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March 31, 2010

Share in your success

As we move into the era of grants being in ever shorter supply, it is only sensible for communities to develop new ways of raising funds to finance their work.  Asset rich communities can always consider the option of secured loans.  But that route is not for everyone and not all communities own assets.  Another option is the community share scheme.  DTA Scotland is discussing with partners how they could progress this idea along the lines being pursued down south

Development Trusts Association – Community Shares Programme

The Community Shares Programme is a two-year action-research project funded by the Office of the Third Sector and the Department for Communities and Local Government working in partnership with the Development Trusts Association and Co-operativesUK. The purpose of this programme is to investigate how members of the public can invest in enterprises serving a community purpose.

Launched in January 2009, the Programme has contributed to the rapid growth of interest and activity in community investment.

In the first half of the last decade there were, on average, four new community  share schemes each year. But in the second half of the decade, the number of community share schemes started to increase, culminating in a sevenfold increase in 2009, when 28 enterprises launched community share offers. In addition to this, at least another 50 community groups are known to be exploring the option of community investment. From farming, football and pubs, to community retail stores and renewable energy, community investment is proving to be an excellent way of financing enterprises that serve a community purpose.

This enthusiasm for community investment brings with it new responsibilities. Most members of the public have little or no direct experience of buying shares, or what to expect from an investment offer. Educating the public about their rights as investors and the risks associated with equity investment is paramount. Potential investors need to know what risks they are taking, how they can get their money back, and what social and financial returns they can reasonably expect. They need to know their rights as shareholders, and how their involvement in an enterprise can improve its fortunes. It is reasonable for the public to expect protection from unscrupulous promoters, or even over-enthusiastic but poorly informed community activists. Investing is not the same as giving, regardless of how good the cause or well-intentioned the promoters. At the same time, heavy-handed regulation could be an unnecessary burden on community-owned enterprises.

The aim of the Community Shares Programme is to learn from the practical experiences of ten community organisations that are planning to make a community share offer. This evidence will be used by government to shape its community regeneration policies, and provide more effective guidance, regulation and support for community investment.

The Community Shares Programme defines community investment as:

“The sale, or offer for sale, of more than £10,000 of shares or bonds to communities of at least twenty people, to finance ventures serving a community purpose.”

For a full copy of the report see