1966 - 2016
UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries. With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. UNCDF’s financing models work through two channels: financial inclusion that expands the opportunities for individuals, households, and small businesses to participate in the local economy, providing them with the tools they need to climb out of poverty and manage their financial lives; and by showing how localized investments — through fiscal decentralization, innovative municipal finance, and structured project finance — can drive public and private funding that underpins local economic expansion and sustainable development. By strengthening how finance works for poor people at the household, small enterprise, and local infrastructure levels, UNCDF contributes to SDG 1 on eradicating poverty and SDG 17 on the means of implementation. By identifying those market segments where innovative financing models can have transformational impact in helping to reach the last mile and address exclusion and inequalities of access, UNCDF contributes to a number of different SDGs.
UNCDF turns 50 in 2016, the very first year that the global community has been collectively called upon to step up to the challenge of achieving the Sustainable Development Goals (SDGs).
The history of UNCDF is more than the story of an agency’s growth from a small fund financing stand-alone capital infrastructure, to an organization with the unique role of testing new financial models to reach the ‘last mile’, helping public and private actors develop sustainable models to support growth that is inclusive and sustainable. It is the story of an organization making a difference in poor people’s lives by building resilient communities, expanding access to infrastructure and bringing financial services to underserved markets. It is the story of women and men given the chance to live a better life thanks to innovative financing solutions for development.
Fifty years ago in 1966, the UN General Assembly established UNCDF to promote economic development. The immediate goal was “to assist developing countries in the development of their economies by supplementing existing sources of capital assistance by means of grants and loans.” In 1973, the General Assembly decided to reorient the UNCDF's activities towards “first and foremost the least developed among the developing countries”. At the heart of UNCDF’s philosophy, then and now, has been the concept of going the last mile for ending hunger, achieving full gender equality, and improving services – the belief that working together, we can assist LDCs to transform their economies and ensure that no one is left behind.
Today, in 30 LDCs, UNCDF is transforming poor people’s lives by increasing their access to the resources they need to break the cycle of poverty. While our programmes are diverse, our mission is singular – to make finance work for the poor. UNCDF financing models are applied in thematic areas where addressing barriers to finance at the local level can have a transformational effect for poor and excluded people and communities.
Much has been achieved in the years since 1966, but much remains to be done. Many people in the LDCs we serve still cannot access infrastructure, services and investment to benefit from and contribute to growth. Today, more than ever, UNCDF is committed to supporting transformative change in local economies improving the lives of those whom the SDGs are designed to serve.
Recognizing the urgency of accelerating the economic and social development of under-developed countries, that the flow of capital from the economically advanced countries to the under-developed countries for the economic and social development of the latter was wholly inadequate in nature and scope, and considering the need for the UN to supplement all existing efforts for capital assistance to the under-developed countries, on 15 December 1960, the UN General Assembly decided that a United Nations Capital Development Fund should have been established, and requested a Committee of 25 representatives of Members States to consider all concrete preparatory measures and submit its recommendations.
Five years later, following three resolutions on the basis of which preparatory steps had been undertaken with a view to starting the operations of the fund, taking into account the report of the Committee, as well as the recommendations contained in the Final Act of the United Nations Conference of Trade and Development, and the study of the Secretary-General on the practical steps to transform the Special Fund created in 1958 into a capital development fund in such a way as to include both pre-investment and investment activities, the UN General Assembly reaffirmed the need for extending United Nations economic assistance to the field of investment activities in the developing countries and decided the extend the mandate of the Committee on a United Nations Capital Development Fund so to carry out the tasks envisaged in resolutions 1826 (XVII) and 1936 (XVIII).
UNCDF was officially established on 13 December 1966 as “an autonomous organization within the United Nations” with the purpose to “assist developing countries in the development of their economies by supplementing existing sources of capital assistance by means of grants and loans.” UNCDF was envisaged as global UN development bank, providing grants and concessional loans throughout the developing world, a capital investment counterpart to the technical assistance offered by UNDP and other UN agencies.
The UNDP Administrator was requested by the General Assembly to administer UNCDF by performing the function of the Managing Director and the Governing Council of UNDP to perform the function of the Executive Board of UNCDF.
The UN General Assembly – “considering that the Fund could have most effectively be used in complementing the technical assistance and pre-investment activities of UNDP, as well as the investment activities of international financial institutions, and taking into account that UNCDF was not only a means for cooperation between developed and developing countries, but also an instrument for cooperation among developing countries themselves” – endorsed the Governing Council's decision to reorient the Fund's activities towards “first and foremost the least developed among the developing countries”, in support of those development and investment activities that would build and strengthen the economic and social infrastructure of these countries, particularly in the fields of integrated rural development and small-scale industries.
At the beginning, UNCDF financed stand-alone infrastructure projects designed to promote economic growth and development -- bridges, roads, irrigation schemes and the like. UNCDF focused mainly on Africa. It shared offices with UNDP, but functioned largely on its own. By the early 1990s, UNCDF began to focus on the role of local governments in planning, financing and maintaining capital investments.
UNCDF’s work at the local level started including support for microcredit institutions. While increasing the availability of credit was generally considered an effective way to stimulate local private sector activity, “microcredit” was beginning to give way to the broader concepts of “microfinance”, and UNCDF saw an opportunity to establish itself as a leader in the field. Pursuing this opportunity meant separating its microfinance work from its wider activities at the local level, and focusing in two broad areas: Local Governance (then reoriented to Local Development): decentralization and public financial management for local investment, service delivery and economic development; and Microfinance: the range of policies and products designed to empower poor families and small businesses, including savings, microcredit,micro-insurance and remittances.
Following the UN International Year of Microcredit, UNCDF made a strategic shift to concentrate its microfinance programmes on financial inclusion more broadly and focused on a sector development approach to building inclusive financial sectors. UNCDF also started supporting digital finance innovations to reach unbanked, poor and remote populations who have been excluded from traditional financial networks. These services are often seen as safer than carrying cash, and they promote transparency by creating audit trails and reducing fraud.
UNCDF’s approach to local development was reoriented to local development finance. That meant to show how localized investments—through fiscal decentralization, innovative municipal finance, and structured project finance—can drive public and private funding that underpins local economic expansion and sustainable development.
Today, in 31 of the world’s 48 least developed countries, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.