The Role of Local Economic Development Agencies (LEDA)

The first LEDAs were set up in Europe at the end of the 1950's. LEDA are promoted by various European governments as well as by the ILO.

I.   Objective

• Foster the economic development of the territory where it works; tap the endogenous potential of a territory.

• Capitalize on endogenous resources and concentrate on support for those groups with the most difficult access to regular economic and financial circuits.

• Foster integration and coordination of local institutions and associations around a shared vision of local economic development.

• Promote local small and medium sized business; create entrepreneurial culture.

• Plan and bring into being a system of services to public and private organizations that can support local economic development.

• Pay special attention to identifying the most vulnerable social groups and identifying poverty traps.

II.  What is a Local Economic Development Agency

• Sets up, runs, and supports an endogenous network able to catalyze development. The essential mission of LEDA is to:

  • create jobs.

  • promote and support small and medium-sized businesses in the various branches of production.

  • improve the economic context and opportunity of the territory.

• Promotes free competition among healthy businesses.

• Provides tools for economic development that include the weakest and most vulnerable.

• Uses businesses as a weapon in the fight against poverty.

• Develops relationships of collaboration and cooperation across sectors.

• Allows the local government to be the direct actor.

       Several core characteristics of a LEDA are:

• It is an organized structure.

  • LEDAs have their own legal structure and functional autonomy; it has a legal framework.

  • They involve local actors from both the public and private sector; consortium of public and private sector groups.

  • Non-profit association   . 

  • Bundles services together: financial services, technical assistance, training of potential entrepreneurs, territorial service.

  • Institutional entity -- plays a role in the local and national political picture.

  • Contractual entity -- independent access to funding, to subcontracts and services, to national and international programs.

  • Administrative entity -- implement projects and provide services and credit.

• It is a territorial structure.

  • Tool for development policy in decentralized states.

  • Provides practical support for national policies concerning the decentralization of economic development decision-making and services.

• Forum for social dialogue.

  • Forum where local actors can promote and determine their own processes of economic development.

  • LEDA - autonomous and democratic quality: public institutions and local associations are participants, but LEDA is not accountable to individual parties but to the general assembly.

  • Space for decision-making.

• Coordinates local economic development planning and implementation.

  • Assembles all the actors in order to design a strategy for local economic development.

  • Indicates the most promising sectors, priority interventions and their configurations.

  • Provides technical assistance to the local administrations responsible for planning.

  • Assists the entrepreneur to find a good idea and develop his or her business plan, ascertaining its feasibility.

  • Assists businesses both during start-up and in their initial period of activity.

• Weapon against poverty.

  • Credit is accessible to all: LEDAs act as guarantors with the banks, providing collateral for the poor.

  • Associative structure enables all territorial organizations to participate and play a role in the decision-making process.

  • Vehicle for small producers to market products outside the local area.

• Provides Credit.

  • Helps to finance business plans.

  • Credit disbursed on the basis of feasibility of project.

  • LEDAs currently boast high loan repayment levels.

• Sustains enterprise development and sustainability.

  • Helps the beneficiary to draw up business plans and provides inexpensive credit.

  • Helps in formulating reliable business plans, credit disbursement and post-financing assistance.

• Social Benefits.

  • Protects and enhances the environment. Business plans that capitalize on environmental resources and introduce new environment friendly, energy-efficient "The challenge is to find the rules and the institutions for stronger governance -- local, national, regional and global -- to preserve the advantages of global markets and competition, but also to provide enough space to ensure that globalization works for people, not just for profits”   (Human Development Report, UNDP, 1999). Technologies receive a higher score for their financing.

  • Is an additional resource for women; i.e., many offer subsidized credit lines to assist the creation of businesses and projects that address their deep-felt needs.

• Has links with national and international networks.

III.  Who Belongs to a LED Agency?

• All the local public and private-sector entities that want to participate are involved in the decision-making bodies: community groups and civic associations, trade unions, producer’s organizations, business associations, service centers, city governments, the local offices of ministries, specialized public structures, vocational training institutes, banks, universities, etc.

• Is comprised of a governing structure and operational structure.

• Governing structure:

  • General Meeting Assembly.

  • Executive Board actually runs the LEDA; handles administration, drafts internal regulations, makes decisions on projects and programming:

    • Consists of 5-10 members and is elected from general assembly.

    • The board’s term of office is usually one or two years.  Responsibilities within it are subdivided, with the election of the chairman, the treasury and the secretary.

• LEDA branches are staffed by specially trained personnel and provide a narrower or a broader set of services depending on the state of communications from the head office.

IV. Procedures to Set-Up and Build a LED Agency

• Promoting the Idea & Making Contacts.

  • Promote the idea with potentially interested parties.

  • Identify possible founding members.

  • Seek their consensus and encourage their dialogue and participation   in designing and implementing the project.

  • Hold individual meetings with the different groups to hear different viewpoints (i.e. public authorities and local administrations, local offices of State or public-interest institutions, universities, trade associations and unions, international development agencies, etc.).

• Organize Local Meetings & Establish a Committee  . 

  The purpose of the LEDA committee is to draft a plan for the LEDA:

  • Organize a profile of the structure, setting out objectives, organization, functions, legal form, budget, projects and activities.

  • Formulate a plan indicating the main operational stages.

  • Draft by-laws-basic rules for governing (esp. by-laws that facilitate the entry of new members).

• Presenting the LEDA.

  • Contact competent national authorities and institutions in order to present the idea to them and define the relationship between the LEDA and national policies.

• Equip the LEDA With Necessary Instruments to Operate.

  • a short-term plan of operations ( The steps needed to establish procedures, find offices, etc, the activities for training its members and future technical staff, promote LEDA in the territory).

  • a formal budget and initial investment in the LEDA; costs must cover the following:

    • capital formation expenses

    • operating expenses

    • program expenses

  • procedures for managing the credit fund.

  • operating procedures that are clear, defined, adopted and ensure qualitative standards, such as transparency and democracy.

  • personnel selection procedures.

  • offices and equipment; the LEDAs headquarters needs to be recognizably autonomous (headquarters are always located in the territorial capital, up-to-date computers and Internet connection should be implemented whenever possible).

  • initial external visibility.

  • legal personality: legal consultants and support from central government.

• Give Priority to Initiatives that Maximize Visibility or Respond to Emerging Needs  . 

  • build credibility as an institution that responds to concrete local needs.

  • for instance, the reconstruction of a road of strategic importance for marketing local crops, improvement of transportation systems or the opening of a credit line from agricultural commodities.

• Technical Team Does a SWOT (Strengths, Weaknesses, Opportunities & Threats) analysis.

  • identify the local economy’s most promising sectors and the main impediments to the unfolding of its potential.

  • business plans should exploit the area’s potential and respond to the needs of the population. 

  • expand the local economy to the benefit of the entire population.

V. What do LED Agencies do? What Programs do LED Agencies Implement?

     What LED agencies do:

• Integrate the business in the lines of production that are the center of the endogenous local development.

• Assist the entrepreneur to find a good idea and develop his or her business plan by providing information on business opportunities and offering specific technical assistance.

• Assist businesses both during start-up and in their initial period of activity ( Supply support in organizing production, perfecting technology and administration, managing markets, and marketing).

• Provide financial support, facilitating access to credit on reasonable terms.

• Prepares a consolidated plan for local economic development that constitutes a reference point not only for its members but also for national and international organizations interested in investing in the territory.

• Launches key lines of production for the territory, by creating a significant number of new enterprises and financing and reinforcing existing ones.

• Introduces Special Training Programs.

     

     Programs that LED agencies implement:

• territorial development plans.

• studies and surveys directed at local and territorial organization.

• specialized technical assistance for local institutions.

• enhanced coordination of different actors engaged in thssssse area.

• orienting international cooperation and national development programs.

• overall business support: formulation of territorial and business development plans, locating potential sources of funding, applying to the appropriate bodies for finance and following through on the applications.

• local marketing campaigns.

• provide information on area’s resources and potential, laws, regulations, and consumption.

• encouraging the creation and spread of other specialized services, such as financial and commercial services.

• research and education of entrepreneurial activities.

VI. Case Studies

• Nueva Segovia, Nicaragua -- Collaboration.

  The LEDA has collaborative relations with national organizations (i.e., ministry for agriculture and livestock, National development bank, Center for exports and imports, etc.) as well as carries out projects for international organizations (UNDP, ILO, OXFAM, etc).

• South Africa -- Inventory of Local Opportunities.

  A successful method of inventorying local opportunities was adopted in South Africa:

  • identification of business ideas, analysis of the demand for and supply of goods and services in the community.

  • ideas analyzed as opportunities, with considerations for sustainability and impact.

  • ideas are presented to the population and LEDAs stimulate the participants’ interest in starting their own business.

  • transformed into projects, with technical and financial support of the local organizations.

• Central Bosnia -- Evaluation Scheme to Offer Credit.

  The parameters of the evaluation scheme focus on the sector of activity, beneficiaries, creditworthiness of the entrepreneur, investment/employment ration, degree of product and process innovation.   A score is assigned to each parameter and the business plans that have the highest scores get the priority for funding.

• Mozambique -- Observing Other LEDAs.

  The country sent   a delegation from different provinces within the country to El Salvador and Portugal so that local officials and officers and ministers could understand the mission, and management of  the LEDAs.

• Morazan, El Salvador -- A Successful LEDA.

  The LEDA in Morazan is established with many associations as members, various services supplied, projects under way, projects under study, and relations with numerous national and international organizations.