Local authorities invest for the long-term benefit of citizens and the resilience of the places they serve. For more than 150 years, that financing has rested on three pillars: central government borrowing, financial institutions and municipal bonds, which allowed businesses and citizens to invest directly. In recent decades, the PWLB has become the dominant source of funding for local authorities, but councils across the UK are rediscovering the potential of citizen investing to deliver cost-effective borrowing while deepening engagement with residents.
Citizen investing: a long history
National Savings & Investments (NS&I) allows central government to borrow directly from citizens through a stable, competitively priced source, dating back to the Post Office Savings Bank in 1861. Local government also raised funding from citizens in the nineteenth and early twentieth centuries. Municipal corporations issued bonds to finance waterworks, electricity generation, tramways and housing – enabling people and businesses to invest in the growth of their towns and cities.
At its peak in the early 1900s, around 15% of local authority financing came from individuals – compared with around 8% of national government funding raised today through NS&I.
Despite this long history, citizen lending gradually fell from favour as administrative costs rose, making public issuance less viable. At the same time, the simplicity and accessibility of the Public Works Loan Board (PWLB) borrowing made it the default option for many authorities.
Bringing back municipal lending for the digital age
In 2020 we worked with the Financing for Society project at the University of Leeds, led by Professor Mark Davis and funded by DCMS, to explore how municipal investing could be reintroduced using digital platforms. That research led to a pilot programme allowing councils to raise capital from residents for the first time in a generation.
Since then, 18 councils across the UK have launched citizen investment programmes, raising more than £25m from more than 3,200 investors nationally. Funds have supported initiatives from renewable energy installations and energy efficiency programmes to green infrastructure, retrofit schemes and community assets.
Case study: Southwark LBC
Southwark has raised £3.5m through its green investment programme. It has issued four separate loans since 2024, attracting more than 1,100 investors, including more than 200 local residents. Over 30% of funds have come from local individuals and businesses, demonstrating tangible community participation alongside national support.
Tom Sharland, head of climate change and sustainability at the council notes: ‘Our green investment programme has been a real win-win. We've engaged hundreds of people in our community as investors, and it has strengthened understanding of how we are delivering local infrastructure.'
A simple, cost-effective way to borrow that builds engagement
Municipal investments issued through Abundance are loans arranged via a regulated investment platform, and are used to finance capital spending on green and social infrastructure. They sit within existing prudential and treasury management frameworks, with the guiding principle that the total cost of capital should represent a real-terms saving against the next best available alternative.
Across loans issued to date, councils have achieved an average saving of around 20 basis points compared with the equivalent PWLB certainty rate (calculated on the day invested and inclusive of all Abundance fees), demonstrating that citizen lending can compete with established sources of finance.
The benefits extend beyond cost. Citizen investment shines a light on work by local authorities that often goes unnoticed. It introduces an additional level of visibility and participation in councils' capital infrastructure programmes – from specific project delivery to wider placemaking – creating a citizen communication channel that complements existing accountability processes.
Citizen lending therefore offers a flexible addition to councils' treasury toolkits –providing long-term capital while strengthening civic connection and diversifying borrowing sources. Support from institutional partners announced in 2025, including Unity Trust Bank, further underlines the credibility and scalability of the model – investing an initial £15m to ensure targets are met as the citizen investor community grows.
As councils look to finance larger infrastructure programmes, blended approaches combining citizen and institutional capital could enable authorities to raise tens of millions in a secure and diversified way.
For councils seeking to broaden their funding base and deepen engagement with their communities, the return of citizen investment may represent not a departure from tradition, but a pragmatic rediscovery of it.
Karl Harder is co-founder and joint managing director of Abundance Investment
Find out more at abundanceinvestment.com
