UNCDF Local Finance Initiative (LFI) Case Study No.6: NUCAFE Uganda - Unlocking Private Finance

28 March, 2018

Original source:  UNCDF

To realize inclusive growth, countries should have the capacity and resources to mobilize, allocate and account for capital flows to “last mile” pockets where poverty is entrenched, economic opportunities are limited, and development plans under-funded. Concurrently, local communities should have access to capital to fund their local development needs and respond to growing demands for better infrastructure, services, and jobs.

Yet, in many least developed countries (LDCs), local savings are not invested locally or limited investment is provided for local development because of lack of confidence from financiers and track record of successful transactions. Innovative financing mechanisms coupled with UNCDF risk mitigation instruments help reveal markets to a wider pool of investors; and thereby crowd-in non-traditional funders, public and private, into new areas.

In 2012, UNCDF launched the Local Finance Initiative (LFI), a “last mile” finance model aiming to unlock finance so that local development projects can get to “closure.” The purpose of LFI is to correct market failures and attract catalytic capital for the investments that are not being picked up by existing public or private investors. Therefore, LFI does not seek to crowd out the private sector and provide public subsidies for those investments that would be likely to attract investment without its support. This represents the foundation on which LFI investments are identified and how the selection process does not distort the market. UNCDF seeks to spark a demonstration effect where the public sector can replicate the blend, leveraging the private sector finance to take the business model to scale. The LFI approach and its risk mitigation strategieshave proven that local development investments can access additional funds from domestic capital markets, which is in line with the call for action in the Addis Ababa Action Agenda and Sustainable Development Goal 17 (the means of implementation) to mobilize resources from multiple sources to finance development.As the LFI investment pipeline is expanding rapidly, UNCDF would like to document and capture the knowledge, information, and lessons learned in a systematic manner. This series of case studies aims to demonstrate how LFI approach contributes to unlocking domestic capital and realizing transformational local impact.

As the LFI investment pipeline is expanding rapidly, UNCDF would like to document and capture the knowledge, information, and lessons learned in a systematic manner. This series of case studies aims to demonstrate how LFI approach contributes to unlocking domestic capital and realizing transformational local impact. Case study 6 covers LFI’s use of blended finance to attract external investments for the National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE) project in Uganda.

Access the case study here.

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