Over the last few years, municipal finance has become increasingly complex. It is not surprising that most people do not understand how public finance works. Required information is scattered over different places, multiple diverse projects are bundled as a single mega bond and the process is slow and bureaucratic. These characteristics make public bonds not public at all.
Neighborly, the crowdfundingplatform for public projects in the US, brings municipal bonds back to its roots by making it understandable and accessible for the public again.
All information bundled at one platform
Neighborly makes public bonds easy to understand. To make good decisions about your investment you need reliable and accurate data. In practice, the availability of information about public finance is scares. Tax assessments, public debt issuances and demographic data are in practices fragmented, reported inconsistently or come at a cost. Neighborly has bundled all this information for you to make a good accurate thought-out investment. Most important, it shows you where your investment is going; if you fund either a new parking lane or a new playground in your neighbourhood, the choice is yours. With transparent, bundled information, Neighborly makes public finance more understandable and accessible.
Neighborly makes small projects come to life
Projects with a relative small price tag have more success via Neighborly than via the old fashioned way. When governments sell bonds, they are more likely to pay for large-scale projects with high community impact such as a new highway or university than for small projects with less impact. Small private investors on the contrary, are more interested in small projects where they benefit from personally, such as a biking lane or community park. Neighborly gives these latter investors the opportunity to invest in projects where they can benefit from personally. Consequently, these investors give life to small projects that otherwise are put on the shelf.
Less risk and higher interest rates
Neighborly enables investors to receive less risk and higher interest rates on savings than on regular saving accounts or stock. At the moment, the interest rate on a saving account is lower than 0.8%. Taking inflation into account, putting money into a bank account will rather cost you money than it gives you. The stock market isn not an attractive alternative either; uncertain and overstressed markets bear high risks. Municipal bonds are the solution to these problems. They are relatively low in risk because the government guarantees for the bonds and the interest rate is fixed. Moreover the interest rate is in general relatively high compared to saving accounts. Additionally, interest rates on public bonds are not taxed, which makes it an even more attractive alternative than saving accounts or stocks. Investors receive relatively high interest with low risk via Neighborly.
To conclude, Neighborly’s innovation of public finance makes municipal bonds more accessible and understandable. They perceive this by providing more accurate and transparent information in one place, making it possible to fund small projects which otherwise are put on the shelf, and by offering an attractive alternative to stocks or saving accounts. “Neighborly brings the public back in public finance” (A. Cortese, 2015).