Municipal Finance

Strong municipal finance systems and procedures are critical to the delivery of sustainable services. FEI has practical experience in strengthening of municipal financial management systems and supporting governments intent on improving the overall governance environment and the delivery of sustainable services.

The FEI team excels at:

  • Supporting the development of revenue-based value capture systems linking urbanization and infrastructure development
  • Guiding the overhaul of revenue and expenditure management systems
  • Promoting the introduction of appropriate levels of ICT

FEI supports local governments by guiding the overhaul of revenue and expenditure management systems. To develop a sound understanding of the capacities, strengths, and weaknesses of the client local government, our team assesses the institutional, financial and human resource capacities in a comprehensive manner using detailed qualitative assessments. In tandem, the team assesses the financial strength and the creditworthiness of the local government entities. These analyses cover both historical trends and projected future scenarios to guide comprehensive reforms to enhance creditworthiness and financial capacities in the medium to long-term and the delivery of sustainable public services.

Local governments in the developing world often lack appropriate revenue policies. As a result, revenue targets are often mediocre, ill-designed, and lack substantial analyses of policy options. This issue will be increasingly pertinent as cities’ real estate volume grows rapidly, and the potential value capture from real estate development explodes. Value capture can be a major source of revenue for construction of integrated infrastructure needed to leverage private sector and international investment in cities. The municipal finance experts in FEI have experience in helping local government to review and update their revenue policies, helping to set realistic policy targets for the medium term, and updating and communicating with stakeholders’ explicit policies on an annual basis.

Our team’s experience suggests that incremental changes in local government revenue and expenditure management systems do not reach a breakthrough and frequently fail to show robust results. Substantial improvement in the performance of these systems requires a comprehensive overhaul that should be considered and financed as a capital investment and subjected to the same review and analysis as any other capital investment program. Such institutional refurbishments not only expand revenues and help to control expenditures, but they also widen operating margins and reduce the financial vulnerability of the local entities. Our team has experience in working with governments to conduct the necessary assessment of the systems at the local government level and to develop realistic strategies to introduce new revenue and expenditure management systems which are appropriate and effective.