Transcript United Nations Capital Development Fund

United Nations
Capital Development Fund
Investing in the Least Developed Countries
Executive Board Meeting
January 2006
0
UNCDF Summary: Investing in the LDCs
 UNCDF makes investments in the Least Developed Countries:
-Currently working in 28 Least Developed Countries.
-Current investment portfolio about $125 million.
 Our Mission: Reduce poverty in these countries and help them achieve
the Millennium Development Goals.
 Our Method: Investing in human and institutional capacity at the local and
national levels and funding and supporting Local Development
Programmes and Microfinance Institutions (MFIs).
 Our Approach: Long-term outlook seeking local and national capital
formation and human development.
 Our Capital: Flexible, high risk and innovative.
1
Presentation Overview

UNCDF Background and Context.

UNCDF Today.

Primary Goals, Activities, and Outcomes.

Practice Areas: Local Development and Microfinance.

Quantitative Review of UNCDF Activities.

Alignment with the Brussels Programme, the Millennium Development
Goals, and UNDPs Practice Areas.

Growth and Expansion Plans.

Organization and Management.

Business Development Strategy.
2
UNCDF Background and Context

1966: UNCDF was founded as an independent instrument of the UN with
a special Mission:
“…to assist developing countries in the development of their economies
by supplementing existing sources of capital assistance by means of
grants and loans…”

Assistance is given:
“in a flexible manner…and should be given to support general
development plans…or to meet general development requirements.”

Resources should be:
“large enough to make a significant contribution to the achievement of
accelerated and self-sustained economic growth of the developing
countries.”

Contributions should be designed to:
“ensure the provision of assistance on a long-term and continuing basis”
and “should be pledged or indicated as far as possible for a number of
years.”
General Assembly Resolution 2186 (XXI) on the Establishment of
the United Nations Capital Development Fund, 1492nd Plenary
Meeting, 13 December 1966
3
UNCDF Background and Context

1973: Mission further elaborated to focus exclusively on the Least
Developed Countries (LDCs).

1999: UNCDF Practice Areas refined to focus on:
 Local Development.
 Microfinance.

June, 2005: Business Plan adopted by Executive Board for 2006-2007:
 Confirming importance of UNCDF Practice Areas to LDCs.
 Supporting significant expansion of UNCDF activities into additional LDCs.
 “Mainstreaming” $5 million UNCDF annual administrative costs in UNDP
Biennium Budget for 2006-2007.

August, 2005: New Executive Secretary joins UNCDF.
4
UNCDF Today

Uniquely situated within UN System and International Development
Community:
 Neutrality and access of UN affiliation.
 Close partnership with UNDP.
 Close partnership with LDCs and local governments.
 Only UN entity working “on the ground” exclusively in the LDCs.
 Only UNDP entity able to commit capital and make investments.
 Significant flexibility in design and breadth of financial instruments.
 Ability to develop new, creative, pilot investment programmes and
accept considerable financial risk.

Practice Areas closely aligned with Brussels Programme of Action,
Millennium Development Goals (MDGs), and UNDP Practice Areas.
5
UNCDF Today
…continued

Currently working on more than 36 projects in 28 LDCs with total
investments of approximately $125 million.

Independently assessed record of effectiveness; track-record of
success; internationally recognized technical expertise.

Planning growth by:
 Expanding to 45 LDCs by 2010.
 Increasing investment amount per country.
 Investing in inclusive financial sectors.
 Financing additional Microfinance Institutions (MFIs).
 Expanding investments in Local Economic Development.
 Expanding investments in Post-Conflict countries.
6
UNCDF Today
…continued
•
Actively engaged in organizational restructuring to enhance
efficiency and effectiveness:
 Reduced Headquarters staff to focus on strategic management.
 Increasing staff in Regional and Country Offices to be closer to
“clients” and investments.
 Effective use of reduced administrative budget for maximum impact.

Strengthening partnership with UNDP:
 Leveraging investment mandate to complement/supplement UNDP
programmes and activities.
 Increasing joint programming in LDCs.
 Participating in “Integrated Package of Services.”
 Closer financial and administrative management.
7
Two Primary Goals
UNCDF has two primary goals:
Goal #1: Contributing to the reduction of poverty and the achievement of the
Millennium Development Goals in the LDCs.
Goal #2: Assisting LDCs to climb the development ladder so they gradually
become “Lesser Developed” and eventually “Middle Income” Countries.
The “development ladder”
High-income economies (55)
GNI > $10,066
Upper-middle-income economies (40)
GNI = $3,256-$10,065)
Lower-middle-income economies (54)
GNI = $826-$3,255
Least Developed Countries (50)
GNI = $750 (less than $2/day)
Low-income
economies (59):
GNI = < $825
Sources: World Bank List of Economies, July 2005; UNCTAD, 2005
8
Two Primary Goals
Goals and Targets
Sub-Saharan Africa
Southern Asia
MDG 2005 Progress Chart
GOAL 1 | Eradicate extreme poverty and hunger
Reduce extreme poverty by half
very high poverty
high poverty
Reduce hunger by half
very high hunger
very high hunger
GOAL 2 | Achieve universal primary education
Universal primary schooling
low enrolment
moderate enrolment
GOAL 3 | Promote gender equality & empower women
Equal girls’ enrollment in
primary school
far from parity
far from parity
very high mortality
high mortality
very high mortality
very high mortality
GOAL 4 | Reduce child mortality
Reduce mortality of underfive-year-olds by two thirds
GOAL 5 | Improve maternal health
Reduce maternal mortality
by three quarters
GOAL 7 | Ensure environmental sustainability
Halve proportion without
improved drinking water
Halve proportion
without sanitation
low coverage
high coverage
very low coverage
very low coverage
Target already met or
close to being met
Target is expected to be met by 2015, or the problem that
this target is designed to address Is not a serious concern to
the region
Target is not expected to be met by 2015, if prevailing
trends persist
No progress, or a deterioration or reversal
9
Primary Activities
To accomplish these Goals, UNCDF engages in four primary
Activities:
1.
Providing grant-based Human and Institutional Capacity Building
Investments at national and local levels to prepare for and support
Local Development and Microfinance Investments.
Capacity Building Investments help nations and local communities to:
– Develop in accordance with their own circumstances and priorities.
– Own the development process.
– Establish participatory, multi-stakeholder, decentralized decision making and
administrative processes.
– Create and implement enabling policy and regulatory environments at national
and local levels that support Local Development and building inclusive
financial sectors.
– Attract, manage, use, and accumulate capital efficiently.
– Work in partnership with donors, development agencies, civil society, and the
private sector.
10
Primary Activities
…continued
2.
Providing capital and technical assistance through its Local
Development Investments to assure adequate access to social
services and socioeconomic infrastructure at the local level.
3.
Providing capital and technical assistance through its Microfinance
Investments to assure access to financial services for the poor and to
support Microfinance Institutions during their start-up and expansion
stages.
4.
Conducting research and communicating and sharing the learning
and knowledge that are derived from UNCDF Investments.
11
Primary Outcomes
Activities designed to achieve five primary Outcomes:
1.
Enhanced local democratic governance process and capacity for Local
Development and Microfinance Activities.
2.
Enhanced local community access to social services and economic
infrastructure.
3.
Enhanced access to financial services at the local level.
4.
Enhanced Local Economic Development on a sustainable basis,
including the development and support of strategic partnerships with
donors, development agencies, civil society, and the private sector.
5.
Scaling and replication of methods and results at national, regional, and
global levels and maximum policy impact.
12
Seven Guiding Principles
1.
“The key to escaping the poverty trap is to raise the economy’s capital stock
to the point where the downward spiral ends and self-sustaining economic
growth takes over.”*
2.
Capital creates capacity + Capital follows capacity.
3.
Scaleability and replicability must be institutionalized.
4.
Always work at four levels: local, national, regional, and global.
5.
Gender equity and mainstreaming, environmental sustainability, and
appropriate use of information and telecommunications technology must be
embedded in every programme and investment activity.
6.
Partnerships are critical to our success.
7.
UNDP is our most important partner.
* UN Millennium Project (2005) Investing in Development (Overview Report), p.19
13
Summary of Goals, Activities,
Outcomes and Principles
14
Practice Areas: Local Development
Local Development Investments focus on:


Sustainable, scaleable decentralized planning, delivery, and
management of basic socioeconomic infrastructure and services:

Demand-driven, participatory process.

Working with local and national governments within established
governmental structures: “National Ownership” strategy.

Focus on poor, rural areas.
Small-scale, largely grant funded capital investments in infrastructure
and access to social services:

Feeder roads.
 Water and sanitation.

Health clinics
 Agriculture.

Schools.
 Environment.

Markets.
15
Practice Areas: Local Development
…continued
Investments made primarily through Local Development
Programmes and Local Development Funds:

Local Development Programmes consist of:
 Institutional capacity building to strengthen local democratic
governance and improve local infrastructure and service delivery on a
decentralized basis.
 Reforming Public Expenditure Management to deliver
infrastructure and services—increasing effectiveness, efficiency,
equity and accountability.
 Integration of local government planning and PerformanceBased Budgeting with national planning, budgeting and fiscal
systems.
 Public information and accountability systems to enable citizens
to hold local governments to account.
 Greater local government collaboration with civil society, private
sector, national sector activities.
16
Practice Areas: Local Development
…continued
 Local Development Funds consist of:
 Unconditional block grant transfers—flexible within agreed limits
to be allocated to local priorities.
 Decentralized capital investments in essential infrastructure and
social services.
 Performance-linked funding facility at local government level.
 Simulated fiscal transfers that will later replace the Fund facility to
permit continued national financing of local investments.
17
Practice Areas: Microfinance
Microfinance Practice Area consists of two primary investment
themes:
 Building inclusive financial sectors:

Objective: enhance access of the poor to financial services.

Geographic focus: Sub-saharan Africa.

Key programme elements:
•
Multi-stakeholder financial sector assessment.
•
Development of national policy, strategy and action plan.
•
Multi-year Implementation focused on developing:
-
Local capacity of Microfinance Institutions (“MFIs”).
-
Policy, legal and regulatory environment.
-
Support environment and services for local MFIs.
-
Broader access to financial services and products.
-
Increased private sector participation.
18
Practice Areas: Microfinance
…continued

Investing in Microfinance Institutions:
 Objective: invest in start-up and emerging MFIs with a view to creating
sustainable, growing, financially viable enterprises.
 Institution and capacity building focus.
 Flexible and innovative financial instruments.
 Microstart Programme: performance-linked microcapital grants with
Technical Service Providers from South to provide capacity building,
support to local MFIs.
 Micro Save Programme: develops market research tools for MFIs
seeking new products and services.
19
Practice Areas in Post-conflict Situations
Local Development and Microfinance Practice Areas relevant and
important to Post-Conflict situations:

Priority areas for reconstruction in PostConflict situations per 2005 Human
Development Report:
Conflict Makes a Bad Situation Worse
Infant mortality rate, 2002
(deaths per 1,000 live births)
Democratic Republic of Congo
 Repair infrastructure and provide
credit for private sector recovery.

225
UNCDF investing in the transition from
conflict to stability:
200
 Strengthening local government.
East DRC
175
 Building participatory and
decentralized institutions.
150
125
West DRC
100
75
Source: IRC 2004
50
Sub-Saharan
Africa,
average
20
Practice Areas in Post-conflict Situations
…continued

UNCDF rebuilding the local economy and services to support human
development:
 Providing investment capital for small-scale infrastructure reconstruction
and enhanced access to social services.
 Establishing enabling environments to build inclusive financial sectors.
 Providing investment capital to establish and support local Microfinance
Institutions.
 Developing enabling environments and investment programmes to
strengthen private sector and civil society participation.

Seeking to coordinate and work closely with BCPR.
21
Where UNCDF Works
Currently working in 28 LDCs:
22
Where UNCDF Works
…continued

Total population of UNCDF client countries: approximately 573 million*.

Average GNI per capita: approximately US$ 338*.

14 of UNCDFs clients are landlocked or small island countries.

18 are also in Conflict or Post-Conflict countries.

In all countries UNCDF works closely with national and local governments, with
UNDP, and with wide variety of other development partners.

UNCDF: well-established “on the ground” in many of the poorest and most
difficult working environments in the developing world.
* Excluding Liberia for which data not available
23
Quantitative Review of UNCDF Activities
UNCDF Activities in Local Development
Number of LDCs
23
Total Population of LDCs
558 million
Number of investments in LDCs
29
Geographic distribution of investments
70% Africa
20% Asia
Total UNCDF financing required for Current Investments
Approx. US$113m
Estimated UNCDF financing required for Pipeline Investments
Approx. US$160m
32 investments
32 countries
Indicative key data for 2004
•
•
•
•
•
Number of local governments supported
Number of investments made in infrastructure and access to social services
Average amount per investment
Estimated number of direct beneficiaries
Average investment per capita
377
2,492
$2,400
4,554,000
US$1.31
24
Quantitative Review of UNCDF Activities
…continued
Local Development Investments by Sector in 2004
21% Roads/
Bridges
14% Education
13% Health
20%
Ag/environ
14% Water
3% Markets
15% Institutional
Support
25
Quantitative Review of UNCDF Activities
UNCDF Activities in Microfinance
Number of LDCs
11
Total Population of LDCs
Approx. 65 million
Number of investments in LDCs
11
Geographic distribution of investments
90% Africa
Total UNCDF financing required for Current Investments
Approx.$12 million
Estimated UNCDF financing required for Pipeline Investments by
2010
Approx. $90 million
16 investments
16 countries
Indicative key data for 2004
•
MicroStart investments – results to end-2004
•
•
New MFI investments in 2005
Number of Post-Conflict countries building inclusive financial sectors
68 MFIs
21 countries
450,000 new clients
5 LDCs
4
2 in “hard” pipeline
26
Quantitative Review of UNCDF Activities
Highlights of the International Year of Microcredit









More than 100 Countries participated in Year activities.
61 National Committees established.
30 Countries participating in Global Microentrepreneurship Award
programme.
More than 350 conferences and events.
Nearly 100 academic institutions involved.
Forum held 7-9 November at UN Headquarters with more than 700 guests.
Seminar hosted by NY Federal Reserve Bank on 9 November to focus on
regulatory and supervisory issues.
Blue Book on Building Inclusive Financial Sectors for Development to be
released on 17 January 2006.
Data Project initiated with World Bank and IMF to establish
framework for evaluating and monitoring access issues in
emerging countries and LDCs.
27
Independent Assessment of Results
2004 Independent Impact Assessment confirms UNCDF
relevance, expertise, niche and results:

“Assessment of UNCDF’s programmes confirmed that UNCDF’s mission,
programmes and goals are relevant to the achievement of the MDGs. Its
programming supports the Programme of Action for the LDCs for the decade
2001-2010 and responds to the local needs of the countries in which it
intervenes.”

“UNCDF’s areas of expertise are very much in demand in LDCs… In fact,
LDCs are asking for more of UNCDF’s services.”

“[UNCDF] fulfils an important risk-taking, innovation role that other
development agencies and LDC Governments are interested in expanding and
building on…”

“UNCDF programming models in both microfinance and local governance
demonstrate a clear and innovative niche…”

“The Fund has contributed to significant results through both its microfinance
and local governance programmes in poverty reduction, policy impact, and
replication of its projects by donors…”

“UNCDF is praised by the majority of its stakeholders as a flexible partner that
is active in developing knowledge, effective in implementing projects, and
influencing the orientation of the sectors in which it works…”
Source: Universalia (2004) Independent Impact Assessment of UNCDF: Final Synthesis Report, ppii, iv
28
Independent Assessment of Results
…continued
2004 OECD-DAC Review of 19 donor decentralization
programmes confirms UNCDF “success”:
“UNCDF’s programme is the only example whereby a programme was
successfully institutionalized and replicated nation-wide. The programme
was a success because it was implemented in close co-operation with
governments and aimed at promoting sustainable and replicable
institutional development of Local Government from the outset…
Source: OECD (2004) Lessons Learned on
Donor Support to Decentralization and Local Governance
29
Independent Assessment of Results
…continued
2005 CGAP Review of UNDP Microfinance Portfolio confirms
“success” of UNCDF’s MicroStart and excellence of UNCDF
technical services:
“The successful model is the MicroStart programme pioneered by the
microfinance unit of UNCDF…MicroStart’s ‘hit rate’ of successful projects
was 69 percent, which represents strong performance, not only compared
to other donors, but also in absolute terms.”
“UNDP has privileged access to the excellent technical services of the
internationally recognized, dedicated microfinance unit of UNCDF.”
Source: CGAP (2005) Review of UNDP Microfinance Portfolio, pp2, 3
30
UNCDF Alignment with Brussels Commitments, MDG
Priorities and UNDP Practice Areas
•
Brussels Commitments
People Centered Policy Framework
Good governance
Human and Institutional Capacities
Productive Capacities
•
MDG Priorities
Capital Accumulation
Public Investment
Effective Governance
Priority Countries
•
UNDP Practice Areas
Democratic Governance
Poverty Reduction
Crisis Recovery
31
Growth and Expansion Plans
Local Development
Microfinance
Geographic expansion to more LDCs, including Post-Conflict countries
Target: 40 by 2010
Target: 25 by 2010
 Increase investment size per country

Expand regional and country sector
approach to building inclusive financial
 Increase investment size per investment.
sectors
 Expand local investments to more multiTarget:$6 million investment per country
sector projects.

Identify new MFIs and supporting
institutions for investment.
Target: $5 million per country
Target: 50 by 2010
Invest in broader and deeper products and
services for Local Economic Development:

Local Economic Governance.

Social and Community Development.

Locality Development.

Enterprise Development.

Enhanced investment support for new
financial services institutions to supplement
and complement microcredit.
Invest in broader and deeper offerings of
financial products and service:

Credit

Savings

Insurance and risk allocation

Remittances
Increase gender equity and mainstreaming in all programmes
Increase environmental programme components
Increase utilization of information and telecommunications technology
Strengthen partnerships with national governments, multi-lateral and bi-lateral agencies,
donors, private sector, and civil society.
32
Organization and Management: Restructuring
Consistent with UN Reform initiatives, UNCDF is restructuring to
achieve greater decentralization and improved operating efficiency
and effectiveness:



Streamlined HQ to focus exclusively on strategic functions and management: 41%
reduction in HQ posts.
 Addition of Business Development and Operations Advisors by 28 February
2006.
Expansion of presence at Regional level: 100% increase in Regional personnel.
Expansion of presence in Country Offices in LDCs: 25% increase in Country
personnel.
HQ
Regional
37
2005
2006
2007
22
22
5
19
19
Country Offices
42
JPOs
Totals
9
51
56
97
11
103
12
109
33
Organization and Management: Restructuring
…continued

Principal impacts of restructuring:
 More field presence closer to LDCs.
 Enhanced field presence supported by programme funds.
 More cost-effective structure for delivering service in the field.
 Reduced HQ overhead costs.
 Enhanced capability to mobilize resources and manage operations
efficiently.

Restructuring programme began 1 August 2005.

Headquarters restructuring completed by 31 December 2005.

Regional and Country Office expansion begun.

Full implementation expected by 30 June 2006.
34
Organization and Management: UNCDF and UNDP

Participating in development of “Integrated Package of Services”.
 Focus on joint programming at regional and country levels.
 Specific UNCDF products and services to be included.
 Specialized products and services under consideration for PostConflict countries.

Integrating UNCDF technical experts in UNDP Regional Centres and
Country Offices.

Clarifying, coordinating, simplifying, harmonizing roles and relationships
between UNDP and UNCDF:
 Practice Area definitions.
 Service delivery.
 Business Development.
 Public-private partnerships and private sector involvement in Local
Development, Local Economic Development and Microfinance.
 Operational systems and policies.

Exploring more efficient utilization of UNDP administrative services and
support.
35
Budget Forecast 2006-2007: Expenditures
$54.4 million
Investments
$41.7 million
$36.7 million
$49.4 million
$29.2 million
Country Investment Support
Regional Investment Support
$5 million
2004
2006
$5 million
Admin (UNDP since 2006)
2007
36
2006-2007 Growth Summary
2006
2007
2008-10
$36.7m
$49.4m
$54.2m
Local Development
$27.5m
$32.8m
$33.0m
Microfinance
$9.2m
$16.6m
$21.2m
28
35
45
Local Development
23
31
40
Microfinance
7
16
25
103
109
109
Total annual programme
expenditures
Total number of LDCs
UNCDF Personnel
37
Business Development Environment


Business Development: the biggest challenge and constraint.
Long-term nature of Goals, Activities, and Outcomes requires long-term,
consistent financial support from donors and partners.
 Low-income countries need “a bold, needs-based, goal-oriented investment
framework [to 2015] aimed at achieving the MDG targets.”
 10 year framework should contain:
• “A public sector management strategy.”
• “A clear strategy for decentralizing target-setting, decision-making,
budgeting and implementation responsibilities to the level of local
governments.”
• “A clear private sector strategy to promote economic growth and have
countries ‘graduate’ from donor assistance in the longer term.”
 Key conditions for maximizing impact:
• “…early priority on up-front investments to deliver services on the
ground, adopting replicable and locally appropriate delivery
mechanisms.”
• “…long-term predictable donor funding… covering capital and
recurrent costs…”
All references from UN Millennium Project (2005),
Investing in Development Overview Report.
38
Business Development Strategy

Broaden and diversify the donor base of Member States, including approaching
Middle Income and Southern Member States.

Seek long-term, predictable funding from Member States: focus on common longterm development objectives.

Broaden and diversify and development partner funding:
 Work closely with existing partners and expand with them into new LDCs.
 Develop and formalize long-term relationships with additional partners (including
in the Southern Member States):
• Multi-lateral agencies.
• Bi-lateral agencies.
• NGOs and foundations.
• Private sector.
39
Business Development Strategy
…continued

Assure appropriate Local Government and local MFI participation in funding
of all activities.

Develop long-term relationships with civil society, academia, and private
sector as partners in UNCDF programme design, financing, implementation,
and evaluation.

Coordinate Business Development Plan with BRSP, Regional Bureaus, and
Resident Representatives.

Formalize Business Development Plan for 2006-2007 with new Business
Development Director.

During 2006 seek to develop 1 or 2 large scale thematic or regional
investment programmes of sufficient impact and interest to attract significant
funding from long-term institutional partners.
 UNIFI: Building Inclusive Financial Sectors in Africa.
 Local Economic Development: Investments Focused on Rapid Private
Sector Development.
40
Key Challenges and Constraints

Resource mobilization: HQ, Regional and Local.

Managing the decentralization process.

Managing growth and expansion plan.

Successfully developing / implementing new initiatives: BIFSA and
LED.

Concluding and implementing MOU with UNDP.

Developing and implementing appropriate communications strategy.

Developing and implementing appropriate research programme.
41
United Nations
Capital Development Fund
Investing in the Least Developed Countries
Executive Board Meeting
January 2006
42