Local financing in rural areas
[ Summary ]
Local financing - needs and issues
Financing is a special form of partnership that exists in varying
degrees between a number of different players. However, it is
common to find a gulf between funding supply and demand.
1.1 Financing, a form of partnership
“To finance”, means “to furnish with finances or money; to find
capital for”, “to conduct or engage in financial operations, to
manage monetary affairs; to provide oneself with capital” . It also
means to provide someone with the means to access the market for
goods and services in order to carry out a project. The matter of
financing therefore involves a supplier and a beneficiary.
However, even in its most commercial form of a bank loan, financing
differs from an ordinary supplier/customer relationship because the
commitment between the two parties generally extends beyond the
supplier providing the goods or services and the customer simply
paying for them.
By its very nature, financing engages the responsibility of the
“customer/beneficiary” to his supplier at other levels, whatever
form such financing takes:
- If it involves a donation or subsidy, the financing can never
totally be divorced from its underlying objective and the donor’s
expectation of a result from the beneficiary: this may include
support for a specific project or more general support to
participate in a public interest measure (e.g. subsidizing a
- If it involves a loan, the beneficiary is committed to
reimbursing this loan and the supplier will certainly guarantee its
reimbursement and negotiate the terms and deadlines.
- If it involves co-partnership in a project, there is a de
facto joint responsibility between supplier and beneficiary.
In all cases, the fund provider and beneficiary share an objective.
This is why financing is first and foremost a special form of
partnership. This partnership may vary in scale, from a bank that
is happy to grant consumer credit, to a partnership between a
project promoter and one or more savers pooling together their
ideas, know-how and financial resources to implement a project.
Linking financing to a partnership is crucial, because this link
makes it possible to grasp the full importance of financing and to
turn it into a local development tool in its own right.
By considering financing from this angle, it is also possible to
turn financing into a real lever for coordination, rather than
merely a management tool. So, in some cases, LEADER subsidies for
project promoters may be perceived simply as resource allocations
whilst, in others, they trigger mechanisms which engage the
beneficiaries in local processes of consultation, shared
objectives, collective learning, transfers of experience, etc.
By forging a link between financing and partnership, we also
pinpoint the correlation that exists between local financing and
social cohesion/democracy. Indeed, financing is easiest in areas
with strong social cohesion. By contrast, in areas dominated by
conflict and distrust of institutions, people coming forward with
ideas and projects are able to count solely on their own resources,
which limits their ability to bring their ideas and projects to
As we shall see, setting up financial engineering structures at
local level, and alternative financing solutions more generally,
relies primarily on new forms of partnership and of joint
commitment between a variety of players (local councils, business
firms, financial institutions, project promoters, etc.). Financing
is therefore a particularly effective lever, making it possible to
progress beyond agreements that may remain superficial and to
culminate in concrete undertakings concerning the proportion of
each partner’s resources that they make available for common
Financing is therefore not simply a means of advancing projects or
of developing ideas. It is also an essential tool for creating new
links and new solutions to bridge the gap between an area’s people
and its institutions, and hence an instrument of social cohesion
 According to the “Oxford English Dictionary”,
Compact Edition, Oxford University Press, 1971.