A new report has found that investment-based crowdfunding could provide public sector infrastructure developers with a competitively-priced source of capital at scale, while “increasing democracy, transparency, trust and local engagement.”
The government-funded University of Leeds study Financing for Society found that investment-based crowdfunding can offer substantial advantages for public sector bodies seeking capital for infrastructure development such as NHS facilities, schools and other social infrastructure.The key conclusions are:
- Funds can be accessed at competitive rates and efficiently raised and drawn down through debt-focused investment crowdfunding platforms;
- Crowdfunding can provide 100% of debt finance for projects up to £20m and mezzanine finance for larger projects;
- Finance through crowdfunding provides a new model for public sector developers to engage and communicate with local residents and service users;
- Raising investment from ordinary people allows the economic benefits of project development to be shared and broadened among the general population, while giving those who will benefit from the services a deeper stake in its success;
The research project was funded by the DCMS, implemented by the University of Leeds, Local Partnerships and crowdfunding platform Abundance Investment and led by University of Leeds academics Dr Mark Davis, associate professor of sociology and research fellow Dr Laura Cartwright.
Davis said: “If we want a radically different world to the one we now see around us – if we want that world to be fairer, more equitable, and more sustainable – then we are going to have to do radically different things with our money. We are going to have to allocate capital to those enterprises and organisations that can unambiguously demonstrate the positive social and environmental outcomes they are delivering. The report concludes that the public sector is yet to make the most of crowdfunding and to realise the financial and non-financial benefits it has been shown to generate.”
Three NHS case studies looked at projects of varying scales and complexity. The research found that for projects under £20m, debt-based crowdfunding could provide 100% of the debt requirement.
For larger-scale projects it could also “provide a valuable role as mezzanine finance while increasing community and citizen engagement.” The report concludes that while the first projects will be challenging to complete, once the process and templates have been established, this way of financing projects should be scalable.
Bruce Davis, co-founder and managing director, Abundance Investment, said: “We have an urgent need to develop new hospitals, schools and other social infrastructure across the UK, however the current models of development are broken. Democratising the finance of public sector projects will be a game changer for the constructors, service providers and traditional sources of finance. Not only is it now able to work within the low costs of capital needed for such projects, it is also able to deliver real citizen engagement at the local level which itself is worth its weight in gold.”