Shared Interest
Encyclopedia
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 Labelling Organisation
(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.
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.
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. Oikocredit was Shared Interest's main channel for lending in its first five years.
Once Shared Interest had reached a capital of £4m (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 the opportunity arose for Oikocredit to establish its own UK presence once again through voluntary Support Associations.
, a legal structure similar to a building society or credit union. Its membership is almost entirely composed of UK individuals (some 8,743 in 2009), who invest withdrawable share capital
(£26.1 million in 2009), which is used to provide credit facilities to organisations engaged in fair trade
. The society had 28 staff (2009), mostly in the UK, with recently established regional offices in Kenya and Costa Rica.
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.
, 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.
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.
The diagram illustrates the lending process:
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
financial co-operative based in the United Kingdom formed in 1990. Today it provides credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
and financial services to fair trade producers, retailers, importers and exporters throughout the world. Shared Interest works with both Fairtrade Labelling Organisation
Fairtrade Labelling Organizations International
Fairtrade International was established in 1997, and is an association of 3 producer networks, 19 national labelling initiatives and 3 marketing organizations that promote and market the Fairtrade Certification Mark in their countries Fairtrade labelling organizations exist in 18 European...
(FLO) and the World Fair Trade Organization
World Fair Trade Organization
The World Fair Trade Organization , formerly the International Fair Trade Association , was created in 1989 and is a global association of 324 organizations in over 70 countries...
(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.
History
Shared Interest was the brain-child of Mark Hayes, then an investment banker with 3i, now an academic economist at Cambridge, who was the first Managing Director from 1990-1999. Inspired by the success of TraidcraftTraidcraft
Traidcraft is a UK-based fairtrade organisation, established in 1979. The organisation has two components: a public limited company called Traidcraft plc, which sells fairly traded products in the United Kingdom; and a development charity called Traidcraft Exchange that works with poor producers in...
in harnessing socially responsible investment
Socially responsible investing
Socially responsible investing , also known as sustainable, socially conscious, or ethical investing, describes an investment strategy which seeks to consider both financial return and social good....
for the finance of fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
, Hayes approached Traidcraft founder Richard Adams
Richard Adams (Traidcraft)
Richard Adams, OBE is the British founder of the UK fair trade organisations Tearcraft and Traidcraft and of a number of social enterprises which promote ethical business.Adams attended King Edward VI Five Ways school in Birmingham...
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.
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
Oikocredit
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...
. 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. Oikocredit was Shared Interest's main channel for lending in its first five years.
Once Shared Interest had reached a capital of £4m (1994), a planned transition took place to establish its own lending business by the creation of a clearing house
Clearing house (finance)
A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...
with what is now the World Fair Trade Organization
World Fair Trade Organization
The World Fair Trade Organization , formerly the International Fair Trade Association , was created in 1989 and is a global association of 324 organizations in over 70 countries...
, to finance directly fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
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 the opportunity arose for Oikocredit to establish its own UK presence once again through voluntary Support Associations.
Shared Interest Society Limited
The Society is incorporated as an Industrial and Provident SocietyIndustrial and Provident Society
An industrial and provident society is a legal entity for a trading business or voluntary organisation in the United Kingdom, the Republic of Ireland, and New Zealand...
, a legal structure similar to a building society or credit union. Its membership is almost entirely composed of UK individuals (some 8,743 in 2009), who invest withdrawable share capital
Industrial and Provident Society
An industrial and provident society is a legal entity for a trading business or voluntary organisation in the United Kingdom, the Republic of Ireland, and New Zealand...
(£26.1 million in 2009), which is used to provide credit facilities to organisations engaged in fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
. The society had 28 staff (2009), mostly in the UK, with recently established regional offices in Kenya and Costa Rica.
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.
Shared Interest Foundation
In 2004, Shared Interest Society Ltd. established a subsidiary charityCharitable organization
A charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...
, to provide business and financial management training for fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
organisations, as well as grants to support individual organisations and the fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
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 tradeFair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
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
Trade credit
Trade credit is an arrangement between businesses to buy goods or services on account, that is, without making immediate cash payment. The supplier typically provides the customer with an agreement to bill them later, stipulating a fixed number of days or other date by which the customer should pay...
. 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.
The finance mechanism
- The order is placed by a buyerBuyerWhen someone gets characterised by their role as buyer of certain assets, the term "buyer" gets new meaning:A "buyer" or merchandiser is a person who purchases finished goods, typically for resale, for a firm, government, or organization...
(e.g. a coffee importer) with the producer (e.g. a coffee farming co-operative) - Shared Interest makes an advance payment on behalf of buyers to the producers
- The producer is able to borrow an additional amount against that order to cover their expenses
- The goods are delivered
- The final payment is made to the producer; the buyer re-pays the credit provided by Shared Interest