MECHANISM FOR PARTICIPATORY FINANCING OF LOCAL DEVELOPMENT: ESSENCE, SOCIAL AND ECONOMIC IMPACTS
Abstract
The lack of financial resources needed to solve the everyday problems in Ukrainian local communities actualize the issue of working out new financial mechanisms to enhance financial base for local development. The effectiveness of participatory financing as one of such mechanisms is examined in the paper. Investigation of the impact of the mechanism of participatory financing of the European Union and UNDP “Community based approach to local development” on social and economic development of Ukrainian local communities leads to the conclusion that the method of financing acts as an institution which motivates the local community self-organization, initiative activity and productive cooperation with the authorities. The analysis showed a positive impact of participatory financing both on economic indicators of local community development in the short run and on the characteristics of the communities’ social capital which could be a factor for long term economic development. This conclusion is supported by regional experts. Generally they evaluate the scheme of participatory financing as an effective one. The main value of this model of financing is a synergistic effect (all the participants get result that they could not achieve individually). The work on this article was supported by an individual grant №12-0991 from the Economics Education and Research Consortium, Inc. (EERC), with funds provided by the Global Development Network.
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