Pioneering financial schemes: a multistakeholder approach for urban development
These schemes provide novel approaches to addressing these challenges, offering new strategies to mobilise, distribute and/or govern the use of diverse financial resources, foster collaboration among stakeholders, and promote long-term sustainability. This article focuses on the role of such schemes, highlighting it in enabling multistakeholder partnerships to address urban challenges and equipping cities with the tools to implement new financial strategies effectively.
Innovative financial schemes are defined as “creative or novel approaches used by cities and urban practitioners to mobilise, distribute and/or govern the use of funds for implementing sustainable urban development projects.” This definition highlights the adaptability and forward-thinking nature of IFS, positioning them as vital tools in addressing the evolving landscape of urban challenges.
Multistakeholder approach to pioneering finance
Findings from the analysis of Urban Innovative Actions (UIA) projects highlight the important role of multistakeholder engagement in driving the success of these innovative approaches. In most projects, IFSs were designed and implemented by relatively large consortia made up of diverse stakeholders – e.g. municipalities, NGOs, academic organisations, private companies, national agencies, etc. This collaborative approach allowed municipalities to overcome barriers, including budget constraints and insufficient capacity. By pooling expertise and resources, these partnerships facilitated the development of effective and targeted urban action, allowing urban authorities to leverage additional resources and achieve more with fewer resources.
This also led a sense of shared responsibility, which could be associated with a perception of reduced risk and an increased willingness to experiment. In addition, IFSs acted as an important driver for cross-departmental collaboration within municipalities. This included regular interactions between departments that typically do not work together, ultimately breaking silos. In general, the design and implementation of IFSs required a collaborative framework with strong multistakeholder engagement. These new collaborative frameworks allow diverse perspectives and new ideas to be incorporated into city-level discussions. Examples of this multistakeholder engagement by UIA cities can be summarised below:
Brussels Capital Region (BE), CALICO
Brussels Capital Region (BE), CALICO
The CALICO community land trust (CLT) employed a new approach to governing funds for community-driven housing projects by involving citizens directly in the financial decision-making process. This model allowed residents to actively participate in setting budget allocations and funding priorities, fostering a transparent and inclusive management of CLT resources.
Prato (IT), Prato Urban Jungle (PUJ)
Prato (IT), Prato Urban Jungle (PUJ)
The Prato Urban Jungle (PUJ) project launched Prato Forest City, a crowdfunding platform aimed at funding urban greening initiatives in the city. The platform engaged and mobilised a range of stakeholders, including citizens, local businesses, and non-governmental organisations, in decision-making processes. The platform departed from conventional top-down approaches to urban greening, fostering a sense of ownership and shared responsibility for the city’s environmental well-being
Milan (IT), WISH MI
Milan (IT), WISH MI
WISH MI introduced an incentive mechanism in the form of a digital voucher scheme to improve access to education and well-being services for vulnerable groups in the city. The scheme shifted the public administration's role from being a direct service provider to facilitating a network of NGOs and other non-profit organisations to deliver these social services. The digital voucher scheme introduced a new approach to how, municipalities, citizens and service providers interact. Service providers began collaborating on a public platform, while citizens actively selected services, fostering a more interactive and participatory community environment. As such, the city took up a coordinating role, while the services were provided by NGOs and other non-profit organisations.
Innovative financial schemes for more effective governance
Successfully advancing urban development requires strengthening the institutional capacity of cities. Additional findings from the case studies show that innovative financial schemes have the potential to produce meaningful practices of innovation within city administrations. These schemes introduce a range of new funding mechanisms, management models, and implementation strategies, allowing cities to explore novel ways of addressing urban challenges in innovative and effective ways. By rethinking the use of public finances in these ways, cities can strengthen their innovation capabilities, ultimately leading to more effective governance and implementation of projects.
As urban challenges become increasingly complex and resource constraints more pronounced, the capacity to design, implement, and replicate IFSs will likely be key in the future. IFS address critical gaps that municipalities often face, such as limited budgets, lack of expertise, and constraints on institutional capacity. These financial schemes have introduced changes to traditional governance structures by testing new ways for municipal authorities and local stakeholders to collaborate and manage urban development projects. This shift creates more inclusive decision-making processes and strengthens multi-stakeholder partnerships critical for managing sustainable urban development projects effectively. By promoting increased multistakeholder engagement, IFSs provide cities with new opportunities to implement projects that might otherwise be unfeasible, driving meaningful and lasting change in urban development.
Background information
To better understand the role of innovative financing in cities, the Urban Innovative Actions (UIA) commissioned a study on good practices for IFS in delivering UIA projects. The study, set to publish in January 2025, analyses 12 UIA projects that implemented IFS to address urban challenges. By drawing insights from these case studies, the research identifies best practices and offers key recommendations for urban practitioners seeking to adopt IFS. Read the inception report here. The study’s inception report, released in October 2024, provides an overview of the objectives for the study, the landscape of EU regulations and context in using IFSs at the local level, and introduces the concept of IFS. It underscores the emergence of new financing models designed to meet the increasingly complex and dynamic needs of cities.