Regional Capital Dumfries Galloway and the Hanseatic

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 nonperformance Council may call upon Default Fund for compensation

How it Works - Procurement • A awarded £ 25 k 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 “startups” or youth enterprises etc

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

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 Capital Users Capital Rental LLP % Investors Ownership % Managers Trustee

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 £ 1 m = 20 k Mw/hrs at £ 50. 00 Mw/hr – 2, 500 Mw/hr per year = 50 k 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?