Pauline Hinchion: Make money work for communities with bond scheme

The political noise about the closures of banks, often the only ones left in communities, has been getting louder recently.
Pauline Hinchion, Scottish Communities FinancePauline Hinchion, Scottish Communities Finance
Pauline Hinchion, Scottish Communities Finance

The reality is that the widespread and systematic closures have been happening for at least ten years.

Media outrage has homed in on the impact this is having on people who can no longer get local access to their cash. However, the consequences of these closures can be especially ­disastrous for community businesses in rural and deprived urban areas, putting a severe strain on the ­communities they serve. Vital ­services are often lost as a result.

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The damaging effect that bank ­closures is having on local communities is well documented and backed up by research. According to ­financial campaign group Move Your Money, communities without a bank lose 104 per cent of lending growth, meaning that the major banks are actively withdrawing money from those areas rather than lending. This, in turn, has an adverse effect on the sustainability of communities.

On average, communities that lose their last bank suffer a drop in ­lending of around £1.6 million, a ­significant and damaging economic loss to any community.

Even in communities where a bank still exists, the reality for most ­business is that it is extremely ­difficult to access affordable, micro finance, particularly in the ten years since the financial crash.

The impact of this much diminished financial landscape can be ­significant in terms of business ­failure, job losses, lack of job opportunities and a decrease in the availability of local products and services.

All of these factors combine to make our communities less attractive places to live and work.

However, we do not have to ­passively accept this squeeze on local ­economies or the damage it can inflict on communities. Ordinary people can play a role as citizen investors in their local economies through community bonds.

Individuals, organisations and communities can come together to purchase community bonds, with the money raised being used to set up a loan fund. This fund can then be used to lend money to social and community enterprises, assisting them to continue to trade and grow.

This approach is being developed by Scottish Communities Finance Ltd (SCF), which has identified a need for alternative forms of finance for small-scale community and social enterprises.

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SCF is a new community benefit society that wants to create a new type of citizen investor – ordinary people who want to invest in their local economies in order to strengthen them and keep them flourishing.

The first community to take ­advantage of community bonds is the Scottish social enterprise sector. The bond has been developed in conjunction with Scottish Social Enterprise Networks (SENs). At present there are 17 locally-based SENs across Scotland with more than 800 ­members. These members are often small, locally-based organisations providing vital services – often filling gaps which appear in public services – in both urban and rural communities.

The bond offer aims to raise £100,000 through the sale of ­community bonds costing £50 each – and offers a 2 per cent return upon maturity. The offer closes on 7 May 2018. The money raised through the sale of bonds will then be used to set up a new loan fund that social enterprises across Scotland can access.

It is hoped that this fund will help fill the lending gap which has been created by the reluctance of banks and other financial bodies to offer micro, unsecured loans – often leaving small-scale community and social enterprise with few or no options when it comes to seeking finance. SCF aims to assist ­Scotland’s ­communities to become more ­viable and more vibrant – including ­supporting local job creation, regeneration and improved local services.

It wants to encourage ordinary people to invest in their communities. By pooling their financial resources into community loan funds and lending this out to community businesses and social enterprises, they can help make communities more sustainable.

Purchasing community bonds is about making an investment in your community. Becoming a citizen investor shows support and encouragement for regeneration, local job creation, vibrant facilities and a diverse economy. For more details, contact SCF on 07934690429 or email [email protected] or see

Pauline Hinchion, Scottish ­Communities Finance Ltd.

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