Kommuninvest was born on a train

How come I became engaged in questions concerning local finance? Let us turn the clock back to 1975. After graduating from university I got a job in a small local authority in Sweden as the head of finance. My responsibility was, besides budgeting, accounting, reporting, also to keep contact with local private companies, deal with questions of municipal housing and, of course, the debt management. A broad field of responsibilities in a small municipality, and a perfect occasion to learn the nuts and bolts of local public administration.

Lars M Andersson in the late 1980s

Lars M Andersson in the late 1980s

After some years I moved to a regional centre to become the finance director there. This was at the time (the early 1980s) when the money market evolved rapidly in Sweden. I used this market to invest the city’s liquidity surplus and from time to time borrow short term. But of course for all cities with investment programmes long-term borrowing is the main interest. I struggled to negotiate reasonable interest rate, but I soon found out that the banks were not really interested in competing with each other. It dawned on me that I was in front of something akin to an oligopoly, where all banks offered a similarly high interest rates. The high rates did not at all reflect on the good creditworthiness of Swedish local authorities.

One morning in January 1986, while commuting by train, I started to write a business plan outlining how local authorities could take the matter into their own hands. The idea was a cooperation scheme where local government would pool their borrowing through a vehicle of their own. It took maybe three weeks to complete a draft of the plan, writing every morning and evening on the train. It was one day finally ready to be presented to the local politicians. Within a year after this moment the agency of Kommuninvest was created. I was appointed to be its first CEO and remained in this position for fifteen years, until 2001.

Lars Eriksson, Second President, and Ingrid Fransson, First President of the Board of Kommuninvest

Lars Eriksson, Second President, and Ingrid Fransson, First President of the Board of Kommuninvest

The agency was established as a regional entity owned by the local authorities in the region of Örebro, located in the middle of the country, west of the capital Stockholm. We did not have to wait long until local governments from other parts of Sweden knocked on our door and asked to join, but the real expansion of the activities of the agency came in 1992 when Sweden was hit by a financial crisis. This crisis led most local authorities to substantial problems financing their investments, but the authorities in Kommuninvest could use their collective power. It was decided, at this point, to rearrange Kommuninvest into a national agency were all Swedish local authorities could seek membership if they met the criteria of creditworthiness.

This short narrative might suggest that the step from idea to reality was easy. The reality was far from it. Several obstacles had to be negotiated during the build-up phase. As expected, the banks fought us with every weapon they could find. The agency was, after all, risking destroying their lucrative municipal loan market. Later on we got to know that the banks even held meetings where they all were present and the agenda was: how can we put an end to the new agency?

Another problem was the bewilderment of the civil servants at the finance supervisory authority and the Swedish Ministry of Finance. They had never heard of anything like this, and it disturbed their notions of how things ‘were normally done’. My suspicions is also that the initial hostility from the civil servants also arouse from the preconceived notion that local authorities could not be trusted with anything as serious as this. It took us three years and lots of hard work and negotiations to get the legal status we needed to work properly. This decision was taken by the Minister of Finance against the advice of several senior civil servants.

The final challenge, and this was the most fun part, was to put together all the different routines, develop the organisation, recruit members, present the agency to investors and so on. In other words, we had to develop all things that are necessary to get the agency to work in an efficient way. After a few years we found out that similar agencies existed for a long time in Norway and Denmark, and we started to cooperate to learn from each other. When the Finnish agency that was created in 1990 they also joined this cooperation.

Lars M Andersson today

Lars M Andersson today

Today, Kommuninvest is the market leader for municipal credits in Sweden. More than 90 percent of all regional and local authorities are members of the agency. Total lending has, in the last interim report (June 2016) reached 269 billion Swedish kronor corresponding to 41 billion US-dollars. Kommuninvest’s funding is carried out worldwide, backed with AAA credit ratings from both S&P and Moody’s.

During my time as the CEO of Kommuninvest I was often invited to give speeches at locations in many parts of the world. After I left the agency I have continued to work with questions related to local authority finance and management both in Sweden and internationally. I have been advising both central and local government in a number of countries and it seems like there now is a massive interest for financial cooperation between local authorities in many countries.


Stockholm 2016-11-07


Lars M. Andersson

Member of the Supervisory Board and President of the Strategy Committee of Agence France Locale and member of the Board of the Fond mondial pour le développement des villes (FMDV) and a global advisor for several governments and institutions

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Lars M Andersson has contributed to UN-Habitat’s newly published handbook for city leaders

unhabFinance for City Leaders Handbook has recently been published by UN-Habitat in Nairobi, Kenya. Lars M Andersson, together with Pavel Kochanov, is the author of a chapter on Pooled Financing Mechanisms. Pavel Kochanov is a senior subnational specialist at the International Finance Corporation (IFC). His primary area of expertise is credit and governance risks of subsovereign government entities globally. Pavel holds a Ph.D. in economics from Moscow State University.

The chapter written by Andersson and Kochanov is introduced as follows in the book: “Chapter 6, by Lars M. Andersson and Pavel Kochanov, discusses pooled financing mechanisms in which a group of municipalities aggregate their borrowing needs and raise their total financing needs together on the capital market. The authors argue that this form of raising capital is especial­ly important for small to medium-sized cities to be able to access long-term and fairly priced debt.”

Download the handbook here.

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La journée de l’Agence

(for English see below)

Estelle Grelier

Estelle Grelier

Le 19 mai, l’Agence France Locale a eu sa première « Journée de l’Agence » avec l’Assemblée générale des actionnaires et la réunion du Conseil d’orientation. Estelle Grelier, Secrétaire d’État en charge des collectivités territoriales a conclu la discussion, ensemble avec le maire de Lyon, Gérard Collomb.

Dans le rapport d’activité de l’Agence France Locale, j’ai écrit l’article suivant sur mon travail de diffuser le modèle de l’agence:

La diffusion du modèle à l’international : L’agence France Locale, un exemple pour le monde

Des rouleaux de l’Atlantique aux versants des Andes aperçues depuis des salles de conférences à Bogota ou à Dakar, de Londres à Lyon, j’ai cette année voyagé sur plusieurs continents pour raconter l’Agence France Locale et le concept de LGFA (Local Government Funding Agencies), les agences des financements des collectivités locales. J’ai été accueilli partout avec un immense intérêt. L’AFL a en effet connu une année fantastique : elle a réalisé son émission inaugurale dans des conditions très favorables, a débuté ses opérations de prêt avec succès, et les collectivités locales, partout dans le monde, ont les yeux tournés vers elle et s’en inspirent.

Des raisons comparables à celles qui ont présidé à la création de l’AFL sont à l’origine de l’intérêt qu’ont pour les LGFA les collectivités locales partout dans le monde. Des villes se développent partout : cela mène à un besoin d’infrastructures plus urgent que jamais. Et ce sont les collectivités locales qui doivent supporter la plus grosse charge de ces investissements. Le financement de ces projets est pour de nombreuses villes un défi majeur, qui a mené à un intérêt grandissant pour la coopération entre collectivités, dont la première étape est, comme en France, l’organisation d’émissions groupées. J’ai ainsi étudié la faisabilité de ces émissions en Afrique du Sud, en Roumanie, en Bulgarie et au Sénégal.

En Afrique du Sud, Yves Millardet et moi-même avons tous deux été impliqués dans le projet par la ville de Johannesburg et l’Association des collectivités locales Sud-africaines : les villes de la province du Gauteng viennent ainsi de programmer une émission groupée, inspirée de celles qui ont été réalisées en France avant la création de l’Agence.

La Société Financière Internationale (IFC), qui dépend de la Banque Mondiale, a également manifesté de l’intérêt pour les émissions groupées, et j’ai réalisé pour elle différentes missions. J’ai ainsi, en février dernier, débattu de ces questions à Bogota en Colombie ; une autre initiative de l’IFC a été le Study Tour organisé en novembre dernier, lors duquel nous avons invité un groupe de représentant des collectivités locales de Pérou, de Colombie et d’Afrique du Sud à visiter l’Agence France Locale à Lyon et l’agence danoise, Kommunkredit, à Copenhague.

J’ai enfin suivi de très près la récente création de l’agence britannique (Municipal Bond Agency) ; leur émission inaugurale a été différée mais est attendue après l’été et le référendum sur la sortie de l’Union Européenne.

Tandis que je voyageais pour expliquer comment la coopération peut aider les collectivités locales à financer leurs investissements, j’ai eu le privilège inestimable de prendre part au succès de l’Agence France Locale, et suis fier de dire aujourd’hui que nous sommes désormais un exemple pour de nombreuses collectivités locales partout dans le monde.


Lars M Andersson

Membre du Conseil de surveillance et président du comité stratégique de l’Agence France Locale


Last week, on the 19th of May, Agence France Locale had its first ”journée de l’agence”, which include both the shareholders’ general assembly and the annual meeting of the Policy Board. Estelle Grenier, State Secretary in charge of local authorities, concluded the discussion, together with the Mayor of Lyon, Gerard Collomb.

In the Agence France Locale’s Activity Report for 2015, I have written the following article about my work to spread the agency model internationally:

Agence France Locale – An example for the World
From the slopes of the Andes outside the conference room in Bogotá, to the rolling Atlantic waves I could see from a room in Dakar; I have travelled to four continents last year speaking about Agence France Locale and the concept of local government funding agencies. And in all corners of the world I have been met with intense interest. This is no doubt also connected to the fact that AFL has had a fantastic year. It issued its first bond issue at very favourable term and successfully started the lending operation. And local authorities worldwide are watching and are being inspired. It has been my pleasure to be the first port of call in many conversations regarding how these types of projects are started.

Similar reasons that propelled the creation of AFL lay behind the interest for local authority funding agencies in other places. Cities are growing all over the planet. This leads to an ever more urgent need for infrastructure investments. And it is the local authorities that have to carry the main burden of these investments. The financing of these projects is for many cities a major challenge, which have led to an increased interest in cooperation between local authorities. The general term for this type of cooperation has become Pooled Financing.

During 2015, I have produced feasibility studies of the possibilities to introduce Pooled Financing in South Africa, Romania, Bulgaria and now I am in the process of doing the same in Sénégal. These are thus four countries already contemplating the first moves in the process.

The South African project is led by the City of Johannesburg and the South African Local Government Association. Both Yves Millardet and I have been involved in this process. The latest news is that there is planning for a club deal with the cities in the Gauteng Province. This is inspired by the French example of club deals before the creation of the agency.

The International Finance Corporation (IFC), which is a part of the World Bank, has also taken an interest in Pooled Financing. This has led to a number of assignments that I have done for the IFC. One example is that I, in February 2015, was in Bogotá to speak these questions during the so-called Creditworthiness Academy. Another IFC initiative was the study tour that was executed during November 2015. We invited a group of representatives of local authorities from Peru, Colombia and South Africa to visit Agence France Locale in Lyon and the Danish Agency, Kommunekredit, in Copenhagen.

I also closely follow the development of the UK Municipal Bond Agency and I was in London when they got their new offices, very close to the Houses of Parliament. Their first bond issue has been delayed, but is expected after the summer and after the “Brexit” referendum.

As I have travelled to spread the message that cooperation will help local authorities to finance their infrastructure investments, is has been invaluable to have the privilege to be a part of the success of Agence France Locale. We are an example for the world now!

Lars M Andersson

Member of the Supervisory Board and chairman of the Strategy Committee of Agence France Locale


More on the « Journée de l’Agence » on the website of AFL and France Urbaine.For photos from the event see here.

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From Dakar to New York

Dakar1I have been advocating for pooled financing and financial cooperation between local authorities in two very different events the past weeks. First stop was Dakar and the first African Municipal Bond Forum with representatives from many cities on the continent. The purpose of the forum was:

Lars Dakar“… to promote the development of an African Municipal Bond Market and the understanding of the current state of the domestic and international debt market and the potential for introducing municipal bonds”.

I was invited to speak at the plenum discussion at the start of the forum, where I explained pooled financing in general and what pooled financing agencies exist today. Later, in a workshop session, I discussed how pooled financing could be introduced by referring to the process behind the creation of Agence France Locale.

NYCIn New York, I was invited by New Cities Foundation to their event “Innovations in Urban Infrastructure Financing”. It was a day full of examples of innovative ways to finance local infrastructure, delivered by representative of both cities and private companies. One of the main interventions was delivered by Dr. Julie Kim, researcher at Stanford University and Senior Fellow at the New Cities Foundation, presenting her newly published “Handbook on Urban Infrastructure Finance“. I had the pleasure to moderate the session “Supporting our Cities: Best Practises in Urban Infrastructure Financing” and give a presentation on pooled financing for cities.

Lars M Andersson

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Pooled Financing in Bulgaria


The National Association of Municipalities in the Republic of Bulgaria (NAMRB) has given me the assignment to do a first study of the possibilities to introduce Pooled Financing Mechanism (PFM) in Bulgaria. I presented the study in Sofia on February 24 in front of 500 representatives of Bulgarian municipalities, in conjunction with the Annual Meeting of the NAMRB. Further discussions on the same subject took place the following day at NAMRB’s headquarters.

In conclusion, I found that the introduction of PFM in Bulgaria is feasible and recommended next steps. Here you will find the executive summery of my study.

Lars M Andersson

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Sweden and Norway exceptions in local authority borrowing

Local authorities are responsible for a large part of public infrastructure investments in all European countries. These investments are supposed to have a long life, let’s say 30-40 years or more. When borrowing to finance these capital expenditure most European local authorities prefer loans with a duration that corresponds to the life of investment. However, limitations in the credit markets can sometimes make it difficult to borrow beyond 20 – 25 years.

In France, recent trends show that more and more local authorities ask for 20 years or more. The same preference for long with long duration can be seen in the UK. Aidan Brady, chief executive of UK Municipal Bond Agency, said the other week in an interview that “A lot of authorities like to borrow 40 to 50 years”.

In Sweden, the situation is very different; many municipalities tend to borrow short-term. Kommuinvest’s lending during the first half of 2015, “the average period for which capital… was tied up was 2.3 [years]” (Kommuninvest’s Interim Report 2015). The CEO of the Norwegian Kommunalbanken, Kristine Falkgård, recently wrote an article where she points out that municipal short-term borrowing increased during the last year to around NOK 70bn. It is easy to agree with Falkgård’s opinion that substantial refinancing risks could arise from financing long-term investments with short-term loans.

Today, the difference in interest rates between short-term and long-term is relatively modest, so it is not easy to see the rationale of choosing short-term solutions. Even if the interest rate differences were bigger, local authorities should evaluate and be more transparent with the risks they are taking in their borrowing operations, just as Falkgård writes in her article.

  • Read Kristine Falkgård’s article in Kommunal Rapport (in Norwegian)
  • Read the interview with Aidan Brady and Sir Merrick Cockell in Room 151

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UK Municipal Bond Agency

Read about the latest development of UK Municipal Bond Agency in the article in Public Finance: Municipal bond agency opens for business.

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First Study Tour of European Agencies for Pooled Financing

participatorsLast week’s study trip to Agence France Locale in Lyon and Kommunekredit in Copenhagen (3-5 November) is concluded. It was a rich and intense experience with participation of representatives from South Africa, Peru and Colombia. Thank you all for your input. The purpose of the trip was to study two agencies for pooled financing for local authorities and draw experiences for projects to introduce pooled financing in the country of the participators.

PavelThe study trip was arranged by the International Finance Corporation (initiation and concept), FMDV – Fonds mondial pour le développement des villes (mobilisation of participants and organisational support), and PPIAF/SNTA (grant financing). I contributed with the overall design of the program and I also wrote the accompanying informational material.YVES ET MOI

Finally, a big thank you to Yves Millardet and Johnny Munk, and their colleagues at Agence France Locale and Kommunekredit, for their hospitality and very informative presentations of the two agencies.

Lars M Andersson


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Financement des collectivités locales en Europe: défis et opportunités

L’Europe est aujourd’hui confrontée à un certain nombre de défis, qui tous influencent nos collectivités locales.

Le principal sujet à l’agenda du monde d’aujourd’hui est la question climatique, sujet qui sera également le thème de la conférence mondiale qui se tiendra à Paris en Décembre prochain. Il s’agit peut-être de notre dernière chance de trouver une solution commune avant que les conséquences soient irréversibles. La lutte contre le changement climatique exige, entre autres choses, des investissements et des ajustements de l’action publique.

L’évolution démographique va conduire à une population plus âgée en Europe. Moins de personnes actives pourront soutenir un groupe croissant de retraités. Dans le meilleur des cas, la base d’imposition sur le revenu augmentera lentement, dans le pire, elle n’augmentera pas du tout. Il y aura également un besoin croissant de soins et de soutien pour les personnes âgées, cette charge étant souvent de la responsabilité des collectivités locales.

L’urbanisation est une tendance mondiale. En Europe, c’est un développement très ancien, mais il continuera.

Cela produit une série de questions difficiles qui doivent être abordées :

  • D’une part : les grandes villes ont un besoin d’augmenter rapidement les services publics et les investissements dans les infrastructures. Il y a souvent un besoin urgent d’améliorer les systèmes de transport et de construire des logements. Il y a également besoin de construire de nouvelles écoles ainsi que des crèches. Cela produit une pression supplémentaire à l’augmentation des plans d’investissement et à la nécessité d’avoir accès aux meilleurs financements possible.
  • D’autre part : la nécessité de fournir des services dans les collectivités locales rurales avec moins de revenus d’impôts et moins de dotations. En outre, c’est un défi de trouver la main-d’œuvre pour la production des services publics nécessaires.

En plus de ces défis, nous assistons actuellement à l’un des plus grands flux de réfugiés vers l’Europe de l’époque contemporaine.

La capacité de trouver des remèdes aux problèmes auxquels nos sociétés sont confrontées dépend de la croissance économique en Europe et ailleurs.

Au centre du débat sur la croissance, nous trouvons la nécessité de rétablir le niveau de l’investissement là où il était avant les crises de 2008-09, quand il était à un niveau 15% supérieur à celui d’aujourd’hui. Il est maintenant un fait reconnu que les investissements d’infrastructures sont le moyen le plus important pour obtenir une économie prospère mondiale. Cela est vérifié par le plan d’investissement du président de la Commission européenne Monsieur Junker et par les publications récentes du FMI. Mais le problème va plus loin que les faibles niveaux d’investissement dans de nouvelles infrastructures, la qualité des actifs publics existants se détériore aussi. L’Europe, et d’autres parties du monde ont besoin de nouveaux investissements mais également de maintenir leurs patrimoines.

Les collectivités locales jouent un rôle crucial dans l’économie. En France, les collectivités locales sont responsables de plus de 70 pour cent de tous les investissements publics, alors qu’en Suède, ce chiffre est légèrement inférieur. Il est donc évident que la question des investissements publics est étroitement liée aux collectivités locales et leurs possibilités pour ces entités de maintenir une taille suffisante des programmes d’investissement. L’une des questions clés est le financement.

En Suède, l’agence de financement des collectivités locales Kommuninvest a été créée en 1986 et a joué un rôle important dans la fourniture de crédits pour les investissements des collectivités locales suédoises. Kommuninvest a réduit sensiblement le coût de l’emprunt pour les collectivités locales et a donc contribué à renforcer le niveau des investissements locaux.

L’Agence France Locale a été créée en Octobre 2013, en utilisant l’inspiration de l’agence scandinave ajustée à la réalité française. Dans un temps très court, plus d’une centaine de collectivités locales françaises sont devenues membres de l’Agence France Locale. Récemment, l’agence a lancé avec succès sa première émission obligataire et, aussi, ses premiers prêts aux collectivités locales. Le 30 septembre, le conseil d’administration a décidé d’une nouvelle augmentation de capital et ce sont 12 collectivités supplémentaires qui intègreront l’AFL.

Les agences de financement des collectivités locales appuient la croissance et c’est important de trouver des moyens pour améliorer leurs possibilités de servir les collectivités locales dans leur quête de réaliser les programmes d’investissement.

La question fondamentale est comment les collectivités locales et les agences de financement peuvent appuyer la croissance et quels sont les défis pour ces agences aujourd’hui et demain?

Lars M Andersson

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Expert Panel on Alternative Metropolitan Municipal Financing Models

It is with much excitement that I have accepted to be one of the experts on a panel involved with the project of proposing alternative municipal financing models for metropolitan cities in South Africa. The project is led by South African Cities Network (SACN) in partnership with the City of Tshwane.

The background of the project is described as follows by its originators:

”In a context of decentralisation coupled with rapid urbanisation which is characterised by growing levels of poverty and informality, metropolitan municipalities’ are increasingly concerned about their capacity to deliver on their expanding functions and demands. While on the one hand cities are increasingly focal and acknowledged as important engines of growth and development, they also find themselves under extreme financial pressure which jeopardizes their mission. And while there is legitimate pressure for cities to improve their own efficiencies and maximise their revenue generating capacity, it is also increasingly evident that the current metropolitan municipal financial model is inadequate and unsustainable, using a grant system intended to plug unplanned deficits as a crutch for a financing model that is itself increasingly deficient, and also requiring creative rethinking about the kinds of appropriate innovations that could place metros on a more sustainable path to delivering development for the present as well as the future.”

The first meeting of the expert panel took place at the Rockefeller Foundation’s Bellagio Conference Center at the Como Lake in Italy during September 23 – 25. Among the participants were representatives from SALGA, the Financial and Fiscal Commission, the City of EThekwini, UN Habitat, FMDV, Japan International Cooperation Agency, and from the organisers: SACN and City of Tshwane. It was three days of intense work that laid a good foundation for the continuation of this worthwhile project.


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