This is a presentation by Paul Steele, chief economist at the International Institute for Environment and Development (IIED) on financing the Sustainable Development Goals and Paris Agreement at the local level. The presentation was made at the Money Where It Matters (MWIM) event, held in London from 7-8 December 2016, when the presentation framed the following discussions. The purpose of the MWIM event was to reflect on our insights and explore further how financing mechanisms can more effectively channel resources to the local level, and identify opportunities to increase flows of finance to the local level in new contexts for development assistance and national investment. Participants at the event also agreed on outstanding questions that require further research on finance for and with local actors to achieve the effective use and management of funds to deliver climate resilient sustainable development. More details: https://www.iied.org/promoting-local-access-development-climate-finance

1. Getting money where it matters 1
Paul Steele
December 2016Paul Steele
December 2016
Financing the SDGs and Paris
Agreement at the local level
(Public and private finance, development and climate
finance)
Getting Money
Where It Matters…

2. Getting money where it matters 2
Paul Steele
December 2016
Objectives of Money Where
it Matters: finance forum
• WHY? To share insights from Africa, Asia and
Latin America on the value of finance at the
local level & how to tackle risks/challenges.
• HOW? To identify the opportunities available
for increasing the flow of finance to the local level
in new geographies and contexts
• WHAT NEXT? To agree outstanding questions
on local level finance that will enable funds for
climate resilient sustainable development to be
managed efficiently

3. Getting money where it matters 3
Paul Steele
December 2016
Overview of presentation
• What is “local level” finance?
• What are benefits of local level finance?
• How to increase finance to local government?
• How to increase finance to community groups?
• How to increase finance to small and medium
enterprises?
• What reforms are needed in international finance?
• What are perceived risks of local level finance and
possible solutions?
• Next frontiers: what are outstanding questions?
• Meeting agenda

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Paul Steele
December 2016
What is “local level” finance?
Finance for:
• Local government linked to communities
• Community groups and collective action
• Entrepreneurs, especially small and medium
scale enterprises (SMEs) offering goods and
services to the poor, or employing the poor
May include role for national government:
• Finance may flow through national government
• enabling policy, incentives and regulations

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Paul Steele
December 2016
Benefits of local level finance?
• Relevant: poor know their priorities best so
choose most useful public and private services
• Longer lasting: local level finance builds on
existing institutions and is owned by people
• Value for money: better targeted investments
lower costs and include local contributions
• Accountable: enables more inclusive oversight
by citizens, challenging power relations and
changes incentives

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Paul Steele
December 2016
How to increase finance to
local government linked to
communities?
• Use decentralisation/ decentralisation
channels
• Build capabilities of local government to
engage communities
• Support and reinforce local governance and
support bottom up demand from citizens
• Blend climate (adaptation and mitigation)
finance with development finance

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Paul Steele
December 2016
How to increase finance for
community groups?
• Recognize contribution of finance to building
social and political capital of disadvantaged groups
• Recognise contribution of people’s own monies to
neighbourhood improvement
• Learn essential financial management skills, now able
to hold aid agencies and government to account
• Provide for better use of state (include local
government) subsidy finance
• Potential use of land as equity in public - private
developments

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Paul Steele
December 2016
How to increase finance for SMEs
• Public finance to complement SMEs
(eg early development costs by public finance)
• Commercial financing modalities to support
SMEs (eg simplified loan applications, more
accessible lending conditions)
• Enabling policy context: Getting policies and
regulations right for SME finance
• Building local demand for SME services

9. Getting money where it matters 9
Paul Steele
December 2016
Reforms in international
finance to reach the local level
• Identify how much finance reaches local
level and involves communities. Set a fund
target.
• Earmark flexible grant funding for local finance
• Increase appetite of international funds to
support innovative financial instruments for local
priorities
• Strengthen local capacity for climate finance
• Build national platforms to channel climate
finance flows to the local level.

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Paul Steele
December 2016
Perceived risks of local
finance and possible solutions
• Transaction costs of many small
projects – addressed by “aggregation”
mechanisms e.g. federations of community
groups, Ministries of Local Government, SME
windows
• Fiduciary risks of lower capacity groups –
addressed by public financial management
support etc
• Impacts harder to track – addressed by
community and participatory monitoring etc

11. Getting money where it matters 11
Paul Steele
December 2016
Next frontiers?
• Improve local govts ability to blend different
sources of finance behind community priorities
• Innovative finance mechanisms to mobilise
private finance into pro-poor services
• Explore role of community groups to de-risk
private investment
• Track finance to local level and improve
national & global oversight of equity of flows
• Design of international funds for public finance
to reach local levels and mobilise private finance

12. Getting money where it matters 12
Paul Steele
December 2016
Agenda
7th December: here:
• Climate and Energy
8th December: London House
• Forestry and Urban
• Conclusions and next steps
Local level finance: why, how and what next?