Financing for Society: Crowdfunding Public Infrastructure (Pilot Fund)

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:

  1. 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;
  2. 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;
  3. 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?

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