< Back to '19th April 2023' briefing
April 18, 2023
Democratising finance
When the concept of social enterprise first knocked at the voluntary sector’s door, the initial response was to ‘man the barricades’ and ‘resist at all costs’ this notion of generating profit or monetising the good works of the charitable sector. Much of that early resistance to this perceived intrusion by private sector motivation has fallen away and a broad understanding of how profit can be made for social good has become codified. However, there remains a certain unease when talking about wealth and finance around the community sector. There’s a new concept that might easy this hesitancy – Democratic Finance.
DEMOCRATIC FINANCE – AN AMBITIOUS NEW PROGRAMME
For some communities across Scotland, money and wealth are considered taboo subjects. Any mention of finance, investment or growth can swiftly shut down a conversation. There is a feeling, amongst many folk, that these terms, and this world of finance, just does not belong to them. Finance and funding models are too often viewed as external or elitist and wealth is concentrated in too few hands.
We firmly believe that this needs to change and that democratic finance is the best vehicle to bring about this change. Therefore, the Development Trusts Association Scotland, in partnership with Scottish Communities Finance Ltd, is developing an ambitious programme focused on increased knowledge and use of democratic finance models that will result in more money circulating within communities for greater public benefit.
Our Democratic Finance programme will demonstrate that money can and should be generated, owned and controlled by the community. We want communities to not only better understand their sources of wealth, but also to retain more of that wealth and have more say in how it is used. Our aim is a change to the economic system itself through increased use of finance and funding models that build a new level of economic democracy.
Our Community Shares Scotland programme has proven the many strengths of citizen investment in community led enterprises. By supporting local people and organisations to invest in projects through community shares, wealth is retained and boosted within communities. This investment (£19 million in community shares raised to date) in turn drives mutual confidence and agency, unlocking support and investment from other previously closed off sources. This can include attracting investment from external sources, albeit with protections in place to ensure that the community has a say in how it is controlled and spent.
Since 2018, Scottish Communities Finance Ltd has championed community bonds as a new form of democratic finance for community and social enterprises across Scotland. Offering a unique model, it has assisted organisations seeking finance for renewable energy, new builds and business development and growth.
Building on the huge success and ethos of both Community Shares Scotland and Scottish Communities Finance, this programme will focus on increased knowledge and use of financial models that generate and capture wealth within a community. These financial models are particularly pertininent as we attempt to move away from grant dependency. We will initially focus on exploring the following models:
- Using democratic finance to grow community shared ownership of renewable energy developments across Scotland
- More productive local use of income from renewable energy developments – including exploring investment opportunities alongside grant giving
- Piloting a Scottish Community Shares Booster programme to grow the community shares market in harder to reach communities and sectors. This will be based on the good practice and success of the English Community Shares Booster
- Increasing awareness and use of community bonds and other more affordable and flexible debt options
- Developing and piloting community-based legacy gifting
- Creating a more coordinated system of High-Net-Worth philanthropic giving at a grassroots community level
- Awareness raising and support for organisations to utilise community lotteries
- Better awareness and use of common good funds and assets
- Expanding donation-based crowdfunding
- Promoting more cross community and cross sectoral investment via democratic finance instruments
The programme will also include a capacity building strand – focused on raising awareness of democratic finance models, both with communities and with third sector intermediaries. We will also champion a collaborative approach, bringing in sectoral expertise from other intermediaries where needed.
Our Democratic Finance Programme clearly links to the fourth finance pillar of the Community Wealth Building agenda. This finance pillar specifies that flows of investment and financial institutions should work for local people, communities, and businesses. DTAS, through our Democratic Finance programme, aims to lead on this pillar on the ground – ensuring that the theory is made practical and that communities benefit directly.
Keen to know more or to get involved? We’d be delighted to hear from you. Get in touch via morven@communitysharesscotland.org.uk.