The lack of adequate basic urban services and infrastructure is a major challenge in human settlements development. With rapid urbanization, governments are increasingly having difficulties to meet the growing demand for housing and urban development, urban services and infrastructure.

The lack of revenues is one of the biggest problems facing most cities all over the world, which makes them one of the vulnerable layers of government, with increasing responsibilities and small share in the allocation of public resources.

The Municipal Finance Systems Initiative aims to promote shared responsibilities between governments, the private sector, non-government organizations (NGOs) and community-based organizations (CBOs) to explore innovative mechanisms and instruments to finance urban development and basic urban services and infrastructure. Particularly it focuses on how to tap the private sector resources to provide urban services and infrastructure to the poor and how community-based organizations can participate effectively in urban development and urban services and infrastructure provision and management.

The main activities of the Municipal Finance Systems are:

1. To explore options, mechanisms and strategies of improving municipal revenue;
2. To explore and design new policies, strategies and instruments of municipal management in order to improve effectiveness, efficiency and equity in municipal finance systems;
3. to explore and design institutional and regulatory frameworks which enable community-based organizations (CBOs), Non-government organizations (NGOs), individual households and the private sectors to contribute towards the financing of housing and urban development;
4. to undertake studies and evaluations on municipal finance systems and instruments;
5. To promote reforms and policy changes to adjust the inter-governmental fiscal relationship to balance the municipal responsibilities with adequate resources;
6. To promote innovative mechanisms and instruments to mobilize long-term capital into housing and urban development, particularly for the poor;
7. To provide advisory and technical services in developing municipal finance capacity and strengthening municipal finance systems.