[ Summary ]
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
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
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;
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
What structures provide for greater financial flexibility in the
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
- 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
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
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
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