Amidst global challenges such as climate change, urbanization, migration and resource scarcity, a radical transformation of the international financial architecture is pressing. With over half of the world’s population residing in urban areas, local and regional governments have assumed a crucial role in enhancing quality of life through sustainable and transformative investments. Their journey toward financial resilience, supported by partners and allies, was prominently showcased at the third Conference of the Malaga Coalition for Municipal Finance, in view of the Summit of the Future and the Fourth International Conference on Financing for Development.

 

 

Since its inception, the Malaga Coalition has brought together diverse stakeholders and achieved significant results. The first Malaga conference (2018) identified bottlenecks for local and regional governments in the current financial ecosystem and agreed on the need for structural change. The second Malaga Conference (2019) launched a financial instrument of the Coalition to provide equity financing to local and regional government-led projects in developing countries – the International Municipal Investment Fund (IMIF) and its associated Technical Assistance Facility (IMIF TAF). In 2021 and 2022, two preparatory meetings of the Coalition took place (one for local governments and their associations; another with national governments and development partners) to consider the evolving situations of municipal finance due to the pandemic.

 

This International Conference, Accelerating Progress Towards a Financial Ecosystem That Works for Local and Regional Governments, hosted by the Ayuntamiento de Málaga in Spain on October 5 and 6, 2023, was led by UCLG and the United Nations Capital Development Fund (UNCDF), with support from the Global Fund for Cities Development (FMDV). This event brought together local and regional governments, national decision-makers, and international financial and development partners, all dedicated to shaping a more inclusive and sustainable local financing system, a condition to achieve the Sustainable Development Goals (SDGs).

 

The conference saw a dynamic exchange of ideas, marked by many relevant insights and contributions. Mr. Francisco de la Torre, Mayor of Málaga, welcomed the attendees and emphasized the need to address global challenges and align with the SDGs, especially in the face of crises and on the path to the ecological and social transitions. Ms. Emilia Saiz, UCLG Secretary General spoke about the strategic importance of local and regional governments in achieving the SDGs and highlighted the need for a cultural shift in development financing. Efforts should be extended beyond traditional financing models. New approaches must encompass financing the economies of care and equality, reflecting a holistic approach to sustainable development and wellbeing.

 

Diving into the conference, Mr. David Jackson, Director of Local Transformative Finance at UNCDF, presented the finances of local and regional governments as fundamental economic units. The five building blocks that compose the Coalition’s policy agenda allow to conceive targeted solutions, innovative approaches, mechanisms, and instruments for subnational governments. Mr. Carlos de Freitas, Executive Director of the Global Fund for Cities Development (FMDV), summarized the Coalition’s previous achievements and underscored the importance of involving development banks in global collaborations.

 

A recurring theme in Malaga was the empowerment of local communities and increased financial resilience of local governments for transformative investments originating at the grassroots level. By actively involving citizens, promoting women’s participation, and encouraging community engagement, local governments can ensure that development initiatives are community-driven and sustainable. During the Special Session on Financing Culture, Inclusive and Gender Responsive Urban Services and Infrastructure, the Mayor of Banjul, Ms. Rohey Malick Lowe, suggested that “If we empower women, we fix the world”.

 

Central to the conference discussions on financial transparency and innovation was the World Observatory on Subnational Government Finance and Investment (SNG-WOFI). Led by UCLG and the Organisation for Economic Co-operation and Development (OECD), the SNG-WOFI is currently the largest repository of subnational finance and governance data, providing a comprehensive overview of the state of local and regional government finance in 135 countries. Ms. Isabelle Chatry, Head of Unit, Decentralisation, Subnational Finance and Infrastructure from OECD, presented the key findings of the 3^rd Edition of SNG-WOFI, which serve to support evidence-based policymaking towards effective decentralization and fiscal reforms. Mr. Kader Makhlouf, Special Advisor to the UCLG Secretary General, emphasized the collaborative nature of the SNG-WOFI project and its significant influence on various stakeholders, including development agencies and research institutions. The SNG-WOFI is a tool for informing, engaging in dialogue and building capacities, but also promoting transparency, accountability and good governance, ultimately reinforcing local financial resilience, local democracy and encouraging financial innovation and best practices.

 

The Malaga Coalition policy agenda is proposed as a concrete path to develop the required financial ecosystem, through: 1) intergovernmental fiscal transfers; 2) own-source revenues; 3) domestic capital markets; 4) city-friendly investment funds; and 5) guarantee funds for cities. Subnational governments should be equipped with the financial and technical means to realize their full potential in the provision of public services and sustainable infrastructure. Citizen involvement in financial decisions, supporting women and promoting community participation were also stressed as priorities, in addition to addressing digitalization and the long-term sustainability of investment funds in cities.

 

Through the Pact for the Future of Humanity, UCLG proposes to take a step further to redefine collectively the essence of finance through innovative models and to review the economic system at the global level. Local and regional governments and their allies must all shift the approach and purpose of finance in order to reduce inequalities and protect common goods. The International Conference of the Malaga Coalition marked a significant milestone, forging strong alliances to improve local finance and showcasing progress and innovation in local and regional government financing.