The United Nations Capital Development Fund (UNCDF) supports various government schemes and programs such as poverty reduction; climate change and achieving sustainable development goals in Bangladesh. Along with this agenda, the Municipal Investment Finance (MIF) was introduced in Bangladesh, to establish country-level frameworks for municipal finance and sustainable financing.

Under the above initiatives, the Bangladesh Municipal Investment Finance (BMIF) project has been designed to establish new sources of financing for Urban Local Bodies (ULBs) in Bangladesh to improve environment, energy and climate resilience at sub-national levels.

In general, local taxation, fees and resources from fiscal transfers are major sources of income for elected Councils/ Pourashavas in Bangladesh. While creation of urban infrastructure is financed through Grants (from Annual development programs) allocated to ULBs for particular projects, a small amount of debt financing is done through the Bangladesh Municipal Development Fund (BMDF), a World Bank funded project. As demand for investment financing exceeds income generated from sources and non-existence of opportunities for local governments to access financing from capital markets/ financial institutions, it becomes difficult for Government to undertake infrastructural up gradation.

To address these constraints, the BMIF project intends to support the process of enabling the municipalities’ to access capital markets and institutional finance to enable them accelerate expansion of urban infrastructure and to explore options to address legal and regulatory constraints to such access. The project also aims to develop an approach that will enable municipalities to secure resources from capital markets through ECOBONDS to secure financing for local governments.

A key step in achieving these outcomes is a systematic assessment of the financial systems of municipalities that are being supported in seeking access to capital markets and institutional finance. To support these activities, UNCDF retained ICRA Management Consulting Services Limited (IMaCS) in association with Credit Rating Agency of Bangladesh Limited (CRAB) to develop a methodology for evaluating credit worthiness of municipalities in Bangladesh.