It’s the tales of the entrepreneur trying to launch their clothing range or the businessperson looking to fund their next property development that spring to mind whenever crowdfunding is mentioned. However, with the spotlight increasingly shining on ethical investments, a new use for crowdfunding has emerged.
Three councils have recently trialled crowdfunding as a way of raising affordable capital to finance local projects. Councils are generally reliant on the Public Works Loans Board (PWLB), however this new strategy presents a potentially far more flexible avenue for them to go down.
These pilots were part of a study conducted by the University of Leeds, who were assessing the suitability of alternate finance methods for the public sector. In the study Bristol, Leeds and Isle of Wight councils tested how effectively projects such as regeneration schemes fared as crowdfunding opportunities. Other public bodies quickly followed suit and Dudley, King’s College and Royal Devon and Exeter NHS trusts joined the study.
The idea of using crowdfunding is not completely unchartered territory for councils as Swindon Borough Council successfully raised £4.3 million in 2016/17 to fund two solar parks. Indeed, the relationship between crowdfunding platforms and the community as a whole is well-established; Kuflink investors have funded a range of much-needed projects over the past few years, including a recent care home, so extending this opportunity for council projects seems a natural step along the same path.
The study concluded that crowdfunding is a workable alternative to the PWLB because of its flexibility and the fact that the funding pool is potentially much wider, meaning more projects can go ahead in a quicker time. Aside from the financial benefits, the study also found that it was a good way of enhancing community engagement.
Of course, this is not a case of expecting charity from the public, for this is an investment on their part. As well as an opportunity to invest in local projects there is an opportunity to earn an impressive return on their investments. With councils saying that they will be giving this method further consideration, the future of public sector crowdfunding looks to be a bright one.
Read the full study here