Foreword

As we enter the Decade of Action, achieving the Sustainable Development Goals (SDGs) requires accelerating transformational change, driven by innovation, risk-taking, and partnerships. Modeling financial pathways that are inclusive of last mile communities will be a key ingredient to enable such change and ensure no one is
left behind.

Accelerating SDG action has become even more urgent in the context of the COVID-19 crisis, which is reinforcing existing challenges and posing particularly grave risks to poor and vulnerable communities in the least developed countries (LDCs), including women, youth, informal workers, migrants, and smallholder farmers. The pandemic’s unprecedented impacts increase the risk that vulnerable communities in LDCs will be left behind.

The crisis highlights the critical role to be played by a range of financing solutions, including Official Development Assistance to leverage other forms of capital. Rapid international collective action to scale up the deployment of innovative financing approaches that create new pathways to reach last mile communities in LDCs will be critical to supporting resilient and sustainable local economic development.

The current international financial architecture does not favor local economic investment in LDCs, so UNCDF works to tackle this challenge. Committed to market development approaches that can transform how public and private finance flows to the last mile, UNCDF creates demonstration effects and viable models that crowd in other actors, and can be replicated and brought to scale.

The results we achieved in 2019 contributed to i) develop markets for inclusive digital finance and economy solutions that reach the poor; ii) build ecosystems and provide catalytic finance to support small SDG positive businesses; and iii) create transformative change that enables local governments to access capital to build stable, dynamic, and resilient local economies.

The COVID-19 crisis has highlighted the valuable roles to be played by digital solutions, sub-national finance, and small business finance to support communities through the worst of the crisis and to emerge with strong foundations for recovery.

As we look ahead to 2021, when we will develop our next Strategic Framework and accompany the process to define the Fifth UN Conference on the LDCs, we reaffirm our commitment to support accelerated SDG action in the LDCs to assure that the next decade of action is more resilient to future shocks, more sustainable, and more inclusive of the last mile.

We thank our many public and private sector partners, notably our LDC government partners and donors who co-create innovation with us, take risks with us, and recommit with each initiative to the goal of leaving no one behind.

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The current international financial architecture does not favor local economic investment in LDCs, so UNCDF works to tackle this challenge.

Judith Karl
Executive Secretary
UN Capital Development Fund

Least Developed Countries and the Changing Development Context

When the United Nations launched the “Decade of Action” to achieve the Sustainable Development Goals (SDGs) in January 2020, the message was clear: delivering sufficient and well-targeted financing to achieve the SDGs by 2030 would be the critical priority over the next 10 years. This includes ensuring that finance will flow to the areas with the greatest development needs, notably the least developed countries (LDCs).

While progress in implementing the 2030 Agenda has been uneven over the past five years, a number of shifts in the development landscape bring important opportunities for LDCs.

The digital finance revolution is profoundly impacting the global economy and transforming LDC societies. The number of registered global mobile money accounts surpassed 1 billion in 2019, with 469 million such accounts in sub-Saharan Africa alone. The digital revolution helps drive increased access to financial services and is changing how poor people save, receive social payments and remittances, and buy products and services. It is also changing how micro, small and medium sized enterprises (MSMEs) can access financing to grow their businesses and deliver services and SDG solutions more efficiently. With only one in six people connected to the internet in LDCs, significant investment and support will be needed to fully tap these digital opportunities and make sure LDCs are not left behind.

The growing realization that local government action is essential to achieve a majority of the SDGs. With often dramatic economic and social differences between capital cities, secondary cities and rural areas within a given country, development requires local approaches.

Local development policies, fiscal decentralization and targeted local investments are key to tackle specific local challenges to reduce inequalities and accelerate sustainable development. To further unlock the powerful role of local governments requires strengthening capacities and defining more effective channels for public and private development finance to flow to the local level.

The importance of the private sector in driving SDG innovations and inclusive growth. SMEs create the majority of jobs in LDCs and they increasingly recognize the business opportunities and benefits from investing in sustainable business approaches. Fully unleashing the development potential of the local private sector in LDCs will require dramatically improving access to investment capital needed to grow small businesses, as existing domestic and international financial institutions and investors often view them as too small and risky and are not set up to service them.

The COVID-19 pandemic is now causing significant socio-economic hardships for LDCs, in particular for vulnerable population groups, and the crisis risks halting or even reversing any progress made on the SDGs. At the same time, the crisis has demonstrated the critical roles digital solutions, local government finance and SME finance play in mitigating and responding to its impacts. Accelerating investments and support in these areas will be important components of LDCs’ response, recovery and longer term development plans.