Regional Capital? Dumfries & Galloway and the Hanseatic Microfinance Initiative.
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Regional Capital?
Dumfries & Galloway
and the Hanseatic Microfinance Initiative
Introducing NET Partnership
• Nordic Enterprise Trust
• Link Associates– Anne Grethe Eckmann
• Partnerships Consulting LLP– Chris Cook
Nordic Enterprise Trust (“NET”)
• Scottish Company Limited by Guarantee – Not-for-profit– Charitable status
• Aim
“To regenerate the historical business and cultural links of the Nordic nations”
Hanseatic Microfinance Initiative
• Partnership-based policy development across Baltic/North Sea region
• “Guarantee Society”– Local Government Procurement– Mutual Credit
• “Capital Partnerships”– Property– Energy
Hanseatic Microfinance Initiative
• Hanseatic Microfinance Institution– Trans national network of local initiatives
• Programme of Local pilot schemes
• Programme of events and publications on and off-line
• Norwegian central and local government participation and matched funding
Q. When is a Partnership not a Partnership?
• A. When it’s a UK Limited Liability Partnership (“LLP”)
• Q. What is it if it’s not a partnership?
• A. An “Open” corporate body: with limited liability: and………er, that’s it!
Why an “Open” Corporate?
• Open to any “stakeholder” to be a Member, as long as they subscribe to the “Member Agreement”
• A legal “wrapper” – like a “trust”, but without the drawbacks - for any assets or revenues anywhere in the world
• Tax transparent
The Guarantee Society
An LLP with four Members• Local Council • Service Provider (risk management, admin,
accounting & IT)• Associations with a “Common Bond” ie
geographic (D & G) or functional– Businesses– Individuals
Guarantee Society and Procurement
• Local businesses pay proportion of revenues into a “Default Fund”
• Local council contracts with Members of GS
• In the event of default, dispute or other non-performance Council may call upon Default Fund for compensation
How it Works - Procurement• A awarded £25k contract for Council• Scenario – A falls ill
– B completes contract– Council collects any additional cost from GS default
pool
• Scenario – dispute between A and Council– GS appoints Referee/ arbitrator– Award paid from default pool
• GS Members pay provision into Default Pool – possibility of reinsurance or regional pools
Guarantee Society and Mutual Credit
• Businesses extend each other interest-free credit
• Credit may be settled in cash or barter
• No interest, but provision to default fund
• Bank or Credit Union as Manager
• Council may provide Guarantee for “start-ups” or youth enterprises etc
Guarantee Society – Business to Business
Sellers
Buyers Subscription/Service Charge
Manager
££
PoolTrading andClearing in £and £’s worth
£
Provision
Subscription/Service Charge
£Default Rebate
Repayment£
How it Works• A sells item to B for £1000 - 60 days credit• B pays 1% per month provision into Pool• B pays only £500 on due date• Alternatives
– A gives more time to pay– A accepts barter payment of “£500 worth”– A receives £500 from Pool and either
• Pool gives extension to B, collecting £500 over agreed period• B pays “Debt to Society” in hours at agreed rate; or• Pool writes debt off
– Combination of the above
Guarantee Society – Local Credit
• Individuals allocated guarantee limits by Manager (eg Credit Union, Airdrie Savings Bank)
• Local businesses extend interest-free credit to local individuals
• Individuals pay provision into Default Fund
The Capital Partnership
• Trustee/ Custodian Member
• Capital User /Occupier Member
• Capital Provider/ Investor Member
• Manager
• Revenues/Production shared– Return OF Capital – Return ON Capital
Capital Partnership
LLP
Investors
Capital Users
Capital Rental
Managers
% %
TrusteeOwnership
Example- Affordable Housing
• Trustee - eg D & G Council• Investor
– Land owner invests Value of land
– Development financier – option for builder stakeholders to Invest
– Long term finance for developed properties
• Manager • Occupier – rents the Capital invested in the Land
Example - 1 Mw Wind Turbine
Cost £1m = 20k Mw/hrs at £50.00 Mw/hr– 2,500 Mw/hr per year = 50k Mw/hrs over 20 years– ie 40% of production sold to Investors
Community “Co-owner”– sell 40% of production at today’s price for 25 years– allocate 10/20% of production to Developer/Operator– receives Balance of 40/50% as energy dividend
Investors “Co-owners”– buy energy at today’s price valid 20 years: beats gold!
Example – Crichton Campus
• Trustee – owns freehold in perpetuity for Community• Occupier
– Business– Academic
• Investor– Property (Crichton Campus)– Intellectual property (Academic institutions)– Development Capital (“angels”)
• Manager (Crichton Campus)• Occupier (Capital user) shares revenues (if any) with
Investor and Manager.
Summary
• Guarantee Society stimulates local business– through more local procurement– through pool of local credit
• Capital Partnerships allow local investment in local productive assets
• No requirement for funding from either Treasury or Scottish Executive
Next Steps
• Guarantee Society– A micro-business pilot scheme developed in
partnership with D&G and FSB?
• Pilot Capital Partnerships– Affordable housing scheme/competition using
D & G land?– Crichton Campus Business/Academic
partnership?
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