Social loans to support the financial needs of local authorities

“Safety net”, “Green fund” or even “increase in the overall operational allocation”. To mere mortals, these technocratic expressions mean nothing. For local elected officials, reference is made to the measures adopted by the government and Parliament in response to the energy crisis. First an allocation of € 600 million in the 2022 amending budget adopted this summer to tackle inflation, then the release of € 1.5 billion to accelerate the ecological transition and finally an extension of an additional € 110 million for 2023 finance law currently being examined by Parliament. Cash should fill explosive operating expenses and revive irregular investments.

After € 2.3 billion of green loans …

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

Having funded 650 projects worth € 2.3 billion in soft mobility and clean transport, water and sanitation management, waste management and recovery, energy upgrading of public buildings or even production and development of renewable energies, Postal Bank and SFIL group I want this time to help municipal councilors to finance health, social and family action, education, professional training, sport, culture, community life, cohesion of territories or even the fire brigade.

“The energy transition cannot take place without the social transition,” Serge Bayard, Deputy CEO of Swiss Post’s financing and investment bank, told La Tribune.

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

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

Hybrid public development bank between a private law company and a 99.9% subsidiary of 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, in a few years we will be at least one billion euros more”, calculates its CEO, Philippe Mills.

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

“Green loans were a bit complicated to implement, because they changed the mindset of elected officials and especially that of technical services who had to engage in criteria and report on them,” recalls Serge Bayard, of the Postal Bank.

“The social impact will be assessed ex ante and ex post by external and independent auditors, if only in order to be able to report it to our investors”, explains Philippe Mills of the SFIL group.

A leverage effect dependent on self-financing and … subsidies

As for the leverage effect, it will vary according to the resources of the local authority concerned and the means co-invested by the other stakeholders.

“It depends on the self-financing part and the subsidy part. We work closely with the state, the regions, the departments to ensure the coherence of the whole ”, says Serge Bayard.

“The leverage will be at the macroeconomic level. The volume of social investments should increase, ”says Philippe Mills.

Too early to talk about the evolution of interest rates

It is also too early to talk about the evolution of interest rates and this variable on local choices.

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

“Interest rates will depend on market conditions at time T,” agrees 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) of Montpellier, 10 million out of 52.5 for the long-term hospital center in the Belfort area, 25 million for the Isaire hospital center (from the Oise, ed) ESPM and 110 million for the university hospital of Rennes. Transactions carried out by the Postal Bank and … by the Banca del Territorio, another entity of the Caisse des Dépôts.