The United Nations Capital Development Fund (UNCDF) co-hosted the third High-Level Policy Dialogue of the Málaga Global Coalition for Municipal Finance on October 5-6, 2023 in Málaga, Spain. This conference organized with United Cities and Local Governments (UCLG) and the Global Fund for Cities Development (FMDV) brought together diverse leaders to take stock of progress on the Coalition’s five-point policy agenda for transforming municipal finance.

The 3rd High-Level Policy Dialogue of the Malaga Global Coalition for Municipal Finance took place on October 5-6, 2023 in Malaga, Spain. Hosted by the Ayuntamiento de Málaga, the conference brought together diverse leaders in local government finance to take stock of progress towards the Coalition's policy agenda for enabling financing flows to cities and local authorities.

In his opening remarks, Mayor of Malaga Francisco de la Torre highlighted the urgency of addressing pressing economic, social and geopolitical crises through reforms that foster inclusive and sustainable development. Speakers from UNCDF, UCLG and FMDV reiterated the indispensable role of cities and local governments that has been underscored by COVID-19. The conference focused on the five building blocks of the Coalition's policy agenda: intergovernmental transfers, own-source revenues, domestic capital markets, city-friendly investment funds and guarantee funds.

Key Insights on Intergovernmental Transfers
Well-designed intergovernmental fiscal transfers (IGFTs) build trust and enable performance improvements. However, complex allocation criteria and lack of transparency pose challenges. Solutions involve needs-based, predictable funding and striking a balance between conditional and unconditional grants. Local governments should have greater autonomy but also be incentivized to mobilize own-source revenues.

Bolstering Own-Source Revenue Collection
Own-source revenue optimization hinges on updated property registers, digitized processes, capacity building and trust-building among citizens regarding compliance. Regional comparisons of revenue collection data are instrumental for showcasing gaps and driving reforms. Property taxes, despite revenue size, are a strategic starting point for sustainable revenue streams.

Accessing Domestic Capital Markets
Development banks can facilitate market access for smaller municipalities by aggregating projects. Local governments should embrace alternative financing mechanisms, with municipal bonds presenting opportunities. Credit ratings aid market access but projects must demonstrate viability beyond ratings. There is significant potential in leveraging ESG frameworks to channel investment towards sustainable development goals.

City-Friendly Investment Funds
By serving as intermediaries between cities and capital markets, these funds can facilitate access and pooling of resources. They should align interests of cities and investors, support project preparation and provide early stage project support. Collaboration is key, but coordinating diverse agencies is complex. Clarifying suitable projects for private financing versus public funding avoids mismatched expectations.

Guarantee Funds Unlocking Investment
Guarantees mitigate risk and reduce borrowing costs, but require good projects. They should complement, not substitute, local revenue strategies and capacity building. Sovereign-backed municipal guarantees remain limited in many developing countries. Dedicated guarantee facilities allow aggregation of multiple municipalities and projects.

Utilizing the SNG-WOFI Platform
Standardized data supports comparative analysis, guides reforms and aids capacity building. The portal assists policymaking and advocacy. Users highlight global coverage, country profiles and access to data not readily available elsewhere. Continued advocacy for transparency and local government data reporting is vital.

Highlighting Inclusion and Gender Perspectives and the potential of culture and creativity.
The Special Session emphasized inclusive approaches to address systemic barriers, with speakers advocating targeted investments, empowering female leaders, and participatory planning processes. They highlighted the economic potential of culture and creativity, citing arts centers creating youth opportunities. Holistic definitions of development impact were urged, encompassing wellbeing, gender equality and governance. Speakers concluded that large investments incorporating inclusion from the start are vital for sustainable change. The session underscored reimagining municipal finance through an inclusive lens as integral to inclusive cities.

In charting the path forward, the conference emphasized the need for concerted efforts towards a financial ecosystem that meets the needs of cities and local authorities. The Malaga Coalition stands well-positioned to drive this transformative vision.

Watch this space for a more detailed account of the Malaga Coalition and please find the videos of the conference below:

• Roundtable I – Intergovernmental Fiscal Transfers (IGFTs)
• Roundtable II – Own-Source Revenues (OSRs)
• Roundtable III – Domestic Capital Markets

• Special Session I – Financing Culture, Inclusive and Gender Responsive Urban Services and Infrastructure
• Wrapping up