Funding for LED - Contradicting the principles?
In a nutshell LED is defined as joint actions of the local public and private sector in order to make use of local resources and turn them into a competitive advantage. This very brief definition captures the essence of LED that local people use local resources for local economic development. The provocative question would then be: What do we need funding for?
Whenever there are meetings, workshops or discussions around LED the question of funding usually comes up - usually expected from national governments, international donor organisations or other "outsiders". While it is obvious that a certain degree of funding is needed for training and capacity building measures and also necessary to drive the LED process, there seems to be a contradiction when it comes to financing LED-initiatives. Isn't LED supposed to be handled by local resources only? Very often LED-funding is spent on expensive consultants, over-extensive studies and research, but also on "allowances" and "refreshments".
How is it possible that funding plays such a prominent role in the LED discussion? What is your own experience: Can LED be done with local resources only or do we need outside resources?
Please join the discussion and share your experience with the LED community!
Is there Need for Funding for LED?
Thanks very much Sonja for bringing on board this topic on Funding which indeed is the concern of everybody trying to promote LED in their areas. I here give my views based on the context of rural Uganda. To the best of my understanding, LED as an initiative requires a certain level of self-awareness that should also be coupled with a sense of optimism for communities to positively engage in their own economic development.
Uganda is one of the few countries in the world very much endowed with a wide range of natural resources. The fact that these are often taken for granted (Or not even seen!!)is clearly shown in the low levels of local exploitation of these opportunities for self-advancement. Even in cases where people try to improve their living standards, the issue of sustainability is often not addressed at all!
This then calls for sustantial effort in ensuring behavioral and attitude change among communities. The fact that most African rural people tend to blame someone else for whatever is not coming right with them is very evident across the board. To have people do what they believe in calls for a lot of advocacy effort (Campaigns and awareness creation, public dialogues, etc), capacity development (In particularly entrepreneurship skills, enterprise development, etc) and information and communication (Participatory research, sharing best practices, etc) to mention but only some.
All in all, support from outside is needed both in terms of funds and ideas. More so, funding for LED is more needed at the stage of changing mindsets for people to "See what they have not been seeing" or "See what they have been seeing differently". It is after such that it can be easy to mobilise funds locally, have communities get to be more innovative, and sustainably manage what they have.
Funding for advocacy on LED
Dear Sarah,
thank you very much for your very open and critical comment. I hope I understood you right that in your opinion there is a need for LED advocacy, capacity building and training and efforts to make people understand what their local advantages are and how to make effectively use of them.
I fully support this appraoch which also falls in line with Gwen's comment that LED consultants can play a critical role in an LED process and that they can take up the challenges of awareness creation, capacity building and as advisors and process facilitators.
What I also share with you is the believe that once people understand their local economy and see the potentials that there are, it is possible to mobilise funds locally. If people can "smell" their business opportunity and develop a passion for a certain idea, they usually somehow find their own resources and funds to implement - even in poor communities.
There is a quote by Antoine de Saint-Expupéry:
"If you want to build a ship, don't drum up people together to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea."
For me, this summarises a lot about the LED-approach. If people have a passion for a certain business or entrepreneurial spirit they will often find their own means and ways how to get there. Therefore I came up with the provocative statement that LED doesn't need funding.
I am sure that there are different opinions about the funding issue among the LEDNA-members and hope that more people will share their views!
Please feel free to contribute!
Sonja
To fund or not to Fund LED: Which way
This is a fascinating discussion. Should LED be 'funded'? Well, i will beg to disagree with you by stating the obvious -yes, LED should be funded. There are rather deeper questions that resonate around the source of funding, the terms, the sustainability, the pace of funding,-and such sorts of 'currents'. I have just completed Ndambisa Moyo's 'Dead Aid’ which argues against Aid as a source of funding for development projects. Although her argument is around social evils such as corruption, which Aid brings.
Regarding LED funding, my argument is that, in the countries which have not yet had a thorough going [systematized] local development, some extra [international donor] funding sources are necessary. The reason being, funding from governments might yield corruption [Kenya being a clear case]. These are the same governments which have decaying judicial systems which cannot re-align/recompose government back to a credible funding body. Often than not, international systems replace [at least try to] failing state/vacuum spaces left out by Nation states. Thus, [particularly] African governments have often yielded major local development loopholes. Funding should not be seen as an abstract process- it is rather a highly complex and rich process which embeds skills, collaboration, learning/information exchange, capacity building, among other valuable development elements.
The above introduces a different argument, that international donor funding /lack of it as it concerns LED might be determined by the existing political regimes. Countries such as Rwanda are doing tremendously well, under foreign funding [from NGO's, regional bodies, etc] while countries like Zimbabwe cannot to this day be seen as reliable -in terms of development funding. Some of these sorts of external funding do have impact on local systems- of course some for better others for worse- depending on the pace, the terms and the 'timing'. If these 'determinants' are clearly thought out, LED funding will yield meaningful results. Overall though, i hold the view that this should be phased out for a more sustainable approach-but only when sufficient capacity has been build-both to generate more funding, as well as to manage local development successfully.
Definition of LED, LED contributors and consultants!
As part of LEDNA's approach to LED we have aimed to not make a specific definition but rather to be as inclusive as possible to the many definitions that are current (see this discussion on our LEDNA knowledge hub).
I would like to build on Sonja's summary by suggesting that LED has three key actors - the public sector, the private sector AND community actors. Each contribute and participate in their own ways and in my experience local governments are normally the key convenors with democratic accountability for Strategic planning,fund raising as well as M and E. The private, community and public sectors are all essential participants in the planning and implementation processes. The LEDNA "making-led-work" section goes into the different roles and responsibilities that these various actors can take.
Regarding the need to understand the local economy and conteat ahead of designing LED strategies, this is an essential prcess that should in my view be taken seriously. This resource summarises what needs to be done (and how to undertake), a LED Economy assesment. Whilst it is fristrating to use consultants on these assessments, it is needed until such time as capacity can be built within local governments and local institutions for this to be done in house- has anyone ideas on how what is being done already in Africa to address this skills gap?
More on funding later- but my answer is we design what is needed to improve the economy locally and then cast far and wide for resources- this is the case the World over, no less so Africa.
Gwen Swinburn
Local Economic Development Adviser
gwen.swinburn@gmail.com
Response to Sonja-Ende
Dear Sonja-Ende;
The problem with misuse of resource is not only with LED, it is the problem with all development programs and projects. For the poor countries/communities outside resources are important. Plus why should one restrict itself with local sources. The resource itself does not create the problem, it is how it is deployed. Resource mobilization does not guarantee the effectiveness of development programs. We have heard a lot the problem with the donors and developing countries governments corruption, which is facilitated by lack of transparency.
My opinion is then:
1. the source of resource should not be restricted. After all it is possible to misuse the resource mobilized from local sources also.
2. the focus should not be on mobilization of resources; it should be accompanied by the tool to put it into its effective use.
Funds and LED
Although an “entrepreneurial spirit” is definitely a key aspect in the success of a project/business, I tend to support Jason and Zer’s views regarding funding.
I would even tend to say that the funding issue will determine the entire success of your project.
A well prepared project with a perfect organisation will be a disaster if you don’t have the funds to expand it. I agree that the amount vary quite a lot depending on the project, but it usually always comes back to money.
Unfortunately, I’ve worked on very profitable projects that needed to be funded at the beginning as they were in the agricultural field (and so there is quite a gap between the investments and the first income). Thus, if you can’t convince an institute / bank / person to fund your project, it’s just impossible to launch it.
Furthermore, I do think the question of the “source” of the funds is the most important. Shall we tend to use “international funds” or isn’t it better trying to create a local investment bank to use local savings? Using local savings would be the optimum of local development. On the other hand, it may be impossible to work on this idea in remote areas or areas where local incomes are really low. In this case, it would be necessary to rely on those international funds.
In either case, having tools to evaluate the efficiency and impact of those funds are definitely important.
I would be quite happy to hear your views regarding the “local investment bank” and if you’ve witnessed this kind of project.
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