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The Regional Democracy Think Tank for West Yorkshire

Citizen-led Finance for West Yorkshire

By Mark Davis

How can we find new ways of moving money so that it stays within the regional economy and helps to build the things we need right here in West Yorkshire?

When we hand over our money to a high-street bank – very likely the one you’ve always banked with, perhaps since being provided with your first savings book at school – we empower that bank with full responsibility for deciding where and how our money is invested. This is true for our current, savings, and investments accounts (a cash ISA maybe) – in each case, aside from agreeing a financial rate of return to reflect the risk we are willing to take, we don’t have very much say at all in how our money is put to work.

I want to change that. In 2019, my research with the crowdfunding platform Abundance and the public sector body Local Partnerships co-created Community Municipal Investments (or CMIs). This model uses investment-based crowdfunding to help local people receive a decent financial return for putting their money to work by supporting local projects. Crucially, this is not a donation-based model, which is often what people associate with crowdfunding. CMIs are backed by a business model that uses debt or equity structures to provide a meaningful financial return to those who invest.

Local infrastructure projects are usually funded by local councils. This includes installing solar PV panels on schools and council buildings, building wind farms and electric vehicle charging points, retrofitting social housing to make homes cheaper to heat and so warmer, as well as installing LED lighting on new transport highways for buses and cycles. These are crucial projects if we are to meet our Net Zero targets. But since 2010, UK councils have lost on average 60p in the £1 of central funding under austerity. Now with Covid19, some councils have lost as much as 80p in the £1. In all cases, council budgets are squeezed hard and precious central resources are rightly being protected for health and social care, emergency services, and waste management.

CMIs are long-term investments, anything from 5 to 30 years, with a fixed repayment. Issued by local governments via a crowdfunding platform, CMIs are tied to specific local infrastructure projects in the region, such as those mentioned above. The cost of borrowing for councils is lower than the Public Works Loan Board (PWLB), where councils typically turn to borrow for such projects, and is designed to help councils to avoid complex and sometimes controversial Private Finance Initiatives (PFI) or Public Private Partnership (PPP) structures.

Local citizens who choose to invest take local government risk not project risk – so, the risk is that the local government itself ceases to exist, not that an individual infrastructure project fails – which is about as low a risk as one can imagine. With a 1%-1.5% return reflecting that low risk – equivalent to UK Gilt markets – CMIs provide a better rate of return to citizens than most high-street products, whilst also generating positive social and environmental returns by funding real projects in local communities. Investors can walk, cycle or drive by a new solar panel installation on a local school, for example, knowing that their money helped to put them there whilst also receiving an equivalent or better return than their high-street savings, and helped to finance energy savings in local education.

In short, investors know precisely where their money is and what it is doing. At a time when high-street banks are offering typically less than 1% interest in savings accounts and cash ISAs – and for investments that are opaque and often misaligned with our values – CMIs are intended to offer a stable and transparent alternative.

CMIs are also designed to be socially inclusive, aligned with the wider principles of a Just Transition, by establishing a minimum investment threshold of just £5. Whilst the financial return on investment is negligible at that level, research shows that there are tangible social benefits of participating in civic projects. CMIs therefore provide a short and simple solution to a question I hear a lot in my research, which is “but what can I do to support the climate emergency?”

The UK’s first two CMIs were launched in late 2020. The first, by West Berkshire Council, invited residents to invest over 5 years at a return rate of 1.2% to support two rooftop solar projects in the local community. They hit their £1M target five days early with the scheme attracting 640 investors, with 22% of funds from the local region. The second, by Warrington Borough Council, hit the same £1M target three days early and attracted 500 investors with an average investment of almost £2,000 each. In both cases, the CMI was sufficiently attractive to persuade people to move their money in support of local projects even within the context of economic uncertainty generated by the pandemic.

As I write in June 2021, I am working with Abundance to support over 50 councils around the whole of the UK who are at various stages of the process for launching a CMI. We currently expect five more CMIs to launch before the end of this year.

Community Municipal Investments are an example of research impact, with our region’s universities helping to solve practical problems in our communities. Born in Bradford and working in Leeds, I hope that West Yorkshire will benefit directly from CMIs in the same way as other areas around the country. I urge the Mayor to find out more about CMIs as a part of any regional strategy to build a fairer and greener West Yorkshire.


Mark Davis
Dr Mark Davis is Associate Professor of Sociology at the University of Leeds. Mark’s research has improved protection for UK crowdfunding investors; evaluated citizen-led finance options for Europe’s green Energy Union; and co-created Community Municipal Investments (CMIs). His new book, Crowdfunding and the Democratization of Finance, is being published by Bristol University Press in November 2021.

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