The project aims to identify new or underutilised mechanisms that enable local public bodies, businesses, and citizens to take a financial stake in the success of their communities, with a particular focus on delivering place-based initiatives and driving innovation. It presents a series of case studies showcasing current practices and opportunities for further development, alongside recommendations for these approaches to evolve and contribute further to thriving local economies.

Although substantial work has been undertaken by the Institute and others to scale up institutional investment from sources such as pension funds, banks, and asset managers for place-based impact, comparatively little attention has been paid to expanding community-based finance models.

This report seeks to address this gap by identifying effective, replicable, and scalable approaches, and facilitating cross-place learning in community-based finance.

To achieve these objectives, the Institute led a focused research initiative, including desk-based research, interviews with key stakeholders, and a roundtable discussion with organisations driving and pioneering positive change through community-based finance models.

By examining these local financing mechanisms, the project aims to enhance the ability of public bodies, local citizens, and organisations to invest in their area’s development, and raise awareness of the positive role these organisations play in community development – ultimately contributing to more resilient and prosperous communities.

The UK stands at a pivotal moment for transforming how finance can drive local economic development. The government’s ’Invest 2035’ industrial strategy green paper, published in November 2024, sets out an ambitious vision for increasing market dynamism and directing capital toward growth-driving sectors. Combined with renewed commitments to devolution, and reforms to the Local Government Pension Scheme (LGPS), these policy shifts create significant opportunities for regions to develop coherent, long-term strategies for inclusive growth.

This evolving landscape presents a particularly promising moment for place-based impact investing (PBII), where investors collaborate with local authorities and communities to develop investment propositions tailored to specific regional needs. In deploying capital to local impact and innovation opportunities, there is significant untapped potential in the UK’s community-based finance ecosystem – both in attracting institutional investment and enabling local stakeholders to invest directly in their communities’ future.

What is community-based finance? Community-based finance encompasses financial arrangements where capital is either sourced directly within the community or channelled through local organisations, with decision-making residing locally.

There are a range of organisations and intermediaries already demonstrating effective ways to mobilise local capital alongside institutional investment. Online investment platforms enable citizens to invest in green infrastructure with as little as £5, while Community Development Finance Institutions (CDFIs) provide crucial support to underserved businesses. Local funds drive strategic investment in social enterprises and community businesses. Together, these pioneers create blueprints for inclusive community-led economic growth that could be replicated across the country.

This report examines the diverse ecosystem of community-based finance in the UK, mapping the key actors, mechanisms, and success stories that demonstrate its potential. We explore how individual citizens, high-net-worth individuals, local authorities, and institutional investors can better mobilise their capital for local impact. Through case studies and analysis, we identify both the barriers preventing these mechanisms from scaling and the opportunities to overcome them.

At a time when communities across the UK are seeking new ways to drive sustainable economic development, community-based finance offers a powerful tool for ensuring growth is both inclusive and locally led. By understanding and building on existing success stories, while also addressing key challenges, we can create a more diverse and resilient financial ecosystem that better serves local needs and aspirations.