Urban Economies determine the success of national economies as they are characterized by agglomeration economies and network effects, based on higher density, proximity and interaction.

Cities in the world’s poorest countries are increasingly expanding as a result of overall population growth and continued migration from rural to urban areas. Close to half of the world’s urban dwellers reside in relatively small settlements of less than 500,000 inhabitants, and the fastest-growing urban settlements are medium-sized cities, such as those with less than 1 million inhabitants, located in Asia and Africa.

The benefits of urbanization, however, are not automatic. Poorly managed urbanization in LDCs can increase pollution, congestion, market failures, rentier positions, or social marginalization, thereby creating a widespread sense of social injustice and political tensions as well as contributing to international migration.

LDCs continue to face serious challenges in providing the public and private infrastructure to accompany this urban expansion, often resulting in unplanned and ad-hoc growth without concomitant public and private investment. One consequence of this government spending that prioritizes emergency and immediate needs instead of long term investment.

This month #UNCDFExpertsChat spoke to Vito Intini, UNCDF’s Municipal Investment Finance Programme Manager, about the promise of getting urbanization ‘right’ in LDCs. Vito has extensive experience in the area of regional economics, private and financial sector development, fiscal decentralization, and public financial management. He has worked in academia and various international organizations, including the European Union (EU), Organization for Security and Cooperation in Europe (OSCE), Organization for Economic Cooperation and Development (OECD), World Bank, and the UN Secretariat. Vito holds Masters degrees in the fields of Environmental Policy, Development Economics, Labor Economics and a PhD in Economic Geography.

#UNCDFExpertsChat: What is the development challenge you are trying to solve? How does UNCDF’s MIF programme solve that challenge?

Vito Intini: Getting urbanization ‘right’ in LDCs is one of the most pressing global development challenges of our time.

The ‘right’ urbanization will critically depend on sound urban Local Governments (LGs) and institutions and their capacity to manage fiscal and other financial resources. Local Governments are facing the urban challenge, but often lack the financial means to tackle it. LGs in LDCs have weak local revenue bases, and decentralisation systems typically do not devolve responsibilities with commensurate fiscal resources or authority.

Considering that, the role of local governments has been broadly acknowledged in implementing the international development agendas towards 2030, including the Addis Ababa Action Agenda, the 2030 Sustainable Development Agenda, COP 21, and the Habitat III New Urban Agenda.

Despite skepticism, the private sector has a significant role to play in infrastructure financing in LDCs, but central and local governments need to be credible in order to attract their interest in partnering and investing.

UNCDF has developed the Municipal Investment Finance programme (MIF) to create and share viable solutions for local governments to cope with their ever-growing responsibilities. MIF tries to correct some of the above-mentioned distortions by increasing the capacity of local governments and other sub-sovereign entities to address key urbanization challenges through access to sustainable sources of capital financing. This is achieved by:

• Utilizing domestic private sector capital (e.g. institutional investors);
• Channeling funds towards investments in innovative financial instruments; and
• Improving institutional effectiveness and coherence by coordinating with national and local governments in ensuring that the necessary policy, legal and regulatory frameworks are in place and are implemented.

The ultimate beneficiaries of the MIF programme will be citizens of the target cities in the selected LDCs, whose fixed capital formation is intended to be significantly increased by the investments made with the additional financial resources raised by MIF.

#UNCDFExpertsChat: What is the last mile financing model of MIF? How does it build public/private partnerships?

Vito Intini: MIF helps local governments be agents of long-term, stable return, transformative and catalytic investments. The programme brings borrowers and lenders together, trying to jointly manage the risks inherent in infrastructure financing through well designed capital investment plans and helping tapping capital markets through blended finance and debt instruments.

On the municipal side, MIF emphasizes the importance of local revenue generation, sound public finance management system, capacity for project development, debt service and management, as well as use of credit enhancements. On the investor side, MIF highlights the importance of a diversified financial sector and a suitable regulatory and legal environment. By tackling these issues, MIF tries to build long-term bridges between these two critical sides of the same coin.

MIF relies on the critical premises that LDC capital markets, including institutional investors such as insurance and pension funds, are ideally situated to finance increased local government involvement in transformative investments.

Public-private partnerships also become a critical modality of capital investment because, when properly designed and implemented, can combine the strengths and key roles of local governments being agents of development with those of the private investors and untapped capital markets, which can provide additional blended financial resources to expand local fixed capital formation.

#UNCDFExpertsChat: How does MIF support the achievement of the SDGs?

Vito Intini: SDG 11 “make cities inclusive, safe, resilient and sustainable” is particularly central to MIF’s current work and long-term goals. But given the cross-cutting role of local governments as key public service providers and agents of local development, almost all SDGs are linked to MIF. Indeed, cities and local governments are critical in attaining advancements in SDGs related to poverty, hunger, quality health and education services, gender equality, clean water and sanitation, energy, economic growth, infrastructure, partnerships. These are all SDGs where cities and local governments play a critical role.

#UNCDFExpertsChat: The SDGs have a strong focus on leaving no one behind. How does MIF reach poor communities and under-served regions in LDCs? How does it make sure that it reaches women and vulnerable groups?

Vito Intini: There are three main ways through which MIF can reach them.

First of all, MIF primarily targets secondary cities that are disproportionally underfunded by national governments and development assistance.

Secondly, through new and better designed critical cities’ infrastructures that under normal conditions do not have access to long-term finance.

Last, but not least, through freeing fiscal space that can be prioritized to target marginalized and more vulnerable segments of the urban population, including in slums.

#UNCDFExpertsChat: Can you give an example of how MIF has made a difference to the lives of poor people and communities?

Vito Intini: In its first year of implementation, MIF has already provided results on two levels.

First, steering policy and legal reform in the first country where it has been implemented, Bangladesh. Secondly, influencing the global debate on municipal finance.

MIF also partners with another UNCDF programme, the Local Finance Initiative (LIFE), to design and implement project financing where municipalities play a critical role. As a result, MIF has received an increasing number of requests from LDC cities to be implemented there.

#UNCDFExpertsChat: What are the lessons learned from MIF's implementation so far?

Vito Intini: The past first year in MIF’s life has provided a very useful opportunity to fine tune it and learn.

First, having a local champion, typically a mayor or senior official, in the municipality can make a difference in terms of achieving the program’s outcomes.

Second, local economic development is a complex area of work that requires continuous presence close to the partners (both local and national) that is critical to build long-term trust and trigger a really transformative process in the local economies. This needs to be reflected in the initial allocation of financial and human resources.

Third, in many LDC secondary cities there is leadership, vision, will to show result, and capacity that are not “secondary” to their national ministries or capitals. This is the real asset that development assistance should indeed leverage on.

#UNCDFExpertsChat: What's the plan for scale up? What can we look forward to in the future of MIF?

Vito Intini: MIF is now engaged with central and local authorities in the Eastern Africa region that are keen to have the program starting there. They have already understood the structural transformation that MIF can entail at the local level. Clearly the demand out there is huge.

The future of MIF looks promising and exciting if enough resources can be allocated to meet the increasing demand arising from LDC cities. Many of them can be a true agent of transformation in their local economies and the international community cannot let them down.

We look forward to continue working closely with our key partners, the Government of Bangladesh, the municipalities where we have already worked, our new African partners, and the Swedish International Development Agency (Sida), whose support has been critical to start MIF, and with other development partners to scale up the programme and expand it to other LDCs.

#UNCDFExpertsChat: What's exciting about working in this space?

Vito Intini: MIF is a laboratory where traditional and orthodox development recipes are combined with more innovative approaches in order to addresses real and complex problems that urban local governments in LDCs face.

Its benefits clearly extend beyond local finance, and boost inclusive and sustainable local development more broadly in a very tangible and pragmatic way.

MIF has given me the exposure to the world’s top-notch experts in various areas related to municipal finance and to be a transmission channel between this global expertise and the local actors that are overwhelmed by their increasingly intractable urban development challenges.