Broadly speaking, pooled financing entails gathering the borrowing
needs of a group of municipalities and raising the combined debt on
the capital market or from other sources of finance. This can be done
either through a state governmental agency or through cooperation
among local authorities.
The revenue available to local governments is a key determinant of a
city’s ability to provide the services citizens need and to meet expenditure
requirements. In cases where revenue is constrained, infrastructure
investments often suffer, and government services are reduced.
Local Governments need to achieve sustainable sources of
finance to be able to invest in urban infrastructure and offer basic
services. However, local governments face several challenges
such as insufficient and unreliable transfers from central government,
poor tax collection, weak fiscal management and other
constraints that affect their institutional capacities.
Municipal finance consists of the revenue and expenditure of local government in urban areas. Although the remit and capacities of local governments to engage in financial decisions vary enormously, across countries municipal nance generally aims to generate the resources needed to fund local services to the satisfaction of citizens through fair taxation and use of external resources.