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[The Guardian] How community shares are taking rural Cumbria by storm

A novel finance scheme is transforming remote villages in England – Daniel Heery explains how locals are embracing social enterprise

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Nenthead mning heyday

As pictured here, Nenthead was once a thriving mining town. But do co-ops and social enterprises represent its future? Photograph: Don Mcphee

What do the buy-out of a community shop, a new community snowplough and a new fibre optic broadband network have in common? They have all happened in the village of Nenthead in Cumbria and they have been part financed by community shares – a way of raising finance from members of the community to deliver vital services. The fact that this financial revolution is happening in one of the highest and remotest villages in England is even more remarkable. But why is this area such a fertile ground for social enterprises, and why have they adopted community shares with such enthusiasm?

I established Cybermoor, a social enterprise delivering broadband to the areas other internet companies couldn’t reach in 2002. We rolled out wireless broadband to many properties around Alston Moor, second only to Kensington and Chelsea for take up. We launched a share offer last February to finance the expansion of our fibre optic broadband network – which will give locals cutting edge communications links capable of going 10,000 times faster than existing broadband speeds.

 

Community shares were introduced in Victorian times to attract investment to organisations with social objectives and had a facility for investors to make a modest return. Share offers have grown in popularity over the past decade – organisations can raise finance relatively quickly and in many cases returns for investors are better than those offered by bank savings accounts. Investors recognise the social benefits of investing, like the table and chairs in Nenthead shop for elderly residents to sit down and have a catch up over a cup of tea.

 

Alston Moor has been great for social enterprises – within a few hundred metres you can find the South Tynedale RailwayCommunity Gym,Alston Moor FilmCybermoor and the Moody Baker. The business case for these services is marginal in one of the remotest parts of England – but these social enterprises have built strong community links to remain viable. The model is infectious; when you have gained the confidence on one project you are ready for something more ambitious. We started with wireless broadband and are now digging up roads to lay an advanced fibre optic infrastructure. In Nenthead, the group which took over the shop are eying the empty Methodist Chapel with a view to its redevelopment. Experience and peer support are clearly important to social entrepreneurs and help to explain the concentration of social enterprises.

It also goes some way to explaining the prevalence of community share offers – as groups grow in confidence, they are better equipped to go to the public for investment. By understanding the experiences of other groups, they can also learn from their experiences.

The simplicity of raising community share finance is a great attraction. There are three main steps:

• You need an appropriate structure — most organisations are set up asIndustrial and Provident Societies.

• Develop your business plan – this supports your offer document and has all the usual information about what the business will do, the market, the team, costs etc.

• Create the offer document which contains an overview of the business plan and what the investment is with details of how to invest.

 

Five things to think about

 

1. Try and get the balance right between momentum and planning. Don’t take too long – its easy to lose enthusiasm for a project if you spend too long sorting out all of the detail. However, it’s worth remembering that you want to be sure of your facts if you are asking local people to invest. A pioneer offer can be a good way of raising finance for feasibility studies.

2 Try and get a sense of the balance between financial and social returns for your potential investors when you are developing the share offer. Are you targeting hard-nosed investors who want a solid rate of return or are you looking for investors who will be happy with social returns? Ideally you want investors who are interested in social returns but who want or need some financial return if they are going to invest. This has implications for the business model and we carried out focus groups to get a sense of local views.

3. Use support services like the community shares website and the Co-op Enterprise Hub to get initial support with setting up your business and share offer. You can get expert advice on how to structure the business to be “share offer ready.”

4 Its useful to role play selling the share offer with members of the community before it is launched to get an idea of what their reaction will be, allowing you to modify the offer document.

5 Think about the enterprise investment scheme (EIS) – it can offer investors a decent return of 30% over five years. However, they need to pay enough tax to begin with and it would not benefit people on low incomes.

 

 

More support

  • The co-op enterprise hub — can support the establishment of a new co-op and advise on a share offer. We had fantastic support from Dave Hollings.
  • The community shares website — has a wealth of information following the Cabinet Office/DCLG sponsored community shares programme. As one of the pilots, we were supported by Jim Brown in developing the share offer.
  • Co-operative and Community Finance — have launched a new initiative to underwrite share offers, carrying out due diligence and building confidence in a community. They can offer a mix of loans and equity.
  • Cybermoor delivered a community shares event at the end of March – with case studies on four share offers in Cumbria. You can watch videos of the speakers and download the presentations.
  • The Key Fund can invest in equity and make loans to social enterprises – they provided Cybermoor with equity to cover a scheme where people on low incomes could spread their investment over time.

 

 

Daniel Heery is company secretary for Cybermoor Networks Ltd. Twitter:@cybermoor

This content is brought to you by Guardian Professional. To join the social enterprise network, click here.

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