External sources of funding: The factor of development of local governments

Abstract

The financial sector is characterised by numerous changes that affect the changes in the institutional structure of functioning of the financial system, as well as the choice of funding of business entities. This has resulted in the fact that in contemporary business conditions, financing of economic development become a complex area of research. Local development planning on the basis of public revenues is a weak base for the rapid development of local governments. Therefore, it is necessary to supplement the budget financing by attracting private capital for the construction of public goods and improving the quality of public services. In this regard, the objective of this paper is to point to alternative ways of borrowing, both from domestic and international sources of funding, as well as to the possibilities for their use by the local governments. Bearing in mind the defined objective, the paper discusses the possible external sources of funding of local governments, such as loans from commercial banks and other financial institutions, and municipal bonds. In order to evaluate the possibilities for successful development of local governments, the paper points to the possible solutions to financing projects of public importance in the practice of Serbia.

Keywords

• local government
• bank loans
• municipal bonds
• international sources of financing
• international financial institutions