Reducing Financing Costs for Local Communities’ Welfare. An analysis of the Swedish local government funding agency Kommuninvest from the perspective of the social and public economy.

In the aftermath of the financial crisis of 2008, many European local governments faced difficulties in financing their investments due to both a partial bank withdrawal from the local government borrowing market and money transfer cuts from the central state to the local public sector. Additionally, the new Basel III regulations are likely to negatively affect the low interest borrowing of local authorities and the current European sovereign debt crisis raises questions about the low-risk qualifications of the local public sector. This study examines to what extend the Swedish local government funding agency Kommuninvest can serve as a model for costefficient and diversified funding for local governments from the perspective of the social and public economy. Kommuninvest, a cooperative of financial services regulated under private law, which is 100% owned and governed by Swedish local governments, procures funds from the capital markets through the issuance of bonds and allocates them through loans to their members. I have used qualitative empirical methods based on ad-hoc questionnaires. The results are divided into two groups. The first group deals with social economy concepts: I argue that Kommuninvest can be considered as, firstly, an entity which lies at the boundaries of the social economy concept, and secondly, as a régie coopérative, a public cooperative. The second result group suggests that Kommuninvest can actually serve as a model tool for diversified and costefficient funding for other local governments. The Swedish agency benefits from a unique institutional framework of internal and external enabling conditions. However, this unique framework constitutes a limit for a successful establishment of the Kommuninvest model as other countries have their own specific cultural, political and legal contexts.

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