1. 1 BUILDING LOCAL CREDIT MARKETS

2. 2 Vehicles for Local Credit Banks Municipal Bonds On-Lending External Credits Environmental Funds OBJECTIVE: Build a Consistent System of Credit

3. 3 Dangers of Fragmentation Brazil30 years of on-lending; no market Indonesia52% default rate on water loans Municipal Bank Monopoly? Tax Exemption only for Municipal Bonds? OBJECTIVE: Level Policy Field

4. 4 Goals for Maturing Market Identify Credit Risk Reduce Credit Risk Tap Long-Term Savings for Long- Term Credit Provide Technical Support for Local Financing

5. 5 Identifying Risk Credit Ratings Their Special Role in Local Borrowing for Developing Countries Disclosure before Credit Rating

6. 6 Reducing Credit Risk (1) Building Precedents for Repayment Indonesia Kenya Lockbox Approaches to Revenues Ahmedabad Bond Municipal Utilities Role of Trustee

7. 7 Reducing Risk (2) Collateral ChinaLand Other Assets Intercepts & Offsets Tamil Nadu v. Brazil

8. 8 Tapping Long-Term Savings Insurance Companies The prudential investment test Pension Funds Legal Restrictions (e.g. Poland) Paradox of US Tax Exemption Secondary Market Securitizing Local Loans? Re-selling Municipal Bonds?

9. 9 Banks or Bonds? Partnership Banking with Technical Support BondsUnbundling the Partnership

10. 10 Blending Grants & Subsidies Blockage of Credit Created by Poor Design Initial E. European Environmental Funds Revolving Funds Way to Introduce Subsidies to Market-Based Credit

11. 11 Blended Credit Systems China Full Tariffs for Wastewater Treatment Plants, plus Asset Collateral Bank Lending + Enterprise Bonds South Africa INCA as Specialized Intermediary Czech Republic Banks and Bonds