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 £ £ Pool Trading and Clearing in £ and £’s worth £ Provision Subscription/ Service Charge £ Default Rebate Repayment £

How it Works A sells item to B for £ 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 % Trustee Ownership

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?