Empowering Communities for Improved Service Delivery

Challenge

Local governments in Bangladesh are a key element of the overall governance landscape; however, they operate in a highly constrained policy and institutional environment. Local governments have inadequate fiscal autonomy or their own source revenues; limited decision making powers; and weak accountability systems. Subnational expenditure as a share of total government expenditure has been less than 4%, while less than 2% of total government revenue is collected at local levels. Most local development decisions are prioritized by deconcentrated national agencies. However, local governments, especially, UPs provide communities and citizens with opportunities for inclusive participation in civic affairs, and offer substantial opportunities for enhancing government accountability and transparency at the grassroots level.

In recent initiatives, successive governments have affirmed their intent to devolve powers to lower levels through more autonomy and increased allocation of resources. In 2009, GoB revised local government ordinances to facilitate the transfer of additional expenditure responsibilities and enhanced fiscal resources to UPs. These reforms enabled the transparent and predictable fiscal transfer system for UPs to be introduced and established by the two consecutive phases of LGSP. Fiscal transfers supported by the project enabled UPs to execute their assigned expenditure mandate as per the 2009 UP Act.

Approach

With nationwide coverage to all 4,500+ UPs (about 130 million beneficiaries), LGSP2 provides direct block grants (both basic and performance-based) to eligible UPs that meet the minimum transparency and governance conditions (i.e., demonstrating participatory planning and open budgeting, timely submission of biannual financial reports, and annual audit clearance), along with full discretion for communities to decide their own priorities and grant utilization.

A commendable achievement under LGSP 2 is the successful establishment of a nationwide performance grant system with clear criteria and transparent assessment, supported by rigorous annual financial audits mainstreamed in all UPs nationwide, this was an unprecedented initiative in the local governments of Bangladesh. The open budgeting and planning as means for citizen engagement has enabled the community members to debate spending needs and question spending efficacy, thus created greater transparency and good governance at UP level. Furthermore, strengthening the UP Help Line and introducing Women’s Forums at the Upazila level are some of the new social accountability measures under LGSP2. Recognizing the major contribution of women in local level development, it earmarks about 30 percent of the grants for local schemes prioritized by women. Moreover, the project as established a comprehensive management information system for strengthening capacity of monitoring, evaluating and supervising local governments.

Results Achieved

• 130 million people across the country benefited from enhanced governance and service delivery.
• All 4,500+ UPs get annual financial audit and performance assessment for improved financial accountability.
• 30% of funds to schemes prioritized by women, through over 400 functional Upazila Women's Development Forums.
• 20% annual increase in UP own- source revenues nationally.

Next Steps

The momentum provided by LGSP2 and its achievements in empowering local governments of Bangladesh need to be further sustained. The proposed Third Local Governance Support Project (LGSP3) aims to mainstream and institutionalize the formula-based UP fiscal transfer system into GoB’s inter-governmental fiscal framework, through a number of significant policy reforms to be implemented by GoB with the Bank support.

Basic Information