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Promoting local government access to finance for local public infrastructure, an overview

Promoting local government access to finance for local public infrastructure, an overview. 2 nd session of the Committee on Local Finance World Council, Marrakech, November 1st, 2006 Thomas Meekel, Project Manager, CGLU.

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Promoting local government access to finance for local public infrastructure, an overview

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  1. Promoting local government access to finance for local public infrastructure, an overview 2nd session of the Committee on Local Finance World Council, Marrakech, November 1st, 2006 Thomas Meekel, Project Manager, CGLU

  2. 1/ There is a variety of financing mechanisms for local public infrastructure. 2/ However, these mechanisms are developing over time and may not be available for all LGs in a given national context. 3/ This session focuses on financial intermediairies created at national level to boost local public infrastructure. Agenda

  3. 1/ FINANCING MECHANISMS a. Traditional Public Financing Methods – Direct funding LOANS BONDS Grants LOANS Guarantee BONDS SAVINGS

  4. 1/ FINANCING MECHANISMS b. Traditional Public Financing Methods – Trough a Public Utility Guarantee LOANS BONDS Guarantee SAVINGS BONDS

  5. 1/ FINANCING MECHANISMS c. Traditional Public Private Financing Methods Guarantee LOANS BONDS

  6. 1/ FINANCING MECHANISMS Intermediate conclusions • There is no borrowing unless: 1/ Regular future income flows are secured, 2/ An implicit or explicit guarantee mechanism protects the lender in case of non repayment. • Non revenue generating infrastructure projects will need abondment of taxes to obtain long term financing • Local Government investment needs compete with other investment needs and demands (State, business, individuals): LGs are rarely served first!. • Given public finance constraints, taping private savings is key for expanding the financial envelope. .

  7. 1/ There is a variety of financing mechanisms for local public infrastructure. 2/ However, these mechanisms are developing over time and may not be available for all LGs in a given national context. 3/ This session focuses on financial intermediairies created at national level to boost local public infrastructure. Agenda

  8. 2/ AVAILABILITY OF THESE FINANCING MECHANISMS Developing a Sound Local Credit Market A long evolution: From a nascent to a developing local credit market, providing access to finance for local public infrastructure for a growing number of LGs

  9. 1/ There is a variety of financing mechanisms for local public infrastructure. 2/ However, these mechanisms are developing over time and may not be available for all LGs in a given national context. 3/ This session focuses on financial intermediairies created at national level to boost local public infrastructure. Agenda

  10. 3/ SPECIALISED FINANCIAL INSTITUTIONS a. A simplified typology • INVESTMENT FUND: . Delivers mainly grants and marginally credit. . Example: FEICOM (Cameroon). • SPECIALISED FINANCIAL INSTITUTION: . Depends from the State and ODA, delivers medium to long term credits and grants. . Example: FEC (Morocco). 3. DEVELOPED SPECIALISED FINANCIAL INSTITUTION. . Finds its resources on the financial markets, provides credit under market conditions. . Example: FINDETER (Columbia), CAIXA (Brazil).

  11. 3/ SPECIALISED FINANCIAL INSTITUTIONS b. Are they successful? • In broadening access to finance for LGs: Do SFI allow medium and small LGs to access finance for their infrastructure through credit and grants their infrastructure? • In developing the local credit market Do SFI support transition to market based municipal credit market systems?

  12. Let’s exchange experiences! Question for the coming debate: Given the current available mechanisms, which financial tools should be explored and developped? Conclusion

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