Community shares: putting our money where our mouth is

If you were gripped by a desire to solve a problem on your doorstep – renovating a neglected building, say, or expanding a sports club to reach more people – how would you go about it?

The first bit is old-fashioned people power. It takes a movement of local people, driven by a shared passion, to get ambitious projects up and running. Once you have secured community engagement, you can start to think seriously about turning passion into real, life-changing outcomes: re-opening that building to the public, improving the health of more kids.

Projects like these need capital, though, which is where community shares come in. It is only one of many options open to local groups, but at Power to Change we are optimistic that it represents an innovative way to bring together social good with business savvy.

Community investment, like any decent, patient investment, is about hope rather than expectation

This is what happened last year in the small Kent village of Benenden. When local people took over a shop and post office which were closing down, they had big plans to maintain the existing services and fit a new café.

But that takes capital. So they decided to issue community shares as a way to attract the investment, sold directly to other local people at £10, deliberately set at a price affordable to people in the area. Community shares are not designed to bring profit to investors; rather, the investment is in the social benefit that the business would bring.

The group in Benenden ultimately raised £70,000 from 300 shareholders, which was double the target, and a big enough chunk of money to keep the building open and refit it for the whole community.

This type of capital is not exactly a new idea: it has existed since the mid-nineteenth century, and was a building block of the co-operative movement. But we’re optimistic we can help repurpose it for today.

The Community Shares Booster Programme

The best way to test this optimism, of course, is to check whether community shares can flourish on the ground. So, working with Co-operatives UK, Locality and the Community Shares Unit (CSU), we set up the Community Shares Booster Programme earlier this year to help community businesses explore this option. It will try and help established projects as well as those starting from scratch.

Successful applicants to the programme will get up to £10,000 as a development grant to help launch their share offer, and then up to £100,000 in match-funding once the share offer goes live. In other words, every time someone decides they are up for investing in a local project, we will invest along with them.

The market in community shares is already pretty sizeable (since 2009 nearly 100,000 people have invested over £100m to support 350 UK community businesses, according to the CSU). Now is the time to find out what further demand is out there and what more the market can deliver.

Sometimes it is good to admit that you don’t know everything—and we don’t know for sure whether our programme will stimulate community businesses in the way we hope. But then, Power to Change exists to take risks that other funders can’t. Community investment, like any decent, patient investment, is about hope rather than expectation. 

And the need is there. All community businesses require risk capital, whether this is to start the business, help it grow, or ensure it is sustainable. Traditional sources of income for local groups have diminished. Yet risk capital has to come from somewhere, and community shares mean that investment comes from the very communities set to benefit from the success of the business.

This is not the stock market, with investment disappearing off around the world. In our experience, no money works harder for a community than finance raised from that community. Once issued by a community business, investors can later withdraw their share capital should they wish. Every shareholder gets a single vote, regardless of the size of their shareholding, to guarantee that the business is democratic and to safeguard its social purpose. And although investing in shares will always carry risk, it is a risk that community shareholders can help to manage. 

Crucially, most businesses are also subject to an asset lock, which means that the business can’t simply be sold on for profit at a later date. Walking away with a bumper profit might seem OK if you’ve bought shares in some jazzy start-up, but not if local people have invested in saving an asset for the whole community.

We don’t know yet how much of a role community shares will play in our future. But we are starting to find out.

MORE INFORMATION: To find out more about the Community Shares Booster Programme, see here. There is an application support webinar on 21 September 2016 at 3pm – see the bottom of the page for details.