23 February 2020 – Cities’ institutional capacities to source alternative financing are critical for urban development. However, financing cities’ long-term needs in a rapidly urbanised world remains a global challenge and collaboration is essential in this regard. Innovative financing models have increasingly come cities’ priorities due to lack of public funding. Innovative financing mechanisms are also important market catalysers of the partnerships between public and private sectors. Such partnerships help lower financial risks of the investment, while creating a strong common focus timely and effective results.
Innovative financing can be defined as “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 include Energy Performance Contract (EPC), Public Private Partnership (PPP), Revolving Fund, crowdfunding, and municipal (green) bonds.
In order to strengthen cities’ capacities in this area, the International Urban Cooperation (IUC) Programme, of which UCLG APSAC is one of the partners, successfully organised a webinar “Innovative Financing Mechanisms,” on 23 January 2020. This was the final edition of the three IUC webinars focusing on local financing. In addition to the explanation of innovative financing tools, the webinar also included practices implemented by three cities: Yogyakarta (Indonesia), Malmo (Sweden), and Kochi (India).
Yogyakarta has introduced a programme that aims to reduce both poverty and income inequality, collaboration of five actors i.e. local government, private sector, university, residents, and community. The programme is financed by private sector through Corporate Social Responsibility (CSR) forums. Local government of Yogyakarta has designated the CSR forums as channel for communication and matchmaking the supply and demand. The CSR forums have been clustered into four groups to fit with the objectives of the programme.
Malmo, as the first city in Sweden, shared its experience in optimising green bonds and challenges. They emphasised the importance to contract a consultant for adding the transparency and seek a second opinion provider to rate the sustainability of public-listed companies. Economic feasibility as well as managing investment and loans were mentioned as main challenges.
UCLG ASPAC has been cooperating with European Union (EU) in the field of climate and energy under the framework of IUC Asia programme. It has supported cities in Southeast Asia through capacity building and networking in the Global Covenant of Mayors for Climate & Energy (GCoM). In the webinar, IUC Asia enriched the discussion by promoting the case of Yogyakarta. IUC Asia is also proud to promote IUC’s booklet comprising most frequently used innovative financing schemes completed with case studies.
Click to download more details about tools of innovative financing:
Click here to watch the recording of webinar https://youtu.be/Ilx2xGjvlqU