This paper introduces indigenous knowledge (IK) as a significant resource which could contribute to the increased efficiency, effectiveness and sustainability of the development process. IK is defined as the basis for community-level decision making in areas pertaining to food security, human and animal health, education, natural resource management and other vital economic and social activities. Several good practice cases will demonstrate the value added by IK to development in the productive as well as social sectors. An overview of the World Bank’s Indigenous Knowledge for Development Program describes the objectives, some of the achievements and the challenges ahead. Further cases will demonstrate how some of these challenges can be met. In conclusion, the paper argues that the harnessing of IK empowers local communities and could help improve aid effectiveness in poverty reduction.