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?