Closing the municipal finance gap for migrants and refugees (OECD)

This article first appeared on OECD’s website. MMC engages in content partnerships with several organizations, and cross-posting does not indicate an endorsement or agreement.

Although cities – not rural areas or camps – serve as the primary destination for migrants and refugees worldwide, city governments face systemic barriers to accessing the funding and financing they need to provide for these communities.

These funding and financing barriers exist at local, national, and international levels. Locally, city governments have limited channels of own-source revenues (taxes and fees levied by a city) and often lack the capacity to design projects that are financially attractive for international investors. At national level, governments often restrict cities’ ability to borrow or provide financing with strings attached. International financial investment mechanisms usually require national sovereign guarantees or high levels of credit worthiness that cities – especially those in low-income countries – rarely have, while donors infrequently view city governments as viable agents of humanitarian or development actions.

The lack of municipal financing for migrants and refugees not only strains cities’ capacity to provide for growing populations of marginalised residents, but also blocks a critical opportunity for international and national actors to leverage city governments as actors worthy of investment.

Take the city of Amman in Jordan for example. It is estimated that there are over 300 000 and over 435 000 Syrians living in Amman. Amman’s ability to generate own-source revenues is limited. For example, revenues reach just 50% of spending on solid waste management. Moreover, intergovernmental fiscal transfers have not increased in line with the arrival of refugees.

The Greater Amman Municipality has pursued several strategies to close this financing gap, including maximising the use of multilateral funds from the likes of the European Bank for Reconstruction and Development (EBRD) and UN-Habitat. This led to the creation of the Amman Vision Company, a private entity to raise and manage private investments and explore ways of improving internal capacity to open new financial opportunities and increase the city’s own-source revenue, such as issuing municipal bonds.

Thanks in part to its multi-pronged strategy and commitment to serving all of its residents, the Greater Amman Municipality recently won the Bloomberg Philanthropies Global Mayors Challenge, which awards USD 1 million to cities with the most innovative urban solutions in the wake of the Covid-19 pandemic. The “Amman is Listening” project will establish a city-wide online participatory forum for residents to raise issues directly with the municipality and navigate its services. The municipality will leverage the project to help refugees acclimatise to Amman and build greater accountability between the city government and displaced residents.  

But Amman’s experience is an exception, not the rule. There are few strong examples of international financing or funding mechanisms that are both directly accessible to city governments and appropriate for projects that benefit migrant and refugee communities. For example, mechanisms such as the UN Start-Up Fund for Safe, Orderly and Regular Migration (Migration MPTF)or the Lives in Dignity Grant Facility set up by the European Union and the UN Office for Project Services, are explicitly focused on migration and development, respectively. However, cities cannot easily access this funding directly without the support of an international agency or national government.

That’s why the Global Cities Fund for Migrants and Refugees (GCF) seeks to fund cities directly to implement projects of their own design. And by doing so, it is proving fiscal feasibility in city governments that are often disregarded by donors with low risk tolerance.With nine city grantees, eleven more on the way, and an active pipeline of over 20 projects, the GCF quadrupled its initial budget in less than two years and built a marketplace of investment-ready, city-led solutions that directly help migrants and refugees.

Despite the impact and scaling potential of the GCF, closing the funding gap for city-led projects that are inclusive of migrants and refugees requires a fundamental shift in how governments, donors and global institutions partner and operate:

• National governments must expedite and simplify cities’ access to financing and provide sovereign guarantees to back international investments, all while lessening restrictions on inter-government transfers – the lifeblood of cities in low-income countries.
• International donors and investors need to support cities to diagnose challenges and scope, develop, and implement more attractive and sustainable inclusion projects. They can do this while increasing the capacity for cities to generate own-source revenues and ensuring large-scale infrastructure investments – which are common in cities – including money for services that help migrants and refugees.
• Cities must strengthen their municipal finance capacities, including better budgeting practices, more revenue generation, and transparent financial management, with a specific focus on improving the overall quality, reach, inclusivity, and participatory assessment of public service delivery.

This type of systemic change does not happen overnight — it requires a multi-year, multi-strategy approach and a movement with innovative, disruptive leaders behind it. It starts with bold ideas and a reimaging of what we count as valuable. Cities – and the migrants and refugees who call them home – are worthy of our investment.

As the work of the Mayors Migration Council has shown, the results will be invaluable for migrant and displaced communities: as a USD 4.5 million fund, the GCF over 20,000 people across 20 cities stand to directly benefit from the GCF at a cost of less than USD 200 per person. Compared with the economic benefit migrants and refugees bring to the communities that welcome them, such as evidence of increases to medium incomes and GDPs in refugee-accepting countries, it is clear that investing in cities pays off.