Remarks by Judith Karl, UNCDF Executive Secretary, on the occasion of the Getting to the Last Mile side event

  • May 29, 2016

  • Antalya, Turkey

Distinguished panelists,
Ladies and gentlemen,

Thanks for joining us for this important discussion on “Getting to the Last Mile”.

To meet the graduation goals of the Istanbul Programme of Action and the SDGs with their emphasis on leaving no one behind, we need new approaches that target and prioritize the last mile. This includes the poorest of the poor, but also the household, sub-national, and small enterprise levels that are under-served and excluded, where development needs are greatest, and where resources are most scarce.

The booklet we have prepared with UNDP examines the structural, financial, political and social drivers of inequality and exclusion that exist in the last mile.

It also stresses the importance of building long-term resilience. Given the vulnerabilities many LDCs face, development gains can be fragile if not built for sustainability.

To tackle these exclusions and build this resilience, we need to get investments flowing predictably and sufficiently to the last mile areas of LDCs.

There is therefore a need for financing models and public-private partnerships that lower investment-specific risks; that create confidence in local economies; and that incentivise additional private sector finance and domestic investments in the last mile.

UNCDF innovates those financing models that demonstrate how public resources – such as ODA - can de-risk the local economic space and crowd-in public and private resources, especially from domestic sources. We do this by in two ways:

  1. By showing how localised development finance -- through fiscal decentralization, innovations in municipal finance, and structured project finance -- can drive public-private funding for local development plans.
  2. Through financial inclusion which expands the opportunities for individuals, households and small businesses to participate in the local economy and improve household resilience. Here the use of digital pathways can boost access to poor and remote populations.

Four of the six case studies examined in the booklet show how innovative approaches that build sustainable finance models can make finance work for the poor by unlocking public and private finance at the “last mile” sub-national, peri-urban and rural levels.

One case study examines an UNCDF programme that deploys seed capital and technical assistance to de-risk and develop a pipeline of bankable infrastructure projects. Despite significant inflows of domestic and international, public and private investment capital for infrastructure, very little is funding critical local infrastructure that underpins dynamic local economies and builds resilience to wider economic shocks.

UNCDF’s structured project finance approach crowds in capital from domestic banks and pension funds – such as the Tanzania Investment Bank – at a rate of 1:10. To date, about $1.2 million in core has unlocked $52 million from the domestic private sector. In Tanzania, this programme is being scaled up as a national platform for local governments. This programme is now in Bangladesh, Benin, Lao-PDR, Senegal, and Uganda in various stages of operationalization.

A second case study shows how innovative business models and flexible financing vehicles can establish viable markets to expand access to clean and renewable energy solutions for poor households and communities.

Globally, nearly 3 billion people have no access to modern energy services. Here, our programme uses seed funding to reveal markets and build financing ecosystems ready to meet clean energy demand. It provides risk capital and technical assistance to competitively selected financial and energy service companies. These businesses then develop scalable consumer financing models, ranging from traditional microfinance institutions providing energy loans to enterprises piloting Pay-As-You-Go energy services.

A third demonstrates how a shift to digital financial services can reach unbanked, poor and remote populations which have been excluded from traditional financial services networks.

For most financial institutions, the biggest constraint is the high cost of delivering basic deposit services to the poor. This usually requires a banking infrastructure often lacking in LDCs. Yet, nearly 42% of the population in LDCs had mobile phones in 2012 while only 14% of the population had access to formal financial services.

Here UNCDF uses its convening power paired with a tailored package of technical, financial, and policy support to build ecosystems in support of digital financial services.

A fourth case study shows how UNCDF and UNDP were able to come together and support a robust response to the Ebola crisis. In Sierra Leone we introduced technology for electronic payments and biometric identification, so that emergency workers could be paid reliably and on time. This programme digitized hazard payments to over 15,000 Ebola response workers over the course of just two weeks during the height of the crisis in December 2014, almost doubling that number by March 2015.

Taken together, these case studies demonstrate how the right mix of innovative financing and business models can make finance work for the poor; tackle exclusions and inequalities; and build resilience in LDCs.

Each programme is different. But several common themes emerge which are important for this discussion on lessons learned. Many of these are captured in the Last Mile Action Agenda we put forward in the booklet:

One is that LDCs and their development partners should focus on the last mile as a distinct set of needs, behaviors and structures. Targeting the last mile is different from promoting sustainable development overall and hoping that the most excluded and marginalized benefit from a rising tide of averages.

A second is that last mile programmes need to be flexible, especially where markets are dynamic and technological advances enable countries to leapfrog traditional development stepping stones.

The proliferation of mobile technology and rapid growth of digital payment platforms, for example, has disrupted original assumptions of the programme working on clean energy access. Whereas the programmes worked with financial service providers in Nepal, energy lending was not a priority for such providers elsewhere. As a result, UNCDF shifted to working also with energy service companies.

A third lessons is the need to target public investments carefully to where they add value and can tackle market failures, including at the subnational level. Too often, centralized plans and strategies intend to reach excluded and marginalized groups and regions, but the associated budgets and actionable programmes to make that happen are lacking.

UNCDF’s ability to use a range of financial instruments meant that its programmes can incubate a new venture or business models; de-risk complex infrastructure projects; mobilize domestic resources; or incentivize financial service providers to move beyond their comfort zone towards rural areas and under-served populations.

Fourth, getting to the last mile means that behaviours need to change. Each of the programmes has sought to change how investors and other development partners perceive and respond to risks and opportunities in local economies. More broadly, these programmes demonstrated how public resources – such as ODA – can de-risk the local economic space and shift resource allocations and opportunities in LDCs in favour of poor households and communities.

Fifth, it is not enough to reach the last mile populations and places with once-off interventions. LDCs and their partners must build the capacities at the national and subnational levels so that countries and communities are able to withstand and bounce back from shocks.

This will not happen overnight. Supporting communities and households which have long been experiencing persistent exclusions and inequalities will require learning by doing and patience. The fruition of these efforts can take years, not months, and they do not fall neatly into a programming or funding cycle. This requires a greater tolerance of risk and a commitment to investing “patient capital” that will see returns sometimes over a longer period than typical impact or donor investors expect.

Sixth, follow the evidence. Supply side and demand side diagnostics, coupled with regular assessments, are needed to understand how specific solutions change the factors of inclusion, access, and opportunity. Evidence also helps attract finance by revealing markets and demonstrating the viability of working in the last mile.

Seventh, partners need to invest in more research on how exclusions, inequalities, and discrimination interplay with poverty, and in understanding effective models that address inequalities and exclusions.

Last, there is a need to leverage and share lessons about what works. These can include lessons from North-South, South-South and triangular cooperation.

And that is why we are all here today – to share lessons and experiences so that together we can all improve our ability to get to the last mile.

There are successes which are propelling growth and development into the last mile in LDCs.

The challenge now is to innovate, scale up and replicate those solutions that can empower more and more “last mile” communities and households.

I look forward to an interesting discussion this evening on how can make that happen.