Shared InterestAn approach to finance based on partnership
Shared Interest is a registered cooperative lending society that offers credit to fairtrade producers. Based in the UK, it is a global organization that is unique in its field and an example of the sort of economic initiative that could be seen as taking an associative approach. It raises its capital from the general public who, by opening an account with a minimum or a maximum of £100 £20,000, then become members of the Society and receive interest on their accounts set at a level that enables it to lend at favourable terms. Shared Interest has the aim both of working for the benefit of disadvantaged producers and of bringing a fair financial return to lenders, while at the same time respecting the environment and playing a responsible role in the community. Its approach since it was founded in 1990 has been forward looking, a marriage of sensible pragmatism and visionary courage that enabled it in 1998 to launch a webbased electronic clearing house for IFAT (International Federation for Alternative Trade) members.
WHY SHARED INTEREST?
When a third world producer receives an order, he/she will often expect to receive payment only when the buyer has sold the goods on to their customers; e.g. the producer must have the finance to manufacture and deliver the goods, and perhaps wait a further three months, before being paid. To fill this gap the producer will probably need access to credit which is unlikely to be available from ordinary banks and may only be got from local traders at exploitative rates. This is where Shared Interest is able to bridge the gap, making it possible to finance fairtrade. Through its relationship to fairtrade producers and buyers around the world, e.g. because it knows them and works in partnership with them, it is able to make a fairer and more realistic assessment of lending risks than commercial banks are able to do. In fact, lending to poorer people, cooperatives and womens organizations might be a better risk than many of the large projects that commercial banks tend to get involved with. Shared Interests track record bears this out, so far. Investors in the Society have to be prepared to share the risk and uncertainty with smallscale producers in poor countries.
HOW SHARED INTEREST WORKS
Being a cooperative operating within a legal framework and according to prescribed aims, means a great deal more accountability and transparency than you would normally find in a financial organisation. Members are kept in touch with business through a quarterly newsletter, regional meetings, and at the AGM where they elect the Council and the Board. Voluntary regional representatives (for example, me) also play a role in publicising the work of Shared Interest and maintaining communication within the organization. Through the newsletter and reports of meetings, members take a very active interest in all aspects of Shared Interests work, while an excellent web site provides heaps more information and even a game.
Money can be invested in a share account or in targeted bonds (such as the micro credit loan stocks for which funds raised are then lent on to Oikocredit who specialize in micro credit financing), cash reserves are kept with social banks in Europe, the Cooperative Bank and occasionally with cooperative building societies. The money is lent out on the basis of relationships with producers and retailers around the world, maintaining and extending these relationships is obviously a key to good lending. Shared Interests Clearing House is still a fairly recent initiative and gradually more and more traders are coming in; its advantage is not only the cost saving over using commercial banks but the ability to extend credit through it and to track transactions electronically.
THE STORY SO FAR
During its first 10 years, Shared Interest has shown a steady growth so that now there are around 8,500 members with nearly £20 million capital invested. And with the development of the Clearing House it is anticipated lending will increase sufficiently. Shared Interest has adopted a careful approach to managing its funds in its initial growth phase as a financial organization 20% of the value of its share accounts is held as cash reserves to meet possible high levels of withdrawal and there is at present no leverage.
Shared Interest was born out of the need to create a proper means of financing international social initiatives and it operates in partnership with many organizations working in the same field: some of those may be familiar to you Traidcraft, Oikocredit, Oxfam, Ten Thousand Villages, USA, Equal Exchange: others you probably wont have heard of the Tabora Beekeepers Cooperative, Tanzania, the CO RR Jute Works, Bangladesh or the many small coffee growers who supply Cafe Direct. It is the mutual support and spirit of cooperative endeavour common among all these groups that helps to paint a quite different picture of a future global trading network, than the ruthlessly selfinterested one so often taking centre stage in the gaze of todays media.
If you would like to know more about Shared Interest or you know of a group who would be glad to hear about what Shared Interest does, then you can contact them at:
Shared Interest Society Limited
25 Collingwood Street
Newcastle upon Tyne
NE I 1 JE
Tel: 0191 233 9100
Or contact me, Arthur Edwards, at 6 Hertford Street, Oxford OX4 3AJ Tel: 01865 245796
This article first appeared in e2, Jan/Feb 2001