According to CCINC, a conservative demand by community investment organizations surveyed in the study is $750 million over two years. Growth opportunities that were identified included; business succession; social enterprise, including buyouts and conversion to co-operatives; housing development; and community owned energy. Early results from a financing demand study in Atlantic Canada by the Social Economy Research Network suggest the average social enterprise requires a minimum of $500,000 for expansion of programs and services including investing in housing.
Some of the common barriers faced by community investment organizations to finance projects include; lack of operational resources to enable deal flows; the need for training and capacity by project proponents; and rising costs of construction making it tougher and tougher to build affordable housing.
It is clear that community investment is growing in Canada and that there is continued demand for financing. How will we ensure its growth? The 2009 CCINC report entitled Building Local Assets: Community Investment in Canada provides the following recommendations:
- Improve research of the sector. Further develop the community investment scan. Develop an industry standard template to increase adoption and increase response rates. If at all possible, bring on Statistics Canada. As part of this effort, a digital catalogue of community investment organizations should be developed.
- Develop a hybrid model - an urban based CF. To move capital you need adequate staff resources. Is there a way to marry the CF concept with urban-based loan funds? Combine CF operational resources and the support of a national network with the ability of community loan funds to raise private capital and finance more diverse activities.
- Attract private capital. Use incentives like tax credits and guarantees, after the example of the CEDIF. Promote it as a public agenda. (Now is a good time, given the ethical beating that mainstream investment is taking). Explore Program-Related Investments and develop the reassurance that foundations need to start placing capital in community funds.
- Invest in housing and nonprofit commercial space. Look at the few under-priced but expanding housing markets where equity can be developed and assets grown. Look at the real opportunity to build affordable home ownership units in combination with nonprofit office space to enable asset accumulation by individuals and nonprofits.
- Crack the business succession vacuum with social enterprise conversions. Succession planning is a huge issue in rural communities and may be ripe for worker co-operative conversion.
- Develop a national community investment framework that puts forth a concise, forward-thinking document that identifies opportunities for growth and the real returns to families, communities, and to the Canadian government. This will include convening roundtables and rationalizing the sector through mergers between leading organizations.
- Expand opportunity with credit unions. Credit unions are in over 1700 Canadian communities. This is a great network through which to expand community investment. The Nova Scotia Co-operative Development Council provides a great example for aggressive program development in this area.
- Facilitate sharing and adoption of leading practices in the field from each slice of the sector: community funds; credit unions; Community Futures; and equity investment opportunities like the CEDIFs. CEDTAP was a wonderful resource. We need to be able to share knowledge at a better pace with a similar vehicle..
With enhanced private investment incentives, the deliberate sharing of practices, merging of structures, and provision of an appropriate level of operational resources, the sector could generate even more investment in Canadian communities. In an economic downturn that many people see as being caused by the excess of the marketplace, there is a big opportunity to educate the public on community based investing, to promote investing for blended returns. Socialfinance.ca is a great resource. We also need to be hitting the streets, talking it up with potential investors and to our local MPs about tax incentives and great models. Think big about projects that have impact for your community. How can community investment make the project work, and how can your local investor and MP help. This is the time. So let’s get out there!
I look forward to your comments where I can elaborate on innovative deals and maybe more in depth profiling of some of the institutions involved.
I’m interested in developing new investment opportunities for the Socially Responsible Investor - someone who is already attuned to the ‘money for meaning’ concept. I think it is possible to develop a bond mechanism to support a ‘well-qualified’ non-profit project where the money would be repaid in full with a return of 4-5% after a 5 year investment. A proper business model applied to the non-profit would be how this would be decided.
It is only now that the common banking and investment returns are so low that this would be considered. Previoulsy such a low return over 5 years was of no interest but creating a bond mechanism, with something like a venture capital model should work.
If anyone is all ready working on this, I’d be interested in hearing from them.
By Tina Crouse on Jan 27, 2010