Local Finance Initiative Global Programme

Report Cover Image
Evaluation Plan:
2016-2017, UNCDF
Evaluation Type:
Mid Term Others
Planned End Date:
11/2017
Completion Date:
11/2017
Status:
Completed
Management Response:
Yes
Evaluation Budget(US $):
107,600

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Download document Summary of the LFI Programme Board Comments on the LFI Evaluation.pdf related-document English 411.41 KB Posted 464
Download document LFI MTE_Final Report.pdf report English 647.92 KB Posted 694
Download document LFI ToR.pdf tor English 359.22 KB Posted 1095
Download document LFI MTE Final Report_Appendices final.pdf related-document English 2357.63 KB Posted 862
Download document ToR for LD investment committee.pdf related-document English 628.17 KB Posted 706
Download document Decision LFI Global Programme Board 15-16 May 2017.pdf related-document English 828.27 KB Posted 368
Title Local Finance Initiative Global Programme
Atlas Project Number:
Evaluation Plan: 2016-2017, UNCDF
Evaluation Type: Mid Term Others
Status: Completed
Completion Date: 11/2017
Planned End Date: 11/2017
Management Response: Yes
Focus Area:
  • 1. Others
Corporate Outcome and Output (UNDP Strategic Plan 2014-2017)
Evaluation Budget(US $): 107,600
Source of Funding:
Evaluation Expenditure(US $): 107,600
Joint Programme: No
Joint Evaluation: No
Evaluation Team members:
Name Title Email Nationality
Ganesh P. Rauniyar Team Leader
Priscilla Phelps Team Member
GEF Evaluation: No
Key Stakeholders:
Countries: GLOBAL
Lessons
Findings
1.

A. Relevance and Quality of Design

1.1. How relevant is the Local Finance Initiative (LFI) to the programme countries in which it has intervened? The aim of the LFI programme to deliver inclusive, sustainable and gender-equitable LED is highly relevant in all three countries evaluated. Poverty reduction?the ultimate aim of LFI?is also a national priority in each of the three LFI countries.

The lack of capital for both private and public sector investments undermines economic development generally and LED in particular, as has been recognized in the national development plans of the participating countries:1

  •  Tanzania’s Vision 2025 calls for investment in infrastructure with the involvement of the private sector and communities and the National Five-Year Development Plan (2016/17- 2020/21) focuses on implementation constraints for LED including the need to track LED plans prepared by local communities.
  •  Uganda's Second National Development Plan (2015/2016-2019/2020) calls for the promotion of LED and states that the private sector has an important role in sub-national development and finance.
  •  Benin’s Vision 2025 seeks to promote private sector revitalization and business development to achieve sustainable acceleration of economic growth and transformation.

Tag: Relevance Gender Equality Programme/Project Design Financial Inclusion Poverty Reduction Private Sector

2.

The TOC also does not show how PI leads to improved legal and operational frameworks. Nevertheless, the RRF for the LFI-T Phase 1 included outcomes and activities related to the development of an improved institutional framework?specifically, support to policy reforms and national capacity development?but these outcomes were eliminated in the global programme and subsequent national programme RRFs. This change may have led to reduced attention to institutional reforms and national capacity building in subsequent work plans.

The TOC also suggests that PI will lead to improved international LED support frameworks and to more support from the international community. The RRFs and programme designs go further in identifying the central place of international (and local) partners in LFI, but neither is specific on the criteria for partner selection or on how partnerships will be employed or maintained.

Monitoring should provide feedback from projects to the programme, but LFI does not have tools to systematically monitor targets or identify the factors affecting project financing and implementation. Not collecting, disseminating or applying this knowledge to make programme activities more effective reduces LFI’s relevance. For instance, issues such as delays in project preparation and lack of equity may be more related to management shortcomings in the firms or LGAs and lack of risk management tools than with shortcomings of the financial sector, but the emphasis remains on preparing financial applications.

 


Tag: Effectiveness Monitoring and Evaluation Theory of Change

3.

1.2. How well is LFI situated in comparison to similar initiatives by other national and international development partners?

LFI appears to be unique in both Tanzania and Uganda in offering the combination of technical assistance, seed capital and help with access to financial institutions.

However, numerous other private, public and non-governmental projects provide technical support, facilitation of financing and/or financing on favourable terms particularly for agro processing and renewable energy projects.3 To name a few examples, the International Finance Corporation’s (IFC) $5 million Scaling-up Renewable Energy in Low Income Countries Programme launched in 2015 in Tanzania promotes commercially viable mini-grid business models and advises banks on financing mini-grid developers.4 REA in Tanzania provides advisory services to developers interested in investing in hydropower generation. In Uganda, private dairy companies provide technical support to dairy farmers. In both Tanzania and Uganda, national organisations and development partners are implementing programmes to increase capital investment and to match projects with investors, such as Uganda’s BID Network.


Tag: Effectiveness Relevance Bilateral partners Financial Inclusion

4.

1.3. How coherent is the programme design to the achievement of overall programme objectives?

The programme design is coherent with overall programme objectives at both the policy and project level.Since LFI was first implemented as a pilot programme in Uganda, the goals were not only to scale up individual country programmes but to transform LFI into a global programme. The design appears to be sufficiently flexible for this to occur without losing the coherence of the programme. For example, the expansion of LFI into Benin with a food security focus and linkage to the F4F programme still fits within the larger LFI programme concept. The selection of specific sectors and geographical locations in consultation with government also appears to work well.


Tag: Coherence Implementation Modality Programme/Project Design National Institutions Private Sector

5.

1.4. How well have LDCs and development partners at the central and local levels supported the LFI programme objectives?

National governments support LFI programme objectives according to interviews conducted and as demonstrated by their willingness to enter into country framework agreements and participate in PBs and SCs. Both national government and LGA officials are convinced that LFI represents a unique opportunity to mobilize finance for LED projects.

The evaluation team spoke with only one local development partner other than LGAs. In Uganda, the Inclusive Dairy Enterprise (TIDE) project is working with the UCCCU dairy producers who would partially own the project being assisted by LFI (Farmers Creameries Ltd. [FCL] processing plant). While TIDE was aware of LFI’s involvement, the TIDE project does not depend on the FCL project being financed.5


Tag: Effectiveness Bilateral partners Country Government Donor Financial Inclusion Private Sector

6.

1.5. How well designed is the LFI programme with a view to later transition, expansion and replication in line with UNCDF’s maturity model?

UNCDF’s “maturity model” consists of three stages: innovation, consolidation and scale up.6 The intention with LFI was to develop a successful model, test it in Tanzania and replicate it in other countries while scaling it up in Tanzania. The time required to develop the model to a mature state was not estimated at the outset, although the replication goal in the global RRF is eight countries by year five (2017 or 2018).

The LFI programme design represents a departure from previous LD programmes, given that LFI attempts to mobilize funds from private domestic financial markets. While each new programme is an advance on its predecessors, the move from donor funding to market funding for infrastructure is probably the most ambitious transition LD has attempted to date.


Tag: Relevance Sustainability Programme/Project Design Strategic Positioning Theory of Change

7.

1.6. To what extent did programme design sufficiently took into account crosscutting issues?

The programme design has adequate focus on three key cross-cutting issues.

Gender: The LFI global programme document states that gender will be mainstreamed by (i) embedding gender equality criteria in tools for project selection and development and (ii) advocating for women’s participation in development activities supported at the local level, including in local government structures. The expectation is that this two-pronged approach will not only give women the opportunity for capacity building, it will help ensure that women entrepreneurs have equitable access to productive resources. To understand this aspect of the programme design, the evaluation team reviewed programme materials (including those for outreach), the project portfolio and arrangements made by LFI to work with IELD.


Tag: Relevance Gender Equality Women's Empowerment Programme/Project Design Women and gilrs

8.

B. Efficiency in the Use of Resources

2.1 What is the quality of programme management and how well has the initiative delivered its expected results to date?

Programme management. Management functions7 for all three LFI countries are carried out from the Tanzania office, although many aspects of planning, staffing and control are prescribed by UN policies and systems. Recruitment and direction of local staff, business processes and resource management are mostly handled locally by an internationally recruited Programme Manager. LFI takes key management decisions in consultation with the LDF Practice at UNCDF headquarters in New York.

Business systems. The programme’s business processes and systems make it difficult for the Programme Manager to optimize programme resources. LFI lacks proper systems to plan and allocate human resources on a weekly or monthly basis and to analyse project costs. Staff, consultants and travel accounted for 53 percent of programme resources during 2012-16, but there is no system for charging these costs to projects, an essential tool for analysis and control of project costs and for calculating the value of LFI-donated labour.


Tag: Efficiency Communication Human and Financial resources Project and Programme management

9.

While CFPs provide transparency to the project selection process, LFI has not assessed whether CFPs are the best tool for project identification. They take considerable staff time and most submitted projects are rejected. The evaluation team concluded that too many projects are being accepted – more than LFI has the resources to support in a reasonable time period, which has led to a practice of leaving LFI’s commitment to the “selected” projects somewhat vague and open-ended.

Requests for applications (RFAs) have not been used to preselect financial institutions, although this approach was originally considered, because LFI believes banks wouldn’t tolerate being scrutinized in such a way. Banks are approached on a case-by-case basis once loan applications are completed, based on the preferences of developers and perceived interests of the bank. Given the number of projects that are delayed indefinitely attempting to meet the conditions precedent of lenders, a less “arms-length” approach might be more efficient at mobilizing bank financing for LFI projects.


Tag: Effectiveness Relevance Human and Financial resources Partnership Project and Programme management

10.

The evaluation team observed that some project delays could be attributed to LFI itself, including failure to anticipate certain predictable project challenges. For example, since LFI-T Phase 1, LFI has supported the Kibaha modern market (see case study C. in Appendix 12), which requires formation of a Special Purpose Vehicle (SPV). However, a consultancy to propose the SPV structure was contracted only in 2016. Lack of equity is causing delays in numerous projects, but so far LFI has limited ability to help project developers raise equity. This raises a question about the allocation of staff resources, and whether it might be more effective for LFI to outsource more of its analytical work so that IOs and the Programme Manager can focus on mobilizing finance and other finance-related aspects of programme delivery.


Tag: Challenges Coherence Human and Financial resources Project and Programme management

11.

Delivery of results. Although the small LFI-T Phase 1 team was very active, it did not meet a number of the targets established in the programme documents and AWPs. At the same time, the funds provided were approximately 70 percent of the amount originally budgeted [$3.5 million versus $5.1 million (estimated)]. By programme end, UNCDF projected it would finance 10 to 15 LED projects (Output target 2.3), form 5 new partnerships (Outcome target 4), increase the amount of bank financing by 100 percent to at least $8 million, mobilize $2 million from institutional investors and mobilize $20 million of credit enhancement. None of these targets were met, nor were targets revised. The monitoring system proposed for the programme [programmatic component (d) in the LFI-T programme document, page 32] was not put in place, nor were baselines established, which made tracking and reporting on all commitments difficult. Remarkably, when UNCDF published its final report for LFI-T Phase 1, the original RRF outcomes were not reported on nor even mentioned.10


Tag: Effectiveness Human and Financial resources Project and Programme management Bilateral partners Donor

12.

Cost effectiveness. Total expenditures of the LFI programme were $6.07 million for 2012-16, of which 21 percent or $1.3 million was used for grants. (An analysis of programme costs is found in Chapter II, Section A.7). The ratio of private financing raised to UNCDF funding would show how effectively LFI funding was used to leverage private financing. However, it is difficult to calculate this until private loans directly attributable to LFI efforts are closed and/or disbursed. In addition, to calculate leverage at the project level, LFI needs to first track actual LFI costs per project, as discussed elsewhere in this report.

As designed, the benefits of LFI go beyond financing, and include improved operational and legal frameworks and strengthened local capacity. LFI believes that all projected benefits are being and will continue to be realized, albeit with delays. However, a complex set of outcomes coupled with an inadequate monitoring system, as discussed earlier, does not permit the programme’s intangible benefits to be monitored.


Tag: Effectiveness Human and Financial resources Project and Programme management Bilateral partners Donor

13.

2.2 What is the quality of programme outputs delivered to date?

Technical and financial support. The main programme output is the technical and/or financial support provided by LFI to project developers. Programme participants generally consider the quality of the technical assistance they receive and the dedication of LFI staff to be high. Several project developers noted that they did not know where they could get comparable assistance. The content of technical and financial analyses appears uniformly rigorous across projects, due to the use of LFI’s standard analytical tools.


Tag: Effectiveness Policies & Procedures Financial Inclusion Capacity Building

14.

2.3 What is the current and likely performance of investments financed at the local level in LFI programme countries?

To date, there is no universe of completed projects on which to base a prediction about the performance of investments. The best information available to the evaluation team to judge performance came from site visits and the case studies prepared as a part of the evaluation (a summary of the case studies is included at the end of this section and detailed case studies are located in Appendix 12).


Tag: Effectiveness Project and Programme management Financial Inclusion

15.

For public sector projects, it is more difficult to use leadership as a criterion for success, since LFI has experienced both executive staff reassignments and new officials elected during the course of LGA project preparation. To provide stability to local government projects, it may be necessary to provide more long-term project-level technical support to LGAs.

The performance of LED projects is also related to their impact on the ground. This is a function of how benefits generated by the investment are shared between project developers and suppliers, users, employees and other project stakeholders.14 Currently, LFI MOUs and Grant Agreements make no demands on project developers receiving assistance with respect to the sharing of benefits (for instance, agreeing to minimum wages, decent working conditions, maximum prices, mediation of disputes, etc.). Even the requirement that cash grants be reimbursed to LFI mentioned in the LFI-T Phase 1 programme document has been dropped.


Tag: Effectiveness Efficiency Resource mobilization Financial Inclusion Private Sector

16.

Contacts with financial institutions happen late. LFI may work for one or more years with sponsors before making contact with financial institutions. In one case (Newla's Gelato) an entire Information Memorandum was prepared before two banks rejected the project because it was perceived to be a start-up. The Luswisi project is likely to experience delays while financing is mobilized because there does not appear to be any concerted equity raising effort taking place, which could be happening even while the engineering study is carried out. LFI might consider forming an advisory or "pre-loan" committee of bankers to review projects with LFI at an early stage. LFI might also dedicate one staff person specifically to helping project sponsors with fundraising.


Tag: Efficiency Financial Inclusion Private Sector

17.

2.4 What is the quality of programme monitoring systems?

Detailed programme monitoring frameworks were reportedly prepared for all LFI programmes.15 The LFI-T Phase 1 programme document envisioned development of a monitoring system using existing monitoring tools, as well as performance tracking tools to be introduced under LFI-T. These tools and systems would be used to track project status, financing mobilized, policy and operational reforms; and partnerships, programs and services provided for LED with international development community support. Indicators were also to be developed to monitor the economic development impact of the programme.


Tag: Effectiveness Monitoring and Evaluation Project and Programme management

18.

2.5 How well are partner contributions and involvement in programme implementation working?

Members of SCs and PBs and their organizations are priority counterparts for LFI (although the evaluation team did not consider all members to be partners). SCs and PBs are meeting in all countries, although not on their planned schedules (at least 4 times per year for SCs; once per year for PBs). In the past 2 years, the Tanzania and Uganda SCs have met approximately every 8 months.


Tag: Sustainability Resource mobilization Bilateral partners Country Government Donor

19.

How far is the programme contributing to improvements in capacity and changes in the behaviour of public and private sector project developers to identify and develop small to mediumsized infrastructure projects at the local level in programme countries?

3.2. How far is the programme contributing to the improved capacity and changes in the behaviour of the domestic financial sector to providing financing for small- to medium-sized infrastructure projects at the local level in programme countries?

The LFI TOC makes it clear that LFI is largely intended to be a capacity building programme, in which the project development and financing process is used as a sort of laboratory for those whose capacity is being built (hence the use of the phrase “demonstration project”). The two programme outcomes that all LFI RRFs share concern capacity for project development and capacity for project financing (Outcomes 1 and 2, respectively).

 


Tag: Effectiveness Partnership Theory of Change Capacity Building National Institutions Private Sector

20.

LFI seems to prioritize its own capacity needs over those of counterparts. Having in-house capacity is certainly necessary for LFI to deliver on programme outcomes. However, some recalibrating may be needed to prioritize more the capacity building needs of counterparts, based on several observations: (a) LFI staff tend to conduct analyses internally when outside experts (and LFI oversight) might be more efficient; (b) LFI has focused on developing tools that serve LFI (project screening tools, for example) more than counterpart agencies; (c) LFI has no platform for sharing tools, reports, data, project case studies, etc. with partners; (d) in Uganda, MOLG commented to the evaluation team that the ministry would prefer the IO be housed in the ministry so its staff could absorb his expertise; and (e) an apparent lack of emphasis on capacity building in local institutions (academic institutions, business support entities, etc.) that have the potential to sustain LFI approaches over time.


Tag: Effectiveness Sustainability Country Government Capacity Building National Institutions Private Sector

21.

Awareness of LFI and its objectives is not very high. The RRFs and LFI staff mention the need for awareness of LFI in two contexts in particular: (a) awareness of project developers of LFI CFPs and (b) awareness of bankers of the LFI programme and of the non-recourse project financing model. LFI and MOLG concluded from the most recent Uganda CFP that different awareness-building measures were needed to stimulate interest in CFPs within the public and private sectors. That MOLD did not successfully mobilize local governments (by its own admission) suggests that LFI may have overestimated its counterpart’s outreach capacity. Or it may be that without more training to understand what launching a privately financed project or PPP entails, local governments reticence to submit proposals is well-placed. In this case, awareness is a by-product of capacity building.


Tag: Effectiveness Country Government Awareness raising National Institutions Private Sector

22.

D. Impact on Broader Policy, Financing and Economic Systems

4.1. To what extent is the programme on track to supporting the building of an improved policy and institutional enabling environment to channel resources (both domestic and international) to financing local level infrastructure in LFI target countries?

The programme TOC envisaged the need for improvements in national legal frameworks. As mentioned earlier, policy and legal reform was an outcome only in the LFI-T Phase 1, but remains an output in subsequent RRFs.

UNCDF provided inconsistent responses as on whether promoting reforms in the enabling environment is a focus of the programme. According to the LFI Programme Manager, LFI has not yet initiated any overall policy reform agenda in any of the countries covered by this evaluation, but has taken a more situational approach to address specific policy reform needs. This is driven by the perception of LFI that legal, policy and institutional reforms take time and higher level engagement with the government and other constituencies than LFI has the resources to maintain.


Tag: Impact Human and Financial resources Monitoring and Evaluation Capacity Building Institutional Strengthening

23.

4.2. To what extent can programme activities be linked to increases or decreases in the domestic and/or international resources set aside for infrastructure development at the local level?

There is no evidence to date that the LFI can be linked to increases or decreases in the domestic and/or international resources available for infrastructure development.

UNCDF expected to raise significant additional donor resources from both domestic and international sources for LFI beyond the initial contribution from Sida. As described to the evaluation team, and shown in the Programme Data Sheet on page resource mobilization efforts by the Programme Manager at the national level and by UNCDF at the international level have maintained a small but stable funding stream, but these efforts have not raised significant additional resources nor diversified the donor base. (The evaluation team was not able to verify how ambitious these activities have been.)


Tag: Effectiveness Sustainability Resource mobilization Project and Programme management Donor

24.

Given these uncertainties, financial institutions in both Tanzania and Uganda currently have a small appetite for long-term LED investments without a high proportion of equity in the financial structure or government guarantees. Unfortunately, it does not appear that strategies originally proposed by LFI to encourage banks to lend, such as loan pools and various forms of credit enhancement, are being actively pursued.

 


Tag: Resource mobilization Donor

25.

4.3. To what extent is the LFI programme likely to contribute to initiating or sustaining broader economic development in the localities where it is present? The LFI TOC envisions that the implementation of "catalytic projects" will produce development impacts including contributing to employment generation, income production and ultimately to poverty reduction in the participating countries. Since the projects are at different stages of development, and few have been implemented, it is difficult to predict their contribution to local economic development in the places where they are (or will be) located.


Tag: Impact Sustainability Inclusive economic growth

26.

E. Sustainability of Programme Results within the Broader Policy Environment

5.1. To what extent is change in the policy and institutional level supported by the programme likely to continue over time?

LFI focuses strongly on the preparation of investment projects, as if this were the principal impediment to LED financing. But this is clearly not the case, and in fact improvement in the national legal framework is one of the core elements of the LFI TOC.

LFI is carrying out or proposing to carry out activities that will contribute to the operational aspects of sustainability. These include setting up National Platforms in LFI countries (although concrete results so far are limited). In Uganda, LFI has supported establishment of the LED Unit within the Ministry of Local Government. LFI’s work to establish public-private governance structures for LGA projects will contribute to sustainability. LFI has supported the establishment of SPVs for Same District Council, Kinondoni Municipality, Arusha City, Kibaha Town Council and Ileje District Council. These are useful initiatives that need to be followed through to implementation.


Tag: Effectiveness Sustainability Financial Inclusion Institutional Strengthening National Institutions

27.

5.2. What are the prospects for continued financial and social performance of the portfolio of LFIsupported investment projects over time?

By design, the LFI programme is to provide revenue to the developers and socioeconomic benefits to the wider local communities, particularly for the poorer segments of the population now mostly engaged in primary production and/or wage employment. Yet to date, the projects in LFI’s portfolio in all three countries are mostly in the process of accessing finance (See Appendix 6 for a list of projects in various stages of financing.)). As a result, there is no sample of completed projects whose prospective financial and social performance can be assessed.

 


Tag: Effectiveness Sustainability Risk Management Financial Inclusion

28.

F. Gender Equality and Women’s Empowerment

6.1 To what extent is the LFI programme aligned with UNCDF’s gender mainstreaming strategy and LDCs’ national gender-related goals?

As described throughout the evaluation, gender equality is a core objective of the LFI programme. The programme documents speak clearly about seeking gender-related outcomes. In addition, the evaluation team observed that LFI staff members are sensitive to gender issues and are committed to supporting projects that contribute to women's economic empowerment.

Women play an important role in agriculture in LFI countries. Therefore, the programme focus on agricultural-based investments could be an important entry point for women's economic empowerment.

The evaluation shows that the programme is well-positioned to contribute to gender equality and gender mainstreaming in LED. UNCDF’s agreement with IELD has the potential to provide significant benefit and to fill gaps identified in the gender framework. These include developing a gender action plan, updating the LFI RRF to incorporate results indicators related to gender and defining a strategy to reward staff for efforts to further the goal of women’s economic empowerment


Tag: Gender Equality Women's Empowerment Financial Inclusion

29.

6.2 Did the LFI programme strategically allocate resources (funds, human, time and expertise) to achieve gender-related objectives?

The programme’s resource allocation seems to be gender neutral. Of the seven Investment Officers at LFI (five in Tanzania, and one each in Benin and Uganda), the gender composition is 6 male and one female. Overall, female staff account for 30% of the total (4 out of 12, all based in Tanzania).


Tag: Efficiency Human and Financial resources Operational Efficiency

30.

6.3 How are women and men likely to benefit from the LFI project activities?

As stated earlier, it is too early to predict how women and men are likely to benefit from the LFI project activities because most projects are at the initial stages of financing and implementation. Generally, men benefit more than women from programmes such as LFI unless women’s enterprises are sought out, or the programme targets sectors where women are active.

The evaluation team noted that LFI is actively seeking to support viable investment proposals proposed by women developers, but its strategy has yet to be fully consolidated. It was not evident that LFI had identified sectors where women are heavily represented. The pipeline of projects in all three countries suggests substantial focus on agro-processing investment proposals, which could be a means for preferentially benefitting women, but a concerted effort would be required to identify and follow up on these opportunities.

It should also be noted that the evaluation team did not identify any human rights concerns in carrying out the evaluation and concluded that LFI staff are prepared to address these issues should they be found.


Tag: Effectiveness Impact Financial Inclusion Private Sector Women and gilrs

31.

6.4 Are the gender-related outcomes likely to be sustainable?

The sustainability of gender-related outcomes will depend on instilling the philosophy of women’s economic empowerment in counterpart organizations and on developing leadership among women entrepreneurs.

Selecting and supporting of women-owned projects is part of this formulation, but it may take more effort to convince leaders to continue with these efforts. LFI in association with IELD and other agencies needs to focus strongly on these issues in the remaining programme period, in order to ensure their sustainability. UNCDF management can contribute by setting a high standard when reviewing annual work plans and establishing and monitoring programme benchmarks.


Tag: Sustainability Gender Equality Women's Empowerment Financial Inclusion

32.

Environmental management: LFI programme documents assume that LFI projects will demonstrate prudent management of local resources and environmental impacts and wherever possible contribute to environmental sustainability.

LFI follows UNDP’s environmental safeguard requirements in investment proposals. It also requires that project sponsors conform to the environmental review process called for in each country’s environmental management framework (law or other) and implement any requirements that result from national environmental reviews. LFI has not independently reviewed the soundness of national laws, nor would this be expected of an individual programme of the scale of LFI. However, staff members seem to be diligent in ensuring programs have complied with national requirements.

 


Tag: Sustainability Project and Programme management

33.

Food security: The global programme document recognizes the importance of the private sector, including SMEs, in ensuring food security and the need to develop new financial mechanisms for food production and marketing. LFI anticipated that food security would be a government priority for LFI, especially in Africa, and that the programme could focus on improving all four pillars of food security?availability, stability, accessibility and utilization. This possibility has been strengthened by linking LFI with the F4F programme.


Tag: Food Security Private Sector

34.

Cost-effectiveness of LFI assistance cannot be assessed. As explained earlier, LFI keeps no records of the hours spent on client projects. With the available currently information, it is not possible to estimate the full financial contribution of LFI to the projects it supports or the time required to carry out new tasks or to assess the benefit produced relative to LFI's cost. In some cases, the value of staff time could be higher than the grants awarded to projects. (In the cases studied, staff advisory time is shown as "no valuation.") An effort to record and value staff time might help LFI staff members better identify with the private market forces that are driving its clients' decisions.


Tag: Effectiveness Efficiency Human and Financial resources Project and Programme management

35.

LFI’s relationships with clients are very informal. In only two of the six projects analysed had a memorandum of understanding (MOU) been signed with the developer. (Draft MOUs were found in some cases, but no signed versions, which could be just a record keeping issue.) The LFI MOU uses very open-ended language on the services to be provided (Article II. Areas of Cooperation) that puts no upper or lower limit on the time to be spent, the date for delivery of these services or the outcomes expected. The wording of the MOU may limit LFI’s obligations (LFI staff expressed this belief). However, several developers mentioned that their expectations were not met or that they were confused about the exact support being provided and the delivery timeframe. The failure to sign MOUs and the vague language of the MOU could ultimately create liabilities for UNCDF and at a minimum a reputational risk with governments and clients.

The case studies reveal some general patterns in LFI assistance. Along with the site visits, they also provide clues about the future contributions of these projects to local economic development. Nevertheless, it is impossible at this stage to assess the impacts on backward and forward linkages, since those relationships have not yet been established since the majority of the projects are not yet in full operation.


Tag: Relevance Financial Inclusion Private Sector

36.

SC minutes contain reminders to LFI staff of issues that have not been addressed since previous meetings and expressions of concern about the lack of progress in implementing projects. For example, the Uganda SC reminded LFI staff of an agreement made during programme development that had not been followed up on, which was to create a platform for project developers, financiers and other stakeholders to network, share experience and resolve constraints. Minutes are also very brief and contain many grammatical errors.


Tag: Sustainability Resource mobilization Bilateral partners Country Government Donor

37.

A challenge for LFI with respect to capacity-building is addressing the unique capacity requirements of private sector, public sector and public-private partnership developers. With such a broad agenda, and limited resources, LFI requires a well-defined capacity-building strategy and a well-organized capacitybuilding effort. The evaluation team received positive feedback from the project developers visited and noted the constructive relationship with key counterparts, but could not verify whether the current approach to capacity building is reaching its desired results due to a lack of verification within the programme (for example, assessments of specific capacities before and after). Nor did it appear that alternative approaches had been considered such as classes for groups of developers or engagement of academic institutions. LFI needs a more strategic to accomplish the programme’s original objectives for capacity building.

The following findings contributed to the evaluation team’s conclusions regarding the capacity building strategy:

LFI has not systematically assessed capacity needs or developed roadmaps for capacity building. Such an exercise could have helped to ensure that limited resources are being used effectively. It could have started with identifying specific indicators of capacity on both the development and financing side and defining which dimensions of capacity it hopes to influence, namely: institutional arrangements, leadership, knowledge and accountability.2


Tag: Effectiveness Partnership Theory of Change Capacity Building National Institutions Private Sector

38.

LFI’s government counterparts do not mention the programme or its activities on their web sites. Doing so would help build public awareness in the public sector and development community.

A number of LED developers shared their original misperceptions about LFI and the purpose of the CFPs and training events, pointing out particularly the difficulty of interpreting the CFP application. Some participated in CFPs and training expecting that it would make their projects eligible for grant funding.


Tag: Challenges Country Government Awareness raising National Institutions Private Sector

39.

Training. Training activities attract large numbers of participants, which indicates a high level of interest. The training materials reviewed were well-prepared and technically sound (and ambitious in scope, given the context). The concepts underlying LFI’s project development and financing activities are complex and may be difficult to convey in a training session of 1-2 days. LFI provided sample copies of feedback forms from two training participants to demonstrate that feedback is being collected, but no evidence that the feedback from trainees is being compiled, summarized or used to modify subsequent events or activities. This makes it difficult to gauge participant satisfaction or training impact.


Tag: Effectiveness Relevance Policies & Procedures Theory of Change Capacity Building

Recommendations
1

Stay committed to the original private financing objective of LFI. The unique feature of LFI is its stated commitment to mobilizing private financing for LED. Seeking financing from nongovernmental and sector-specific sources can provide a more diverse funding base for LFI and its supported projects, but this will have corresponding costs. The evaluation team concluded that LFI needs a closer relationship with the financial sector and that all avenues for mobilizing private finance have not been adequately investigated.

2

2. Refocus on the capacity-building purpose of LFI. The principal outcome of LFI should be strengthened capacity: to develop projects, to finance projects and to support policy reforms aimed at improving the domestic capital mobilization for LED investments. But over the evaluation period LFI spent only 2 percent of its resources on learning and workshops. It is recommended that LFI develop and follow a capacity building strategy after analysing with government and other development partners how and where LFI can contribute the most to building capacity that will persist after the programme ends. It is also recommended that LFI select projects with their capacity-building potential in mind and create a budget earmark for training.

 

3

3. Develop a project support strategy.  To help increase the effectiveness of LFI’s support, LFI should define a clearer project support strategy that establishes policies for:

  •  Project selection (CFP or other)
  •  Allocation of staff and other resources to projects
  •  Categorization of projects (assignment to Tiers and identification of bottlenecks)
  •  Conditions on developers in return for LFI support
  •  Exit strategy from a support relationship

Policies should be enforced through MOUs signed with each developer before assisting a project. LFI also needs to estimate the cost of project preparation upfront, ensure there are adequate resources available and monitor expenditures. In some cases, LFI might require developers to cofinance preparation and/or develop lower-cost interventions. It is also recommended that LFI reassess the use of non-reimbursable grants to project developers, especially for seed capital.

4

4. Engage more strategically on the policy and legal reform agenda. In collaboration with other agencies and economists and other experts, LFI should develop a more robust analysis of the impediments to domestic capital mobilisation to support LED. It should also update the Uganda and Tanzania financial scans, in order to identify more clearly the reforms already underway in these countries and those still needed. It is recommended that with the support of involved agencies, LFI more clearly define its niche and visible contribution to the reform agenda

5

5. Leverage LFI expertise through information sharing and communications. LFI should develop a knowledge management and information sharing strategy to leverage and disseminate LFI concepts and tools. To ensure sustainability, UNCDF should identify means and strategic partners for disseminating its expertise, perhaps through joint training, syllabus development, policy roadmaps, a report card and/or the development of a web site or LED finance dashboard.Government counterpart agencies also need to be asked to share information publicly about the purposes and activities of their work with LFI.

6

6. Build programme leadership and improve governance. LFI should consider simplifying the LFI governance structure to include only a Programme Board or Steering Committee in each country with equal representation from public and private sector (particularly the financial sector), perhaps supported by an executive subcommittee. These entities need to be empowered through clearer terms of reference and more effective management tools, allowing them to better monitor and lead the programme. SC/PB members should also be acknowledged in LFI publications.

7

7. Strengthen project monitoring and project management systems. LFI needs better monitoring and management systems to optimize its support to developers and other programme activities and to measure results. Both the Theory of Change and the global and country Results and Resources Frameworks should be reviewed and possibly revised in collaboration with a monitoring expert and government counterparts. It is recommended that the programme agree on standard terminology and identify outcome-oriented SMART monitoring indicators that better align outputs to available resources. LFI also must develop tools to assess the LED impact of LFI investments over time. A mutually agreeable entity should be found to continue the LED monitoring process after LFI phases out.

8

8. Capitalize on linkages with other UNCDF programmes. The evaluation team recommends that LFI be proactive in defining how other UNCDF programmes can provide sector-specific technical support to developers and thereby complement the finance-related support of LFI, while being willing to work in sectors where this support does not exist if they are government priorities. LFI also needs partners who can facilitate contacts with women entrepreneurs and support womenowned businesses with the potential to deliver LED benefits. LFI should support and closely monitor the work of IELD, while cultivating relationships with other organizations that support women’s entrepreneurship. It is also recommended that the synergies between Financial Inclusion and LFI be more clearly identified and better exploited.

9

9. Cultivate strategic partnerships. It is recommended that LFI conduct a stakeholder mapping exercise in each country so that it can strategically identify and target potential partners (public sector, private sector, financing institutions, and development partners) with which to collaborate. It should also to provide adequate resources to nurture, formalize and operationalize key national and local partnerships. Other recommendations include that LFI move from an ex-post to an exante financing approach with donors, refine the national platform concept and ensure that the proposed financing/guarantee facility not compete with country programmes for donor support.

10

10. Fund LFI adequately or scale back commitments. It is recommended that LFI’s resource mobilization strategy be more aggressive, in order to provide adequate resources for the programme. This could entail partnering in fundraising with agencies promoting private finance or with complementary UNCDF programs, approaching financing sources involved in output-based aid, focussing more on addressing equity constraints and recycling programme resources through reimbursable grants. If it is not possible to fulfil financial commitments made with government counterparts, UNCDF should consider scaling back LFI and concentrating only the highest priority activities or locations, or possibly becoming an adjunct to another donor programme. The entry into new countries should only occur once a financial scan is prepared by an objective third party and operational and policy conditions are met. Conditions should include having the resources to provide adequate staffing in new countries.

11

Evaluation recommendation or issue: 10. Fund LFI adequately LFI or scale back commitments.

1. Recommendation:

Stay committed to the original private financing objective of LFI. The unique feature of LFI is its stated commitment to mobilizing private financing for LED. Seeking financing from nongovernmental and sector-specific sources can provide a more diverse funding base for LFI and its supported projects, but this will have corresponding costs. The evaluation team concluded that LFI needs a closer relationship with the financial sector and that all avenues for mobilizing private finance have not been adequately investigated.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Overall comments: Management would like to thank the evaluators for their efforts in evaluating a complex and fast moving programme and for grappling with the technical and programmatic issues involved. The mid-term evaluation has produced useful recommendations which have been used to strengthen LFI as it develops into an investment preparation facility to promote transformative local development and deepen domestic capital financing markets in Least Developed Countries.

The evaluation covers the period leading up to the introduction of the Dual Key system for sourcing and appraising UNCDF Local Development Finance investment opportunities. Under this approach, the thematic development project (for example Women’s Economic Empowerment) identifies high impact investment opportunities that, for structural reasons, cannot obtain finance from capital markets.  The role of LFI is to structure these transactions and make them financially sustainable. The Local Development Finance investment committee requires both an impact ‘key’ and a financial sustainability ‘key’ before unlocking UNCDF seed capital grants, loans or guarantees to the investment. Some of the perceptive comments in the evaluation report have played an important role in strengthening and refining the Dual Key system and its associated LFI pipeline.  The evaluation also covered the period leading up to the operationalization of the UNDCF Least Developed Country Investment Platform (LDC-IP), an in-house debt facility providing loans and guarantees to investment opportunities in the LDCs. The Dual Key Local Development Finance pipeline is a source of investments for the LDC-IP, which approved its first deals during 2017. This debt finance is in addition to the seed capital grant finance provided by LFI in making the transaction financially sustainable. Again, the recommendations of the evaluation report were used to strengthen the internal due diligence processes applied by UNCDF in its capital finance work. How each relevant recommendation was applied is highlighted below.

The LFI Programme Board, including LFI national steering committee representatives from the Governments of Uganda, Tanzania and Benin met in New York during November 2017 to consider the (then) draft evaluation report and its recommendations – many of which have direct implications for local government institutions and for domestic investment policy for local economic development. Following a two-day meeting the board approved ‘comments’ as an input to the UNCDF management response to this evaluation (the summary of the LFI Programme Board comments is available under “Documents” here: https://erc.undp.org/evaluation/evaluations/detail/9315)

Please note that some of the action items in the Management Response apply to more than one recommendation, since some of the recommendations are interlinked. There are 22 unique action items flowing from 10 recommendations.

Key Actions:

2. Recommendation:

2. Refocus on the capacity-building purpose of LFI. The principal outcome of LFI should be strengthened capacity: to develop projects, to finance projects and to support policy reforms aimed at improving the domestic capital mobilization for LED investments. But over the evaluation period LFI spent only 2 percent of its resources on learning and workshops. It is recommended that LFI develop and follow a capacity building strategy after analysing with government and other development partners how and where LFI can contribute the most to building capacity that will persist after the programme ends. It is also recommended that LFI select projects with their capacity-building potential in mind and create a budget earmark for training.

 

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: Management agrees with this recommendation. The original private financing objective of LFI has never been in question. The responses below indicate the steps that are being taken to secure the future of the programme. The recommendation and report refer to credit enhancement tools other than grants; these are now introduced with the UNCDF Least Developed Country Investment Platform (LDC-IP) - a debt facility within the Fund. This will attract private finance by blending its concessional funding with domestic private banks and other investors. In addition, the Local Development Finance Practice has begun to issue reimbursable grants to de-risk LFI transactions in line with the evaluation recommendation. The evaluation also recommends exploring all avenues for increasing private finance. The response has been to accelerate engagement with domestic banks and DFIs for access to investible capital and for access to guarantee facilities. UNCDF’s Local Development team recognize that giving priority to the domestic capital markets and unlocking domestic savings are key to accelerating transformation of LDCs. A view shared by UNCTAD and UNDESA in their annual LDC reports. The LFI experience has demonstrated that domestic financial institutions do not incur foreign exchange risks and also have a different perception of political risk than international investors. For this reason, once their initial reticence has been overcome, they can be effective providers of capital.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
1a. Introduce credit enhancement and debt instruments in UNCDF
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD, PMSU, MSU 2018/03 Completed The LDC-IP approved $185,000 in guarantees and $250,000 in loans for LFI investments during 2017. History
1b. Accelerate the implementation of reimbursable grants for LFI seed capital.
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD, PMSU, MSU 2018/08 Completed First reimbursable grant disbursed December 2017. Awaiting approval of Reimbursable Grant policy. End Q2 2018 for approval of policy. Target: 40% of LFI grants to be reimbursable by Q1 2019 History
1c. Deepen engagement with DFIs and other financial bodies for access to capital and guarantees
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD, PPC 2019/01 Completed During 2017 an additional $2m was secured for lending from SIDA. In 2018 SIDA agreed a four-year commitment to the “Booster Fund” some of which will be used for seed capital investments. Norway also approved funds that will be used for LFI seed capital. Discussions continue with other partners. Ongoing discussions with USAID DCA and SIDA on access to guarantee facility for specific LFI investments History
1d. Establish LD investment committee that will approve all disbursement of seed capital and all requests to the LDC-IP for debt capital. The dual key system means that the LD investment committee requires both an impact key and a financial sustainability key for unlocking any UNCDF capital.
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/03 Completed The LD investment committee met 14 times in 2017 and 2018, approving twenty-four investments. $1,773,165 in Seed Capital Grants, $275,000 in reimbursable grants, $200,000 capitalization of a credit guarantee scheme, $185,000 in guarantees (submissions to the LDC IP) and $ $2,167,179 in loans (submissions/in process to the LDC IP). (The ToR for the LD investment committee is available under “documents” here: G:\TOR_LDIC\LD Investment Committee ToR (tc).pdf) Under the LD dual key system independent discussants sit on the LD investment committee to provide third party verification of the impact key, which is monitored by the UNCDF development project that has sourced the investment HQ attach link to minutes G:\minutes\LDIC_Minutes_2017_2018.zip History
1e. Include financial sector representatives as non-voting observers of LFI country steering committees (domestic institutions only), LFI programme board and in the LD investment committee
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed Attached TOR of the LFI programme Board. The new governance structure of the LFI programme does not have the Steering Committee as approved by the Global LFI Board which serves this role. Financial sector representatives will sit on the LD investment committee in 2019, Non-disclosure agreements are under review by those agencies. G:\TOR_LDIC\LD Investment Committee ToR (tc).pdf History
3. Recommendation:

3. Develop a project support strategy.  To help increase the effectiveness of LFI’s support, LFI should define a clearer project support strategy that establishes policies for:

  •  Project selection (CFP or other)
  •  Allocation of staff and other resources to projects
  •  Categorization of projects (assignment to Tiers and identification of bottlenecks)
  •  Conditions on developers in return for LFI support
  •  Exit strategy from a support relationship

Policies should be enforced through MOUs signed with each developer before assisting a project. LFI also needs to estimate the cost of project preparation upfront, ensure there are adequate resources available and monitor expenditures. In some cases, LFI might require developers to cofinance preparation and/or develop lower-cost interventions. It is also recommended that LFI reassess the use of non-reimbursable grants to project developers, especially for seed capital.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: Capacity building is a key purpose of LFI and management agrees with recommendation. During 2017 three developments have enabled LFI to re-focus:

+ Firstly, the LFI board meeting of May 2017 approved the following conditions for LFI expansion into any given country: 1) Letter of application delivered to the Chair of the LFI board and signed by the Permanent Secretary or equivalent level of the Government Ministry or Government Department responsible for local government affairs with no objection from the Ministry of Finance; 2) Proven existence of the source of funding for LFI seed capital (from government, local government, development partners or other sources); 3) Sufficient regulatory environment to enable investment in LFI pipeline (this includes regulatory environment for public private partnerships with local government and for SME investments). The establishment of the Senior Investment Manager enables the LFI manager to focus on the capacity building, policy and reform agenda in each country (The LFI Programme Board decisions from May 2017 is available under “Documents” here: https://erc.undp.org/evaluation/evaluations/detail/9315)

+ Secondly, the LFI board meeting of November 2017 agreed to establish a tailored capacity development strategy in each LFI country and include these in the 2018 workplan.

+ Thirdly, the same LFI board meeting agreed to establish Local Government PPP units and a Private Finance Liaison Function in the relevant partner government bodies. These will contribute to the capacity building efforts

Key Actions:

Key Action Responsible DueDate Status Comments Documents
2a. Approve policy and financial pre-conditions for establishing LFI in each country
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/03 Completed History
2b. Draw up and implement funded capacity development and communication strategies for local development finance platforms in each LFI country.
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed This include to request all government counterpart agencies to include information on LFI on their web sites. Co-host events in collaboration with national and international partners and document lessons learned. History
2c. Establish local government PPP offices in each LFI country
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed Completed in Uganda and Tanzania. Benin expected during 2018. History
2d. Establish private Finance Liaison function in office of LFI partner government institutions
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed In each LFI country, the LFI government coordinator has been appointed and is liaison of all LFI matters in the country. History
2e. Conduct participant evaluations after training activities
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed Participants evaluation will be shared with all stakeholders History
4. Recommendation:

4. Engage more strategically on the policy and legal reform agenda. In collaboration with other agencies and economists and other experts, LFI should develop a more robust analysis of the impediments to domestic capital mobilisation to support LED. It should also update the Uganda and Tanzania financial scans, in order to identify more clearly the reforms already underway in these countries and those still needed. It is recommended that with the support of involved agencies, LFI more clearly define its niche and visible contribution to the reform agenda

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: The Local Development Finance team has been restructured in line with the evaluation recommendations. The establishment of the Senior Investment Manager facilitates the work of the LFI manager in creating simple, industry standard and robust templates and methods. The LFI manager will liaise with the LDC-IP where relevant in this work and will engage industry professionals from outside to peer review the instruments. Professional financial management software is being procured enable tracking and monitoring of the pipeline and the technical assistance – including tracking of staff time. The Senior Investment Manager enables the LFI Programme Manager to focus on strategic management, overall quality assurance of the transaction support and capacity building and national systems development.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
3a. Establish Senior Investment Manager function
[Added: 2018/01/30]
LD 2018/03 Completed Senior Investment Manager now operational History
3b. Procure, install and operate professional financial management system
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed Pipeline financial management system design is completed. Contractor has been identified and initial technical meetings held. History
3c. Publish peer reviewed LFI operations manual
[Added: 2018/01/30] [Last Updated: 2020/07/06]
LD 2020/06 Completed Publishing stage History
3d. Establish Dual Key system. This includes an annual LD Investment Plan and budget, for sourcing, appraising, structuring and financing investment opportunities. The Investment Plan to be funded by the LD projects that are sourcing the transactions and other resources available. The investment plan is approved by the LD Investment Committee.
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/03 Completed As of January 2018, the Finance 4 Food programme, the Municipal Investment Finance programme and the Women’s Economic Empowerment programme are sourcing LFI investments. The Local Climate Adaptive Living Facility, the AGREM local economic development programme in Guinea, the LoTUS local economic development programme in Asia and the DINU local economic development programme in Uganda will source LFI transactions during 2008 History
3e. Accelerate the implementation of reimbursable grants for LFI seed capital.
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD, PMSU, MSU 2018/07 Completed First reimbursable grant disbursed December 2017. Awaiting approval of Reimbursable Grant policy. End Q2 2018 for approval of policy. Target: 40% of LFI grants to be reimbursable by Q1 2019 History
5. Recommendation:

5. Leverage LFI expertise through information sharing and communications. LFI should develop a knowledge management and information sharing strategy to leverage and disseminate LFI concepts and tools. To ensure sustainability, UNCDF should identify means and strategic partners for disseminating its expertise, perhaps through joint training, syllabus development, policy roadmaps, a report card and/or the development of a web site or LED finance dashboard.Government counterpart agencies also need to be asked to share information publicly about the purposes and activities of their work with LFI.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: Recommendation accepted. A Local Development Finance technical advisor has been assigned to develop a methodology for scanning the financial environment, which will be carried out every two years in each LFI country in conjunction with relevant independent think tanks in each country.  The LFI board meeting of April 2017 approved the following conditions for LFI expansion into any given country: 1) Letter of application delivered to the Chair of the LFI board and signed by the Permanent Secretary or equivalent level of the Government Ministry or Government Department responsible for local government affairs with no objection from the Ministry of Finance; 2) Proven existence of the source of funding for LFI seed capital (from government, local government, development partners or other sources); 3) Sufficient regulatory environment to enable investment in LFI pipeline (this includes regulatory environment for public private partnerships with local government and for SME investments). The establishment of the Senior Investment Manager enables the LFI manager to focus on the capacity, policy and reform agenda in each country in line with this recommendation.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
4a. Develop methodology and template for scanning the financial environment together with partners
[Added: 2018/01/30] [Last Updated: 2019/06/12]
LD 2019/03 Completed This template will further be enhanced as we develop the LFI operations handbook per information on 3c above. History
4b. Approve policy and financial pre-conditions for establishing LFI in each country
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/03 Completed History
6. Recommendation:

6. Build programme leadership and improve governance. LFI should consider simplifying the LFI governance structure to include only a Programme Board or Steering Committee in each country with equal representation from public and private sector (particularly the financial sector), perhaps supported by an executive subcommittee. These entities need to be empowered through clearer terms of reference and more effective management tools, allowing them to better monitor and lead the programme. SC/PB members should also be acknowledged in LFI publications.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: Recommendation accepted. At the Programme Board meeting in November 2017 it was agreed to establish a Private Finance Liaison function within government PPP offices to mobilize finance for long term investment through national platforms for local development finance. This function can help to establish the necessary partnerships for the national platform in each country. It requests that LFI support the establishment of this function. The LFI programme team will develop a capacity building and communications strategy for each LFI country to accelerate the sustainable creation of national platforms for local development finance.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
5a. Establish private Finance Liaison function in office of LFI partner government institutions
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/09 Completed History
5b. Draw up and implement funded capacity development and communication strategies for local development finance platforms in each LFI country.
[Added: 2018/01/30] [Last Updated: 2020/09/16]
LD 2020/06 Completed The global communication strategy was developed with the goal to spotlight how LFI’s work has supported the government’s local development agenda and how the lives of LFI beneficiaries have changed. The strategy has been implemented and the following outputs have been generated to date: • 10 short creative video clips of 1-3 minutes to be used for online digital platforms have been produced. • 200 photographs of projects have been taken. • Multiple human-interest stories for each project from the perspective of the beneficiaries i.e. men, women, youth and local governments have been produced ( Case studies) • Reflection pieces on completed projects have been produced ( Reflections Series which aims to demonstrate the catalytic impact of LFI projects and trigger funding and partnerships with donors, development partners and financial institutions)via events (workshops/webinars), articles, interviews, and social media posts. ( see attached 03-LFI- Reflection Series Plan and rollout strategy) • LFI investment team capacity leaflet, to present to team profiles and the overall investment capacity of the facility have been produced (see attached 04-LFI investment capacity leaflet) • LFI 2017-2020 report to be finalized by the end of July ( to be available soon) History
7. Recommendation:

7. Strengthen project monitoring and project management systems. LFI needs better monitoring and management systems to optimize its support to developers and other programme activities and to measure results. Both the Theory of Change and the global and country Results and Resources Frameworks should be reviewed and possibly revised in collaboration with a monitoring expert and government counterparts. It is recommended that the programme agree on standard terminology and identify outcome-oriented SMART monitoring indicators that better align outputs to available resources. LFI also must develop tools to assess the LED impact of LFI investments over time. A mutually agreeable entity should be found to continue the LED monitoring process after LFI phases out.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: The evaluation recommendations were implemented during 2017. The Programme Board meeting in April 2017 received the LFI annual report 2016 and issued a Board Decision with strong recommendations that guide the LFI Programme Manager. The Global Programme Board met in November 2017 to review the LFI evaluation report and approved a ‘comment’ to the report. Country steering committees will continue to meet in each country.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
6a. LFI manager to report annual progress to programme board. AWP for each year to be drafted in line with programme board decision
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed History
6b. Steering committee to be established in each LFI country
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/03 Completed History
8. Recommendation:

8. Capitalize on linkages with other UNCDF programmes. The evaluation team recommends that LFI be proactive in defining how other UNCDF programmes can provide sector-specific technical support to developers and thereby complement the finance-related support of LFI, while being willing to work in sectors where this support does not exist if they are government priorities. LFI also needs partners who can facilitate contacts with women entrepreneurs and support womenowned businesses with the potential to deliver LED benefits. LFI should support and closely monitor the work of IELD, while cultivating relationships with other organizations that support women’s entrepreneurship. It is also recommended that the synergies between Financial Inclusion and LFI be more clearly identified and better exploited.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: The Local Development Finance team has been restructured in line with the evaluation recommendations. A new function - Senior Investment Manager – has been established with the purpose of ensuring alignment of the growing pipeline with the availability of seed capital, debt capital, technical assistance, and with the LD geographical and thematic investment priorities. The Senior Investment Manager will also support the negotiation of funding arrangements to capitalize the LFI facility and the programmes that source its pipeline, including with DFIs. Professional financial management software is being procured enable tracking and monitoring of the pipeline and the technical assistance – including tracking of staff time. The Senior Investment Manager enables the LFI Programme Manager to focus on strategic management, overall quality assurance of the transaction support and capacity building and national systems development.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
7a. Establish Senior Investment Manager position
[Added: 2018/01/30]
LD 2018/03 Completed Senior Investment Manager now operational
7b. Procure, install and operate professional financial management system
[Added: 2018/01/30] [Last Updated: 2019/09/26]
LD 2019/08 Completed The LD Online Pipeline Management System was developed by the Local Development Finance Practice. The pipeline contains all updated information for each investment, including all financial, performance tracking and documentation. The platform is on the UNCDF SharePoint, which is internal and secure. We have also developed a beta Smart Phone App for the pipeline, which can be accessed on any smart phone. The App allows the updating of any investment on the pipeline, has a pictures and blog feature and notification system. https://undp.sharepoint.com/sites/LDFInvestment/Lists/LDF%20Investment/AllItems.aspx History
7c. Amend the ProDoc, review theory of change and indicators to align with the LD dual key system
[Added: 2018/01/30] [Last Updated: 2018/12/21]
LD 2018/12 Completed History
9. Recommendation:

9. Cultivate strategic partnerships. It is recommended that LFI conduct a stakeholder mapping exercise in each country so that it can strategically identify and target potential partners (public sector, private sector, financing institutions, and development partners) with which to collaborate. It should also to provide adequate resources to nurture, formalize and operationalize key national and local partnerships. Other recommendations include that LFI move from an ex-post to an exante financing approach with donors, refine the national platform concept and ensure that the proposed financing/guarantee facility not compete with country programmes for donor support.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: Recommendation accepted. The Local Development Finance practice has established a Dual Key system for sourcing and apprising investment opportunities. Under this approach, the UNCDF thematic development project (for example Women’s Economic Empowerment) identifies high impact investment opportunities.  The role of LFI is to structure these transactions and make them financially sustainable. The Local Development Finance investment committee requires both an impact key and a financial sustainability key before approving UNCDF seed capital grants, loans or guarantees to the investment. The Dual Key system means that from January 2017 LFI does not source transactions, but instead appraises transactions presented by Local Development Finance programmes.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
8a. Establish Dual Key system. This includes an annual LD Investment Plan and budget, for sourcing, appraising, structuring and financing investment opportunities. The Investment Plan to be funded by the LD projects that are sourcing the transactions and other resources available. The investment plan is approved by the LD Investment Committee.
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/03 Completed As of January 2018, the Finance 4 Food programme, the Municipal Investment Finance programme and the Women’s Economic Empowerment programme are sourcing LFI investments. The Local Climate Adaptive Living Facility, the AGREM local economic development programme in Guinea, the LoTUS local economic development programme in Asia and the DINU local economic development programme in Uganda will source LFI transactions during 2008 History
8b. Establish LD investment committee that will approve all disbursements of seed capital and all requests to the LDC-IP for debt capital. The dual key system means that the LD investment committee requires both an impact key and a financial sustainability key to unlock any UNCDF capital.
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/03 Completed The LD investment committee met four times in 2017 and approved $530,000 in Seed Capital Grants. $150,000 in reimbursable grants, $200,000 capitalization of a credit guarantee scheme, $185,000 in guarantees (submissions to the LDC IP) and $250,000 in loans (submissions to the LDC IP). Terms of Reference for the UNCDF Local Development Finance Investment Committee is available under “Documents” here: https://erc.undp.org/evaluation/evaluations/detail/9315 History
10. Recommendation:

10. Fund LFI adequately or scale back commitments. It is recommended that LFI’s resource mobilization strategy be more aggressive, in order to provide adequate resources for the programme. This could entail partnering in fundraising with agencies promoting private finance or with complementary UNCDF programs, approaching financing sources involved in output-based aid, focussing more on addressing equity constraints and recycling programme resources through reimbursable grants. If it is not possible to fulfil financial commitments made with government counterparts, UNCDF should consider scaling back LFI and concentrating only the highest priority activities or locations, or possibly becoming an adjunct to another donor programme. The entry into new countries should only occur once a financial scan is prepared by an objective third party and operational and policy conditions are met. Conditions should include having the resources to provide adequate staffing in new countries.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: The Dual Key system means that the LFI supported investments are directly connected to the relevant UNCDF partnerships. For example, in the field of environmental finance UNCDF has signed a Memorandum of Understanding with CommonLand (environmental impact investors) to develop a pipeline of LDC investments in land restoration that comply with the UNCCD treaty. Deal sourcing and impact monitoring will be managed by UNCDF’s programmes in resilience – but transaction structuring will be carried out by LFI. With regards to the financial sector the recommendation is accepted and a more systematic approach to engaging with financial sector partners will be pursued as detailed below.  It is also noted that, on a corporate level, UNCDF has significant and active partnerships with the financial sector and impact investment industry, including membership of CGAP, ANDE, GIIN. As part of the development of the LDC-IP UNCDF will partner with an established fund manager.

Key Actions:

Key Action Responsible DueDate Status Comments Documents
9a. Include domestic financial sector representatives as observers of LFI country steering committees.
[Added: 2018/01/30] [Last Updated: 2019/09/26]
LD 2019/08 Completed Completed. The LFI Tanzania government coordinator competed this exercise by getting our host, the government of Tanzania to submit invitations to the 2 financial domestic sector actors (list shortlisted and recommended by at a Board meeting) to be part of the LFI Tanzania Programme Board. However, these actors have not attended a single Board meeting since their appointment in 2018. See attached doc (NMB signed, and TADB signed). History
9c. Include LDC and international financial sector representatives as observers to LD Investment Committee
[Added: 2018/01/30] [Last Updated: 2019/05/30]
LD 2019/03 Completed Independent expert discussants invited and intervened to LD Investment Committee meetings History
9d. Include round table with financial sector as part of Local Development Finance retreat.
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/06 Completed DFIs and private sector Partners including KfW, AfD, AIIB and CommonLand invited to LD retreat. History
9b. Include LDC and international financial sector representatives as observers of LFI programme board
[Added: 2018/01/30] [Last Updated: 2020/01/30]
LD 2019/12 No Longer Applicable [Justification: LFI Global Board was held in November 2019 ]
History
11. Recommendation:

Evaluation recommendation or issue: 10. Fund LFI adequately LFI or scale back commitments.

Management Response: [Added: 2018/01/30] [Last Updated: 2021/01/17]

Management response: As mentioned above, under the Dual Key system LFI operates as a facility for transaction structuring; making high development impact investments financially sustainable, especially in “last mile” transactions where extra transaction support is needed. This requires the injection of seed capital and the provision of highly specialized technical assistance, acknowledged by the evaluation as a unique service. The LFI team of investment officers is expanding. To ensure financial sustainability the costs of the TA and Seed Capital will, as far as possible, be charged to the development programmes that is sourcing the transaction and monitoring its impact. In addition, as recommended by the evaluation, the modality of reimbursable grant will be introduced where appropriate – creating a ‘revolving fund’ for LFI seed capital. This will enable LFI to expand or contract in line with the demand for its services. Finally, UNCDF is pursuing the “capital” resource mobilization strategy recommended by the evaluators and has successfully secured additional funding for its Booster Fund to be applied to the LDC-IP and LFI seed capital. As mentioned previously, The LFI board meeting of April 2017 conditions for LFI expansion into any given country, The LFI board meeting of April 2017 approved the following conditions for LFI expansion into any given country: 1) Letter of application delivered to the Chair of the LFI board and signed by the Permanent Secretary or equivalent level of the Government Ministry or Government Department responsible for local government affairs with no objection from the Ministry of Finance; 2) Proven existence of the source of funding for LFI seed capital (from government, local government, development partners or other sources); 3) Sufficient regulatory environment to enable investment in LFI pipeline (this includes regulatory environment for public private partnerships with local government and for SME investments).

Key Actions:

Key Action Responsible DueDate Status Comments Documents
10a. Implement LFI financing strategy in line with Dual Key pipeline sourcing system. Target: Over 50% of LFI costs financed by transaction sourcing programmes
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD 2018/12 Completed Women’s Economic Empowerment programme (IELD) financed 100% of TA and Seed Capital costs for its pipeline in 2017. LD Investment Plan 2018 to include contributions from all other LD initiatives that source LFI transactions. History
10b. Accelerate the implementation of reimbursable grants for LFI seed capital. Target: 40% of LFI grants to be reimbursable by Q1 2019
[Added: 2018/01/30] [Last Updated: 2018/09/28]
LD, PMSU, MSU 2019/06 Completed First reimbursable grant disbursed December 2017. Awaiting approval of Reimbursable Grant policy. History

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