Principal Investigator: Mark Davis
End date: January 2019
Funder: DCMS, HM Government
Financing for Society: Crowdfunding Public Infrastructure Projects is launched by the Bauman Institute and includes a ‘pilot fund’ provided by UK Govt. Its purpose is to assess the barriers and opportunities of crowdfunding as an option for public sector bodies to finance new, socially-beneficial infrastructure projects and to understand better the benefits of using this method of alternative financing.
Dr Mark Davis (PI) leads and coordinates a Project Team – including: ‘Inclusive Economy Unit’ based in Department of Digital, Culture, Media and Sport (DCMS); Abundance Investment; and Local Partnerships – to build the knowledge base around crowdfunding, to understand where and how crowdfunding can work best, for which infrastructure projects, and how it benefits the local community – i.e. by allowing individuals to invest their money in line with their values, and to have a real stake in their local community.
Through the pilot fund and associated social research, Financing for Society will explore the feasibility of crowdfunding as a means of raising finance, assessing the contexts within which crowdfunding can work and the mechanisms that can help to ensure the delivery of the most socially-beneficial outcomes, as well as identifying some of the barriers to developing crowdfunding in the public sector.
Financing for Society will run from January – August 2018, with the Pilot Fund closing on 30 March 2018.
We are committed to making it easier for people to make investments that reflect their values. This solution has enormous potential to do just that, while benefitting local communities and securing economic return.
We want to understand the contexts within which crowdfunding can work and the mechanisms that help to ensure the delivery of the most socially-beneficial outcomes, as well as gain knowledge of some of the barriers to developing crowdfunding in the public sector.
There are three pressing issues that crowdfunding may be able to help resolve:
- Individuals currently do not have meaningful choice to invest their money into projects that have a positive impact in their local community. With precious few opportunities to invest money in line with their values, individuals habitually transfer responsibility for investment of their money to mainstream financial institutions, such as high-street banks;
- Due to funding cuts as part of the national austerity drive, Local Authorities are increasingly turning to commercial models to fund infrastructure, i.e. via Public Private Partnerships (PPPs) (including re-financing existing PFI contracts) and financing alternative delivery models for delivery of public sector investment/services. As such, Local Authorities can find it very difficult to finance smaller but socially-beneficial infrastructure projects via these routes, as private sector firms are unwilling to pay the bidding and due diligence costs for smaller value projects;
- Developing infrastructure through private finance initiatives can create significant value for communities in terms of high quality infrastructure while enabling the state to stay within its borrowing limits. In recent times, the use of PFI has come under considerable pressure due to public perception that the private sector has overly-benefited from the schemes. Introducing community investment through public-private financing schemes has the potential to share more equitably the value between the state, civil society and the private sector, but also to open up pathways to new models of PPP delivery which could offer greater levels of local control.
Hypothesis: Based upon previous research at the Bauman Institute (FITTER and Building Democracy) and some recent case study examples, we want to know whether or not Local Authorities and other Public Sector organisations may benefit from the use of crowdfunding to help finance socially-beneficial public infrastructure projects. This includes creating new models for PPP and for the funding of smaller projects that may otherwise struggle to find more traditional private sector financing.
We know that crowdfunding schemes have been proven to give local people the option to invest their money for a potentially attractive financial return, whilst at the same time seeing that money produce tangible benefits from their investment in their local community.
But how generalizable are these case study success stories?
As an example of a recent case study of crowdfunding public infrastructure, see the project led by Swindon Borough Council to build a prosperous low carbon community underpinned by the Council operating a self-sustaining business model.
The Council built a 4.8MW solar park by crowdfunding £1.8m, of which £500,000 was invested by the local community. Local people could put in as little as £5 and it took 5 months to raise the full amount.
- Swindon Borough Council Diversity Impact Assessment: Chapel Farm Solar Scheme 2016
- Swindon Common Farm Solar CIC is building a greener future for the town (article by Abundance Investment Ltd.)