The mission of the Municipal Infrastructure Development Fund, or ‘MIDF’, is to achieve long-term sustainability in municipal services while developing the municipal credit market in the Western Balkans.
The challenge – infrastructure funding gap
Local infrastructure across the Western Balkans suffers from a significant backlog of investments. Recent financial and economic distress has had a profound impact on national and regional budgets in the Region, limiting funding availability for infrastructure investments. Between 2008 and 2013, public investments in the Western Balkans substantially decreased by more than 30%. Municipalities continue to struggle to fill this funding gap through alternative external financing due to restricted creditworthiness, insufficient capacity and the limited risk appetite of the commercial banking sector. As a result, municipalities are often unable to access the funding required for crucially needed investments. This is an inappropriate and unsustainable situation, especially considering the expectation that the Region will join the European Union.
The vision – enabling infrastructure investments
To tackle this challenge, the European Bank for Reconstruction and Development (EBRD) and KfW established the Municipal Infrastructure Development Fund in 2013. MIDF provides the long term funding needed for infrastructure investments and helps to close the existing funding gap in the Western Balkans, including in Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro and Serbia.
The approach – partnering with the commercial banking sector
MIDF operates in cooperation with carefully selected local commercial banks in the Region to expand access to funding sources for the municipal infrastructure sector. MIDF co-finances projects with the participating banks by sharing lending risks and / or providing liquidity. Benefitting from its shareholders strong sector expertise and track record, MIDF exclusively focuses on municipal infrastructure investments. This notably includes the construction of new, or the rehabilitation / modernisation of existing, infrastructure for water supply, wastewater treatment and sewerage, solid waste management, local energy supply systems, energy efficiency measures, social infrastructure and public transport. Local communities are the ultimate beneficiaries of MIDF financed investments.
To support the mission of the Fund and the successful implementation of the investment projects, MIDF mobilises international donors to offer grant funds for technical assistance to participating banks and the eligible beneficiaries. This includes grant funded support for project preparation, implementation and wider training initiatives to ensure that investments are well-managed, financially sustainable, and provided on commercial principles. The ultimate goal of the technical assistance is to realise projects quickly and achieve high impact, while building capacity for greater efficiency and quality in the provision of municipal infrastructure services as well as municipal infrastructure financing.