Shared Interest

Last updated
Shared Interest
Type Co-operative
Industry Financial Services (Fair Trade)
FoundedOctober 1990;32 years ago (1990-10)
HeadquartersPearl Assurance House, 7 New Bridge Street West, Newcastle, NE1 1EH, Tyne & Wear
Key people
Patricia Alexander (Managing director)
Revenue1,643,643 United States dollar (2016)  OOjs UI icon edit-ltr-progressive.svg
Total assets £43 million GBP in share capital (2019)
Number of employees
36
Website Official website OOjs UI icon edit-ltr-progressive.svg

Shared Interest Society Limited is a fair trade financial co-operative based in the United Kingdom formed in 1990. Today it provides credit and financial services to fair trade producers, retailers, importers and exporters throughout the world. Shared Interest works with both Fairtrade International (formerly known as Fairtrade Labelling Organizations or FLO) and the World Fair Trade Organization (WFTO). In 2004, the Shared Interest Foundation was formed as a charitable subsidiary, providing training and support services to producers, complementing the financial services offered by the Society. Shared Interest received the Queen's Award for Enterprise in 2008. [1] [2] [3] [4]

Contents

History

The idea that led to Shared Interest was the creation of Mark Gerard Hayes, then an investment banker with 3i, now an academic economist at Cambridge University, who was the first managing director from 1990 to 1999. Inspired by the success of Traidcraft in harnessing socially responsible investment for the finance of fair trade, Hayes approached Traidcraft founder Richard Adams in 1986, beginning a collaboration that culminated in the formation of Shared Interest in 1990 as a special form of co-operative saving and loan society. [5]

The initial £100,000 funding (subsequently repaid) for the launch of the Society came from Traidcraft, Joseph Rowntree Charitable Trust, and a similar co-operative established in 1975 in the Netherlands, now called Oikocredit. However the creation of Shared Interest was finally made possible by the action of SIAL (Scottish Churches Action for World Development Investment Association Limited), an Oikocredit Support Association, who provided the first 200 members and £300,000 of capital in the form of shares in Oikocredit. Oikocredit was Shared Interest's main channel for lending in its first five years.

Once Shared Interest had reached a capital of £4 million (1994), a planned transition took place to establish its own lending business by the creation of a clearing house with what is now the World Fair Trade Organization, to finance directly fair trade between the Global North and Global South and increasingly within Southern markets themselves. Shared Interest continued to support Oikocredit by the issue of loan stock until 2005, after which Oikocredit established its own UK office.

Structure

Shared Interest Society Limited

The Society is registered under the Co-operative & Community Benefit Societies Act 2014. Its membership is almost entirely composed of UK individuals (some 11,500 in 2018), [6] who invest withdrawable share capital (£43 million in 2019), which is used to provide credit facilities to organisations engaged in fair trade. The society had 34 staff (2012), mostly in the UK, with established regional offices around the world.

The Society is unusual in having a council of ordinary members as well as a Board of Directors. Both bodies are elected; the Council acts as a select committee which scrutinises the work of the Board. Furthermore, a majority of the members of Council are nominated for election by a process of random selection, similar to jury service, in the interests of wider participation.

How it works: by opening an account, a person becomes a member of the Society and buys non-transferable withdrawable shares to the value of their investment. £1 buys one share and people can invest between £100 and £100,000. Shared Interest is the only accredited open share offer to have received the Community Shares Standard five years ago. It is very different from a charitable donation as, once your account is open, a person can withdraw money from their account as well as add to it. All members have an equal voice regardless of the amount in their account.

Shared Interest Foundation

In 2004, Shared Interest Society Ltd. established a subsidiary charity, to provide business and financial management training for fair trade organisations, as well as grants to support individual organisations and the fair trade movement as a whole. To date, the Foundation's work has been funded largely by donations from the Society's members.

The nature of the financial requirement

International trade and production involves long processes which take much time. For example, many months elapse between the sowing of a crop in the tropics and the final purchase by a consumer of a finished product in a European supermarket. The money laid out at each stage of production and distribution is called working capital. For smaller producer organisations to access international markets on terms consistent with their independence, if at all, requires access to working capital, by both producers and fair trade distributors, beyond what is available from banks. Normally this extra working capital would come from profit-maximising shareholders in some form or from accumulated past profits. Shared Interest provides unsecured finance, similar to trade credit. Shared Interest can do this only because its own members are prepared to accept the risk of loss on their investment in Shared Interest, and to accept the limited and currently lower financial returns resulting from the high costs of dealing with emerging organisations in the Global South. [7]

In 2018, Shared Interest lent money to 363 organisations representing 470,421 individuals. They worked in areas where other lenders are less keen to operate in order to deepen impact and support those farmers in greatest need. Very few social lenders operate with smaller lending facilities or more vulnerable groups. Shared Interest works primarily with organisations who are certified as fair trade as they believe these producers align with their own values. The fair trade movement aims to promote fair and equal trading terms for producers in developing countries. It is based around ten key principles:

• Creating Opportunities for Economically Disadvantaged Producers • Transparency and Accountability • Fair Trading Practices • Payment of a Fair Price • Ensuring no Child Labour and Forced Labour • Commitment to Non Discrimination, Gender Equity and Women's Economic Empowerment, and Freedom of Association • Ensuring Good Working Conditions • Providing Capacity Building • Promoting Fair Trade • Respect for the Environment

The finance mechanism

Shared interest lending diagram.PNG

The diagram illustrates the lending process:

  1. The order is placed by a buyer (e.g. a coffee importer) with the producer (e.g. a coffee farming co-operative)
  2. Shared Interest makes an advance payment on behalf of buyers to the producers
  3. The producer is able to borrow an additional amount against that order to cover their expenses
  4. The goods are delivered
  5. The final payment is made to the producer; the buyer re-pays the credit provided by Shared Interest

Related Research Articles

Financial capital is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based, e.g., retail, corporate, investment banking, etc. In other words, financial capital is internal retained earnings generated by the entity or funds provided by lenders to businesses in order to purchase real capital equipment or services for producing new goods and/or services.

<span class="mw-page-title-main">Fair trade</span> Sustainable and equitable trade

Fair trade is a term for an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and environmental standards. The movement focuses in particular on commodities, or products that are typically exported from developing countries to developed countries but is also used in domestic markets, most notably for handicrafts, coffee, cocoa, wine, sugar, fruit, flowers and gold.

<span class="mw-page-title-main">Equity (finance)</span> Ownership of property reduced by its liabilities

In finance, equity is an ownership interest in property that may be offset by debts or other liabilities. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets owned. For example, if someone owns a car worth $24,000 and owes $10,000 on the loan used to buy the car, the difference of $14,000 is equity. Equity can apply to a single asset, such as a car or house, or to an entire business. A business that needs to start up or expand its operations can sell its equity in order to raise cash that does not have to be repaid on a set schedule.

Islamic banking, Islamic finance, or Sharia-compliant finance is banking or financing activity that complies with Sharia and its practical application through the development of Islamic economics. Some of the modes of Islamic banking/finance include Mudarabah, Wadiah (safekeeping), Musharaka, Murabahah (cost-plus), and Ijara (leasing).

A merchant bank is historically a bank dealing in commercial loans and investment. In modern British usage it is the same as an investment bank. Merchant banks were the first modern banks and evolved from medieval merchants who traded in commodities, particularly cloth merchants. Historically, merchant banks' purpose was to facilitate and/or finance production and trade of commodities, hence the name "merchant". Few banks today restrict their activities to such a narrow scope.

Richard John Adams is a British businessman and social entrepreneur. He is the founder of the UK fair trade organisations Tearcraft and Traidcraft and of a number of social enterprises which promote environmentally responsible and ethical business.

<span class="mw-page-title-main">The Co-operative Group</span> British group of retail businesses

The Co-operative Group Limited, trading as Co-op, is a British consumer co-operative with a group of retail businesses including grocery retail and wholesale, legal services, funerals and insurance retailing.

<span class="mw-page-title-main">The Fairtrade Foundation</span>

The Fairtrade Foundation is a charity based in the United Kingdom that aims to help disadvantaged producers in developing countries by tackling injustice in conventional trade, in particular by promoting and licensing the Fairtrade Mark, a guarantee that products retailed in the UK have been produced in accordance with internationally agreed Fairtrade standards. The foundation is the British member of FLO International, which unites FLO-CERT, 25 National Fairtrade Organisations and 3 Producer Networks across Europe, Asia, Latin America, North America, Africa, Australia and New Zealand.

Cafédirect is a UK-based alternative trading organization.

Traidcraft was a UK-based Fairtrade organisation, established in 1979. Its trading arm, Traidcraft plc, which sold fairly traded products, went into administration in January 2023.

<span class="mw-page-title-main">Industrial and provident society</span>

An industrial and provident society (IPS) is a body corporate registered for carrying on any industries, businesses, or trades specified in or authorised by its rules.

<span class="mw-page-title-main">Cooperative banking</span> Type of retail or commercial bank organized cooperatively

Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world.

A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that is not legally a bank; it does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFC facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment which act as backup facilities should the primary form of intermediation fail."

<span class="mw-page-title-main">Bank</span> Financial institution which accepts deposits

A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.

Equal Exchange Trading is a UK-based alternative trading organization. Equal Exchange is a worker's cooperative distributing food and beverage products in the independent natural food sector. The organization's origins stretch back to 1979 "when three voluntary workers returned to Edinburgh after working on aid projects in various parts of Africa."

<span class="mw-page-title-main">Oikocredit</span> Cooperative

Oikocredit is a cooperative society that offers loans or investment capital for microfinance institutions, cooperatives and small and medium-sized enterprises in developing countries. It is one of the world's largest private financiers of the microfinance sector. The idea for Oikocredit came from a 1968 meeting of the World Council of Churches. Following this, Oikocredit was established in 1975 in the Netherlands.

<span class="mw-page-title-main">Supply chain finance</span>

Supply chain financing is a form of financial transaction wherein a third party facilitates an exchange by financing the supplier on the customer's behalf. The term also refers to the techniques and practices used by banks and other financial institutions to manage the capital invested into the supply chain and reduce risk for the parties involved.

Social accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large. Social Accounting is different from public interest accounting as well as from critical accounting.

London Capital Credit Union Limited is a not-for-profit member-owned financial co-operative, based in Archway and operating across London and the South East.

Ann Wigglesworth fair trade pioneer, educator and Aberdeen Woman of the Year 1985.

References

  1. ↑ Chapter 5 of Nicholls, Alex and Opal, Charlotte (2005) Fair Trade: Market-Driven Ethical Consumption. London, Thousand Oaks and New Delhi: Sage Publications ISBN   1-4129-0105-7
  2. ↑ Moore, Geoff (2004). "The Fair Trade Movement: Parameters, Issues and Future Research". Journal of Business Ethics. 53: 73–86. doi:10.1023/B:BUSI.0000039400.57827.c3. S2CID   55108569.
  3. ↑ Supplementary material from the published and audited Directors' Reports and Accounts for the periods ending 30 September 1990-2006, filed with the Registrar of Friendly Societies at the Financial Services Authority.
  4. ↑ :: The Queen's Award for Enterprise :: Archived 2012-03-28 at the Wayback Machine
  5. ↑ "WorldAware Business Awards". WorldAware. 1998. Archived from the original on 23 July 2001.
  6. ↑ "Changing Lives across the Globe". Shared Interest (homepage). Archived from the original on 19 February 2018.
  7. ↑ Mackenzie, C.; Lewis, A. (1999). "Morals and Markets: The Case of Ethical Investing". Business Ethics Quarterly. 9 (3): 439–452. doi:10.2307/3857511. JSTOR   3857511. S2CID   145516515.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.