As one of the original pioneers of the alternative finance sector, we have always believed in the power of working together. When we started to work on municipal investments in 2019, we knew it had to be developed in partnership – with councils, academic institutions and policy organisations that understood the potential of reviving the age-old tradition of municipal lending for the digital age.
Six years on from the first pilots with West Berkshire and Warrington councils, two new research reports – from the University of Leeds and the Green Finance Institute (GFI) – provide strong evidence of both the model's success so far and its potential at scale.
The results so far have exceeded our expectations. Nineteen pioneering councils have now tested municipal lending in the real world, raising more than £30m from more than 3,000 citizens and mission-aligned institutions. Across those investments, councils have saved an average of 29 basis points compared with the Public Works Loan Board (PWLB) Certainty Rate.
The University of Leeds' report also shows that the value is not only financial. Drawing on research with investors and councils, the authors found municipal investments can create stronger partnerships between citizens and the places they call home, providing a practical route to participation by helping residents become part of a shared civic mission.
Local councils do much more than just empty the bins and fill the potholes – investing is a way to show you support the long-term investment that is needed for any community to thrive.
The GFI research points to a significant opportunity ahead. Through analysis of real PWLB lending data, it found that billions of pounds of council borrowing could be delivered through municipal lending, with significant savings in borrowing costs.
Together, these findings suggest that citizen lending can help create an ‘NS&I for local government' – saving councils money while deepening engagement with citizens. That is a powerful combination as councils look for new ways to fund green and social capital projects.
Learn more at councils.abundanceinvestment.com
Karl Harder is co-founder and joint managing director, Abundance Investment
