With a modern twist on an old concept, raising funds directly from citizens through a regulated investment platform is developing as an alternative source of borrowing. Karl Harder, co-founder and joint managing director at Abundance Investment, explains.
For most councils, the Public Works Loan Board (PWLB) remains the primary source of borrowing to finance capital projects. Its reliability, scale and administrative simplicity mean it will continue to play a central role in local authority finance.
However, a growing number of councils are now developing a complementary alternative to PWLB borrowing by raising funds directly from citizens through a regulated investment platform. The experience of these councils, which have issued more than £25m over the last five years, suggests this approach can provide competitive pricing while maintaining operational simplicity and the potential to grow into a significant source of capital.
The idea itself is not new. Borrowing from citizens was once a routine part of municipal finance in the UK.
A borrowing model with historical precedent
Central government continues to raise funding from individuals through National Savings & Investments (NS&I), which has evolved from its beginnings as the Post Office Savings Bank (established in 1861) to a point where it now has 24 million savers.
In the nineteenth and early twentieth centuries municipal corporations issued bonds directly to the public to finance infrastructure including waterworks, electricity generation, tramways and housing.
By the early twentieth century around 15% of local authority borrowing was held by individuals in this way. Over time the use of municipal investments fell away as issuing public debt became administratively complex compared with borrowing from the PWLB.
The development of digital investment platforms now makes it possible to revisit this approach with minimal administrative overhead.
Reintroducing citizen lending
In 2019 a number of pilot councils and public bodies supported the Financing for Society project at the University of Leeds, in partnership with Abundance Investment, to explore whether councils could once again borrow directly from citizens using a regulated digital platform. In 2020, this resulted in West Berkshire and Warrington councils launching the first municipal loans seen in a generation.
The resulting model allows councils to issue loans to retail investors while remaining fully aligned with prudential borrowing rules and existing treasury management frameworks.
Since then, 18 councils have launched municipal investment programmes, raising more than £25m from over 3,200 investors. The capital has supported projects including renewable energy installations, retrofit programmes, green infrastructure and community facilities.
Case study: Bristol City Council
Bristol City Council has launched two investment rounds so far, and has more than 750 investors.
Councillor Martin Fodor, chair of the authority’s Environment and Sustainability Committee, said: “The council is delighted to be at the forefront of the rebirth of UK municipal investment market. We have saved 0.23% on average for every pound borrowed so far, compared to the PWLB Certainty Rate. What is exciting for us is that the model is so simple to use and scalable, and we are looking forward to realising even greater benefits as the citizen investor community grows.
“The Abundance model’s straightforward administration makes it easy to deliver, enabling communities to back meaningful improvements with confidence and minimal complexity. It really deepens community engagement by giving residents a real stake in local climate projects, helping wealth stay and grow within Bristol.”
Cost, convenience and diversification
Municipal investments are structured as loans arranged through a regulated investment platform and used to finance capital expenditure. They sit alongside other borrowing within an authority’s treasury management strategy.
One of the primary test aims was to ensure value for money. Across loans issued to date, the average saving compared with the equivalent PWLB certainty rate has been around 20 basis points, inclusive of all platform costs and calculated at the point of investment.
Operationally the model was designed to minimise additional work for treasury teams. Loans are issued through a single platform partner and integrate with existing borrowing processes and reporting structures.
For many authorities the attraction is therefore twofold: competitive pricing and access to an additional source of capital.
A powerful citizen engagement tool
Municipal investment can also provide a practical way to explain how council borrowing translates into visible local improvements.
Projects funded through these programmes — from solar installations to public realm improvements — offer tangible examples of how capital investment supports communities. Investors receive regular updates on project progress, creating a structured communication channel alongside existing democratic accountability mechanisms.
Even at scale, citizen lending is unlikely to replace established borrowing routes. But as a supplementary funding option it can provide competitive pricing, operational simplicity and greater diversification within councils’ borrowing strategies.
In that sense, the model represents less a new innovation than a modern version of an approach that was once a routine part of municipal finance.
