Investors who agree to buying municipal bonds effectively loan money to the issuer in exchange for an agreed number of payments over a prearranged time period. At the end of this period, the bond reaches what is called the bond maturity date and the investor receives (if all goes well) the return on their investment including the interest allotted over the time period.

There are quite a number of uses for municipal bonds. For example they may be used to finance such developments as the construction of road networks such as highways or academic schooling facilities.
Perhaps the most common reason people invest in “munis” is because of their extremely favourable tax implications. They are most popular with high income earners as the return on their investment is larger due to the rewarding municipal bond rates they are entitled to.