Brief: Municipal Finance for Migrants and Refugees: The State of Play

Most migrants and displaced people live in cities. City governments are best placed to provide services to meet their needs, but the systemic barriers they face to access finance restrict them from doing so. Locally, city governments have limited channels of own-source revenues (OSR) and often lack the capacity to prepare projects that are financially attractive for investors. At the national level, central governments often restrict their borrowing ability. Internationally, most financial investment mechanisms require national sovereign guarantees or high levels of credit worthiness that cities—especially those in low-income countries—rarely have.

There are a few strong examples of international mechanisms that are directly accessible to city governments, such as the International Municipal Investment Fund of the UN Capital Development Fund (UNCDF) and United Cities and Local Governments (UCLG), or that focus on migration and displacement, such as the UN Start-Up Fund for Safe, Orderly and Regular Migration (Migration MPTF), but mechanisms that are both accessible to city governments and have this thematic focus are rarer. These include the Lives in Dignity Grant Facility set up by the European Union (EU) and UN Office for Project Services (UNOPS), or the Financing Durable Solutions Initiative for Forcibly Displaced Persons and Host Communities created by UNCDF and the UN Refugee Agency (UNHCR).

To model behavior and send a positive signal to the field, the Mayors Migration Council teamed up with C40 Cities Climate Leadership Group (C40 Cities), the UN Migration Agency (IOM), UCLG, the United Nations Human Settlements Programme (UN-Habitat), and UNHCR, to set up the Global Cities Fund for Migrants and Refugees (GCF), a mechanism to address the unmet needs of cities as they support migrants and displaced people. By directly funding cities to implement projects of their own design, the GCF builds precedents of fiscal feasibility in city governments that are often disregarded by donors with low risk tolerance.

Despite the impact and scaling potential of the GCF, the significant finance gap for city-led inclusion of migrants and displaced people requires a fundamental shift in how governments, donors, and global institutions partner and operate. This type of systemic change does not happen overnight—it requires a multi-year, multi-strategy approach and a movement of innovative disruptive leaders behind it.

With the support of our like-minded partners UCLG, UNCDF, and UN-Habitat, this report aims to provide a small starting point in this direction. It explores the municipal finance landscape for migration and displacement, discusses the barriers cities face when accessing resources and their mitigation strategies, and puts forward concrete recommendations to unlock a virtuous cycle for financing more inclusive cities.

Key global recommendations include:

• For cities
  • Strengthen municipal finance capacities 
  • Build relationships with national government officials and other relevant funders and actors in the migration space
  • Consider a People-in-Place approach to urban inclusion. 
• For national governments
  • Engage city officials in policy deliberations about migration and displacement
  • Broker connections between city governments with mulitaterals and national or international financiers/donors
  • Provide national expertise in support of cities to help them build financial projects and programs
• For international funders and financiers
  • Provide and mobilize direct funding and financing to city governments to support inclusion of migrant and displaced communities
  • Support and incentivize cities to embed inclusion into their project priorities and investment plans. 
  • Provide or fund technical assistance to cities. 
  • Develop mechanisms to increase city government participation and influence in policy and funding deliberations