During Giving Week 2021, as part of our learning journey on local investment models we hosted an online workshop on “Investing in Our Future: Models of Community Ownership” in collaboration with Stir to Action.
Following the decision by Barking and Dagenham Council on 15 December to establish an
endowment
EndowmentA legal structure for managing a financial investment. Often in the form of a donation to a non-profit organisation, such as a charity or university, which uses the income it generates for good work.
fund with BD Giving, we launched a process to co-design an
investment policy
with the community, starting with a design workshop in March 2021.
We want to make sure that our new Community Endowment Fund follows our three core values of perpetuity, inclusivity and sustainability. Following feedback from participants to the March workshop, which included the desire to look at models of local investment, we decided to look more closely at models of community ownership seen in the UK.
During this online session Stir to Action, who have already done some incredible work around this area, shared their knowledge on community owned investments with both the participants from the community and ourselves. This blog explores some of the concepts that were discussed.
EndowmentA legal structure for managing a financial investment. Often in the form of a donation to a non-profit organisation, such as a charity or university, which uses the income it generates for good work.Investment Policy
A strategic document that outlines how an organisation will manage their investment assets (the “Portfolio”), with often a set of financial (and sometimes impact) objectives and boundaries.
Difference between Community Enterprises and Private Enterprises
Community enterprises are community-based enterprises that use business to improve the life of a community. They are different from private enterprise because their business activity is undertaken as a means of achieving community benefit, not private gain. As such, they can provide access to certain services or products to users who struggle or are unable to pay their full market price. The difference is usually covered by a customer, commissioner or purchaser willing to pay for or subsidise these services on behalf of the service user or beneficiary.
A community enterprise also differs from a private enterprise in that it usually uses a democratic governance structure. Whether it is a cooperative or a community interest company it can have a large number of owners and ownership tends to be distributed equally between its members. In cooperatives, a model of community enterprise, everyone has a share of the business and power/control over decisions around the business is distributed equally, regardless of the number of shares held by any one member. In other words, each member has only one vote, ensuring that there is a democratic control of the organisation by the members.
This also means that there is less speculation within the organisation and the profits generated are reinvested into the community. As there are multiple stakeholders from the community, such as customers, residents or employers, there is a greater sense of member ownership. All have the same stake within the business and get to decide how the business operates and how the profits are distributed.
A community enterprise also differs from a private enterprise in that it usually uses a democratic governance structure. Whether it is a cooperative or a community interest company it can have a large number of owners and ownership tends to be distributed equally between its members. In cooperatives, a model of community enterprise, everyone has a share of the business and power/control over decisions around the business is distributed equally, regardless of the number of shares held by any one member. In other words, each member has only one vote, ensuring that there is a democratic control of the organisation by the members.
This also means that there is less speculation within the organisation and the profits generated are reinvested into the community. As there are multiple stakeholders from the community, such as customers, residents or employers, there is a greater sense of member ownership. All have the same stake within the business and get to decide how the business operates and how the profits are distributed.
What are Community Shares?
Community shares generally refers to shares which are withdrawable and cannot be transferred or sold to third parties. They are known as affordable and practical as they are exempt from financial regulation. Additionally, even if an individual holds a significant amount of share
capital
Capital
The amount of cash and other assets held by an organisation.
, they have one vote to ensure that the enterprise is democratic. In most cases, shareholders tend to invest in projects and organisations that will benefit the community rather than solely provide a financial return. These investments are usually long term capital investments with a 5-10 year payback period to allow the organisation sufficient time to develop their trading and build up their income. The
return
on investment on
community shares
Community Shares
A way for community businesses and co-operatives to raise money by offering investment opportunities to their members. When members invest, they receive a share of the organisation. These shares can be withdrawable.
also tend to be lower than what can be expected on the private market as the value is not just financial, which also means that there is less speculation.
Stir to Action have shared with us three different case studies of cooperatives that have had great success within their community.
Capital
The amount of cash and other assets held by an organisation.
Return
The amount of money you expect to get back from an investment,
usually as a percentage gained over a set period of time.
Community Shares
A way for community businesses and co-operatives to raise money by offering investment opportunities to their members. When members invest, they receive a share of the organisation. These shares can be withdrawable.
Stir to Action have shared with us three different case studies of cooperatives that have had great success within their community.
Visit our Community Endowment Fund page to see our journey so far
