Involving private firms in municipal efforts to improve urban services may also make the projects more attractive to the World Bank or other regional/national development banks. Private involvement is often seen as evidence that the municipality is serious about tackling problems such as inadequate services or ineffective tariff structures. This was certainly the case in Cartagena in relation to World Bank investment illustrated in Box 7.12. Accessing these public funds can be a benefit to the municipality - if it uses the funds to ensure that the partnership arrangement meets local objectives. Such 'soft' money is usually significantly less expensive than private investment. Some of it is grant money that can be used to reduce transaction costs. Some of it is debt, that must be repaid, but at lower interest rates or over longer periods of time than private loans.
At the same time, involving a public development bank in a project can make the project more attractive to potential private investors. Foreign private lenders often take comfort from the presence of international development banks in a deal. They calculate that local governments are more likely to honour their commitments if the World Bank is involved than if private investors only are present.