Scottish Rural Communities Policy Review: stage 2 - Finland case study

6. Regional and local support infrastructure

Finland's 15 Centres for Economic Development, Transport and the Environment (ELY Centres) are regionally-based state administrative bodies responsible for implementing EU rural development programmes at the regional level. They manage the allocation of funds for various initiatives, including business development, infrastructure projects, and environmental measures.

While the ELY Centres formally approve the projects selected by LAGs for funding under their strategies and issue final grant decisions, their role is primarily limited to legal oversight. The actual discretionary power regarding the alignment of projects with local development strategies rests solely with the LAGs. This division between discretion based on appropriateness and a legal scrutiny is a defining feature of the Finnish implementation of the LEADER approach.

In summary:

• The Ministry of Agriculture and Forestry: Defines the total funding framework allocated to each LAG.
• ELY Centres: Carry out legal oversight at the project application stage and may reject a grant proposal supported by a LAG only on legal grounds. The LAG’s opinion is binding unless there is a legal basis to deviate.
• Paying agency – Finnish Food Authority: Responsible for disbursing and controlling the payments.
• Process system: All stages of the application and payment process are carried out through the electronic system called Hyrrä.

According to evaluations conducted over the years, this system continues to cause occasional issues, particularly regarding business support decisions. Differing interpretations between ELY Centres are sometimes perceived as unfair. However, in the broader picture, the model has gained legitimacy and is generally regarded as pragmatic. Trust-building and early-stage negotiations on potential issues mean that serious disputes are rare. A clear advantage for the LAGs is that the model reduces burden and frees up time to focus on the substantive aspects of the LEADER approach (Rannanpää et al., 2020).

Regional councils are associations of municipalities at regional level with a limited immediate programming power from a rural policy perspective. However, these regions, together with ELY Centres, educational institutions, and various other regional-level stakeholders, convene multiple consultative governance networks, particularly related to programmes co-funded through the ERDF and ESF.

Municipalities represent the lowest level of public administration in Finland. In 2025, there are 308 municipalities, of which 108 use the designation city and 200 the designation municipality. Finnish municipalities are democratically governed and carry broad responsibilities, including economic development, basic education, local infrastructure, and the authority to levy taxes. With the exception of Helsinki and Kauniainen, all municipalities contain at least some areas eligible for LEADER funding. Below the municipalities, there are up to 4,000 rural settlements that can be considered as villages (Suomen Kylät, 2025). These villages do not have clearly defined boundaries or a formal legal role within the administrative system. However, around 3,000 of them have a village association or a similar body promoting the social life and development of the village.

Compared to the modest general subsidies that municipalities may grant (upon application) to local associations (such as village, sports, or youth organisations) to support their vital work in communities, the allocations to the LEADER approach via the LAGs represent substantial investments. Municipalities also appear to rely increasingly on the LEADER approach for targeted rural policy at the municipal level. This often means that municipalities have few, if any, distinct rural development policies of their own. Consequently, they place their hopes on local rural actors to make full use of LEADER resources (Mustakangas, 2025.)