Methodology and General Operational Approach:
- Primary Financing Mechanism: Acting as the main and preferred funding channel for the Palestinian local government sector, responsibly managing development grants, funding programs, and lending initiatives mobilized by the Central Government and international Development Partners.
- Adherence to International Standards: Ensuring all financial allocations, procurement activities, and accounting methods strictly comply with international standards of transparency and financial accountability.
- Shift Towards Creditworthiness: Transitioning capable municipalities from full grant dependency towards long-term financial sustainability, enhanced revenue management, and independent borrowing capacity.
Detailed Interventions and Implemented Systems:
- Institutionalizing the Municipal Lending Function: Assigning competent, dedicated, and specialized staff members within MDLF to manage lending functions and coordinate start-up lending activities.
- Piloting Revolving Funds: Mobilizing extra financial resources from Development Partners to deploy and pilot "Revolving Loans" as an innovative financing instrument for eligible LGUs.
- Municipal Creditworthiness Model: Designing and formalizing a standardized Credit Rating Index / creditworthiness model to evaluate municipal financial capacities and prepare them for safe market borrowing.
- Revenue Optimization and Controlling Net Lending: Assisting LGUs in maximizing local revenue streams through automated financial software (FARV, RMIS) while actively curbing net lending expansion to restore fiscal balance.
Projected Budget, Indicators, and Targets (Through 2026):
- Projected Budget: Allocating a ring-fenced budget of $10 million to pilot revolving loans (bringing the internal financial, training, and MIS sub-total to $10,270,000). The overall projected 5-year budget managed under this framework is $272 million ($54 million per year).
- KPIs and Five-Year Strategic Targets:
- MDLF Operating Cost Coverage: Ensuring MDLF's absolute capacity to fully cover its own annual operating costs independently (Target: Yes).
- Lending Staff Competency: Securing fully competent MDLF staff to manage the newly institutionalized lending functions (Target: Yes).
- Revenue Growth vs Net Lending: Increasing local revenues in 70 municipalities while successfully maintaining no increase in their net lending balances (Baseline was 61 municipalities).
- Revolving Loan Pilot Beneficiaries: Actively engaging and extending loans to at least 1 municipality during the rolling pilot phases of the revolving loan mechanism.
- Creditworthiness Indexing: Mapping out and identifying the number of municipalities achieving creditworthiness according to the newly engineered index (Target: TBD based on the model implementation).
