Community development funds
Learning note
Print this pageThis Note relates to KSF4: Implementation arrangements and institutional aspects
Version: January 2008
Core issues
Community Development Funds (CDFs) are demand-driven cost-sharing mechanisms that promote participatory community development. Finance is normally channelled to groups for small projects they have themselves identified, to which they add their contributions in cash or kind and over which they maintain control. Infrastructure, social services, training or productive investments may all be eligible, but generally only public goods are funded. There is no single, ideal model. The core issues below centre on the need to tailor CDFs to particular situations:
- There should be a clear rationale for a CDF approach: it should be demonstrably compatible with community needs and traditions in the project area or country as well as with government policies for poverty reduction and development. Conditions should allow for pro-poor targeting and transparency in CDF operations - see Learning Notes 1.1 - Project Rationale and Relevance and 2.3 - Targeting.
- Eligibility criteria, decision-making procedures and requirements on beneficiary contributions should be designed in such a way as to promote inclusion of “the poorer”.
- An institutional structure and location are needed that allow for flexibility, efficiency and transparency, can handle many small projects, and can attract and maintain competent management and staff. Institutional arrangements should be consistent with government policies for decentralization and devolution.
- Needs for staff training and capacity building for CDF operations should be identified and funded.
- An initial menu of options for CDF support is needed. This should be backed by agreements with stakeholders on the scale of beneficiary contributions, subsequent O&M responsibilities, any cost recoveries, and demonstrations of affordability and/or profitability for the Target Group.
- Overlap or confusion between CDF funding and provision of credit via rural financial services should be avoided - see Learning Note 3.4 - Rural Finance).
- Likewise, CDF resources at the disposal of beneficiaries should be clearly separated from project finance allocated to supporting services, CDF promotion, group formation, capacity building, monitoring and evaluation, etc.
Key tasks for design and review
- Keep CDFs simple; avoid multiple and overly ambitious goals, menus or geographic coverage. Test on a pilot scale if necessary.
- The relation of funds with other project actions has to be considered.
- Focus on detailed planning of operational, administrative and managerial aspects but keep menu choices flexible.
- Avoid adopting operating procedures and access conditions that could favour the better off and/or lack transparency, and so could unwittingly exclude the poorest.
- Allocate investment resources for CDF promotion/publicity; and for training, forming and supporting the operations of CDF user groups.
- Ensure that chosen CDF support services and intended suppliers have the skills and capacity for their identified tasks. Design training and capacity building components to cover identified gaps.
- Agree with stakeholders on the arrangements for post-disbursement handover and consolidation, e.g. to meet future recurrent costs of the CDF to forge permanent links between local government and communities, or to operate and maintain items financed.
- Prepare cost estimates and a financing plan for the proposed CDF.
- For larger CDFs, make arrangements to draft an Operating Manual as part of project start-up.
- Ensure that M&E indicators in Key Files will monitor the evolution of grass-root capacity and that findings will feed into management decision-making - see Learning Note 6.1 - Monitoring and Evaluation.
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