LOCAL GOVERNMENT BONDS, AS A POSSIBILITY OF SOLVING THE PROBLEMS OF FINANCE INVESTMENT PROJEKTS

Abstract

The municipal community is basically a form of management and decision-making of the people living in the municipal community. It is a local government that has a certain degree of freedom, independence and material capabilities to achieve its original functions determined by the constitution and the law. The municipal community in the Repulika Srpska is single and monotypic in its basis, the same as it was in the former Yugoslavia. In an effort to overcome most easily the problems with financing the investment projects, the municipal community faces the dilemma of whether to finance the projects with the funds borrowed from the commercial banks or by issuing a series of bonds on the financial market. Both models have their advantages and disadvantages. Financing by issuing bonds allows the investor to initiate the interest rate on the borrowed funds but with the corresponding costs and risks overtaken by the investor – issuer, which are related to the success of the issued programs on the market, while the financing of the project by borrowing from the commercial banks allows the investor to obtain the necessary funds for financing the projects in a safer and simpler way, with the interest rate defined by the commercial bank in accordance with its business policy.