Handbook on Community Investment in Co-Operatives

The Business Council of Co-operatives and Mutuals (BCCM) has produced a self-help manual to assist communities around Australia to use the co-operative model to raise capital.

The BCCM said the handbook, called Community Investment for Australian Co-Operatives, has been developed to introduce communities and existing co-operatives to methods of financing and to demonstrate that co-operative shares, despite their unique characteristics, are flexible capital instruments ideally suited to community enterprises.

“The handbook will give co-operatives information to increase their ‘financial literacy’ and familiarity with co-operative financing methods under the co-operatives national law (CNL) and provide some guidance for communities wishing to start up co-operatives that are suited to community investment,” author Robyn Donnelly said.

“Access to capital has always been a hurdle for the growth of the co-operative sector, partly as a result of what is seen as a ‘traditional financial operating method’ and because co-operatives tend to sit outside financial markets.

“Co-operative shares are not tradeable on financial markets, and other securities

are generally not used for financing.”

The handbook points to a report from a Senate inquiry into cooperatives, mutuals and member-owned firms which found that “there are currently limited options for

co-operatives and mutuals to raise capital that avoid the debt to equity ratio problem”.

The Senate made a recommendation that governments support small and medium co-ops to raise capital in flexible ways.

Donnelly said the 2009 launch of the Community Shares Unit by Co-operatives UK provided an example of the potential of community investment through co-operatives to build self-sustaining community enterprises.

“This handbook owes much to the resources produced by the Community Shares Unit,” she said.

The handbook is divided into five sections:

• Part one looks at the concept and potential of community investment as a fundraising model, and examines the potential of crowdfunding and its availability as a tool for the promotion of community investment.
• Part two examines the different types of co-operative under Australian law and identifies factors in each type that may influence a community’s journey to decide the design of an appropriate business model. It also deals briefly with the process of forming a co-operative, but more particularly with the Australian regulatory requirements for active membership.
• Part three explains the characteristics, restrictions and flexibility of different types of co-operative securities and their classification as either equity or debt.
• Part four provides a guide to the disclosure requirements for co-operative securities under the co-operatives national law.
• Part five contains some examples and additional resources.