This Topic Guide provides a framework for understanding the underlying
issues and challenges of sub-national finance as well as examples of
emerging good practices in financing capital investment in
infrastructure and services at sub-national level in developing
countries. The guide is designed to assist DFID Advisers to develop
business cases to address the issues and challenges in developing
policy, building institutional capacity and designing mechanisms that
will enhance sub-national financing of infrastructure and services in
developing countries. In doing so, the guide considers the following key
- Importance of planned and inclusive urban development for the
promotion of growth and poverty reduction
- Addressing the infrastructure investment requirements of sub-national
- High dependency on intergovernmental transfers and limited own revenue
potential as an outcome of incomplete decentralisation and weak
regulatory frameworks for fiscal devolution
- Mechanisms to promote credit worthiness and bankability of
sub-national borrowers and projects in accessing new forms of
The guide is structured in 4 sections:
- Section 1 considers the need for and relevance of sub-national
- Section 2 highlights the policy and regulatory frameworks for
sub-national financing focusing on: intergovernmental transfers (IGTs)
and grants; own-source revenue (OSR); and municipal borrowing.
- Section 3 examines the instruments and mechanisms for sub-national
financing focusing on: municipal borrowing and municipal development
funds; pooled financing; private financing; municipal bonds.
- Section 4 highlights key issues and inferences going forward.
This Topic Guide has been produced by Evidence on Demand with the
assistance of the UK Department for International Development (DFID)
contracted through the Climate, Environment, Infrastructure and
Livelihoods Professional Evidence and Applied Knowledge Services (CEIL
PEAKS) programme, jointly managed by DAI (which incorporates HTSPE
Limited) and IMC Worldwide Limited.
Slater, R.; Goyal, H. Topic Guide: Sub-national financing for urban infrastructure. Evidence on Demand, UK (2015) 59 pp. [DOI: 10.12774/eod_tg.march2015.slaterretal]