Gareth NashCo-operative and Mutual Solutions Limited

Community investment is the practice of members of a community buying shares in an enterprise that serves a community purpose

It empowers communities by giving members (as part owners) a say in the direction of the community enterprise

Investor members are encouraged to play an active part in the enterprises future

Members receive a fair financial return on their investment as well as sharing in the social, environmental and community benefits

Grants, gifts and donations are best. They are ‘free’ but how much free money is available, how difficult is it to get hold of?

Loan finance can be obtained from institutions/individuals but commits the venture to fixed interest and capital repayments

Equity investment through community shares is more flexible, longer term and connects the investor to the enterprise, thereby sharing risk and reward

Recognition that some community services are best delivered through a business model

Growing public appreciation that businesses can be run for a social purpose, not just private profit

Historic shift in financing community enterprises: from fundraising approach (events, gifts, donations) to investment in community shares

Greater autonomy for communities

Most people are savers not investors, (and some people aren’t even savers)

Most people donate to good causes, rather than invest in them

But most people can invest more than they can afford to donate!

Shift from purely philanthropic to community investment proposition

CommunityShares

Unique features of IPS share capital:◦ Withdrawable and/or transferable◦ One member, one vote democracy◦ Flexible cap on returns◦ Upper limit on person shareholding◦ Withdrawable shares exempt from the financial

promotions regulations

Trade sectorPost 2009 societies

Pre 2009 societies

Members

Share capital

Renewable energy 34 13 8,831 £15,304,000Community shops 20 9 2,492 £903,000Community regeneration 14 9 3,041 £1,908,000Food & farming 18 4 10,228 £1,171,000Consumer co-operatives - 20 8,553,000 £191,275,000Pubs and brewing 10 2 687 £733,000Community finance 1 9 1.837 £2,114,000Community land trusts 7 2 318 £25,000Fair trade 2 1 9,222 £26,151,000Other 9 9 38,530 £7,345,000

Totals 115 78 8,629,000 £247m

Jan- Jun 2011

Projected total 2011

115 new societies registered ◦ (66 community benefit societies, 49 co-ops)

43 community share offers 32 share offers completed £5.74m raised from 6,164 members Average raised £179,000 (median £85,000) Average membership 192 (median 151) Average investment £930 (median £180)

1. Shares provide ‘patient’ capital and are almost always better than loans2. Co-operative and community benefit societies are the most effective legal

format mainly because of financial regulation exemptions and investor democracy

3. Withdrawable share capital provides liquidity but societies have to plan for withdrawals and capital flows

4. There are business benefits from engaging members in multiple roles, e.g. investors, customers, promoters, volunteers, activists etc

5. Pre-starts often need lots of development support and financial incentives6. Financial intermediaries (such as Co-operative and Community Finance and

The Key Fund) have a key role to play in supporting share offers

Community Shares website: www.communityshares.org.uk

Publications• Community Shares Factsheets• Community Investment using IPS legislation• The Community Shares Programme: One Year On • Guide to governance and offer documents • Investing in community shares • A practitioner’s guide to community shares

(published today)