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Creative Ways to Finance Smart Ideas

Submitted by scc europe staff on September 18, 2017

A lack of public funding may be considered a major inhibitor in smart city development, but cities are turning away from traditional financing methods and are instead coming up with creative ways to finance the city. Citizens are willing to get involved to make their city the best it can be, instead of developing an entirely new city. Here’s where the revolutionary concept of crowdfunding comes into play. Or take a look at the city of Stuttgart in Germany, one of the first to apply an innovative financial scheme back in 1995. Below we’ll look into a few successful examples and how you can apply some of the same methods to fund your projects.

 Set Up a Revolving Fund: Over the past 20 years, Stuttgart has reduced its CO2 emissions by tens of thousands of tons thanks to energy-efficiency funding. The driving factor: a revolving fund pulling from the city’s budget. After the start-up phase, the savings from lower consumption are added back to the initial budget line. This means no external contractors and no administration costs.

Take a Citizen-Centric Approach: Why not look at those who will be benefitting directly from the projects themselves—the citizens?One concept is called the 4P model: Public-Private-People-Partnership. Projects are not only citizen-centred, but they are also created in partnership with the citizens who ultimately have the largest stake in these investments since they are the ones implementing and benefitting from the projects in the long run.

Embrace the Start-Up Culture: The concept of a sharing economy is the norm these days, especially among millennials who not only use apps like Airbnb and Uber, they also help create them. Crowdfunding has become a common way to launch businesses, turning a start-up unto a global enterprise. The same method can be applied to smart cities, asking citizens to act as external financial stakeholders. Real life examples are already in place in spots like Silicon Valley, where start up UMBO CV is applying AI technology to video surveillance.    

European Investment Bank: But you may also look into more traditional ways to fund your smart city project. The European Investment Bank has provided 95 billion euros in urban lending since 2011 and is extending that financing to projects with higher risk under the European Fund for Strategic Investments. Besides direct investment loans and city framework loans, they also offer equity fund investments for urban development.