Poverty in our society can be substantially reduced by 1. creating Financial Inclusion Centers ( FIC) in local communities 2. Deploying professionally competent Financially Services Agents to operate the FIC 3. Building a bio-metric database and on boarding of the residents , properties and resources in the community 4. Conducting a community development stakeholder needs assessment 5. Negotiate tax breaks with the Local/state government 6. Issue a Community Development Bond on the local stock exchange 7. Implement a digital repayment system by all on boarded community stakeholders

1. ADDRESSING POVERTY
in
Nigeria
with
Community Development Bonds
Sola Bickersteth
Financial Inclusion Centers

2. Why is this new model of
development finance necessary?
o At the seventieth session of the UN General Assembly on 25
September 2015, the member states including Nigeria adopted 17
SDG Goals which came into effect on 1 January 2016 and will
guide the international development agenda till the year 2030
o The SDGs declaration includes commitments from several
international processes such as the Third International Conference
on Financing for Development, Addis Ababa Action Agenda
(AAAA) that took place 13-15 July, 2015.
o The learning of MDGs has taught us the lesson to discuss the
financing issue upfront at the country level with the implementation
at the community level to turn this ambitious agenda into a reality..
o World Bank Billion to Trillions project recognizes that a
successful implementation of the SDGs will involve mobilizing
substantial private sector finance , while the role of governments ,
MDF and ODAs should now be to catalyze these investments and
provide project risk guarantees
• Globally, the Bond Market is the largest source of
private sector development finance mobilization :

3. Formulate Nigeria’s National SDG 2030 Community
Development strategy and implementation plan
Identify key policies that can encourage private
sector and investors confidence
Create a legal framework for community infrastructure
development ownership and implementation
Prepare ‘bankable’ local projects through ODA, MDB ,
NGOs with repayment guarantees of the CD Bonds3
What is the project implementation
delivery framework ?
National
Strategy
Supporting
Policies
Community
Ownership
Repayment
Guarantees
2
1 3 4
With 744 LGAs and 9572 wards across Nigeria, a national delivery
framework for the issuance and repayment of Community
Development ( CD) Bonds should first be put In place
with the active participation of relevant agencies , legislators ,
ODAs , MDBs , NGOs and private sector representatives
This initiative should be spearheaded by office of the vice
president and coordinated by the Debt management office.
The suggested stages for implementation are :
1
2
3
4

4. CD Bonds are designed to help governments build community
infrastructure, provide affordable housing, create jobs, make access
available to quality healthcare and education, and align with the other
sustainable development goals.
o Offers sufficiently attractive investment terms to a range of
institutional and other private sector investors
o Structures the public sector contribution in a way which shares
risk appropriately, delivers value for money, accounts for public
sector liabilities transparently
o Aligns incentives between a number of partners, reflecting their
mutual interest, and harnesses the potential of citizens and
communities to make financial and other meaningful contributions
to successful infrastructure development
CID Bonds can effectively allow citizens resident within a particular
community to pace the delivery of new infrastructure with what the
community really needs while removing the burden from government
, reducing costly delays that ultimately get passed on to the
inefficiency of the local economy.
Residents , property owners ,businesses and public utilities repay
via special levies over 10-20 year periods for the infrastructure .
The bonds will be issued through or for the benefit of legally
registered Community Development Associations
What are the features of
Community Development ( CD) Bonds

5. A Community Development Association is a legally registered
Special Purpose vehicle that will have the power and right to enter
into contracts ; to own property; adopt by-laws, rules and
regulations to sue and be sued; to obtain funds by borrowing; to
issue bonds; and to impose assessments and levy taxes on
households , businesses and/or properties within the community.
The CDA will be managed by a board of supervisors, made up of
individuals elected by the residents of the community.
The board then hires professionally competent project
administrators , financial services agents and managers who will
be responsible for daily operations of the CDA.
NGOs and Local Government officers will be observers and
advisers members of the board of the CDA
Special property linked levies are set annually by the governing
board of the CD . Tax deductions can be negotiation by the
members as part of a CID bond offering
Generally a repayment guarantee reserve fund should be
established when the bonds are issued, with a minimum balance
of about 10 percent of total bond proceeds or 100 percent of
maximum annual debt services
Why do we need to establish
Community Development Associations?

6. The attractiveness community development bonds could be
enhanced through tax incentives by government , guarantees or a
risk investment tranche by ODA, MDBs or NGOs ,
with the benefit of de-risking the debt tranches while also reversing
the problematic characteristics of a Private Finance Initiative
Financing proper project development , legal documentation . Data
gathering and implementation plan will be of added value to the
bond offering and eventual success.
Members of the community , especially those in the diaspora both
locally and international can be invited to fund these upfront
requirements as well as provide additional de risking fund via a
remittance scheme .
Some of the planning consideration includes if communities wish to
own the public utility components of the bond offering such as
electricity , water , refuse collection , clinics , etc
What are the project planning
and bond repayment guarantees?

7. Why are financial information systems
and community data important?
A recent estimate by Espey et al (2015) suggest that around $1 billion
will be needed annually to finance the data needs of 77 developing
countries. The estimate further suggests that an additional $200
million ODA will need to be provided annually to support the statistics
of these countries
Increased ODA flow is needed to support Nigeria in the creation of
the financial information systems that can enable private sector
financiers to conduct effective risk analysis and ultimately take the
required investment decisions that will lead to the needed trillions:
These are :
o Identity Management Systems : For effective infrastructure
planning and tax administration of the citizens in a community.
o Addressing Systems : Without efficient addressing , individuals
cannot be reached, businesses cannot be identified by potential
clients or financiers and public services cannot be delivered
properly.
o Land Registries and Property Databases : Huge private sector
investments can be unlocked with functional property databases.
o Collateral and Credit Registries :Otherwise unusable property
can be effectively tapped by private sector financiers.
A CD Bond offering to the private sector will be more successful
when Government, ODA , MDBs , NGOs invest more in the
required information systems on the residents of that
community first.

8. Why do we need a structured
Financial Services Agent Network ?
To further support CD bond offerings, Government with the support of
ODA . MDB and NGOs should invest in the structures that enable
easy access to a complete range of financial services especially in
semi urban and rural communities as this can also help to catalyse
the required trillions of private sector investments.
Financial Services Agents: situated within local communities and
professionally trained to simplify and enable affordable access to
otherwise complex financial services from the private sector
By Investing in the infrastructure and capacity building for financial
services locations at poor communities , private sector engagement
can be better activated.

9. Community Infrastructure Bonds would be issued by legally
registered independent special purpose vehicle (SPV) or
“Community Development Associations” on the Nigerian and
other international stock exchanges
These bonds would be underpinned by a range of revenue
streams, to deliver the expected returns to the private investors
There would be no one-size-fits-all model, with local hybridity
and diversity according to the local requirement but the context
will be based on the National community development framework
For investors. Possible repayment revenue sources will include:
o Public budgets such as agreed percentages of Local
Government authority or state governments
o Annual infrastructure development levies especially from
property owners and local businesses
o Utility and public service payments for electricity , water ,
refuse collection , medical services , etc
o Toll collection for roads and similar infrastructure
o Land value increments levy and other revenue streams such as
efficiency savings, asset transfers
o statutory charges, diaspora and donor contributions.
Where will the various bond
repayment sources come from?

10. In summary, a Community Development Bonds offers an
intriguing opportunity for citizens and communities to engage
more directly and meaningfully in the financing of infrastructure
development as provided for in the SDGs.
Such vehicles would enable an improved, more transparent,
diverse and democratic control and governance.
It can present a “win-win-win” situation for Local ,states and the
Federal Government of Nigeria as well as the citizens by
allowing for low-cost, predictable infrastructure financing
Even for new master-planned communities.
The public sector benefits mainly through the development of
high-quality infrastructure at minimal cost and risk to states and
local governments.
Citizens can also benefit through lower mortgage financing
options , enabling households with more moderate incomes
and address the prevalent poverty in the Nigerian society
With over 100,000 communities across the 9752 wards in the
773 LGA , CD bonds is a sure way to generate massive
employment for millions of unemployed Nigerin youths,
What is the conclusion about
Community development Bonds?