Monday, October 2, 2023
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Social loans to save the local authorities’ financing needs

“Safety net”, “green fund” or even “increase in total operating allocation”. To ordinary mortals, these technocratic terms mean nothing. For local elected officials, they refer to the measures taken by the government and the Danish Parliament in response to the energy crisis. First, an envelope of 600 million euros in the amending budget for 2022, adopted this summer to deal with inflation, then the release of 1.5 billion euros to speed up the ecological transition, and finally an extension of 110 million euros further to 2023 – the Finance Act, which is currently under consideration by Parliament. Hard cash needed to fill exploding operating expenses and restart erratic investments.

After 2.3 billion euros in green loans…

It is in this context that Banque Postale and the SFIL group are preparing to offer a new financial product to municipalities, intermediate municipalities, departments and regions. According to our information, the two are local public sector bank executives who claim to be “first lender” local authorities with a market share of 25% will market social loans for a minimum amount of 300,000 euros with exceptions of 150,000 euros.

After financing 650 projects for an amount of 2.3 billion euros in soft mobility and clean transport, water and sanitation management, waste management and recycling, energy renovation of public buildings or even the production and development of renewable energy, Postbanken and SFIL- this time, the group wants to help city councilors finance health, social and family efforts, education, vocational training, sports, culture, association life, the cohesion of the territory or even the firefighters.

“The energy transition cannot take place without the social transition”, Serge Bayard, the deputy general manager of the post bank’s financing and investment bank, emphasizes to La Tribune.

“These are the two legs of the same need: the desire of local communities to invest more responsibly,” he adds.

… “at least one billion euros more in a few years”

A hybrid public development bank between a private company and a 99.9% subsidiary of the Caisse des Dépôts, the SFIL group, created in 2013, mobilizes international savings to refinance these long-term loans.

“Under the double effect of green loans and social loans, we will be at least one billion euros more in a few years”, calculates its CEO, Philippe Mills.

In both cases, the loans are earmarked for specific projects, unlike traditional loans.

“The green loans were a bit complicated to implement, because it changed the mindset of elected officials and especially of the technical services, which had to commit to criteria and report on them”, recalls Serge Bayard. from Postbanken.

“The social impact will be evaluated ex ante and a posteriori by external and independent controllers, if only to be able to report to our investors”, clarifies Philippe Mills from the SFIL group.

A leverage effect dependent on self-financing and… subsidies

With regard to the leverage effect, it will vary according to the local authority’s resources and the funds co-invested by the other stakeholders.

“It depends on the self-financing part and the subsidy part. We work in a highly correlated way with the state, the regions, the departments to ensure coherence in the whole”, confirms Serge Bayard.

“The leverage effect will be at the macroeconomic level. It should increase the scope of social investment”, supports Philippe Mills.

Too early to talk about the interest rate trend

It is also too early to talk about interest rate trends and this variable in local elections.

“Interest rates do not determine the decision to invest, it is political will that takes precedence,” assures Serge Bayard from Banque Postale.

“The interest rates will depend on the market conditions at time T,” declares Philippe Mills of the SFIL group.

He knows something about it. For almost ten years, it has already financed public hospitals: 25 million euros for the University Hospital Center (CHU) in Montpellier, 10 million out of 52.5 for the hospital center for long-term care in the Belfort area, 25 million for the Isaire hospital center (from Oise, editor’s note) ESPM and 110 million to Rennes University Hospital. Operations carried out by the Postbank and… Territorial Bank, another Caisse des Dépôts entity.