UNCDF

Piloting Innovations
for Decentralization Reforms


Local Governments in Local Development
and Poverty Reduction

New York, 21 June 2004





UNCDF


I. UNCDF
II. UNCDFs pilot approach to local development
III. Major areas of innovation
IV. Policy impact
V. Case studies
(a) UNCDF project in BANGLADESH
(b) UNCDF project in MALAWI
(c) UNCDF projects in MALI





UNCDF
Presentation prepared by :

Angelo BONFIGLIOLI, Sr. technical adviser
UNCDF,New York
Azizur Rahman SIDDIQUE, Local
Governance Development Fund Project,
Sirajganj, Bangladesh
Willie SAMUTE, Principal Secretary,
Ministry of Local Government & Rural
Development, Malawi
Mohamed AG ERLAF, Director, National
Authority for Local Government
Investment

UNCDF

II.
UNCDF
UNCDF
UNCDF
The United Nations Capital Fund, created in 1966 by
the General Assembly of the UN, is a multi-lateral
organization.

It has its own legal status and funds (from a group of
donors), within the UNDP group.

UNCDF funds and implements small-scale investments
(in the forms of grants) in LDCs in local development
and micro-finance.
UNCDF

II.
UNCDFs pilot approach
to local development
UNCDF


UNCDF has developed an innovative strategic tool, the
Local development Programme (LDP), designed to
support local development, within the context of
poverty reduction. LDPs stress :

the role of democratic governance in poverty-
reduction (i.e., the establishment of horizontal
networks involving local governments, community
organizations, the civil society and the private sector),

the role of democratically elected local authorities in
local development

An innovative model
UNCDF


Specific challenges faced by LDPs
a) Developing local institutions
b) Building local capacities
c) Fostering pro-poor delivery of
infrastructure and services
d) Financing local development
UNCDF


Major risks faced by LDPs
Lower quality of public services
Inequity & growing regional disparities
Capture of benefits by local elite

Still mixed and incomplete empirical evidence of
the comparative advantage of decentralized
governance in poverty reduction

UNCDF


Since 1998, UNCDF has initiated projects supporting
local governments in more than 20 countries (mainly
in Africa and Asia)
These projects involve a total cost of about $160
million, of which $96 million from UNCDFcore funds
and $64 million from contributions and/or trust funds
from UNDP and other donors : The Netherlands,
Norway, DFID/UK, BSF/Belgium, Danida/Danemark,
and Luxembourg
About $64 million constitute a general fund to support
LGs investments (poverty reduction, infrastructure,
service delivery, etc.), through different configurations
(block grants, earmarked funds, green windows, etc.)

Existing LDP portfolio
UNCDF

III.
Major areas
of LDPSs innovation
UNCDF
Major innovations
LDP
Financing
Capacity
building
Implement.
& production
Accountab. &
transparency
Planning &
Budgeting
UNCDF
Planning & budgeting
Inclusive and cost effective planning : partici-
pation of all local stakeholders

Technical support : innovative ways of providing
LGs with technical skills for participatory planning

Linking planning & budgeting : planning as a more
meaningful process with tangible results


UNCDF
Financing
Fund allocation : use of pre-determined, formula-
based allocations to LGs, for capital expenditure
Block grants : hard budget ceilings, in order to
undertake meaningful investment planning
Support to local budget : on the basis of
comprehensive LDP, away from a project-by-
project modality, with predictable annual
allocations
Performance-based funding: ex-post controls (in
the light of essential parameters)
Matching contributions : in kind and nature,
according to differential approach
Local resources: support for improving local
revenue collection

UNCDF
Capacity building
Training : for a number of different stakeholders
(use of planning tools, procedures. Mentoring of
lower levels of LGs by higher levels)

Learning by doing : fostering capacity-building by
on-the-job familiarization (= the crucial
innovation)

UNCDF
Implementation / production
Procurement /production procedures and
modalities : suitable & flexible arrangements
managed by LGs (private sector bidding, force
account, community implementation, etc.)
Oversight : supervision & monitoring (with
support to project management committees or
task forces under the supervision of LGs)
Private sector : upgrading contractors, training
contractors in contract management & for bidding
for tenders, unleashing entrepreneurship
Operation & maintenance arrangements included
in the planning
UNCDF
Accountability and
transparency
Communication : a strategy for downward
accountability

Monitoring and evaluation : through a number of
self-assessments and auto-evaluations

Participation : participatory planning and
accountability
UNCDF

IV.
Impact on policies
UNCDF


Policy impact
LDP
Broad policy directions: local
governance for poverty
reduction
Legislation & statutory
framework
Regulatory framework :
norms, procedures, practices
Institutional architecture
UNCDF

V.
First case study :
UNCDF Project in Bangladesh
UNCDF
Implementing Agency:
Local Government Division
Ministry of LGRD & Cooperatives
Duration : 5 Years
Started in July 2000
Coverage
3
rd
Phase 45 UPs
1
st
Phase 19 UPs
2
nd
Phase 9 UPs
Funded by
UNCDF & UNDP
UNCDF
Population: 130 million (75% rural)
Density: 876/sq km
Poverty: 58% poor people live in rural areas; 40% rural
pop. are poor (against 14% urban pop.)
Division (06)
District (Zila, 64):
Average popul. : 2 million
Sub-District (Upazila, 469):
Average popul. : 255,000
Union (Union Parishad, 4488)
Average popul. : 30,000
9 wards(Gram Sarkar)

LOCAL GOVERNMENT & ADMINISTRATION
BANGLADESH : Country Profile
Deconcentrated
level
Elected
authorities
UNCDF
LGs (established in 1870) still lack a coherent and
stable policy

Limited authority of UP (strong central control)

Unclear womens representation

Weak tax & revenue power

General mistrust, perceptions of low capacity, elite
bias, corruption and lack of accountability

Some policy statements (eg PRSP), while pointing to
potential role of LGs, still remain starved of
resources and sidelined




Policy Constraints
UNCDF
Participatory Decision Making & Monitoring

Decentralized & performance-based funding

Open Budget Sessions

Women Empowerment

Local Resources Mobilization

Participatory Performance Assessment of UPs

Transparency and accountability

Dissemination of lessons learned for policy change



Overview of major innovations
UNCDF
Participatory Decision Making & Monitoring
Participation of local community in Planning,
Implementation, Monitoring, & Maintenance

Community wards meeting before annual budget
session (at UP level)

Men and women identify local problems and prioritize
them for immediate solution

UP plan and budget incorporated in community plan

UP approved projects are implemented, monitored &
maintained by community committees
UNCDF
Annual Development Block Grant directly allocated to
the UPs instead of sub-district

Use of formula-based predictable grant

Performance-based financing

Timely disbursements to the UPs

Fund owned by UPs

Dissemination of information to Communities

30% of funds earmarked for women
Decentralized & performance-based fund
UNCDF
Open Budget Session
UP Budget prepared through consultation with
community : opinion of local stakeholders on
allocations to different activities

Budget meetings usually attended by 100-500
persons

Communitys concerns are reflected in the
budget

Community participation in local resource
mobilization

Information on different sources of revenue
and expenditures provided to communities
UNCDF
Women Empowerment
UP Women members are organized / trained
through Women Development Forum at district &
Upazila level.

At least 30% of local committees are chaired by
female members

30% local development fund are earmarked for
women

Women participation in decision making process

Advocacy & information on women rights in the
local governments process

UNCDF
Local Resource Mobilization
Enhancement of local revenue mobilization is one of
the key criteria for accessibility to funds

Training/Counselling to UPs and Communities

Local resource mobilized for O&M

Incentive for performing UPs (e.g. in revenue
collection)

Community are informed about the use of revenue
collected by UPs.

Contribute to the government effort to revise model
tax schedule & strategy
UNCDF
Participatory Performance Assessment

Assessment of the UP Activities by the community

The assessment done once a year in a particular day in
presence of local people

The assessment facilitated by UP members or any
persons from community and community representatives
provided score

Participation of 100-300 persons (including 20-30%
women) in the assessment workshop

Use of public score card to assess the performance of
Ups

Links between the results of the performance
assessment and funding & capacity building activities of
UPs



UNCDF
Transparency & Accountability
Organization of UDC, WDC, SSCs & UFT in a
transparent manner to ensure participation of
community

Use of scheme information boards, UP notice boards
for information dissemination

- Monitoring activities managed
by community

- Access of communities to UP
financial transactions

- Community gathering at the
start and handover of schemes.


UNCDF
Dissemination of lessons learned
Performance assessment score card (eventually
introduced nationally by LG Ministry)

Incentive for the LGIs linked with Performance
outcome

Organization of local and national workshops

Wide communication of results and findings of
evaluation studies to constituencies and to policy
makers
UNCDF
Major innovations of the SLGDFP
SLGDFP
Appropriate
financing
procedures
Capacity
building for all
stakeholders
Efficient
implement.
& production
Accountab. &
transparency
with trust and
credibility
Improved
Planning &
Budgeting
UNCDF

V.
2nd Case study :
Local Governance and Development
Management Programme, MALAWI

UNCDF
MALAWI : Country Profile


Population: about 12 million
Poverty is widespread, deep and severe
65% of population is poor: 28% living in dire
poverty
Life expectancy rate 39 years
Literacy rate 58% (female rate 44%)
Up to 1994: 30 years of autocratic rule, over-
centralization and weak local Government
1993: multi-party democracy
1994: first multiparty democratic government
and Government intension to decentralize


UNCDF
District focus for Development Concept
1993: Government adopts the District Focus for
Development Concept, whose elements are:
Development planning and management
procedures and institutional arrangements,
Decentralized Development Financing,
Capacity building for decentralized development
management,
National Decentralization Policy formulation

The policy is implemented by the project in 6 Local
Impact Areas (Districts) 1993 1997
Rolled out to the rest of the country 29 Districts
in 1998 (UNCDF/UNDP) under the Local
Governance and Development Management
Programme (LGDMP)
UNCDF
Local Governance & Development
Management Programme (LGDMP)
Objectives:
Contribute towards the alleviation of
poverty in Malawi by improving governance
through improved broader citizen
participation in decision making and
enhanced performance of central and local
government.
Develop sub national development planning
system
Develop decentralised financing mechanism
to meet the challenges of community
development
Formulation of decentralization policy
UNCDF
Major innovations
of the programme




UNCDF
Sub National Planning System
Giving to the District Development
Committees responsibility for local
development (= i.e final decision on district
specific development through District
Development Plans)

Strengthening development institutions
(VDCs, ADCs, DDC)

Setting planning procedures at all levels
(VAP, SEPS, DDPs)



UNCDF
Sub National Planning System ()
Capacity Building: establishing
procedures, institutions and capacities for
communities participation in local
development

Establishing coordination mechanism
through the setting up of a District
Development Office, District Executive
and Area Executive committees

Establishing institutions for capacity
building at district, area and village level.
UNCDF
The District Development Fund
A decentralised development financing
mechanism established and managed at the
district level

The DDF is designed to respond to issues
and projects that are raised through the
District Development Planning system

Allocation of funds based on a clear formula
UNCDF
Distribution formula
National Level
5% of National Revenue Net statutory
expenditure
20% distributed equally to all district
80% based on population, illiteracy
rate, infant mortality rate and access to
safe drinking water

District level
70% of the funds are allocated to
community based projects
30% for projects initiated at district
level
UNCDF
National Decentralisation Policy
1996 : Commissioning of comprehensive studies
of Decentralization Policy
Institutional set-up for policy formulation
(Cabinet Committee on Decentralization,
Technical Committee and Decentralization
Secretariat)

1998: Decentralisation Policy approved Local
Government Act passed based on the policy

UNCDF
Characteristics of the policy

Devolving political, administrative and
development authority to the districts

Integrating governmental agencies at the
district and local level into one local
government administrative unit

Diverting the centre of implementation
responsibilities

Promoting popular participation, in the
governance and development management
UNCDF
Other achievements
Merger of local and district administration to form
one local government secretariat

Local Government Elections

Establishment of key Local Government
Institutions including the National Local
Government Finance Committee

Approval by Parliament of intergovernmental
fiscal transfer formula

Funding to District Assemblies based on approved
formula including Social Funds

Integration of MASAF III into Decentralized
Planning and Financing Mechanisms

UNCDF
Other achievements

Allocation of funds to assemblies using
the formula

Establishment of key Local Governance
Institutions including the National Local
Government Finance Committee

Sustained central government grant
transfers to all local authorities
UNCDF
Major innovations
LGDMP
Financing
Capacity
building
Implement.
& production
Accountab. &
transparency
Planning &
Budgeting
UNCDF
Challenges
(problems still to be solved)
Slow pace of devolution

Inadequate capacity at assembly level

Transferring less funds than indicated in
the policy

Variation between local priorities and
funding decisions

Multiplicity of participatory institutions at
the community level


UNCDF

V.
3nd Case study :
Support to Local Government
Projects (in Mopti and Timbuktu)
MALI

UNCDF
UNCDF :
SUPPORTING LOCAL GOVERNMENTS
(MOPTI AND TIMBUKTU REGIONS)

MALI
UNCDF
MALI : COUNTRY PROFILE
POPULATION : 13 million
AREA : 1.204.000 km2
1999 : FIRST LOCAL ELECTIONS (participation rate : 22%)
2004 : SECOND LOCAL ELECTIONS (participation rate: 45%)
MINISTERE DE LADMINISTRATION TERRITORIALE ET DES COLLECTIVITES
LOCALES (Ministry of Territorial administration & Local Governments)
Direction Nationale des Collectivits Locales
Agence Nationale dInvestissement des Collectivits Locales (9 lus locaux
faisant partie dun Conseil dadministration de 12 membres)
HAUT CONSEIL DES COLLECTIVITES TERRITORIALES
LIFE EXPECTANCY : 48 ans (men) 49 (women)`
GDP : 230 $ / capita
UNCDF
LOCAL GOVERNMENTS
ANICT: Agence Nationale dInvestissement des Collectivits Territoriales
(Status: Etablissement Public caractre Administratif)
FINANCIAL
SUPPORT
TECHNICAL
SUPPORT
DNCT
ANICT
DNCT: Direction Nationale des Collectivits Territoriales (Central Branch)
UNCDF
DNCT: MISSION
DEFINE, CONTROL AND IMPLEMENT THE REGULATORY FRAMEWORK FOR
LOCAL GOVERNMENTS
CARRY OUT BASIC STUDIES TO IMPROVE AND BUILD UP THE
DECENTRALISATION PROCESS
MONITOR THE LEGAL CONTROL OF THE REPRESENTATIVES OF THE CENTRAL
GOVERNEMENT ON SUB-NATIONAL GOVERNEMNTS
DEFINE THE TYPE OF SUPPORT NEED BY LOCAL GOVERNMENTS IN ORDER TO
PLAY A CRUCIAL ROLE IN LOCAL DEVELOPMENT AND ADMINISTRATION
STRENGTHEN THE COOPERATION BETWEE LOCAL GOVERNEMENTS AS WELL
AS THE PARTNERSHIP BETWEEN LOCAL GOVERNMENTS AND THEIR PARTNERS
UNCDF
ANICT : THE MISSION
DISTRIBUTE GRANTS TO LOCAL GOVERNEMENTS IN ORDER TO FINANCE LOCAL
DEVELOPMENT-RELATED INVESTMENT
FAVOR GRANT PEREQUATION MECHANISMS, WHICH TAKE INTO ACCOUNT THE
DEGREES OF DEVELOPMENT OF LOCAL GOVERNEMENTS, ACCORDING TO
WELL-DEFINED CRITERIA
ASSIST LOCAL GOVERNEMENTS TO DEVELOP BASIC PRO-POOR INFRASTRUCTURE
AND SERVICES
ASSIST SUB-NATIONA GOVERNEMENTS TO MOBILIZE INTERNAL FINANCIAL
RESOURCES
PROVIDE COLLATERAL FOR LOCAL GOVERNEMENTS LOANS AIMED AT
FINANCING LOCAL DEVELOPMENT INITIATIVES
UNCDF
PACR-TImbuKtu & PACR-Mopti
DNCT
NATIONAL COORDINATING UNIT
UNCDFS TECHNICAL SUPPORT TO LOCAL GOVERNMENTS
LOCAL GOVERNMENTS
SUPPORTING THE CRUCIAL ROLE OF LGs
IN LOCAL DEVELOPMENT
PARTCIPATORY PREPARATION OF LOCAL DEVELOPMENT PLANS
PROVIDING TECHNICAL SUPPORT
UNCDF
ANICT: LOCAL BANK ACCOUNTS
ANICT : CENTRAL BANK ACCOUNTS
UNCDF PUBLIC
TREASURY
SERVICE PROVIDERS
LOCAL GOVERNMNTS
UNCDFS FINANCIAL SUPPORT TO LOCAL GOVERNEMENTS
BLOCK GRANTS TO LOCAL GOV.
CONTRACTS
MATCHING GRANTS (FROM LOCAL GOVERNEMENTS)
ANICTS ADMINISTR. COSTS 5% INVESTMENT 95%
PAYMENT
UNCDF
CONTEXTUAL CONSTRAINTS
SLOW TRANSFER OF SECTORAL RESPONSIBILITIES TO LGs
LOW MOBILISATION OF LOCAL FINANCIAL RESOURCES
WEAK CONTROL OF LOCAL MANAGEMENT PROCEDURES BY LOCAL
STAKEHOLDERS
FREQUENT TURN-OUT OF STAFF AT LOCAL GOVERNMENT LEVEL
INSUFFICIENT DECONCENTRATION OF LINE DEPARTMENTS
LACK OF SYNERGIE BETWEEN COMMUNITY APPROACHES AND LOCAL
GOVERNEMENT APPROACHES
LOW IMPLEMENTATION RATE OF INCOME GENERATING INFRASTRUCTURE
UNCDF
PACR-T & PACR-M: LESSONS LEARNED
STRONG CENTRAL GOVERNEMENT INVOLVEMENT
STRONG PARTNERSHIP WITH OTHER DONORS SUPPORTING
DECENTRALISATION AND EFFORTS TO HARMONIZE PROCEDURES
PARTICIPATORY PLANNING AND BUDGETING
ADOPTION OF A GENERAL APPROACH SPECIFICALLY AIMED AT EMPOWERING
LOCAL STAKEHOLDERS
TECHNICAL AND FINANCIAL SUPPORT TO ABOUT 130 LOCAL GOVERNEMENTS
(OUT OF A TOTAL OF 761)
USE OF NON-CONDITIONAL AND PREDICTABLE FUNDS
UNCDF



Piloting Innovations
for Decentralization Reforms


Local Governments in Local Development
and Poverty Reduction

New York, 21 June 2004