The financial and civic value of community municipal investments (CMI) have been demonstrated in two recent reports, says Abundance Investment. So what’s next for this model?
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.
Nineteen pioneering councils have now tested municipal lending in the real world, and the results so far have exceeded our expectations. Councils have raised more than £30m from over 3,000 citizens and mission-aligned institutions, and saved an average of 29 basis points compared with the PWLB Certainty Rate.
Now, six years on from the first pilots with West Berkshire and Warrington Councils, we are delighted that two new research reports have recently been published from the University of Leeds and the Green Finance Institute (GFI), which both provide strong evidence of both the model’s success so far and its potential at scale.
Delivering citizen engagement in the real world
“It’s participatory. And I think that’s a real strength of it. It gets people on board with the idea that they’re doing things in their areas […]. People often feel so separated from decisions that are taken for them, rather than by them. So, things like this break down those barriers. There’s a lot of value in it because it makes people feel like the council is theirs again.”
Cllr Minesh Parekh, Sheffield City Council
Drawing on research with investors and councils, the University of Leeds’ report 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. Their research also found that issuing a CMI was having an immediate effect on resident trust, with 55% of investors saying they trusted councils that had issued a CMI more than those who had not.
“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.”
Citizen investor
In the words of Dr Mark Davis, professor of economic sociology at the University of Leeds: “The evidence we’ve been able to gather and analyse through these two linked reports demonstrates both the financial and civic value of the Community Municipal Investment (CMI) model. We have heard directly from councils and investors how the CMI is a vital civic innovation that is building stronger, fairer and more robust places for the future by giving people a real stake in the places they care about.”
Saving councils money today, with a big potential for scale
In a separate but related report, the GFI has focused analysis on how municipal investments can offer a credible alternative to PWLB borrowing for councils at scale, using analysis of real PWLB borrowing data. The authors found that, to date, councils have saved an average of 29 basis points using municipal investments compared with the PWLB Certainty Rate, and had councils used municipal loans, it would have been less expensive than PWLB almost 90% of the time over the past decade.
The authors also found that municipal investments have the potential to become a mainstream borrowing option for councils. Given they require no departure from established borrowing practice, municipal investments could meet up to 42% of medium-term borrowing demand from actively borrowing councils, equating to £2.3bn a year. Savings for councils can be expected to grow as the market scales, with savings of 60 basis points achievable.
“The opportunity is for councils from using municipal investments is significant. Over time, CMIs have the potential to become a long-term, citizen-backed source of affordable finance for local government. NS&I has been transformative for central government over the last 160 years, and this model offers a clear pathway to deliver similar benefits at the local level as a low-cost, patient and diverse source of borrowing.”
Miles Ashton, Green Finance Institute
Together, these research reports suggest that citizen lending can help create an “NS&I for local government” – reducing borrowing costs 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
Read the full reports from Green Finance Institute and University of Leeds.
Learn more about launching a citizen investment programme.
View Abundance’s historic data on savings vs PWLB Certainty Rate.
Main image: councils are engaging with the residents in new ways by launching citizen investment programmes.
