Much ado has been made about the ability of innovative forms of online finance like crowdfunding to source large amounts of capital for projects from investors located anywhere around the world.

An urban researcher from the Massachusetts Institute of Technology believes the technology could also be used by municipal governments to tap into capital from local community members for infrastructure projects that affect them directly.

Jase Wilson, a graduate student at MIT’s Department of Urban Studies and Planning, first became aware of the difficulties involved in unding urban development while witnessing the frustration of low-income communities in the Boston area during the course of his studies.

“Listening to their conversations about trying to put together money for various ideas that would elevate their community, and seeing how they were on the losing end of an even distribution of tax dollars, made a big impression on me,” he said.

Wilson subsequently founded Neighborly, a “community investment platform” that will enable local residents to make financial contributions to infrastructure projects that will have an immediate impact upon their lives.

The ability to directly fund infrastructure projects within the area that a person lives, of their own choosing, could transform the way urban development is financed.

Until now, however, America’s $3.7 trillion municipal bond market, which is responsible for the king’s share of urban infrastructure funding, has proven too complex and arcane for individual investors to tap themselves, with big banks reaping the rewards by confining direct sales to brokers and institutional investors.

“If people knew they could invest in a street or school down the street, they would do that in a heartbeat,” said Wilson. “They don’t because the market has been made very, very complicated by a handful of global banks who make a profit off making it as complicated as it is.”

In order to overcome this impediment, Neighborly will enable local governments to sell single municipal bonds to individual investors directly, for as little as a few hundred dollars.

The platform benefits all parties to the transaction. For citizens, the smaller investment portions provide direct access to the municipal bond market, which is both low-risk and unencumbered by taxes in the US, making them a preferable alternative to other options.

“A municipal bond with a five per cent return could be the equivalent of another investment yielding 7.5 per cent, and an order of magnitude less risky,” said Wilson.

The platform also provides people with the opportunity to participate directly in the funding of the infrastructure they would like to see in their own communities and one day make use of themselves.

On the other side of the equation, the chief advantage for local governments is almost-direct access to funds for projects from their own residents, without the need to pass through institutional intermediaries or expose themselves to the vagaries of bond markets.

“We see a world in which anyone can invest in anywhere, and places can borrow finance the things they want and need directly from the community,” said Wilson.

Neighborly has already run a pilot project involving the sale of $2 million of a $20 million offering by a California school district to investors in bonds worth $500 apiece, and the company hopes to make bonds available for several other schools in the Bay Area this year.