United Nations Capital Development Fund (UNCDF)

What does UNCDF do?

Local Governance

UNCDF local development programmes promote a decentralized, participatory approach to the provision of basic infrastructure (health, education, transportation, markets, water systems) and the management of natural resources. The development of partnerships with programme country governments, local authorities and communities is emphasized to ensure that local investments match local needs, are managed efficiently, and are sustainable. The Fund uses seed capital to develop local institutional capacities in planning and financial management by coupling real resource management responsibilities with capacity-building support services.

Microfinance

UNCDF microfinance operations support the growth of microfinance institutions that have the transparent track records and solid institutional and financial performance needed to enable them to reach poor clients, particularly women, on a sustainable basis. The Fund also performs a technical advisory role by fostering an understanding of microfinance best practices and assisting programme countries, UNDP and other development partners to incorporate those elements into their programmes.

How does UNCDF work?

Producing concrete results on the ground: As a small-scale investor, UNCDF knows that its impact at the country level will not emanate from the power of its purse or from the scale of the programmes and projects it supports, but rather from its ability to provide stakeholders with concrete, high-quality operational results on the ground that can pave the way for replication on a larger scale.

Promoting innovation, policy impact and replication: As a piloting organization, UNCDF has to produce concrete results that can promote policy changes and provide a viable, tried and tested model for replication by national governments and their development partners. This explains why UNCDF operational policies endorsed by its Executive Board attach a high priority to: national and local ownership, capacity development, participation, gender mainstreaming, innovation, subsidiarity, cost effectiveness and sustainability.

Building partnerships: UNCDF’s work has greater potential for impact and sustainability when partners are engaged from the outset. Accordingly, UNCDF has built strong partnerships to improve outcomes in all aspects of its work: partnerships with the programme countries themselves, UNDP, other UN organizations, the donor community, the World Bank and the Regional Development Banks, the European Commission, NGOs, the private sector – national and international – and Centers of Excellence in both the North and South.

Managing for results: UNCDF reports annually to its Executive Board on the results it is achieving. UNCDF is pursuing three strategic objectives: 1) to improve the organization’s way of working by managing for results exemplified by its use of the following tools: Business Plan, Work Plans, performance indicators, Results-oriented Annual Report; 2) to retain, develop and attract qualified and motivated staff; and 3) to move towards a more results-based financial management approach, including through the introduction of performance budgeting.

Learning from experience: Among the truisms that hold for risk-taking, piloting organizations is that they will not always get it right the first time. UNCDF is no exception. UNCDF learns from its mistakes, capturing lessons and making them the basis for further policy and operational refinement to improve the design and implementation of its operations and the quality of its technical advisory services. In this way, UNCDF investments and technical advisory services become more responsive to beneficiaries’ requests and have greater potential for policy impact and replication. This continual improvement process will remain the foundation for UNCDF work in both local governance and microfinance. This is the reason why monitoring and evaluation are given such a high priority in UNCDF.

Local Governance

UNCDF is one of the UN joint partner agency contributing to a the Local Governance and Community Development Programme (LGCDP). The LGCDP was declared effective by the government of Nepal in 2008 and is a national programme managed and implemented by the Ministry of Local Development (MLD).

The programme focuses on two complementary strategic areas:

  1. Building the capacities and procedures of local bodies, and their financing arrangements, to promote more effective delivery of basic infrastructure and services ("supply"); and
  2. Promoting more active and effective interaction by communities - and especially of the more marginalised segments - with their local governments, in order to better articulate community voice and to hold their local governments to account for the services they are supposed to deliver ("demand").

UNCDF is contributing to LGCDP in the area of promotion of decentralized governance and improved local service delivery along with other UN and JFA partners.

Micro Finance

The "Enhancing Access to Financial Services (EAFS) in Nepal" programme results from a joint formulation exercise between UNCD, UNDP and World Bank to promoter inclusive finance by increasing financial access to micro finance services in the remote and un-served areas of Nepal.

The aim of the programme is to expand poor people’s access to new and/or improved financial services, outreach in remote locations, rural areas and new market segments including in existing geographical locations where the Financial Service providers (FSPs) have a presence) , targeting specially for small business and low income households, especially women , poor youth and excluded groups) in a sustainable manner.

The programme increases access to financial services either through establishing new branch of FSPs/ MFIs or with financial services linkage with existing bankable Saving and Credit Groups ( SCGs) / enterprise groups promoted by GoN, UNDP programmes, / project and INGos.

The intended outcome of the programme is to reach 330,000 new clients and link with 10,000 SCG groups by providing technical assistance to the FSPs/ MFis and financial literacy campaign for increasing the frontier of micro finance services . The project is in operational from 2008- 2012.

What is UNCDF?

  • Established in 1966 by the United Nations General Assembly as a special purpose organization primarily for small-scale investment in the poorest countries, UNCDF has come in recent years through intense and far-reaching changes.
  • As a result, today, UNCDF works to help reduce poverty by piloting small-scale investments in two areas of concentration: local governance and microfinance. While the UNCDF investment portfolio is concentrated on a selected number of Least Developed Countries1, its technical advisory services can be accessed universally on a cost recovery basis.
  • UNCDF is a member of the UNDP Group, is represented at the country level by the UNDP Resident Representative and reports to the UNDP/UNFPA Executive Board.
  • UNCDF’s capacities in microfinance were strengthened in 1999 by the UNDP Administrator’s decision to locate the Special Unit for Microfinance (SUM) within UNCDF.
  • Prior to September 1999, SUM was a joint partnership between the Bureau for Development Policy (BDP) in UNDP and UNCDF. SUM continues to support UNDP’s microfinance portfolio, including those countries outside of UNCDF’s geographic focus.
  • In December 2001, a Memorandum of Understanding was signed between UNCDF and UNDP’s Bureau for Development Policy, spelling out the advisory support services that UNCDF provides to UNDP country offices and programme countries worldwide.