‘The dominant “budget support” modality in international aid does not adequately address demand-oriented capacity development of local actors. SNV therefore aims to help increase access for local organizations to (sustainable) funding for capacity development in a way that empowers them to acquire tailor made services geared towards their needs. To accomplish this goal we will help to stimulate or establish local capacity development
funding mechanisms (LCDFs).’
SNV Strategy Paper 2007-2015 ‘Local Impact – Global Presence’ (p 27)
The LCDF research and development (R&D) phase provided an opportunity for the Overseas Development Institute (ODI) and Netherlands Development Organisation (SNV) to jointly explore the fundamental dimensions of SNV’s LCDF concept – starting from its basic assumptions and logic – to see how it can be put into practice in various capacity development (CD) environments. The LCDF initiative has the potential to inform the thinking and practice of the growing consensus of CD as being a ‘beyond training’ approach to one that deals with systemic issues and power relations. In this position, the LCDF, although locally focused, can create positive knock-on effects on the national aid effectiveness agenda and improve progress towards achieving the Millennium Development Goals (MDGs).
Methodologically, the R&D phase used a systematic exploration of literature on a number of existing CD initiatives around the world in order to generate learning from what is already there and inform proper positioning of LCDF. This was done in parallel with joint ODI-SNV visits to five countries in which SNV currently operates. Visits consisted of workshops and discussions with key country and regional level SNV staff. As such, the R&D phase was a dialogical process that used discussions with SNV as the research evolved to sharpen questions for interrogating and generating lessons from non-SNV programmes, which were explored through desk study reviews. In this process, analytical frameworks were developed, checked and sharpened and answers to main research questions also checked and refined.
In terms of critically analysing the conceptual positioning of LCDF, the R&D phase followed the SNV’s Subsidy Application argument of placing the LCDF in a ‘marketplace’. In this position, LCDF is designed as a mechanism to enable ‘affordable’ and accessible CD services (CDS) for subnational to meso-level organisations in the country’s CD environment. In this position, the hybrid nature of market and social development language is both apparent and unavoidable. However, what was important for the study was to identify some of the prevalent systemic issues that impede the growth and value-added of local markets for CD services. The study showed that consistent systemic issues emerge across a diversity of case studies.
Overall, field observations from five countries were consistent with findings from the desk study that focused on a number of LCDF-type initiatives around the world. These case studies provided useful insights for the LCDF design in terms of systemic issues and interventions, from a basic typology of how CD is approached, managed and funded. Three types of approaches have been identified, including: ‘CD as a component of an investment programme’, ‘CD as the programme’ and ‘CD as a product to be transacted in the marketplace’, with many areas of overlap among them. It was evident that each one of these categories had different implications as to why and how CD is managed and funded in different CD environments, and ‘what works’ and ‘what does not work’.
For instance, using this framework, the study was able to characterise the dynamics in demand and supply expression in local environments and the systemic issues that impede proper expression of demand and supply. This in turn helped with understanding how interventions can be shaped to stimulate CD demand and supply differently in order to improve development programmes. When CD is a component of an investment programme, for example, demand is expressed in the form of externally applied organisational development (OD) assessments of organisations that wish to access funding for the investment project. This happens because CD assessment is a condition for access to project funding and not because CD is a desired outcome on the side of the ‘demanding’ organisation. The situation is different where CD is separated from the investment programme and is offered and purchased in the marketplace.
The framework also helped with analysing the case studies and discussing the various funding characteristics and logics, as well as governance and management dimensions, including recommendations as to how SNV can position itself when implementing LCDF. As regards funding, for instance, we looked at the 10 cases under study with regard to the following factors: i) what is funded under CD; ii) degree of links to activity/investment funding; iii) duration and evolution of funding; iv) contribution to own resources; v) funding modality; vi) flexibility of funding decisions; and vii) accessibility of funding.
With regard to governance, the main dimensions analysed included such issues as: i) breadth of ownership and complexity of the initiative; ii) composition roles of governing boards; iii) committees and sub-committees and their roles; iv) role of the secretariat and donor positioning; v) financial decision making; iv) regulatory environment; and vii) ownership of the programme and representation of clients. For example, where the idea in question is complex and does not have the buy-in of many stakeholders, even though they may be target beneficiaries, the governance structure will be less bureaucratic, and driven by a strong secretariat, with a board selected on the basis of technical understanding of the issue/theme in question. A broadly understood issue, such as civil society strengthening, on the other hand, would have an elected board and several committees concerned with accountability to many CSOs. LCDF relates more to the former than the latter model.
The main LCDF strategy is to bring together a ‘coalition of change’ – a constellation of actors from the private sector, civil society, government and different interest groups – which can focus on changing the ‘rules of the game’ around local markets for CD, alongside deliverables in specific sectors and themes that are of importance to local actors. In other words, the LCDF facility/initiative would be positioned to do two things at the same time. It would aim at addressing systemic issues at national and provincial levels to create a conducive environment, which is a prerequisite for the development of a vibrant CDS market. At the same time, it would aim to improve demand expression and quality of supply for CDS at the sub-national level, where capacity gaps have been identified as a main threat to implementing effective reforms for economic growth and poverty reduction. The analysis has shown that not all advocates or users of CD are able to do this well.
The study has led to the development of various tools and strategies for analysing different environments, such as the value chain logic and the analytical/diagnostic framework. These tools will take different configurations in different contexts with the overall aim of passing on skills to local markets themselves and incrementally reducing the SNV role in these environments. LCDF will then take its own organic shape in different environments, sharing core characteristics and perhaps branding, but working differently in response to the local challenges to CD for better development results.
LCDF will require intellectual drive from SNV in the short to medium term in order to properly clarify logics and value-added in the already complex CD industry in developing countries. This should also inform the choice of national and international partners, because the level of funding that a particular agency is willing to contribute in support of the initiative will not be an adequate indicator of a good LCDF partner.