PART II

SALIENT FEATURES OF THE SUSTAINABLE DEVELOPMENT FACILITY (SDF)
 

The Sustainable Development Facility will be responsible for providing Programme community based organisations (CBOs) with training opportunities and financial and technical assistance so as to build the CBO members' capacity to successfully implement sustainable development activities. The SDF is also referred to as the Support Organisation (SO). A major responsibility of the SDF will be managing the Sustainable Development Facility Fund (SDFF).

2.1  The General Objective

The general objective of the SDF will be to create a strong and stable environment through sustainable development in communities defined by watershed areas.

2.2  The Specific Objectives

The specific objectives of the SDF will be defined as follows:

• To conserve the existing natural environment by supporting community participation in resource management and increasing awareness of environmental conservation issues.
• To promote a better environment through: judicious use of the natural resource base; use of alternative energy sources; development of alternative sources of income; and, conservation of the natural resource base.
• To alleviate poverty by promoting education, health, empowerment of women and improvements in rural infrastructure conditions.

3.1 Legal Status

The SDF will not have legal status of its own. It will be functioning on behalf of the DDC. All the legal proceedings for and against SDF shall have to be carried out in the name of the concerned DDC. The SDF shall have to use the stamp of the DDC for official purposes.

3.2 Management of the SDF

Management of the SDF and its accounts shall be guided by a Sustainable Development Committee, (SDC), consisting of the DDC chairperson, the Local Development Officer (LDO), the District Forest Officer (DFO), the soil and water conservation officer, a VDC representative and a CBO representative (both elected), and the Sustainable Development Coordinator. The chairperson of DDC will preside over the SDC meetings and the Sustainable Development Coordinator shall be the member secretary of the SDC.

The SDC will make all the major policy decisions related to administration of the SCDP Programme and the SDF Fund. It will approve CBO loan applications on the basis of the loan eligibility criteria. The composition of SDC shall be defined in the Sustainable Development Facility Directive 2056 B.S. (see Part II of this document). The SDF will be accountable to the SDC for its performance.

3.3 Staff of the SDF

There shall be two kinds of staff: (1) office staff and (2) field staff. Office staff shall consist of a Member Secretary [called the sustainable development co-ordinator] and an accountant. Field staff shall consist of a manager, community activists (CAs), community officers (COs), savings credit specialists and technicians, and a natural resource management officer. Field staff shall be recruited by the SDF in consultation with SCDP and the DDC. As the SDF expands activities into new VDCs, it will increase the number of staff in proportion to the increase in workload.

3.4 District Level Institution

The SDF will be a district level institution. However, it will provide its services in target VDCs at the village level. The SDF field staff (social mobilisers and community activists) will be working with the CBOs at the grassroots level and will act as liaisons between the CBOs, the Village Development Committees (VDCs) and the Sustainable Development Committee (SDC). The manager of the SDF will be responsible for co-ordinating and monitoring the performance of the social mobilisers.

3.5 Multi-dimensional Role

Though a primary role of the SDF will be to provide credit to eligible CBOs, it will also be responsible for supporting the CBOs to plan and implement infrastructure development programs of their own. Furthermore, it will be responsible for organising the CBOs through social mobilisation, providing the CBOs with skills training, and acting as a liaison with the district line agencies. Additional details on the responsibilities of the SDF are provided in section 4.0.

Responsibilities of the SDF will include:

• Using social mobilisation techniques to encourage rural communities to form community-based organisations (CBOs).
• Training the CBOs how to plan, implement, operate and maintain local development projects, and providing technical assistance as required.
• Providing CBO members with the training and orientation required to plan community activities related to the district's entry point.
• Providing CBOs with the knowledge and information required to mobilise locally available resources through savings and credit programs.
• Managing the SDF Credit Capital Fund so that CBO members have access to credit for initiating income generating activities.
• Providing small grant assistance (from the SDF Seed Grant Fund) to the CBOs for development of local infrastructure projects related to the district’s entry point.
• Acting as a liaison between CBOs and line agencies to ensure that line agencies provide the support and services required by the CBOs.
• Helping CBO members develop the skills they require to manage their resources in a sustainable manner.
• Training CBO members in marketable skills that will help generate employment opportunities.

Note: Environmental management, economic development and social development are the three possible entry points for programme initiation. The entry point should be decided according to the needs of the communities in the district. The entry point for each Programme area shall be decided by the SDC after consultation with the SO/SDF and community representatives. The Programme will gradually expand its activities and cover all three entry points in an integrated manner.

5.1 Financial Management

The SDF will be responsible for managing the SDF Fund. The SDF Fund should be divided into the following four funds which are to be managed under separate bank accounts:

1.  the Credit Capital Fund (CCF)
2.  the Seed Grant Fund (SGF)
3.  the Human Resources Development Fund (HRDF)
4.  the Operational Cost Fund

The Credit Capital Fund is a revolving fund that should be used to meet the credit needs of the Programme CBOs. Of the total amount of funds received by the SDF, 80% should be put into this account. The CCF funds must be administered strictly on a credit basis, and reimbursement of loans must be rigourously enforced. The Seed Grant Fund should be used to provide grant assistance to CBOs for community-wide development projects. The HRDF should be used to fund training activities and exposure visits. The costs incurred from operating the SDF (e.g. staff salaries and administrative expenses) should be paid from the Operational Cost account. The operational cost of the SDF should not exceed 15% of the total amount of funding received by the SDF.

All SDF accounts will be operated from a bank at the district headquarters. The CCF, HRDF and SGF should be operated in savings accounts in the bank to generate maximum interest. The Operational Cost Account should be operated in a current account in the bank and the interest earned from the SDF, the HRDF and the SGF savings accounts should be automatically transferred into the Operational Cost Account. In addition, interest earned from CCF advances to the community will be deposited in the Operational Cost Account.

The SDF will maintain records of the financial transactions at the CBO level to monitor use of the SDF Fund. There will be an annual audit of the SDF Fund and the SDF itself may check the CBOs' accounting books. Decisions concerning the accounts will be made by the SDC. All cheques administered by the SDF will require the signatures of both the LDO and the sustainable development co-ordinator.

5.2 Sources of Funding

Initially, UNDP was the sole contributor to the SDF Fund. However, as UNDP support will eventually be discontinued, it was necessary to identify other potential sources of funding. Possible sources of funding for the SDF include:

1.  Grants from UNDP
2.  Grants from other bi-lateral and multi-lateral organisations
3.  Grants from INGOs
4.  Grants from HMG
5.  Allocation of funds from DDC/VDC/MP budget
6.  Loans from financial institutions
7.  Other sources

Although the Credit Capital Fund money will continue to circulate among CBO members, as the Programme expands into new areas, a greater amount of capital will be required to meet the credit needs of the additional communities. As such, it is expected that HMG, UNDP or other donors will allocate funds as required. The Seed Grant and Human Resources Development Funds should be sustained from the DDC budget, the VDC budget, and contributions from other donors. The interest earned from CBO loans, and the interest earned from the savings accounts (SGF and HRDF) will be transferred into the Operational Cost Account. Further subsidies provided by the DDC, the VDCs and donor agencies will also be deposited in the Operational Cost Account.

5.3 Eligibility Criteria for Credit Capital

Credit advances to CBOs from the SDF Credit Capital Fund will have to be made strictly on the basis of the eligibility criteria. This will ensure the performance of the CBOs and equal treatment of loan applicants. The eligibility criteria will be as follows:

• The CBO must be listed at the SDC office;
• The CBO must prove that it has been having regular weekly meetings, initiated saving and credit activities, and has transparency in it’s decision making process
• CBOs must have used their own community fund savings for small investments and and must have developed a good record keeping system;
• CBOs saving (their community fund) is not sufficient to provide loans to most of its members
• Applying CBO members are citizens of Nepal and are capable of using the loan in sustainable development based productive activities and are able to pay back the loan;
• Activities must be, as far as possible, low cost and not risky;
• The initial amount of credit capital disbursed to a CBO must be limited to thrice the CBO savings amount.
• The loan repayment schedule and duration (which may not exceed 12 months) must be unanimously decided in a meeting when all the CBO members are present;
• The CBO manager takes the responsibility to release the loan, collect the amount, and maintain a good record keeping system;
• Only one member from a household shall be entitled to seek a loan even if there are two or more members from a house hold in a CBO;
• All the CBO members take the collective responsibility for the loaned amount (both principal and interest) if it is not paid back to CBO by the concerned member;

These eligibility criteria have been field tested but may be updated as necessary.

Continuity of the SDF will be ensured by a protective clause in the SDF Directive itself. The protective clause will restrict the use of SDF resources (the SDF Fund) for authorised Programme activities only, and using SDF Funds for other programmes will not be allowed.