and audits by independent external agencies, (ii) community driven participatory planning and activation of Union Parishad level committees, (iii) establishment of Women Development Forums; and, (iv) an operational web-based accounting and MIS system ready to be scaled up across the country.


The Union Parishads which have received direct support of the UPGP, particularly its performance based grants, are outperforming those in the rest of the country, in terms of compliance with the mandated procedures for participatory planning and management, as well as in local revenue mobilization (by 103% in 4 years). The fiscal space has also been growing with 81% of the Union Parishads in the project area completing tax assessments as against 58% of the control area compared, while it was 19% at the baseline stage. Around 3,500 service delivery investments have been completed since 2012, of which more than 50% are oriented towards the MDGs. Given the emphasis on pro-poor investment, the project has succeeded in raising participation of poor households in the planning process from 4% in 2012 to 36% in 2015. The stability and effectiveness of the innovations introduced by UPGP offer the lessons for scale up and mainstreaming in the next cycle of the LGSP.


Future directions: The Bangladesh experience is consistent with UNCDF’s maturity model approach, of innovation, consolidation and scale up. In this case, the innovation was small scale and financed through internal funds. The consolidation was partly financed by IFIs, and the full scale up was financed by the Government with the support of IFIs. The success of this approach has encouraged UNCDF to apply a similar strategy to enable local governments to secure financing for climate change resilience investments. The piloting stage has been completed with UNCDF’s LoCAL project in one district, and a consolidation phase, likely to commence in mid-2016 covering 6 climate change vulnerable districts. Funding from IFIs and the Green Climate Fund is being explored to prepare for a nationwide scale up in the near future. UNCDF is also exploring the use of this three stage approach, to accelerate investments in local economic development by local governments.


Table 1: UNCDF piloting was followed by World Bank upscaling[4]


UNCDF piloting and testing

World Bank scale up

Project Title

Project Duration

UNCDF's funds (US$m)

Total size of project (US$m)

Project Title

Project Duration

Size of IDA project (US$m)


Sirajganj Local Governance Development Project (SLGDP)







Local Governance Support Project/ Learning and Innovation Component (LGSP-LIC)




Local Governance Support Project



Union Parishad Governance Project




Local Governance Support Project II









Ratio of UNCDF seed capital to World Bank scale up








[1] Sirajganj Local Governance Development Fund Project, Project Formulation Report, Ian Barwell et. al., August 1998

[2] Local Government Initiative: Pro-poor infrastructure and service delivery in South Asia, Roger Shotton, 2004

[3] The Learning and Innovations Component of the Local Governance Support Project: Lessons Learned, Simon De-Lay, 2010

[4] Bangladesh data from respective project documents and WB PAD.