This document discusses community investment through community shares. It notes that community shares empower communities by giving members ownership stakes and voting rights in community enterprises. Community shares provide flexible, long-term financing for ventures while also connecting investors to the enterprises' social missions. Between 2009-2011, over 115 new community benefit societies were registered in the UK, raising £5.74 million from 6,164 members through community share offers. On average, offers raised £179,000 with average member investments of £930. The document argues that community shares and co-operative societies are effective legal structures for community investment due to financial regulation exemptions and investor democracy.
2. 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
3. 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
4. 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
5. 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
7. 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
8. Pre
Post 2009 2009 Member Share
Trade sector
societies societie s capital
Renewable energy 34 s 13 8,831 £15,304,000
Community shops 20 9 2,492 £903,000
Community regeneration 14 9 3,041 £1,908,000
Food & farming 18 4 10,228 £1,171,000
Consumer co-operatives - 20 8,553,000 £191,275,000
Pubs and brewing 10 2 687 £733,000
Community finance 1 9 1.837 £2,114,000
Community land trusts 7 2 318 £25,000
Fair trade 2 1 9,222 £26,151,000
Other 9 9 38,530 £7,345,000
Totals 115 78 8,629,000 £247m
10. 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)
11. ¬ Shares provide ‘patient’ capital and are almost always better than loans
p Co-operative and community benefit societies are the most effective legal
format mainly because of financial regulation exemptions and investor
democracy
c Withdrawable share capital provides liquidity but societies have to plan for
withdrawals and capital flows
c There are business benefits from engaging members in multiple roles, e.g.
investors, customers, promoters, volunteers, activists etc
m Pre-starts often need lots of development support and financial incentives
Financial intermediaries (such as Co-operative and Community Finance and
The Key Fund) have a key role to play in supporting share offers
12. 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)
