Community share offers thrive
New research published by Co-ops UK shows community share schemes are thriving, bringing positive impacts to businesses and communities around the UK. Less than a decade ago, the report claims, community shares were almost unheard of. But, since 2012, £155 million has been raised by 104,203 people to create more than 440 essential spaces and services.
The report, which was an extensive review of the UK community shares market, revealed four key findings.
Firstly, community shares create and sustain successful businesses. The first five years are usually incredibly difficult for new businesses, with only 42% making it to the end of their fifth year.
However, this figure is significantly higher when it comes to co-op start-ups, at 76%. Being able to raise ‘patient and flexible capital’ is an important part of this, with 85% of businesses stating that running a community share offer had a positive impact on financial performance.
Raising finance through community share offers is not just of benefit to the business, but also offers an accessible form of investment. Purchasing shares allows people to become members or co-owners in the co-op or community benefit society, thereby gaining a stake in projects that are important to them. As investments can be from as little as £10, community share schemes are accessible to those on low incomes, with 56% of investors earning £35,000 (the average UK salary) or lower.
At 4.8%, the average interest rate on community share offers is not to be sniffed at, but the report found only 17% of respondents gave ‘the prospect of financial returns’ as a top reason for investing. By far the greatest motivation for investors, given by 80% of respondents, was that the project had wider social or environmental benefits.
While just over one fifth of investors only invested in their own neighbourhood or village, 78% also invested further afield. Taken together, these findings suggest that, when viewed at a national level, community shares have “significant potential to reduce inequalities and level up society.”
The report’s final key finding is that institutions, funders, and governments play a key role in supporting and growing the community shares market. It found that the best method of raising finance was a ‘blended’ approach.
For every £1 invested in community shares, an additional £1.18 is leveraged through grants, loans, and institutional investment. For the potential of community shares to be fully realised, more institutional investment from governments, funders, and impact investors should be channelled into the market.
‘Understanding a Maturing Community Shares Market’ can be found here.