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Ahmedabad issues municipal bonds to implement green projects

This case study showcases the city of Ahmedabad’s experience in successfully raising funds through municipal bonds to finance climate-resilient urban development. 

Cities in India are turning to financial instruments like municipal bonds to raise money from the market to fund urban development, incentivised by the easing of rules governing bond issuance. In January 2019, Ahmedabad, the largest municipal corporation in the state of Gujarat, raised about $26,2 million for ‘green projects’ by issuing municipal bonds. The municipality aims to use the funds for waste management, water supply and other infrastructure projects, including the cleaning of its Sabarmati River. 

The following case study describes how Ahmedabad successfully raised funds from the market, and some of the success factors behind the high demand for Ahmedabad’s municipal bonds, including its strong financial risk profile. 

Key messages from this case study include:

  • Green municipal bonds are useful for financing climate-resilient infrastructure, as they can be issued for long tenors of 10-20 years, and are suitable issue sizes for large-scale projects. 
  • Local governments with good credit ratings stand the best chance of issuing bonds, including demonstrating good operational performance, financial health and strong governance.
  • Governments play an important role in incentivising fundraising through market-based financing instruments. In India, the Atal Mission for Rejuvenation and Urban Transformation programme incentivises local governments to raise funds from capital markets to finance urban development and enhance transparency and financial performance.
  • The Securities and Exchange Board of India (SEBI) has played an important role in encouraging municipal bonds by easing the rules governing the bond issuance and allowing foreign portfolio investors to invest in municipal bonds.  

Photo: View of Sabarmati Riverfront in Ahmedabad, Gujarat, India. Credit: Shutterstock.

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