Delivering urban improvements will require strengthening the institutional capacities of cities to source alternative financing. Financing the long-term needs of cities in a rapidly urbanizing world is a global challenge that will require collaboration. Innovative financing models are becoming a priority because of lack of public funding. Innovative financing mechanisms are important market catalyzers requiring collaboration between the public and private sectors. Such partnerships lower the financial risks of the project and create a strong common focus on timely deliver and bringing results.
Innovative financing means “new or novel ways to generate predictable, additional and sustainable finance” and “the raising of funds from unconventional sources or mechanisms to make existing funds ‘go further’.
Some following tools of innovative financing that can inspire local government:
- Energy Performance Contract (EPC)
- Public Private Partnership (PPP)
- Revolving Fund
- Municipal (Green) Bonds.
International Urban Cooperation (IUC) successfully organized a webinar “Innovative Financing Mechanisms” on 23 January 2020 called. This was the final edition of a series of three IUC webinars focusing on local financing. In addition to the explanation of innovative financing tools, the webinar also included the practices of three cities: Yogyakarta (Indonesia), Malmo (Sweden), Kochi (India).
Yogyakarta introduced the programs that aims to reduce both poverty and income inequality, collaboration of five sectors i.e. local government, private sector, university, residents and community. The finance is mainly coming from the private sector through Corporate Social Responsibility (CSR) programs. The local government has created the CSR forum to be designed as a communication channel and matchmaking the supply demand. The CSR forums have been clustered into four groups to fit with the objectives of the programme.
Malmo of city in Sweden shared their experience in way to green bonds and challenges. They emphasized the importance to contract a consultant for adding the transparency and seek a second opinion provider to rate the sustainability of listed companied. Economic feasibility, additionally as well as managing investment and loans were mentioned as main challenges.
The recording of webinar is available here
International Urban Cooperation (IUC) has issued the booklet to collect the most frequently used innovative financing schemes illustrated with case studies. For you are interested to know more details about the tools of innovative financing, please download here.