A document that indicates someone has bought shares in a collection of assets or mortgages. It is also applied when an investor purchase shares in upcoming government or municipal projects, especially when the government entity has reached the limit of loans it can borrow from the national treasury. It will certify the investor has bought shares in the government project, whether it be sewers or roads.
Participation Certificate Details
Local and national governments carry out a lot of projects all around our communities with the intent of improving the standards of living around the area. From government residentials to learning institutions to roads and sewer systems, our governments carry out all these development projects. It shows that most public development projects were initiated by the government, including public hospitals, clinics, and dispensaries. All these projects are developed by governments to build a better society in which everyone can benefit and pay for services at reasonably lower prices than private projects.
The government has multiple sources of income, including taxes from the earning citizens, fees levied on goods, court bails, and penalties for convicted criminals. The funds acquired from different inlets contribute to the well-being of citizens and the development of social amenities. There are basic needs that everyone should enjoy no matter their social class, including food, shelter, clothing, and medical attention. In some developed countries, there are also social services like homes for the elderly and foster homes for orphaned/abandoned children.
Before starting the groundbreaking ceremonies for such projects, the government entity involved in the project first assembles funds that will facilitate the operations of the projects. Some of the funding borrows from the national treasury, where all the revenue raised by the government is stored. However, a limit known as debt-ceiling restricts a government entity’s financing for area development. Past the debt-ceiling, the government entity allows investors to fund the projects, thereby offering participation certificates.
Example of Participation Certificate
You likely have public social amenities in areas where you live developed by either your local or national governments. It may be a public hospital or school that in some countries offers free education to the primary lower education students. Governments also provide scholarships to brilliant students to go to high-class universities and colleges to get tertiary education. All these projects and privileges funded by the government revenues are raised from different inlets, although some are from private investors.
For example, consider you are the manager of a company in a local environment where you grew up. The area is not as developed as other areas that surround your location. You are attached to the area because it is where you were born, raised, and where you currently reside. To your delight, the government releases a development plan that involves constructing three public schools, two hospitals, and five residential blocks that allow residents to live at a slightly lower rent compared to the other residentials. The government also encourages local investors to join in the project for it to be a success.
You have a soft spot for the area, and you would really love to see it develop to better living standards and even become a significant center someday. Apart from wanting to see the area grow, you also conclude that buying shares in the projects will also be a good investment. With all these in mind, you convince your board of management to invest in the upcoming projects, and they comply. It will lead to your company receiving an offer for a participation certificate that proves you have shares in the projects.
Significance of Participation Certificate
A participation certificate is proof that one invested in a government project and is entitled to a particular percentage of shares in the projects. Investors play a big part in any form of development project, especially the government ones that benefit the public. The funds they invest in community projects help to improve the living standards in areas with low standards. It will also bring back profits into the accounts since the assets they’ve acquired have a monetary value.
Having shares in a government project assures you of profit to come in the future when the projects are operational. You should invest in such projects whenever a chance pops up. If you pump funds into such projects, you ought to be issued a participation certificate. With the certificate, you have a claim to the shares deserving of your contribution to the projects.