The objective of the Second Municipal Development Project for West Bank and Gaza is to improve the Recipient's municipal management practices for better municipal transparency and service delivery. There are four components to the project, the first component being municipal grants for capital investment. This component will allocate performance-based grants for capital investment service provision, per mandate of municipalities defined in the local council's law no. 1 of 1997, for sectors described as eligible in the Operations Manual (OM) as well as for operating expenditures for municipalities in Gaza, and will be implemented in two cycles of approximately 18 months each. The second component is the support to municipal innovations and efficiency. This component pilots learning and innovation for municipal development, including implementation of Ministry of Local Government (MoLG) policy decisions. The third component is the capacity building for municipalities and Municipal Development and Lending Fund (MDLF). Finally, the fourth component is the project implementation support and management costs. This component will finance goods and consultants services for monitoring and evaluation, outreach and communication and local technical consultants for the engineering supervision of component one and the MDLF management fee.