Article in UK online news – Room 151

I was interviewed by Gavin Hicks at Room 151 (see below) in the middle of November, concerning PWLB, UKMBA and other local government funding agencies in Europe, such as Kommunekredit and Agence France Locale. You will find the article here:

Room151 is an online news, opinion and resource service for UK local authority Section 151 and other senior officers covering treasury, strategic finance, funding, resources and risk. 

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New book: No More Lonely Heroes – How our world can survive through cooperation

I have, togehter with Göran Tivenius, published a book emphasising the vital importance of cooperation

Cooperation is indispensable if we are to successfully meet the challenges that our societies are facing today and in the future. Many cultures are today centred
on a harmful quasi-religion of competition, greed and self-interest. Societies are in need of collective efforts based on democratic values where the focus is on an active participation by the individual citizen in her or his context, whether it be in cooperatives or in local authorities. To contribute to this end No More Lonely Heroes – How Our World Can Survive Through Cooperation puts forward a number of practical suggestions for creating environments in which cooperation is made possible. The book has a focus on future development, shaped by the lessons of the past. The authors’ vision is a new era, one refreshingly free from the destructive “selfie society”. 


Quotes about the book:

“This book is a major breakthrough and must-read in the area of cooperatives and local authorities, relevant to finance, and provision of services in developing countries” 

Marco Kamiya
Head, UN-Habitat’s Urban Economy and Finance Branch 

“Highly recommended reading about the challenges of cooperatives and how cooperation works in the area of financing local authorities, in developed, emerging or developing markets.” 

Jean-François Habeau
Executive Director
FMDV – Global Fund for Cities Development 


The e-book can be ordered from and and hopefully soon from

Email me if you would like to buy the a hard back copy: lars.m.andersson[at]

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New paper: Local authorities need to meet future challenges with their “affairs” in order.

I have, together with Desislava Kalcheva, written a paper about creditworthiness of local authorities and the importance of keeping a good financial standing even in times when borrowing is not necessary.

The title of the paper is Local authorities need to meet future challenges with their “affairs” in order – What is creditworthiness and how do municipalities achieve it? And, you can find the paper here.

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City Finance Lab

I am proud to be appointed as a member of the City Finance Lab Committee. City Finance Lab is Europe’s first dedicated platform focusing on the development of innovative financial solutions that increase investment in low-carbon, resilient and sustainable urban projects.

City Finance Labis a joint venture between EIT Climate-KIC and South Pole. Supporting partners are FMDV, Global Infrastructure Basel, Imperial College and CDP.

City Finance Lab has now launched its first call for ideas for “cutting edge climate finance solutions for cities. Selected ideas will be announced in early September and will receive guidance to develop and improve their proposals from city finance experts at leading public, private and philanthropic organisations”.

More information

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Finance for City Leaders Handbook – the website

A while ago, UN-Habitat published a 2nd edition of the Finance for City Leader Handbook. Chapter 8, Municipal Pooled Financing Mechanisms is written by Pavel Kochanov, of the IFC, and Lars M Andersson. UN-Habitat has now produced a new website for the book:

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Establishment of an African Cities Development Fund

I participated in a workshop in Rabat, Morocco, last week (30-31 October) organized by United Cities and Local Governments of Africa (UCLG-Africa). The object of this event was to discuss a roadmap for the process of creating an African Cities Development Fund. This fund should have the aim to raise capital in order to finance, through lending, investments in African cities.

UCLG-Africa has published the following text about this workshop:

Establishment of the African Cities Development Fund (FODEVA)

The Fund aims to enable cities to issue bonds on the national and international capital markets

RABAT, Morocco, November 2, 2017/APO Group/ —

United Cities and Local Governments of Africa (UCLG Africa) ( organized a two-day workshop on the establishment of the African Cities Development Fund (FODEVA), October 30-31, 2017 at the Hotel Rabat in Morocco.

The workshop proceeded work that was carried out after the conference, “Funding African cities: agenda, alliances and solutions,” which was held in Marrakech, Morocco, in November 2014. At the conference, members of UCLG Africa agreed to establish a financial vehicle dedicated to the funding of African cities, termed the African Cities Development Fund (FODEVA). The Fund aims to enable cities to issue bonds on the national and international capital markets.
The workshop brought together twenty top level experts including specialists of fundraising on the financial markets; officials of development banks, funds or development banks dedicated to local governments; asset managers in international private banks; officials of rating agencies; and representatives of national and local administrations.

The exchange of views and experiences and the contributions of participants helped to establish that:

  1. There is a pressing need to set up a specialized vehicle for fundraising and access to funding in favor of African local governments. This vehicle will be named the African Cities Development Fund.
  2. The African Cities Development Fund will have a dual role; to sell the destination of African local governments to investors; and to prepare the capacity for absorption and debt management of these local governments.
  3. The African Cities Development Fund should enable local governments, or national institutions specializing in granting loans to the local governments, to borrow over a term of 7 to 15 years to finance development projects.
  4. During the preparation phase for the launch of the African Cities Development Fund, UCLG Africa should mobilize 2 million Euros, including 1.5 million Euros to be provided by local governments and 0.5 million by central governments; the objective being to mobilize 10 central governments and 30 local governments, each contributing 50,000 Euros. This takeoff fund should be mobilized before the end of 2019.
  5. As a starting point, the vehicle should aim to achieve approximately 2 to 3 billion dollars as its first fundraising goal. This should take place quickly (deadline 2020) and should target local governments that have a proven repayment capacity.

In this respect, a roadmap was worked out that would: 1. Define the structure of the capital: 2. Define the risk portfolio: 3. Cooperate with existing national tools: 4. Present the benefits of the vehicle: 5. Involve central governments to obtain their non-objection opinion: 6. Produce an information note on the vehicle: 7. Prepare and organize a communication campaign and a road show for the vehicle.

The intention is to finalize this roadmap in order to present the African Cities Development Fund as a vehicle of credible funding at the 2018 Africities Summit.

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Local Government – creditworthiness and cooperation

The following is a paper that I wrote for the Financing Urban Development Workshop in Nairobi 27 April 2017. The workshop was organized by UN-Habitat.


On track for sustainable urban development –
Creditworthiness and financial cooperation

Lars M Andersson


Urbanisation and a growing need for local infrastructure investments

The urban population has outnumbered the rural since 2007. By 2050, the share of city dwellers is expected to reach 66 percent, but the situation is different in different parts of the world. While Europe and the Americas had an early urbanisation, the process is today rapid in Africa and Asia. According to the World Urbanization Prospects (UN 2014) ”Africa and Asia…are projected to become 56 and 64 per cent urban, respectively, by 2050”.

The rapid urbanisation leads to a growing divide between cities and rural areas, with great challenges for both:

  • a rapidly increased need for public services and infrastructure investment in big cities. The infrastructure is essential in order for society to function. There is often an urgent need to upgrade systems for transportation of goods and people (commuters). New education facilities are needed, and so on. This produces a pressure to increase investment plans and the necessity to have access to financing.
  • the necessity to provide local services in rural local authorities with less income (from taxes or fees). To be able to, for example, provide for the elderly who do not move to cities in the same extent as young people. Furthermore, they have the challenge of keeping the workforce for the production of the needed public services.

The possibilities to produce local public services and to meet future challenges are determined by the local authority’s access to finance. It is a fact that local authorities’ powers to impose taxes, rates, charges and/or fees are in many cases limited in both developed and developing countries. This is in spite of the frequently present rhetoric of decentralisation. Real decentralisation does not happen if the control of local finance is in the hand of the central government. A change is required if cities and other local authorities are to successfully meet future challenges.

Decentralisation of power (sometimes referred to as devolution) within the public sector has for some time been the pronounced trend. There are several arguments for decentralisation and the most important are

  • Efficiency in delivering public services; local authorities are best placed to handle the allocation of public resources locally, simply because they have the knowledge of local needs and local challenges.
  • Democratic accountability; local politicians having the real power of local public services are also subject to direct accountability from the side of the citizens. The accountability of national politicians is often diluted because of the distance to the people in general.
  • Improve citizen participation in matters concerning the society; decentralisation is a way of bringing important political decisions that governs our daily life “closer to the people”.
  • Facilitates efficient and humane integration through greater flexibility and proximity to civil society.

A decentralisation process addresses almost all the questions that are vital for well functioning local authorities, i.e.:

  • Relationship between local authorities and central government, both legally and financially.
  • Flow of income; stability, predictability, diversification, trends (especially of tax-bases), system for collection, collection rates and the possibilities to tap new local taxes.
  • Cost-structure; steering and control
  • Debt; size, interest payments, maturities, payment record and central government restrictions.
  • Institutional factors; organisation, accounting system, audit, level of knowledge and skills.

The local authorities themselves have to, on one hand, show that they are prepared to assume new powers and, on the other hand, in concerted action push central authorities to realise long needed power reforms.


Creditworthiness is about more than borrowing

What is said above about the questions that decentralisation revolve around are, of course, also crucial when it comes to the question of creditworthiness. Basically, creditworthiness is about having the local authority’s “affairs” in order, which is, to say the least, desirable even when you don’t intend to borrow money from anyone. For this reason creditworthiness could in certain circumstances be renamed to “operational worthiness”. But, what is creditworthiness more precisely? The narrow definition is that the entity in question should be able to repay its debt in time and in full, which is not an unreasonable demand. The road to achieve this runs through sound financial management, including fully functional routines for budgeting, accounting, reporting and auditing. There has also to be a possibility to predict future income, not only from own-source revenues, but also from central government transfers.


Municipal cooperation

One area where municipal cooperation has been around for a long time is financial cooperation in order to achieve better conditions for local infrastructure investments. Even though this has a long tradition, over 150 years, the trend is revived in the last 30 years with many new projects recently seeing the light of day. This type of cooperation is often called Pooled Financing Mechanisms (PFM).

PFMs do not remove the decision-making power of the individual local authority, and should be viewed as a complement to other funding sources. Large local governments like capital cities and their close peers can continue to benefit from direct access to bank financing and bond markets, choosing the most efficient source at a particular point in time. However, for most medium-sized and small local governments, municipal pooled financing may be the only mechanism that provides access to long-term and adequately priced debt financing.

PFMs have mainly been applied in the developed world; in the last 10–15 years, there have been few PFM experiments in developing countries. However, there is nothing preventing PFM from becoming a much more common strategy around the world if the trend towards decentralization in developing countries continues—PFMs are a by-product of fiscal decentralization and the growing importance of local governments. Moreover, PFMs can be proactively initiated and implemented by policy makers in developing countries to deepen fiscal decentralization and increase its benefits. Thus, PFMs can play a crucial role in financing growing local infrastructure needs by giving local governments access to capital markets and by providing institutional investors with a new, attractive and reliable asset class. PFMs also foster participating local governments’ financial management capacity, accountability, and creditworthiness, making them stronger and more capable institutions. Financing infrastructure and building independent capacities in local authorities are particularly crucial concerns in the OECD economies, but even more so in places that are less economically developed.

LGFAs have a long and successful history in Northern Europe. The oldest is the Danish agency Kommunekredit created in 1898. The newest additions in the list below are the French Agence France Locale and the UK Municipal Bond Agency, created during the last few years.

LGFA                                                                 Country           Year of creation

Kommunekredit                                               Denmark                1898

Bank Nederlandse Gemeenten (BNG)         Netherlands           1914

Kommunalbanken                                           Norway                   1926

Nederlandse Waterschapsbank (NWB)      Netherlands           1954

Kommuninvest                                                 Sweden                   1986

Munifin                                                              Finland                   1990

JFM                                                                    Japan                      2008

New Zealand LGFA                                         New Zealand          2011

Agence France Locale                                     France                     2013

UK Municipal Bond Agency                           UK                          2014


U.S. municipal bond banks have a slightly different set-up. They are usually closely related to various state governments. The oldest municipal bond banks are in the New England states, but the concept has also spread to other parts of the country. In Canada, there are provincial entities for financing local authorities in a number of provinces, including British Columbia and Alberta.

The state-owned Japan Finance Corporation for Municipal Enterprises was converted into Japan Finance Organization for Municipalities (JFM), and in 2008 Japanese local governments became its owners.

The New Zealand LGFA was created in 2011 and, recently, the Australian state of Victoria formed its Local Government Funding Vehicle.

Also in emerging and developing countries, municipal pooled financing has been developed with the help of international development institutions. Two examples are the Indian Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL) and bond banks in Mexico. TNUIFSL is a public–private partnership with a wider scope of activities than, for example, the European LGFAs, since members of its staff also act as consultants and investment advisors. Mexican bond bank–type entities exist in the states of Hidalgo and Quintana Roo.


Working together – key questions

In my work with financial cooperation between local authorities, I have found that the following value base is crucial:

  • Equality; all local authorities should be treated equal. All exceptions (for example: different margins) should be logical and
  • Transparency; the Agency should be as open as possible with information to the local authorities, and to the financial markets, about the Agency’s activities.
  • Involvement; the local authorities should be made to feel that this is their project, for which every local authority has a responsibility.

This value base can be compared with what the Nobel Prize Laureate Elinor Ostrom concluded to characterize successful so-called commons. She found that the following was decisive:

  1. Define clear group boundaries.
  2. Match rules governing use of common goods to local needs and conditions.
  3. Ensure that those affected by the rules can participate in modifying the rules.
  4. Make sure the rule-making rights of community members are respected by outside authorities.
  5. Develop a system, carried out by community members, for monitoring members’ behaviour.
  6. Use graduated sanctions for rule violators.
  7. Provide accessible, low-cost means for dispute resolution.
  8. Build responsibility for governing the common resource in nested tiers from the lowest level up to the entire interconnected system.

In many cases of cooperation between public sector entities, it is recommended that political decisions be separated from the professional. In the case of a PFM agency, as described above, the political level should be dealing with questions related to overall strategy; questions related to the participating local authorities (capi­tal, guarantees, supervision etc.); and with the follow-up of the professional level. The duties of the professional level, on the other hand, are to prepare the questions for the political level and to handle all financial activities. This not only se­cures low-risk activities, but also prevents undue influences in the lending activities.

Finally, successful cooperation is always build trust and transparency.

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Speaking at ICLD workshop

The Swedish organisation International Centre for Local Democracy (ICLD) is together with The United Nations Capital Development Fund (UNCDF) carrying out an Advanced international Training Programme with participators from local authorities in South Africa, Tanzania, Uganda, Zambia and Zimbabwe. This programme includes a two weeks visit to Sweden, which is packed with workshops and study visits.

Tuesday the 16 May, I had the privilege to address the group with questions concerning

  • Challenges facing local authorities
  • Investment needs as an effect of urbanisation
  • Financing local infrastructure investments
  • Creditworthiness being about more than borrowing
  • Credit quality factors
  • Financial cooperation between local authorities
  • Success factors for cooperation

The participants discussed in groups what local authorities themselves could do to improve creditworthiness and what the central government could do to support local authorities in said direction. The groups came up with interesting and insightful thoughts; among those were the necessity to

…build well functioning administrative systems with accurate information

…use peer-reviews within networks of local authorities

…raise quality of local services to incentivize inhabitant to pay local taxes and fees

…strive to achieve a strong financial position

…fight corruption and increase transparency


Lars M Andersson

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UN-Habitat’s press release

Read UN-Habitat’s press release about the recent workshop in Nairobi here.

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Speaking at UN-Habitat workshop in Nairobi

Financing Urban Development Workshop took place on the 27th April 2017 at the UN-complex in Nairobi, Kenya. This was a part of the Railway City Project: Revitalizing Nairobi City. In the workshop the attendees included representatives of Nairobi County Government, Kenyan Ministry of Transport, Housing and Urban Development, Kenya Railways, GoDown Arts Centre, Embassy of Sweden and more. The Railway City Project is supported by UN-Habitat and it ”will address how integrated mobility and transport system can be developed…The impact of this intervention are expected to reach far beyond the actual site, looking at how a more cohesive, integrated and sustainable development and growth of the central parts of Nairobi can be promoted.”

I was invited to speak about the financing of infrastructure investment, creditworthiness and the basis of cooperation. The other keynote speaker was Mr Hiroaki Suzuki, Urban Development Specialist, formerly with the World Bank.

In my speech I went into some detail about the concept of creditworthiness, claiming the it is about much more than being able to finance projects through borrowing. Basically, creditworthiness is about having a financially well-functioning entity, which of course is crucial even when credits are not needed. Another theme was financial cooperation between public sector entities and finally some thoughts about what values, rules and restrictions are needed for good and efficient cooperation. In the latter, I referred to the basic values of cooperatives and the research of Nobel Prize Laureate Elinor Ostrom about successful commons.

Lars M Andersson

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