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Local financing in rural areas

[ Summary ]


Chapter 3:
Achievements and limitations
of LEADER experiences


3.1 Application of decentralized
financial decision-making


Decentralized financial decision-making is a special feature of LEADER that plays a key role in ensuring proximity to initiatives and project promoters in order to respond to their financial needs. Decentralisation also makes it possible to overcome the constraints of isolation and the difficulties in accessing funding, by allowing more flexibility in the allocation of financial aid to small-scale project promoters.

LEADER subsidies have therefore come to play a leverage role, by encouraging investments using local savings that were formerly unutilized due to lack of support for the emergence of projects and/or of confidence in the future of the area concerned. In addition to identifying projects that have failed to receive any other form of support, LEADER subsidies have a major impact in terms of development education. Successive evaluations have highlighted the growing financial participation of private beneficiaries and even of regional authorities after local subsidies from the LEADER programme have been granted. They have shown that greater “proximity” of the support instrument leads to greater confidence in the area’s future.

In certain Member States and regions, decentralized financing has not been applied across the board, especially where project funding decisions were taken by the national or regional administration, which limits the impact of LEADER’s bottom-up approach. However, where the power of decision has effectively been left to the LEADER groups themselves, such decentralisation has been exploited to the full.

Certain LEADER groups have even gone so far as to decentralize, at least for some of their activities, right down to micro-local level.

This was the case with the Argyll & the Islands LEADER group (Scotland, United Kingdom), which, due to the isolation and inaccessibility of certain parts of the area [23], decided in 1994 to create a pilot micro-financing programme to support local projects of social and community interest [24]. It introduced an important innovation: the programme is managed on a decentralized basis by a network of 13 local working groups (LWG) comprised of representatives from the various interest groups, including entrepreneurs.

Following the creation of the LWG network, the Fund for Local Projects (FLP), financed by LEADER I, was set up. The LEADER group was responsible for designing the Fund’s eligibility criteria, terms of reimbursement, support systems and procedures. In return, the LWGs, partnerships of representatives from scattered communities, took charge of promoting and administering the Fund.

Each LWG was allocated a portion of the Fund, calculated in accordance with the size of the area, its population and its priority status in terms of intervention. An extra EUR 1,400 was added to cover administrative costs.

For each LWG, objectives were fixed in terms of the number of projects to be supported, but no stipulations were made as to the type of project, the interest groups to be given support or the geographical location. These objectives had to be set by each LWG in line with local needs. The LWGs therefore assumed the tasks of promotion and raising public awareness (distributing questionnaires, application forms, etc.) and helped to develop projects, hence playing a role of primary “filter” for the proposals submitted.

The LWGs do not formally approve projects; this remains the LEADER group’s prerogative. However, the LWGs are responsible for examining applications and issuing recommendations (in practice, the LEADER group almost always follows their recommendations). The projects must be aimed at: establishing further development groups, introducing new activities, creating services or facilities for the local community or cultural development. The maximum funding for each project has been set at EUR 1,500.

An evaluation conducted after the formula had been in application for two years, revealed that:

  • projects had not been concentrated in the hands of a few beneficiaries, demonstrating that the programme had had quite a wide impact throughout the area;

  • projects of general interest represented 24% of applications, followed by artistic and cultural projects (23% each);

  • the programme had led to a high degree of additionality: without the Fund, 59% of the projects would never have been implemented and in 18% of cases, project implementation would have been delayed.

LEADER provides the Fund with an annual EUR 170,000. During the first two years, thanks to local co-financing, projects worth EUR 623,000 were carried out. Apart from the fact that it harnesses local savings and other public funds for implementing projects of social and community interest, the Fund has contributed to the acquisition of expertise at all levels. It has enabled local communities to further their project planning and management know- how and allowed LWGs to master the skills of managing procedures, establishing priorities, raising local funds and evaluating project impact. Finally, the Fund has enabled the LEADER group to gain a better understanding of its area’s needs.


[23] Situated in the Scottish Highlands,
Argyll and the Islands is a mountainous area that
includes numerous small peninsulas and 26 inhabited
islands. The area spans 7,156 km2 and is home to some
78,000 inhabitants. After decades of emigration, the
population has risen slightly in recent years.

[24] For more information about this experiment,
contact: David Haworth,
Argyll and the Islands LEADER II Programme
The Enterprise Centre, Kilmory Industrial Estate
Lochgilphead, UK-Argyll PA31 8RT.
Tel: +44 1546 602281;
Fax: +44 1546 603964.

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