The Guardian newspaper featured Community Shares on 2 September.  Click here for a link to the article or read the story below

Community investment is becoming the new way of financing a whole range of initiatives, ranging from renewable energy, agriculture and food, to transport and other local services. Rather than being wholly dependent on grants or loans from government funded institutions, communities are investing directly in these enterprises through the purchase of shares or bonds.

In the first eight months of 2009, the Financial Services Authority (FSA) has registered 15 new co-operative and community benefit societies, all of which have announced plans to raise community investment to finance their activities. A further 23 societies have been registered with the scope to raise community investment, but haven’t yet announced their plans. This compares with an average of just four new community investment initiatives a year over the previous decade.

Five of the new enterprises are community-based renewable energy schemes, including three wind farms and two urban initiatives, Sheffield Renewables and West Oxford Community Renewables. These latter schemes aim to use a mix of low carbon technologies, and rely heavily on community engagement. There are three community land trusts, which up to now have tended to look for grants or donations, rather than investment, to fund their activities. Other enterprises include support for a forestry project in Bolivia and an affordable housing scheme in London.

Another significant trend is the use of community investment to finance community buy-outs of existing businesses facing succession problems or other difficulties. There have been three cases already in 2009. Green Valley Grocers in the Pennines town of Slaithwaite was bought by the community, which raised over £15,000 in under four weeks to purchase a local greengrocer’s shop that was about to close. Over 100 customers and supporters of Busy Bee Toyshop in Manchester invested £32,000 to purchase the business when the owner decided to retire after 25 years. Now people in Dunbar, Scotland, have formed Dunbar Community Bakery with the aim of raising £35,000 to reopen a popular 150 year old local bakery, following the retirement of the last generation of owners.

All 15 of these initiatives are either co-operatives or community benefit societies, using Industrial and Provident Society (IPS) legislation, which provides for a unique form of investment known as withdrawable share capital. Investors become members of the enterprise and have just one vote, regardless of how much they have invested. There is an upper limit of £20,000 in the amount an individual can invest. Shares receive an annual interest payment drawn from the profits of the enterprise. Co-operatives can also pay a dividend on transactions with their members, encouraging and rewarding member loyalty. When members need their money, they can simply withdraw their share capital, subject to any conditions laid down by the enterprise. This type of community investment is exempt from costly regulation by the FSA, which makes IPSs a cheap way of raising amounts ranging from £10,000 to over £1m. The same exemption is not available to Community Interest Companies, which may explain why so few community investment initiatives have chosen that form.

Back in January 2009 the government launched an action research project called Community Shares, to investigate this growing phenomenon. This joint project between the Department of Communities and Local Government and the Office of the Third Sector is working with the Development Trusts Association and Co-operativesUK to support 10 community investment schemes over the next 18 months. New ventures officer, Petra Morris, at Co-operativesUK says “we have identified over 60 community investment schemes in various stages of development.” The programme has already selected five schemes, including Ashington Minors, a childcare nursery in a former mining community, and the community-led FC United of Manchester, set up by disillusioned Manchester United fans, following the debt-fuelled takeover of the club by the Glaziers. A second round of applications to join the Community Shares programme closes on 21 September 2009.