Addressing Growing Income Inequalities in Cities Through Inclusive Local Financing

JOIN US for a panel discussion on November 25, 2020, 9:30 -11am EST

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There is growing inequality in cities as more and more people are rapidly moving to urban areas creating enormous pressure on existing resources and resulting in economic disparities. The urban population of the world has grown rapidly from 751 million in 1950 to 4.2 billion in 2018 (UN Habitat). UN estimates[1] that by 2050, 68% of the world’s population will live in the urban areas. Cities in developing countries face increasing pressure from rural-urban migration, climate shocks, unplanned growth and inadequate basic services and infrastructure. Moreover, inequality is not only a problem in the developing world but affects every city irrespective of the level of wealth and prosperity and it cuts across rich and poor world economies.[2]

Cities accommodate rapidly growing migrants often without any settlement plans with limited municipal resources. As a result, city dwellers including women and youth, persons with disabilities, slum dwellers, minorities and marginalized groups experience inequality and vulnerability in various forms. This includes unsafe working conditions, challenges in accessing decent work opportunities, dealing with the burden of earning income while balancing unpaid care work, accessing financial assets and housing security, and access to services and infrastructure such as safe transport, mobility, and water and sanitation.  These problems are compounded by the fact that such vulnerable groups are also under-represented in governance structures and decision making.

Growing urbanization can be a transformative opportunity to achieve greater equality if cities are planned and financed better. Participation of vulnerable groups in decision making and governance systems can lead to better prioritization of urban investment needs and management of budget allocations.  Cities can offer an improved quality of life for inhabitants through better services, housing and infrastructure if they incorporate the special needs of marginalized and excluded groups. For example, cities can be made safer and free of violence through better street lighting, safer transportation, improved security, and increased focus on areas at risk through vocational training and job creation.

As the Decade of Action for achievement of the SDGs commences, a focus on localization of the SDGs and financing of local development needs is crucial. The 4th report of the Local and Regional Governments Forum[3], at the High Level Political Forum 2020 revealed that at the local level, most cities will not be able to raise the finances that they require to meet their existing and projected demands. This means that services that are critical for millions of vulnerable populations and excluded groups specially in Africa and Asia cannot be guaranteed. In many cities, planning and financing specially for safe transport, inclusive services and gender responsive local economic solutions remains inadequate.

Building inclusive cities will require better planning and stepped up investments in essential services and infrastructure that incorporate the special needs of vulnerable groups. The New Urban Agenda reiterates that an ‘adequate stream of finance to empower local and regional governments and to boost innovation and investment in sustainable public services’ is critical. The cities of the future will need innovative ways of generating financing to ensure sustainability and delivery of essential services for all citizens. With growing inequalities, city governments’ role in prioritizing financing to address deep rooted inequalities, targeting interventions towards most under-developed neighbourhoods, and collaborating with local private sector to generate additional financing will be critical.

Event Objective:

Through this Technical Roundtable, the UN Capital Development Fund aims to gather experts, practitioners including city government representatives and development partners to discuss how to address growing inequality in cities and how to make cities of the future more inclusive and responsive to the needs of all citizens including women and youth. The event builds on the newly launched UNCDF initiative ‘IncluCity’ and will highlight key underlying bottlenecks leading to persistent inequalities in cities and show how city governments can respond to those challenges.

The event will particularly focus on the importance of investing in local solutions that address the needs of the most vulnerable populations and increase their access to economic opportunities, better services and infrastructure. It will showcase best practices and lessons on how an enabling policy and institutional environment for an inclusive agenda for cities can be developed and implemented. The event will provide a forum for discussion and contribute to key recommendations and ways forward for alliance building to produce new knowledge and tools such as measurement systems to track progress on local commitments on equality and economic inclusion.

Speakers:

Moderator: David Jackson, Director, Local Development Finance, UNCDF

Two panels will be organized to focus on two sub-themes. Each speaker will have 5-7 minutes, followed by 15-20 minutes of Q&A.

  • 9:35 – 10:15am: Panel 1: Mayors and Local governments share experience in championing Inclusive Urban Development
    • Honorable Mayor Valerie Plante, Mayor of Montreal, Canada
    • Honorable Mayor Yvonne Aki-Sawyerr, Mayor of Freetown, Sierra Leone
    • Honorable Mayor Uma Chowdhury Jolly, Mayor of Natore, Bangladesh
    • Honorable Mayor Zandya Mutwalib, Mayor of Mbale City, Uganda
  • 10:15 – 11:00am: Panel 2: Development agencies and practitioners discuss priorities for promoting inclusive urban development 
    • Mr. Rene Peter Hohmann, Acting Head of Programmes at Cities Alliance
    • Ms. Angela Mwai, OIC – Human Rights and Social Inclusion Unit, Urban Practices Branch, UN-Habitat
    • Ms. Susana Torre, Architect, Critic and Educator
    • Ms. Samina Anwar, UNCDF –IncluCity Index: Tool for Sourcing and Financing Inclusive and Gender Responsive Municipal Priorities in Cities  

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[1] UN (2018), ‘World Urbanization Prospects 2018’.

[2] Fran Tonkis, ‘City Government and Urban Inequalities’ (2020)

[3] UCLG (2020), Fourth Report of the Local and Regional Governments, ‘Towards Localization of the SDGs: How to Accelerate Transformative Action in the Aftermath of the COVID-19 outbreak’.

Development & Multilateral Finance Instruments: Time to transform

The MedaWeek Barcelona (Mediterranean Week of Economic Leaders) is nowadays the iconic conference dedicated to promoting the Mediterranean region worldwide. This event endorses the key economic sectors and the cultural values of this region through a wide variety of forums. MedaWeek Barcelona serves as the main meeting point for voicing the interests of the private sector in the socio-economic development of the Mediterranean countries.

On the 18th November 2020, MedaTalk held an important talk to provide an updated comprehensive overview of donor and financial instruments available to institutions, chambers, business associations and start-ups, and SMEs across the region and about mechanisms available for the private sector in the Mediterranean.

Issues discussed can be found below:

A. Multilateral Finance Instruments post COVID-19

  • How the pandemic has forced organisations in the development sector to change their approaches to fundraising?
  • Supporting Mediterranean Private sector’s economic empowerment post-pandemic.
  • Role that impact investors, financial institutions, responsible investors and the private sector could play in sustainable job creation and why this must be at the forefront of the Mediterranean region economic recovery post-pandemic.

B. Time to transform Development & Multilateral Financial resources in the Mediterranean region

  • Donor funding, banking and novel financial Instruments.
  • The rise of Development & Multilateral Finance institutions.
  • 2020-2025 funding preview: Looking at donors’ pipelines for the coming years.
  • What kind of work will the selected fund be used for?
  • Financing and promoting Mediterranean investments, creating partnerships, improving governance and mitigating risk can help make the region more attractive to business interests.
  • How can the necessary financial resources be mobilised and available to the Mediterranean private sector?
  • How can we help Business Support Organizations (BSOs) in the Mediterranean play a more active role in developing the private sector, SMEs and entrepreneurs, beefing up exports, luring investments and creating new jobs?

Guests:

Mohammad Abbadi, Senior Investment Manager, United Nations Capital Development Fund (UNCDF), participated to the talk and offered the contribution below:

The United Nations Capital Development Fund (UNCDF) makes public and private finance work for the poor in the world’s 47 least developed countries and developing countries. With its capital mandate and instruments, we offer ‘last mile’ finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

Let me focus my intervention on two areas:

One on urbanization in developing countries as trends clearly show that it is happening at an unprecedent rates… we see small villages and towns evolving to urban cities or towns at a rate that does not catch up with the infrastructure needs, creating an over load to the existing infrastructures and the inability of local governments and municipalities to meet the basic demands of their people.  To top it off, many cities and local governments in the developing countries depend largely on fiscal transfers from central government, with limited authority over their own source revenue, such as tax collection, which in most part is collected by local governments but transferred upward to central government, so it limits the revenue streams under local management and investment.

To add to the complication, in many developing countries, national policies may not always provide flexibility for municipalities to access capital markets, which further limits the financing flows to the local level which is where most development efforts are needed, and where over 50% of the SDGs targets must be met. So clearly we have a choice to make here, Either we build green cities that provide quality lives for the next generation or we face a paradigm shift in our existence with millions of people facing enormous challenges in their lives – many of whom will choose to migrate, as the increasing migration trends we are witnessing to the Mediterranean region.

At UNCDF we see this as a challenge and an opportunity, especially as a result of the Covid-19 Crisis, it was very evident that Local Governments were at the front line in the emergency response, and their role in the preparations, mitigations and rebuilding became center point in every discussion.

Here, it opens the question on what the role of the private sector is in fostering local economic development and the challenges faced at the local level. I think we can all agree that the private sector is the backbone of all developing countries, but such role cannot be looked at in isolation, because if we want a systemic approach that is inclusive and sustainable to the people and local territories, we must create an eco-system where both local officials, local planning and investment bodies are working hand in hand with private sector entrepreneurs and the youth in a coordinated way that can transform economies and investment in productive capacities. Not every growth is meaningful growth, and for growth to have an impact on the people, it has to be transformative and sustainable.

The UNCDF Center of Excellence in Local Government Finance and Local development Finance brings these two together. Our award Winning Dual Key approach, investing with impact, works through our various programmes, financing tools and instruments with cities and the private sector on three fronts:

  1. Systematically identify and encourage productive and catalytic investments in the developing countries;
  2. Strengthen small and medium-sized enterprises (SMEs) to make them bankable and investment ready;
  3. Unlock access to domestic finance and international commercial finance for private and public private investments that are revenue generating, but most importantly, have a transformative and measurable impact on the local economy such as on climate change, women’s economic empowerment and resilience.

Putting this in practice, we support Local Partners to source investments, undertake full due-diligence, structure the investments, assess the development impact and the financial impact additionality and sustainability, unlock additional financial flows to each investment through various blended finance instruments including UNCDF’s own grants, reimbursable grants, loans and guarantees, support the investments in the implementation phases, and advise on performance and impact measurement and reporting.

Our SME pipeline of investments have unlocked significant flows of financing from domestic commercial banks, and in some countries such encouraging results transformed into building national financing systems, such as sovereign wealth funds and line of credits in commercial banks that apply our Dual Key Approach on financing SMEs.

On the Municipal Front, we are building a global coalition with our partner UCLG on Municipal investment Finance to support local governments and municipalities in accessing financing flows, including blended finance instruments, to respond to their most pressing infrastructure needs including revenue generating investments, PPPs, Special Purpose Vehicles and even Pure Private Sector Investments that can transform local economies, create local jobs, protect the environment.

We have also entered into an agreement with a third party fund manager for the creation of the first in the world International Municipal Investment Fund (IMIF), which will provide debt instruments to cities and local governments for revenue generating investments at conditions that are more favorable to cities. UNCDF also entered into another agreement with a third-party fund manager dedicated for SME loans in the growth stage called Build. These are just few examples of new tools and financing flows that we are making available to developing countries.

The Covid19 experiences tells us that we need to build back better, but we cannot build back better if we keep looking at each client in isolation.  Our efforts brings both actors towards a common Local Economic Development approach that identify capacity gaps in promotion of LED, economic analysis, planning and investments, financing modeling and other tools to public and private partners; it focuses on building national platforms and mechanisms that sustain our approaches through local development funds, guarantee schemes, technical assistance facilities and financing networks’ and the Enabling environment to tackle policy, legislative and regulatory support for privates sector development and finally; supporting the development of pipeline of revenue generating investments in catalytic sectors that drive local value chains and add value to local economies and proof of concepts to markets, domestic commercial banks, international financiers.

LFI Global Board Meeting: Local transformation is critical for Agenda 2030 – ten years left…

Welcome to the second of two blog posts that will be issued this week about recent global meetings. The first post was about the 17th November meeting on Local Fiscal Space and the recovery from COVID 19. This second post is a report of the recent Board meeting of the Local Finance Initiative that discussed and approved strategies for local transformation in its member states.

But first, some context. The blog posted on November 4th outlines some of the differences between transformation and growth which informed the discussion at the meeting. A further feature of the conversations was a sense of urgency.

The next ten years are the last decade of action for the attainment of the SDGs. They will also see the graduation of many countries from the “least developed country” category to the “middle income country” group. But what do these categories really mean? In individual and personal teams we measure our wealth in terms of health, happiness, security and prosperity. We can argue about which of the four is most important to us at any given time, yet at a personal level we all know true wealth when we see it. After all, the etymology of wealth is in the old English word “weal” which means “a sustained pattern of health and happiness”

On an aggregate level, how to measure national wealth? The criteria for graduation from the status of “least developed country” include a per capita GNI of above $1,030, and a high enoughe score on two indices of social and economic conditions – the Human Assets Index and the Economic Vulnerability Index. But does meeting these data points really mean that the health, happiness, security and prosperity of a countries population is secured? Clearly, graduation is a milestone in a journey rather than a destination. It is also clear that to continue this journey graduation must be driven by sustainable transformation in social and economic conditions. Otherwise the journey risks coming to a premature stop shortly after passing the milestone. Bhutan recognizes this. Its planning ministry is called the Gross National Happiness commission has developed indicators that reflect not only growth, but transformation as well.

In broad terms, these were the issues debated at the Local Finance Initiative (LFI) Global Board meeting, which saw a high level representation from government, UN agencies, development partners and donors whose deliberations identified the modalities and range of support from the LFI programme that will help achieve stronger, more inclusive, and more resilient economic growth, particularly in light of the impact of COVID-19 on those furthest behind in our societies.

In his opening remarks, Ben Kumumanya, the Permanent Secretary in the Ministry of Local Government – Uganda said it was time for LFI to rethink and realign its priorities in the area of training for local governments and SMEs noting its relevance in accelerating local economic development. He added,

‘At the policy level, LFI should support the amendment of legislations to encourage private sector participation in the economies and also identify new sources of capital.’

Mr. Ben Kumumanya,
Permanent Secretary, Ministry of Local Government, Uganda

As an investment support capacity, the Local Finance Initiative helps countries deliver local economic development in collaboration with national institutions, local authorities and the private sector through a range of pioneering development capabilities and services which include but are not limited to: support to governments and the private sector with project preparation to meet the expectation and standards of financiers, Credit Guarantee Schemes (CGS) that help SMEs secure financing, and UNCDF financial instruments that catalyse access to additional funding for local economic development projects.

Ms. Rosa Malango,
Resident Coordinator, UN Uganda

Speaking at the meeting H.E. Rosa Malango,UN Resident Coordinator, Uganda declared :

I would like to commend UNCDF for supporting the transformation of communities in developing economies, especially in Least Developed Countries (LDCs) like Uganda in Africa and Asia. UNCDF programmes such as the Local Finance Initiative (LFI) respond to emerging needs being identified by Member States as each one of them strives to leverage the 2030 Agenda Sustainable Development Goals, the Addis Ababa Action Agenda, the Paris Agreement, and the New Urban Agenda to achieve their development and growth aspirations. 

She emphasized that she was pleased to learn that LFI is currently operational in eight countries including, Uganda, Tanzania, Benin, The Gambia, Bangladesh, Nepal, Lesotho and Guinea. She also said that it was important to acknowledge that LFI provides specific assistance to nine additional countries including Mali, Senegal, Kenya, Cambodia, Mozambique, Morocco, Ghana, Sao Tome and Principe, and Moldova.

She concluded saying that in Uganda UNCDF is a key member of the UN family and as such played a key role in the formulation of the new UN Sustainable Development Cooperation Framework 2021-2025, which was recently launched by H.E. President Yoweri Museveni.

She added that the Cooperation Framework is an inclusive partnership agreement which enables the United Nations to support the third National Development Plan and the national Vision 2040, by using the SDGs as shared targets for national prosperity for all.

H.E. Ambassador Dr. Perks Master Ligoya,
Chair of LDC Global Coordination Bureau, Permanent Representative of the Republic of Malawi to the UN and former Governor of the Reserve Bank of Malawi

Speaking at the meeting, the Chair of LDC Global Bureau, Ambassador Dr. Ligoya highlighted that financing is a cross-cutting issue in all areas of development from gender to private investment.

‘Financing does not reach the intended people – one study showed that only 20% of development funds reach the ultimate beneficiaries. Initiatives such as LFI will help governments’ development efforts to reach the ultimate beneficiaries,” he said.

This becomes more critical as countries move to middle income status, he asserted that, ‘Graduation to middle income should result in sustainable and resilient economies.’

Ambassador Ligoya also cautioned that rapid urbanization in LDCs is not matched with investments and welcomed initiatives such as the International Municipal Investment Fund that can co-invest with domestic banks in growing cities. LFI drives the technical assistance facility for this fund.

Explaining the role of LFI in supporting inclusive and sustainable development in local communities, David Jackson, the UNCDF Director of Local Development Finance said, 

“Through LFI we have supported the building of local capacities in production and enhancement of local capital markets. For example, our work with governments to establish Credit Guarantee Schemes (CGS) helps SMEs who are the backbone of economies so countries can achieve the transformation at various layers and improve the lives of millions of people.”

Mr. David Jackson,
Co-Chair of LFI Board, Director of Local Development Finance, UNCDF

The practical acceleration of local economic development and economic transformation solutions that reach the grassroots and solve development problems affecting communities require igniting sources of domestic finance especially as countries start to rebuild their economies from Covid 19.  And as more LDCs move to middle-income status, interventions such as those championed by LFI will ensure they do so sustainably.

H.E.     Ambassador     Rabab     Fatima,  
Permanent Representative  of Bangladesh to the UN

H.E.     Ambassador     Rabab     Fatima,  Permanent Representative  of Bangladesh to the UN stated her appreciation that UNCDF with an array of innovating financing tools including LFI have been providing critical support to SMEs in many LDC.

In my own country, its partnership with the Central Bank lead to a much needed credit guarantee scheme for the SMEs to fight back against the pandemic.

Morever she explained that Bangladesh is subscribing to the recommendation of the LFI report for an enhanced focus on productive capacity building in LDC for value creation and diversification of their economics.

LDC need enhanced assistance for equitable financing equitable access to financing advanced technologies and no house productive capacity building.We are keen to working with our partners to make this issue a central theme in the upcoming LDC five conference in Doha.

For climate vulnerable LDC’s like Bangladesh, the pandemic has forced multi-faceted challenges, like floods cyclones and other natural calamities, she declared that the country  happy to partner with UNCDF to scale up preparatory activities such as assessments, survey of different municipalities and districts to identify the vulnerabilities to tackle such risks.

Mr. Roland Mollerus, Secretary of the Committee for Development Policy, Chief of Development Policy Branch, UN Department of Economic and Social Affairs

Speaking at the meeting Mr Rolland Mollerus Secretary of the Committee for Development Policy, Chief of Development Policy Branch, UN Department of Economic and Social Affairs, declared that the new Doha PoA for the LDC will need to reflect the lessons from the unfolding global health and economic crisis and the implications for the LDC’s vision of improving the lives of millions of people in the most disadvantaged countries.

He stated that , ultimately, the success of this new programme of action will depend on the actions taken by the LDC and their development partners.

He stressed that it is equally important and an essential precondition for the success of the program of action is the choice of the framework used to organize the new programme of action.

The committee for development policy recommends that LDC5 adopts the theme expanding productive capacity for sustainable development as a framework for organizing the next programme of action.

The framework was developed by the committee based on analytical studies which built on the work UNCTAD and other organizations such as UNCDF

This analysis identified the limited development of productive capacities as the root cause of LDC persistent challenges, including insufficient progress in resilience building ,the failure to create decent and productive jobs and limited technological upgrading


Enhancing the role of inclusive financing vehicles such as the UNCDF’s LFI and integrating them into the financial sector are critical policy interventions for most of the LDC

If implemented successfully this  and other key measures towards the expansion of productive capacity will contribute to the implementation of the 2030 agenda for sustainable development thereby by ensuring that no country is left behind.

Mr. Ola Sahlen,
Program Manager, Swedish International Development Cooperation Agency (Sida)

Mr. Ola Sahlen, Program Manager, Swedish International Development Cooperation Agency (Sida) said that Sida is funding LFI through the Last Mile Finance Trust Fund mechanism and that it is part of the Swedish Governments support to UNCDF’s work. Ola recalled his field visit to LFI investments in Tanzania and the lessons learnt there.

The LFI BOARD Decision is currently being finalized and will be communicated once it has received official approval from the LFI member states.

Agenda of the LFI Board:

8:00am – 8:30am (New York time)3Opening
 Virtual Welcome :

Mr. Ben Kumumanya, Permanent Secretary, Ministry of Local Government, Uganda and co-chair of the LFI Board
Ms. Rosa Malango, Resident Coordinator, UN Uganda

Opening Remarks
H.E. Ambassador Dr. Perks Master Ligoya, Chair of LDC Global Coordination Bureau, Permanent Representative of the Republic of Malawi to the UN and former Governor of the Reserve Bank of Malawi
 H.E.     Ambassador     Rabab     Fatima,  
Permanent Representative  of Bangladesh to the UN

Mr. Roland Mollerus, Secretary of the Committee for Development Policy, Chief of Development Policy Branch, UN Department of Economic and Social Affairs

Mr. Ola Sahlen, Program Manager, Swedish International Development Cooperation Agency (Sida)
 
Moderator: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
8:30am – 9:20amSession 1: Presentation of LFI 2017-2019 Global Report and 2021 Draft Workplan
 Presentation Mr. Peter Malika, Global LFI Manager, UNCDF   Discussion session Board Members and observers   Moderator: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
9:20am – 9:30amBreak
9:30am – 10:20amSession 2: The Way Forwards
 Presentation of Country Examples:

The role of local economic development finance in accelerating the recovery from COVID-19
(Ms. Christel Alvergne and Ms. Sirra Foon)

Building productive capacity for structural transformation of local economies
(Mr. Dmitry Pozhidaev and Mr. Imanuel Muro)

Financing sustainable urban growth in developing countries (Mr. Jaffer Machano and Mr. Iqbal Abdullah Harun)  

Breakout Discussion on the three topics above Group 1: with French interpretation (Moderator: Ms. Christel Alvergne)

Group 2: without French interpretation (Moderator: Mr. Dmitry Pozhidaev)  

Each group will focus on the practical lessons learnt by LFI and the practical implications for LFI in 2021. Guidance will be provided to support 2021 activities.  

Recommendations from breakout discussions

Representatives from each breakout group  

Moderator: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
10:20am – 10:30amBreak
10:30am – 11:00amSession 3: Discussion and endorsement of the LFI Board Decision
 Closing Remarks: Mr. David Jackson, Co-Chair of LFI Board, Director of Local Development Finance, UNCDF
11:00amEnd of event

Rebuilding Local Fiscal Space

Welcome to one of two blog posts that will be issued this week about recent global meetings. This post is about the conference on Local Fiscal Space and the recovery from COVID 19 held on November 17th.

REGISTER HERE

During 2020 the coronavirus pandemic has rocked the world’s economy causing pain, tragedy and hardship at many levels and effecting seismic changes on how most people live and work. The primacy of local government as an essential institution in mobilizing an effective response and recovery to the pandemic has been demonstrated. The virus has shown that the social and economic response requires a localized but joined up action across different departments and agencies.

Economically, the pandemic has created the sharpest and swiftest drop in global economic activity ever recorded. This contraction has reduced revenues for households, governments (central and local) and for private sector enterprises. Looking ahead to 2021, whether or not there is a swift vaccine and things return to “normal” or whether the pandemic continues for some time, some things are already clear.

Firstly, there have been winners and losers. Online platform providers, remote conferencing software providers, streaming services, delivery services and other businesses that do not require face to face customer interaction have clearly benefited from the pandemic. The “street sector”, which is a major contributor to fiscal revenue and constitutes a social safety net that connects the urban and rural economies (in many developing countries), has been a loser from the pandemic – the consequences of this loss will become apparent in 2021. This sector includes transportation, street sellers, markets, shops and stores and light processing and value addition such as mechanics, tailors, and ironware welders.

Secondly, the geographical scope of value chains has shrunk and many governments and policy makers have been reminded of how far the “just in time” economic model has spread. Attention is now being paid to the local de-industrialization of the last 20 years and governments are seeking to rebuild a domestic capacity to produce basic food and consumer produce within their own national economies. Examples include garments and basic pharmaceuticals. There is surprise that many countries, including developing countries, no longer have the capacity to domestically manufacture soap, for example.

Finally, fiscal space has contracted significantly. In 2021 governments will have less money to spend at time when there will be greater demands on their services. This may have political consequences and there is a risk that citizens will lose faith in government’s ability to serve them leading to further loss of trust and privatization of these services with consequences for those less able to pay.

Experiences so far have shown that especially four factors have impacted the local government fiscal space – 1) Loss of own source revenues due to COVID-19, 2) Non-conducive intergovernmental fiscal transfer system and/or insufficient adjustments of this, 3) Loss of local economic development and finally 4 ) Increase in local government costs due to the impact of COVID-19.

In this context, UNCDF started the Rebuilding Local Fiscal Space Initiative in close collaboration with various partners. Its overall objective is to provide tools and recommendations on the improvement of the local fiscal space in light of the COVID-19 challenges through a case-by-case review and analysis of the core factors impacting this in a range of selected municipalities. The focus of the review will be the four factors mentioned above (1, 2, 3 and 4), which contribute to this loss in the fiscal space and review of possible measures which can rebuild local fiscal space and accelerate national economic recovery and rebuild trust in public institutions, which should be both central government’s and local government’s responsibility.

This initiative will include two main phases – Phase 1) Understanding the four factors that contribute to the loss of local fiscal space, and Phase 2) Designing and testing the three measures to accelerate recovery and rebuild trust. Currently six cities have participated in the initial study including Kumasi (Ghana), Chandpur (Bangladesh), Gulu Municipality (Uganda), Chefchaouen (Morocco), Chiapas (Mexico), and Telita (Moldova).

Objective

The UNCDF Rebuilding Local Fiscal Space Conference will bring together mayors and local government officials of the participating cities and other interested cities, central government representatives and high-level participants from development partners, with the objective to:

  • Present the findings of the initial study in phase 1 of the initiative;
  • Discuss and explore the measures to accelerate economic and fiscal recovery in phase 2 of the initiative;
  • Raise awareness of the imperative of rebuilding local fiscal space.

REGISTER HERE

Opening Remarks

Ms. Maimunah Mohd Sharif,
Executive Director, UN-Habitat
Dr. Rathin Roy,
Managing Director (Research and Policy), Overseas Development Institute (ODI)
Mr. David Jackson,
Director of Local Development Finance, UNCDF

Presentation of Initial Study Findings :

Ms. Gundula Löffler,
Research Fellow, ODI
Mr. Jesper Steffensen,
Senior Partner, Dege Consult

Panel Discussion

Honorable Mayor Mohamed Sefiani,
Mayor of Chefchaouen, Morocco
Honorable Mayor Osei Assibey Antwi,
Mayor of Kumasi, Ghana
Honorable Mayor George Labeja,
Mayor of Gulu Municipality, Uganda
Honorable Mayor Rodica Russu,
Mayor of Telita, Moldova
Honorable Mayor Advocate Jillur Rahman Jewel,
Mayor of Chandpur Municipality, Chandpur, Bangladesh
Dr. Javier Jimenez,
Secretary of Finances of the State of Chiapas , Mexico
Mr. Jaffer Machano,
Municipal Investment Finance Programme Manager, UNCDF

Closing Remarks:

Ms. Emilia Saiz,
Secretary General, United Cities and Local Governments (UCLG)
Mr. David Jackson,
Director of Local Development Finance, UNCDF

REGISTER HERE

8:00am – 8:15am (New York time)[1]Opening
 Opening Remarks
Ms. Maimunah Mohd Sharif, Executive Director, UN-Habitat
Dr. Rathin Roy, Managing Director (Research and Policy), Overseas Development Institute (ODI)
Mr. David Jackson, Director of Local Development Finance, UNCDF  
8:15am – 9:20amMain Session
 Presentation of Initial Study Findings :

Ms. Gundula Löffler, Research Fellow, ODI
Mr. Jesper Steffensen, Senior Partner, Dege Consult  

Panel Discussion
Honorable Mayor Osei Assibey Antwi, Mayor of Kumasi, Ghana
Honorable Mayor Advocate Jillur Rahman Jewel,
Mayor of Chandpur Municipality, Chandpur, Bangladesh
Honorable Mayor George Labeja, Mayor of Gulu Municipality, Uganda
Honorable Governor Rutilio Escandón, Governor of Chiapas, Mexico
Honorable Mayor Rodica Russu, Mayor of Telita, Moldova
Honorable Mayor Mohamed Sefiani, Mayor of Chefchaouen, Morocco  
Q&A   Moderator:
Mr. Jaffer Machano, Municipal Investment Finance Programme Manager, UNCDF  
9:20am – 9:30amClosing
 Closing Remarks:
Ms. Emilia Saiz, Secretary General, United Cities and Local Governments (UCLG)
Mr. David Jackson, Director of Local Development Finance, UNCDF  
9:30amEnd of event

International Municipal Investment Fund – Technical Assistance Facility

Welcome to another local government finance blog from United Nations Capital Development Fund. This is the third of three blogposts leading up to the November 5th meeting of Finance ministries, Central Bankers, and Local Governments from a group of developing countries that are members of the Local Finance Initiative (LFI). The meeting will discuss strengthening domestic capital markets and promoting investment in local economic development by domestic banks. Today’s post is on financing urbanization. The previous two posts looked at financing local economic transformation and at how the Local Finance Initiative applies spatial economics to finance at the (real) frontiers. On the 75th anniversary of the United Nations it is useful to reflect on the changed demographics of the world and the type of financial arrangements and institutions that are now required. When the UN began the world was predominatly rural with only 30% of people living in urban areas. By 2010 we reached a 50/50 share. Today around 66% of us live in towns and cities – a complete reversal of the situation at the founding of the United Nations. This reality required a refreshed development paradigm and innovative financial thinking. In 2016 the New Urban Agenda was adopted at the United Nations Conference on Housing and Sustainable Urban Development (Habitat III) in Quito, Ecuador. It was endorsed by the United Nations General Assembly in December 2016. UNCDF shared its reflections on development financing and cities in the New Urban Imparative for Secondary Cities and increased its capacity in local infrastructure finance. UNCDF and UNDESA also published best practice case studies in Financing Sustainable Urban Development in the Least Developed Countries. In 2018 UNCDF began working with development finance institutions and United Cities and Local Governments (UCLG) in the Malaga Coalition for a global financial ecosystem that works for cities and local governments. The Malaga Coalition partners agreed that a dedicated local government friendly investment fund would contribute to the goals of the coalition by making capital available at the right price and in the right format for local investments with high impact. Such a fund would also contribute to policy and regulatory reform through demonstration investments that could be replicated by others, particularly in co-financed with domestic financial institutions. At the UCLG congress in Durban, November 2019 it was announced that Meridiam was selected as the Fund Manager for the International Municipal Investment Fund. In January 2020 UNCDF launched the prospectus for the Technical Assistance Facility for the IMIF (IMIF-TAF) and provided some initial funding to enable work to begin on the IMIF pipeline. Thanks to the generous support of Sweden and Switzerland (through the BluePeace initiative) the IMIF – TAF is now operational. It uses UNCDF’s local development finance “dual key” pipeline management and the Local Finance Initiative investment structuring capacity. The LFI Board will discuss the progress on both investment structuring and regulatory reform. IMIF TAF also offers technical support to prepare the policy and regulatory environment for municipal finance. In summary, it supports cities and local governments in the following areas:
  • Capacity Strengthening: Support for local governments to promote local economic development, economic analysis, planning and capital investments; capacity support to investment projects on business plan development, financial modeling and other tools;
  • Enabling Environment: Policy, legislative and regulatory support to central and local government authorities to promote local economic development finance and local capital markets including technical support to mechanisms such as project finance and domestic bond markets;
  • Pipeline of Revenue Generating Investments: Support to projects in catalytic sectors that address the urbanization and climate imperative, add value to local economies and provide proof of concept to market regulators, domestic financial institutions, commercial banks, and international financiers. “Dual Key” Pipeline and Local Development Investments
Development work should not be paused due to COVID-19, rather, development institutions need to focus on a way to work with certain restrictions in place. Despite COVID-19, the technical team of the IMIF TAF have started working on project preparation in the target cities. For areas where UNCDF does not have geographic presence, or in unable to physically be present its partners, a considerable amount of work is being undertaken virtually. Project preparation work does have some dependency on the need to be physically present, however, a considerable amount of work can be completed virtually. The team is working on developing these project, so that once travel restriction are lifted, we would be able to send our technical teams to fill any gaps which require physical presence on the ground. Some cities that have been involved in this process so far include Freetown, Sierra Leone  20200620_MAP502 UNCDF is in partnership with Freetown City Council (FCC – the municipal government of the city of Freetown, the capital of Sierra Leone, established in 1893) to enable its access to market financing for its development plan “Transform Freetown”, thereby contributing to transforming the City of Freetown for the benefit of Freetown’s residents. UNCDF and FCC will partner through the Blue Peace Financing initiative set up within the framework of UNCDF partnership with the Swiss Agency for Development and Cooperation and Geneva Water Hub. Freetown is Sierra Leone’s capital city and the seat of government. It is the largest city in Sierra Leone and the engine of Sierra Leones economy, creating 30% of the country’s GDP despite housing only 15% of its population, and occupying less than 0.5% of the national land mass. With over one million residents, and a growth rate of 4.2% per annum, Freetown’s population is expected to double by 2028 Chefchaouen, Morocco chefchaouen The municipality of Chefchaouen seeks to modernize its public lighting system. It has an estimated population of over 45,000 inhabitants and has a public lighting network with an estimated length of 105 kilometers, serving 3,534 lighting points controlled by 51 electrical cabinets totaling an estimated installed power requirement of 530 KW. By upgrading the public lighting to energy efficient light emitting diode (LED) bulbs, which can be up to 90% more energy efficient than incandescent and mercury light bulb, the city can realize cost saving from lower energy consumption and reduced maintenance and operational costs. To realize these financial benefits, an upfront cost of the upgrade is required with a high cost per unit. LED upgrade of public lighting does not only increase luminosity but are also more climate friendly that their tadeonal counterparts due to longer lifespans and improved efficiency. UNCDF has initiated the project with the municipality and some of the areas of the engagement cover:
  • Review of the current status of the available public lighting system to have an updated technical study.
  • Financial analysis of the project and the city to understand the debt carrying capacity of the city and a due diligence on the quality of revenue generated by the city to cover debt obligation.
  • Revise the actual cost of the project – estimated at 1.3 million Euro – to reflect current market pricing.
Since the project does not generate revenue this means that revenue risk is managed by the city. The team is structuring a mechanism to legally ring-fence municipal revenue to service the debt obligation. Kumasi, Ghana Kumasi_cdb The Kumasi Metropolitan Assembly (KMA) seeks address the issue of lack of available parking in the city and to redevelop an existing market. These are two priority areas identified by the KMA that require support. It may be worthwhile to note that Kumasi is the second largest and fastest growing city in Ghana. The issues of congestion and lack of available parking is hindering the ability to properly manage the growth of the city.
  • Development of a multi-story parking lot: Seeks to create room for an efficient movement of people, good and services in and out of the city center, by developing a centralized parking lot with the capacity for 2,500 vehicles. This will reduce the on-street parking facilities which currently clog 88% of the Central Business District.
  • Redevelopment of the Afaso market: Seeks to redevelop the market into a modern market with 988 retail spaces and additional support services needed..
UNCDF has initiated the project with the municipality with the end goal of a fully funded and constructed project which is operational. Some of the areas of the immediate engagement covers:
  • Technical Analysis
  • Economic Implication Analysis
  • Environmental and Social Analysis
  • Project Finance Model
  • Demand Risk Assessment
  • Legal and Tax Review
Kumasi, population 2.5 million, is the capital of the Ashanti region, a formerly independent kingdom pre-dates the formation of Ghana by 100 years. The city has a rich cultural heritage that is particularly evident in smaller surrounding towns. Trade, textiles, farming and mining are leading industries in Kumasi. It is among the largest metropolitan areas in Ghana. Agua Granda, Sao Tome agua-grande-2São Tomé is the capital and largest city of the Central African island country of São Tomé and Príncipe. Its name is Portuguese for “Saint Thomas“. Founded in the 15th century, is one of Africa’s oldest colonial cities. Poi Pet, Cambodia
Municipal solid waste disposal in Poit Pet
The current pandemic means that Cambodia is keen to accelerate its economic integratation with its neighbours and diminish its relieance on global value chains. Poi Pet, on the border with Thailand, expanded from 43,000 inhabitants in 1998 to 90,000 in 2008 and over 140,000 today. Vehicle parts manufacturing in Poi Pet is supplied by cheap electricity from Thailand. The long closed international rail link was re-established in 2018. The local government in Poi Pet is struggling to keep pace with the rapid increase in waste.
The government and UNCDF are working on an innovative Public Private Partnership for a $30m waste to energy project in Poi Pot which will simultaneously fix the waste problem and generate power for the expanding economy. This uses incineration with energy recovery technology and is expected to have an annual waste processing capacity of 50,000 tons and an electricity generation output of 25,000 MWh per year. The plant will also supply steam for nearby processing industries. The financial structuring includes creative solutions that build on the border location. Chadpour, Bangladesh Bangladesh’s rapid urbanization has incentivized UNCDF to pilot its Municipal Investment Financing (MIF) programme and to develop financing instruments, such as Public Private Partnerships and Municipal Bonds, that diversify and aggregate municipalities’ financial base beyond annual grants provided by the central government. DCIM101MEDIADJI_0133.JPG 121959478_3359841880789598_1705263764498917874_n

Metamorphosis: Kafka or Cytora?

Welcome to the latest local government finance blog from United Nations Capital Development Fund. Finance ministries, Central Bankers, and Local Governments from a group of developing countries are meeting on Thursday November 5th at the Local Finance Initiative annual board meeting to discuss strengthening domestic capital markets and promoting investment in local economic development by domestic banks.

This is the second of three blogposts leading up to the global board meeting which will highlight some of the local development finance issues that will be addressed. Today’s post is on financing local economic transformation. Yesterday’s post was about how the Local Finance Initiative applies geographical economics to finance at the (real) frontiers. Tomorrow we will look at financing urbanization.

We are living in unprecedented times – the 2020 global Coronavirus pandemic has totally dominated attention in all corners of the World. The economic effect of the 2020 means that 2021 will be a year of economic recovery. The speed and inclusiveness of that recovery remains to be seen. Will the recovery will be driven by pre-existing value chains or new ones? Most importantly, will the recovery continue the transformation of local economies, raising their productivity, diversifying their base and increasing their resilience to external shocks? Or will the economic transformation of developing countries be knocked backwards or sideways by a recovery that weakens fiscal space and reduces local productivity whilst nominally providing jobs? These are not simply academic questions. 2021 will also be the year of LDC V – the fifth UN conference on the Least Developed Countries which will set the new Programme of Action for the LDCs (PoA) for the period 2021 -2030, during which many of them are expected to graduate from LDC status. Graduation requires reaching a GNI per capita of $1,230 for three successive years and reaching a specified level on the Human Assets Index and Economic Vulnerability index. However sustainable graduation means more than passing statistical milestones. It means transforming local economies – through a metamorphosis into new economic structures.

Metamorphosis means more than growth

Growth is not the same as change. This is especially the case in countries that are rapidly urbanising without the concomitant productivity gains in urban areas and agricultural transformation in peri-urban and rural areas. Recent studies by UNCTAD and by the European Investment Bank suggest that this exactly what is happening in many current LDCs.

Perhaps for this reason the United Nations Committee for Development Policy recommends that LDC V adopt the theme “Expanding productive capacity for sustainable development” as a framework for the next PoA. Their analysis points to the longstanding vulnerabilities exposed by the Coronavirus pandemic (such as over exposure to single industries like tourism or extractive industries and an inability to produce locally basic essential products such as hand sanitizer). The Committee identifies “the limited development of productive capacities as a root cause of LDCs’ persistent challenges, including insufficient progress in resilience building, the failure to create decent and productive jobs, and limited technological upgrading.”

The United Nations Capital Development Fund, as one of the support measures for the LDCs works with local governments, ministries of finance and central banks to develop national platforms for building productive capacity financed through primarily domestic capital markets. The Local Finance Initiative deploys technical expertise in local economic development to engage directly with the private sector and primarily domestic banks to stimulate increases in productive capacities in specific local economies. This contributes to, inter alia, economic development initiatives, or area development programmes, or municipal development strategies, or building climate resilience.

Currently the Local Finance Initiative, is deployed in seventeen countries in cooperation with their central and local government institutions and domestic banks. These include broad support to Tanzania, Uganda, Benin, Gambia, Bangladesh, Nepal, Lesotho, Guinea Conakry and specific support to transactions in Mali, Senegal, Kenya, Cambodia, Mozambique, Morroco, Ghana, Sao Tome and Principe, Moldova. The Local Finance Initiative’s team of investment officers works with local developers and local public institutions to structure investments and bring them to financing through domestic banks and the domestic capital markets. Each transaction is identified with two key criteria in mind: Firstly, its transformational effect on the local economy in line with the CDP analysis; Secondly, its ability to change risk perception of domestic institutions and crowd in further local investment in line with sustainability and development effectiveness. The “dual key” investment approach and its pipeline were awarded a prize for innovation in SME finance by the International Finance Corporation during 2019.

The annual report that will be discussed at the board meeting is now online here. It highlights the work of the Local Finance Initiative during the 2017 – 2019.

Of course, during 2020 a key focus of LFI was COVID-19 using UNCDF’s Dual Key Rapid Response System. As the COVID-19 pandemic is inflicting economic harm in global markets, small and medium-sized enterprises stand the greatest risk of experiencing devastated impacts. Businesses in the service and manufacturing sectors were significantly impacted, due to the halting of operations, slow down of production inputs and demand on products and services, or their inability to implement preventative health measures imposed by the governments or due to the rise in operating costs due to adopting these additional health measures.

The SMEs sector is considered the backbone of the LDCs. Sustaining SMEs in local settings is also crucial to sustainable local economic development. In response to these challenges, UNCDF in collaboration with UN sister agencies and with local governments deployed the LFI approach and its Rapid Dual Key SMEs Grant System to support local governments in identifying SMEs in critical value chains that require injection of capital to sustain their operations due to their financial and development impact importance to local communities and local governments.

For example, in Senegal a partnership between UNDP, UNIDO, UNFPA, UNCDF, FAO, UNWOMEN utilised the Dual Key SMEs Grant System to contribute to the resilience of enterprises and to Support the prevention of COVID-19 by ensuring that the most vulnerable people have access to protective resources in Sandiara, Bargny, Ndiob, Ndiaffate and Mont Rolland localities. As a result, of 139 applications screened 20 SMEs passed through the Dual Key financial and technical impact criteria. At the national scale, UNCDF has worked with FONSIS, the sovereign wealth fund of Senegal to invest in the sectors that promote Women’s Economic Empowerment.

n Zanzibar, in UNCDF LFI partnered with UNDP to support the Government of Zanzibar and its local governments recover from the shock to the tourism industry by re-investing in other value chains such as such as Fishing and Aquaculture. 22 screened project developers aiming to secure required capital to sustain their operations.

Full credit to the Governments of Sweden, Tanzania and Norway, and the ONE UN Fund Tanzania for their generous support to the Local Finance Initiative during the period 2017–2019.