Germany’s experience with municipal finances and its municipal financial equalisation system may be of great benefit for development cooperation, though this theory is far from obvious given the complexity of some parts of the German municipal financing system. In this study we intend to show that this complexity is mainly down to the large number of institutions and processes involved. The multiple forms of municipal financing in Germany’s federalist system offer a wealth of ideas on how different policy solutions have arisen, often under highly divergent conditions. We present German municipal finances as a process of ongoing dynamic interaction between established principles and current political solutions to new challenges. The benefits of the German municipal financing system for development cooperation lie in the fact that the system can also be understood as a policy approach in conjunction with a practical toolbox.

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