Regional Capital? Dumfries & Galloway and the Hanseatic Microfinance Initiative

1. Regional Capital? Dumfries & Galloway and the Hanseatic Microfinance Initiative

2. Introducing NET Partnership • Nordic Enterprise Trust • Link Associates • Anne Grethe Eckmann • Partnerships Consulting LLP • Chris Cook

3. 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”

4. Hanseatic Microfinance Initiative • Partnership-based policy development across Baltic/North Sea region • “Guarantee Society” • Local Government Procurement • Mutual Credit • “Capital Partnerships” • Property • Energy

5. 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

6. 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!

7. 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

8. 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

9. 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

10. 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

11. 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

12. Guarantee Society – Business to Business Buyers Subscription/ Service Charge £ £ Provision Pool Manager £ Trading and Clearing in £ and £’s worth Default Rebate £ Repayment £ Subscription/ Service Charge Sellers

13. 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

14. 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

15. The Capital Partnership • Trustee/ Custodian Member • Capital User /Occupier Member • Capital Provider/ Investor Member • Manager • Revenues/Production shared • Return OF Capital • Return ON Capital

16. Capital Partnership Capital Users Capital Rental LLP Trustee Ownership % % Investors Managers

17. 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

18. 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 pricefor 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!

19. 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.

20. 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

21. 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?