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Economic competitiveness

[ Summary ]


Chapter 2:
Analysing an area’s economic competitiveness


2.2 Ability to appropriately manage financial resources


Managing financial resources is the second essential component of an area’s economic competitiveness.

a) Existing assets

    The financial resources available to an area are in the hands of households, businesses and the local public sector:

    • The savings capacity of households and their attitude to risking their savings by investing locally are key elements that are, however, very difficult to assess. Nevertheless, a general idea can be formed from discussions with key people, financial institutions, consular offices, etc.

    • Businesses and their attitude to risk-taking - What is the role of public funding (subsidies for local farms and businesses) in reviving investment in key sectors of the local economy?

    • The public sector - What resources do local public entities have (budget, local tax revenues, subsidies, etc.)?

b) Use of funds

    How are local financial resources used? What is the relationship between locally generated financial resources and locally utilised financial resources?

    One crucial question is how much funding is available to project promoters and innovative projects? Indeed, in many cases, even where financial resources exist in a rural area, the promoters of small- scale projects, particularly young people, and those needing funds for investment, are not necessarily those with the easiest access to it.

    How, then, can such resources be made available? Most important, what are the obstacles?

    Usually these are:

    • the banks’ lack of interest in “small-fry” project promoters;
    • the lack of adequate collateral from project promoters;
    • the lack of social links that allow risk-taking or of forms of collateral based on trust;
    • the lack of funding alternatives;
    • etc.

c) Organisational systems

    How should the area’s financial resources be managed? What institutional, legal, financial, partnership and other instruments exist for managing such resources?

    How can the banking system be characterised? What banks operate in the local area? What strategies do banks have in the area? Do the banks’ financial products match the needs of local businesses? What is the banks’ attitude to SMEs and, more generally, to managing local savings and granting loans?

    Are there any local banks or cooperative banks? Do they have specific operating practices and rules? How are they integrated into territorial development?

    What structures provide for greater financial flexibility in the area?

    These may, for example, include:

    • Alternative financing structures, guarantee funds, etc.


        In central west Brittany (France) the LEADER group has created a special structure, “GALCOB Initiative”, for harnessing local public and private funding in order to make loans on trust. Such loans are made to project promoters and businesses in the start-up phase, which operate in sectors of particular importance to the area. The project is therefore helping to offset the lack of capital and project promoters in an area still suffering from rural depopulation.

    • Structures for linking public and private investment in order to achieve a leverage effect, such as mixed-finance companies for supporting local development projects.


        The municipality of Ribeira de Pena (Norte, Portugal) created a mixed finance company to build a small hydroelectric station and in so doing secured the support of a number of local investors.

    • Structures for harnessing savings and channelling them into local development


        The “Cigales” network in France is a group of local organisations that place the savings of private individuals who have decided to collectively invest in projects felt to be of benefit to local development. These are usually small-scale welfare projects.

    More generally, how is the link forged between the people with ideas, project promoters and financial institutions? What are the intermediaries (those analysing applications, support and advisory structures, etc.)?

    What obstacles are there to increasing the number of business investors? The shareholders of rural businesses are often limited to the family and perhaps the employees. It may be difficult to bring in outside investors in the form of limited liability companies or public limited companies. Are there any collective forms of investment (cooperatives, consortia, etc.) appropriate to the local cultural context?

d) Values

    Access to funding by the promoters of initiatives and projects depends to a large extent on the degree of mutual trust and solidarity between the area’s players. It is such trust and solidarity that influence attitudes and encourage support that goes beyond purely economic considerations.

    Over and above such issues, there is the issue of the degree to which the community is aware of the importance of keeping savings in the area. Are there any collective forums for fostering this sort of awareness? Alternative structures for funding, channelling savings into local development, etc. can play a key role in this.


      The “Cigales” networks in France, mentioned earlier, often have a much greater impact in terms of shared values, by raising awareness during discussions on project financing, than in strictly financial terms, in view of the relatively small amounts at stake.

    Likewise, what values predominate among local authorities? Is financial support for investors a major concern of district councils, regional structures (e.g. regional governments and consular offices) etc? What does this mean in practice? Are measures limited, for instance, to general conditions for investment support (e.g. the creation of industrial clusters) or are efforts made to target project promoters and other players in need of more specific support?

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