Jun 7, 2021

by Malek Moubasher and Barry Qi on Jun 7, 2021

Communities will be more motivated to support their cities in funding local impact projects if they can know where their money is going. This new article discusses how micro bonds programs can help in bridging the gap between investing and community needs.

Micro Bonds: Bridging the Gap Between Investing and Community Needs

In any project, funding often determines if there will be sufficient resources for a successful execution. However, important public projects are often underfunded, highlighting much of the inefficiencies in our funding systems. A micro bonds platform, which would allow everyday people of the community to purchase low-cost bonds, would bridge the gap between projects that address the needs of the community and the financing it needs.

Take the case of highway maintenance, where funding is largely driven by the gas tax. Unsurprisingly, increasing taxes is highly unpopular. The U.S. Department of Transportation reported that just 20% of Americans support an increase in the gas tax to maintain and improve the transportation system. As a result, deteriorating highways often do not receive sufficient funding for proper maintenance.

Yet in the very same report, they found that 67% were in favor of the tax increase if it were specifically for road maintenance, and 50% were in favor if it was devoted to projects addressing global warming. The discrepancy in the statistics tells us two things.

First, it illuminates the desire for more transparency in our tax and public funding systems. The lack of funding does not come from a lack of willingness to invest, but rather the lack of confidence that tax dollars would be used for impactful projects. With a micro bonds platform, users can learn about prospective projects in their communities and choose where they would like to invest. This would encourage community engagement and provide the transparency necessary to build trust.

Second, there is substantial willingness to invest to address environmental and sustainability issues such as climate change. However, there is currently no platform for everyday people to directly invest in projects that matter to them. Consequently, regardless of how important a project may be, there is no way to ensure that it receives sufficient funding. A micro bonds platform would help leverage the community’s desire to invest, providing a way for people to directly invest the projects that matter to them.

Furthermore, the transparency of a micro bonds platform will also allow municipalities to gauge community interests and priorities. Allowing the public to learn about prospective local projects and an opportunity to invest in them serves as a credible indicator of what people have a strong interest in developing, which can guide how city leaders can best cater to their communities. As a result, not only can a micro bonds platform provide a form of financing, but it can provide insight into how municipalities can best align their agendas with the needs of their communities.

Agora Neos is a FinTech startup that is bringing to the US municipal markets the first micro bonds issuance platform, aiming to help cities to engage their communities in funding local impact projects.

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