Agglomerative Hierarchical Clustering method for allocating financing to local development projects

Abstract

Since the beginning of the process of updating the Cuban economic model in 2011, initiatives have been promoted to improve the Cuban territorial management model, grant municipalities and their governments the necessary decentralization within the framework of a centrally planned economy and develop the instruments that make possible the integral application of the conception of Local Development.

In this sense, development strategies are focused on local projects allowing the achievement of food production that enables municipal self-sufficiency, favoring the development of mini-industries and service centers, where the principle of financial self-sustainability is a key element, harmonically compatible with the objectives of the plan of the National Economy and of the municipalities. Hence, the management of financing at the local level constitutes a fundamental element to be considered, not only because of its scarcity, but also because of the need for efficient and timely administration. This paper defines a methodology for the allocation of financing to local development projects based on multi-criteria decision techniques and the use of the Agglomerative Hierarchical Clustering method. This methodology was implemented in the creation of the Project Financing Allocation (ProFinAll) web application, a system that uses multi-criteria decision-making to select the best projects, based on qualitative criteria and decisions provided by experts, and which allows matching between projects and funding sources.