1. Introduction

The Government of Nepal and the United Nations Development Programme (UNDP/Nepal) have embarked on a mission to alleviate poverty in Nepal by building the rural poor’s capacity to support and help themselves. The new genre of development programmes in Nepal incorporate community mobilisation, decentralisation of decision making power, popular participation, skill enhancement, increasing social awareness and empowerment of women into their approaches to sustainable human development. These attributes have been incorporated into the Sustainable Community Development Programme (SCDP). SCDP is a joint undertaking of the National Planning Commission (NPC) and the United Nations Development Programme(UNDP).

The Sustainable Community Development Programme (SCDP), also known as the Nepal Capacity 21 Programme, was formulated in line with Agenda 21 adopted by the 1992 Earth Summit at Rio de Janeiro, Brazil.

2. Salient Features of SCDP

SCDP seeks to ensure sustainable community development through social mobilisation aimed at institutional development, economic development and environmental preservation. SDCP encourage villagers to organise themselves into community-based organisations (CBOs), to begin to save regularly and invest their savings for income generating activities, and to enhance their community through skill development.

SCDP uses the same funding mechanism and model for community mobilisation as other HMG/UNDP programmes such as the Participatory District Development Programme (PDDP), and the Local Governance Program (LGP), however it is different from its sister programmes because SCDP’s goal is preservation of the environment. To achieve this goal it has the objective of promoting environmentally strong and stable watersheds through community mobilisation and poverty alleviation.

The basic focus of the Programme has been to organise rural communities into effective community-based organisations (CBOs) and help them realise their own management and resource mobilisation potential.

Once community members are organised they can work together to achieve their common development goals. SCDP ultimately aims to make rural communities capable of mobilising their own resources and solving their own development problems.

The SCDP uses support organisations, called Sustainable Development Facilities (SDFs), to support CBO members by providing them with the education and skills training they require to make informed decisions about environmental conservation and poverty alleviation issues in their own community. The SDFs also give the CBOs technical assistance and guidance as required. Furthermore, the SDFs are responsible for managing the Sustainable Development Facility Fund (SDFF), the primary financial support mechanism for the SCDP Programme.

The Programme was launched in the beginning of 1997 and UNDP sponsorship of the Programme will continue until the end of 2002. The Programme covers three districts in the mid and far-western development regions of Nepal, Dang, Surkhet and Kailali. Within each of these districts, SCDP selected 15 Village Development Committees (VDCs) for implementing Programme activities. The criteria used for identifying Programme VDCs included:

1. The geographical area was defined by watershed boundaries
2. The communities did have minimal access to development assistance from the state.
3. There was an absence of rural infrastructure
4. Overall levels of education and literacy were low
5. The development efforts of government agencies were ineffective

The selected VDCs included Terai, mid-hills and mountainous regions.

The Programme used different entry points depending on the needs of the area. Environmental management, social development or economic development were used as entry points for Programme activities. Over time, development activities that pertained to all three of these entry points were conducted in each Programme area. By doing this, communities approached their development problems in an integrated manner and made a concerted effort to promote a better environment and better living conditions in their villages.

The activities of the Programme consists of:

1. Selection of VDCs for the Programme;
2. Selection of/ creation of Support Organisations (the SDFs);
3. Recruitment of Community Activists (CAs) and technical support staff by the SDF/SO for social mobilization, training and support;
4. SDF/SO staff help mobilise community members into community-based organisations (CBOs)
5. CBOs initiate savings and credit activities (from their own community Fund (CF)) and develop community work-plans and programmes with the support of the SDF;
6. Providing funds (from the SDFF Credit Capital Fund (CCF)) to supplement the credit needs of the community;
7. Providing grant assistance (from the SDFF Seed Grant Fund) to the community organisations to initiate community projects for rural infrastructure development and environmental management (as requested by CBOs in their work-plans);
8. Providing training and orientation on skill development for income generation, natural resource management and education.

3. Entry Point Activities

Community members decided what types of activities they wanted to conduct based on the needs of their community. The activities that have been conducted in the existing Programme areas are as follows:

3.1 Environmental Management

• Implementation of forest resource conservation and watershed-management activities, including sustainable use of non-timber forest products and alternative energy sources.
• Promotion of environmental education and awareness.
• Promotion of biodiversity conservation.
• Establishment of local networking and information systems and compiling the information using Geographical Information Systems (GIS).

3.2 Economic Development

• Promotion of credit mobilisation and micro-enterprise development for CBO members
• Establishment of institutional support for functional community-based groups such as farmers, traders, and self-help co-operatives for agriculture-based industries.
• Enhancement of local production systems.
• Established market linkages and market information systems.

3.3 Social Development

• Empowerment of functional community based organisations.
• Promotion of education through literacy classes and awareness activities.
• Promotion of capacity building of communities to identify, plan and implement environmentally sound small scale community development schemes such as health care, sanitation, drinking water, schools buildings.
• Establishment of local information systems.

In the context of sustainable development, the activities described above ultimately converge and create a synergetic effect. Each activity complements the other and ultimately contributes towards sustaining the environment, the resource base and the community.

4. Financial Components of the Programme

Before SCDP extends any financial support to a community, the community members must organise themselves into a community-based organisation (CBO) and start savings and credit activities. Savings and credit activities have been the basic motivation for bringing people together to form a CBO. By developing micro-credit schemes at the local level, SCDP has created a financial resource base for the rural poor and filled an important gap created by the modern banking system.

The Sustainable Development Facility manages the Sustainable Development Facility Fund (SDFF). The SDFF is further divided into four separate funds, one to cover the operational costs of the Facility, and three which are used to support the Programme communities. These three accounts are explained below.

The SCDP provides three kinds of financial support to the community. To supplement the credit needs of CBO members, SCDP has created a Credit Capital Fund (CCF), which is a revolving fund used to provide loans to CBO members. SCDP has also created a Seed Grant Fund from which small grants are given to Programme communities to carry out rural infrastructure projects. These are non-refundable grants, and so it is likely that this fund will be exhausted by the end of the project period. The SCDP also has a Human Resources Development Fund, which is used to pay for capacity building and training activities.

5. Rationale for Sustaining the SDFF Credit Capital Fund

One of the major problems of the rural poor is the lack of access to appropriate credit facilities. Banks and financial institutions do provide micro-credit for income generation programs, however, the bureaucratic loan application process and collateral requirements of banks often prevent the rural poor from accessing these services. SCDP addresses this problem in two ways: first, members of the CBOs formed under the Programme contribute money each week to their CBO’s Community Fund. This fund is used to meet the micro-credit needs of the poorest CBO members. Second, SCDP has created a self-sustaining, revolving fund called the Credit Capital Fund. This fund is used to support CBO members whose credit needs exceed the amount available through the CBO Community Fund.

In order to ensure that the SDF functions smoothly, and that the SDFF CCF is managed properly, it is necessary to develop and promulgate clear guidelines for operation of the SDF. This regulation shall give the constitutional guidelines and working procedure for the Sustainable Development Committee (SDC) and it has to be approved by the DDC and the District Council.

The revolving nature of the SDF CCF would ensure the sustenance of the fund, and the interest earned from CBO loans could also be used to finance and sustain the services of the support organisation (the SDF).

6. Rationale for Sustaining the Seed Grant Fund

The SCDP has a provision for providing non-refundable grant assistance to the CBOs for rural infrastructure development activities such as drinking water, trails repair, micro-hydro, school building, health and sanitation and so on. Grant assistance is provided from the Seed Grant Fund (SGF), one of the four SDFF funds. The Seed Grant Fund, will likely be exhausted by the time the NPC/UNDP demonstration project is terminated and the programme is handed over to the local government. The Seed Grant Fund has been a great attraction for people to come together and work for environmental conservation. In the CBO meetings individuals do not only discuss their community fund savings and credit needs, they also discuss their community’s problems and possible solutions. The support they receive from the Seed Grant Fund to implement their common community development projects has been a great incentive for community members to work together and for the overall improvement of their community and the environment. If this Seed Grant Fund support is discontinued it may have a negative impact on the community’s desire to work together.

Further, the SDF CCF is meant to provide credit to the CBOs community to meet the credit demands of the individual CBO members and interest is charged on the cash advances from CCF. CBO members will not likely be willing to take out loans to invest in infrastructure development activities. Hence the Seed Grant Fund needs to be continued and DDC must be asked to replenish the SGF every year from the DDC budget. In addition to the DDC’s contribution, a provision should also be made to require the participating VDCs to contribute certain amount of money from their annual budget to the Seed Grant Fund.

7. Handover of SCDP and its Concerns

As per the agreement between HMG/NPC and UNDP, the SCDP will eventually be operated by the national government agencies and governed by laws. However, expansion of the Programme into new areas and districts is expected to continue until the SDCs of the programme districts are prepared to take on that responsibility. This grants further opportunities to both the collaborating parties to share technical knowledge and resources to build the capacity of local communities. By the end of the demonstration project, the following impacts and results are expected:

It will be necessary to define a legal and institutional framework so that the National Government Agencies will be able to continue and replicate the programme in a sustainable way, and community members do not feel the impact of NPC/UNDP pull out.

8. SDF Management Options

The guiding considerations in the choice of management options under the new legal and institutional framework will be:

• involvement of local governments;
• securing the continuity of the SDF CCF as the revolving fund for credit facility;
• securing the continuity of the Seed Grant Fund for environmentally friendly rural infrastructure projects;
• securing the continuity of quality services from the support organisations;
• ensuring that it is a non political program;
• maintaining the bottom-up decision making process for resource allocation under the Programme; and
• ensuring the Programme’s sustainability and credibility.

8.1 Option No 1. (District Development Committee)

The DDC itself takes charge of management of the SDF and administration of the SDF Credit Capital Fund and Seed Grant Fund.

The problem with this option is that the DDC is a political body and due to constant political pressures it would be difficult to meet the requirement for political neutrality. Furthermore, the DDC’s priority is not to run savings and credit programs. The DDC is already preoccupied with multifarious local development concerns. In the absence of time, priority and sensitivity, the management of the Fund may suffer. Additionally, the DDC’s secretarial staff is already overburdened with other responsibilities.

8.2 Option No 2. (Cooperative Society)

A co-operative society could be created at the District Level to manage the SDF Fund.

This option was ruled out as it would require the constitution of CBOs at the grassroots into mini cooperative societies. It is only then that a district level cooperative with federal structure can be created. The process of registration is cumbersome and time consuming. Futhermore the entrustment of the SDF Fund in such body would not ensure the continuity of the Fund as cooperative society may be dissolved by its members any time.

8.3 Option No 3. (Non-Governmental Organisation)

Creation of a Non-Governmental Organisation at the district level to manage the SDF and the SDF Credit Capital Fund and Seed Grant Fund.

This would require at least seven people from private sector and registration would have to be done under the Society Registration Act. A registered NGO under the Act alone is not enough. An NGO would also have to obtain a license from Rastra Bank of Nepal to run the credit facility. This option was also ruled out as NGOs often have political ambitions and the continuity of the NGO itself can run into trouble if there are misunderstandings and internal conflicts among the executive members of the organisation. It is also very difficult to ensure that the SDF funds would not be misused.

8.4 Option No 4. (Development Board)

Creation of an autonomous development board under the Development Board Act.

A Sustainable Development Facility Fund Management Board Formation Order has to be issued by HMG. Under this Act the Board has to be constituted by HMG through Cabinet decision and can be dismissed by HMG at any time. Under this option the Board shall have a legal identity of its own and shall not be part of DDC. This option is also ruled out as this idea bypasses local governments, and without their cooperation the program may not be successful. In particular a body accountable to the central government may not be a good option for the management of rural credit at the grassroots level.

8.5 Option No 5. (Autonomous body under DDC)

Creation of an autonomous management committee under the DDC to run the Sustainable Community Development Programme.

Under this option an autonomous management committee is to be created by the DDC to administer the programme. The existing Sustainable Development Committee (SDC) could be taken for this purpose with necessary expansion. Except for the chairman, all other members will be non-political persons. This body will have functional autonomy and will run independently, specialising in watershed management, environmental conservation and local development through rural credit and savings programs. This body will work for the DDC as an autonomous body. However at the time of entering into legal agreements it will have to use the stamp of the DDC.

The SDC itself will not be involved in the implementation of field level activities. These activities will continue to be implemented by the members of the support organisations (who will be asked to organise themselves into a non-governmental organisation). The SDC will have the responsibility to supervise, monitor and evaluate the performance of the implementing NGO/SO.

8.6 Best Option

Option No. 5 is the best option for managing the SCDP as it involves local government and yet the SDF still functions as an autonomous institution. The Legal and Institutional framework for the Programme should be developed for this arrangement. This body can be created by issuance of a set of directives by the District Development Committee under the DDC Act. This directive will have to be approved by the District Council. Once the framework for the management of the Programme has been issued as the Sustainable Development Facility Directive, it will be self regulatory and bound by the terms and conditions incorporated there in. Through this directive, the credibility and continuity of the SDF CCF, the Seed Grant Fund and the Programme activities can be ensured.

The following obligations need to be carried out by the concerned parties for bringing the proposed legal and institutional framework into existence and operation.

The DDC’s Obligations include:

• To approve the draft SDF Directive 2056 B.S. for creation of a legal and institutional framework for the Programme. This directive has to be approved well before the termination of UNDP support and handover of the project. The directive shall define the institutional arrangements for administration of the SDF CCF and Seed Grant Funds, the guidelines for carrying out development and training related activities, and the eligibility criteria for availing the credit capital facility. It will also guarantee the continuity of the SDF fund.
• To put up the directive for approval before the annual general meeting of the District Council and get it approved.
• Not to amend or repeal the directive without having consulted NPC/UNDP.
• To allow NPC/UNDP to inspect the records and use of the accounts of the funds made available to the Sustainable Development Committee and facilitate the inspection and evaluation of the activities at project sites.
• To adopt the existing SOs (NGOs) as the implementing agencies for the Programme under SDC management.

NPC/UNDP’s Obligations include:

• To make available the grant amount specified in the project document to target districts as Programme fund for establishment of SDF, Seed Grant Fund (remaining amount if any) and other activities such as training, awareness and so on.
• To hand over the computers and other equipment used by project management for the use of SDF Secretariat.
• To provide minimum orientation about the programme objectives and procedure to newly constituted SDCs.
• To make a Project (handover) Agreement with the DDC. This agreement will define the major terms and conditions of project design and implementation.

9. Dissolution of Project Management Office

After the handover of the SCDP programme to national counterparts, there will be no role for the Project Management Office and hence it will be dissolved. By the end of the demonstration project it will have fulfilled its mandate and will have fully documented the process for adaptation in new areas. Project management will be assumed by the SDC.

The existing Sustainable Development Coordinators for each district may be placed as the member secretaries of the Sustainable Development Committee in their district. The Co-ordinator shall act as a liaision between the SDC and the SDF field staff. The co-ordinators shall be stationed as SDF Secretariat. The co-ordinator’s salary may be supported by NPC/UNDP for some time, although a provision should be made to phase out this support. The Programme Manager may be hired by NPC/UNDP as a consultant to oversee the performance of each district for a certain period of time.

10. Transformation of the Executive Committee (EC)

The national level Executive Committee will be transformed into a policy review and analysis forum (under NPC) for SCDP, P&P and similar programmes run in different parts of Nepal. This forum will be chaired by the Vice Chairman/NPC, and the chief of the environment division in the NPC will be the member secretary. This body then will be renamed the Policy Review and Analysis Committee (PRAC).