Military in Bethlehem
Social cohesion

Social cohesion

Promoting decentralisation

The longstanding conflict in the Palestinian territories is hampering international development cooperation in the region. The "Municipal Development and Lending Fund" (MDLF) allows international donors to support communities in the West Bank and Gaza in a politically neutral way, which proves to be a successful approach.

KfW Development Bank’s commitment

KfW has been supporting the German Federal Government in implementing its development-policy goals since 1960 within the scope of Financial Cooperation (FC). We combine financing know-how with development-policy expertise. On behalf of the German Federal Government, and primarily the German Federal Ministry for Economic Cooperation and Development (BMZ), we promote and support programmes and projects that mainly involve public-sector players in developing and emerging economies.

Barriers of all kind define life in the West Bank and the Gaza Strip. The Israeli government controls access to the Gaza Strip and most of the West Bank. In 2006, Hamas’ election victory in the Gaza Strip also led to a political split within the Palestinian territorities. Many international donors took their leave of Gaza, many municipalities faced bankruptcy due to the lack of funding. A way needed to be found to strengthen municipalities in both Palestinian territories – in spite of geographic and political fragmentation.

The solution came from the MDLF, which was founded in 2005. Working independently of the ministries and thus also of inner-Palestinian quarrels, this fund can administer monies from international donors and channel them to the municipalities. The municipal development programme evaluated here, which was financed by seven donors, provided support through the MDLF for 136 municipalities in the Palestinian territories between 2010 and 2012. The funds were distributed, similar to a fiscal transfer system, in two budgetary cycles based on a key that factored in both the size of the population of a municipality as well as its performance in the administration. Performance was measured using a standardised set of indicators developed in collaboration with the German Technical Cooperation. In addition to financial allocations, the municipalities also received advice.

That it was possible to establish this transfer mechanism based on objective criteria was seen by the evaluators as a success. The programme could potentially support all municipalities in the Palestinian territories while still remaining politically neutral; incentives are also created for improving “governance”. Thanks to the programme, another step has been taken in the decentralisation process; but unfortunately, decentralisation does not receive much support from Palestinian policies – a risk for the sustainability of the programme’s achievements and their further development.

Evaluation: impact assessment and lessons learned

Whether a project is succesful or not is determined chiefly by asking the following questions: What has the project achieved for the people in the partner country? Has their situation improved in the long run? Three to five years after a project has been completed, the independent Evaluation Unit of KfW Development Bank conducts an independent evaluation for roughly half of the projects completed to draw lessons learned for future projects and programmes.

The assessment of the municipal infrastructure financed through the programme was less positive. As is common in decentralisation projects, each municipality is free to decide which measures to implement. In this case, the selection was not always convincing: for example, around 72 per cent of funds were used for road construction, although the municipalities are also responsible for many other public services. However, it is likely that the preference for roads also had to do with time restrictions and financial limits per budgetary cycle: road construction can happen one section at a time. The mixed impressions of the evaluation mission are reflected in the analysis of data on citizen satisfaction that was carried out by experts of the University of Göttingen on behalf of KfW: it found that citizen satisfaction with public services did not visibly increase, and in some cases, even decreased for individual services. Still, the citizens who benefited directly from the financed infrastructure because of where they live, particularly in relation to the road network, were signifcantly more satisfied than those citizens who, if they benefited at all, only did so indirectly.


This article has been published in the 14th Evaluation Report 2015-2016.

As the programme focused on strengthening institutions and it clearly scored points in governance aspects, the FC project was given an overall grade of “satisfactory”.

Result: "satisfactory" – grade 3


All United Nations member states adopted the 2030 Agenda in 2015. At its heart is a list of 17 goals for sustainable development, known as the Sustainable Development Goals (SDGs). Our world should become a place where people are able to live in peace with each other in ways that are ecologically compatible, socially just, and economically effective.