Building Local Assets: Community Investment in Canada
Over $1.4 billion in assets managed by the community investment sector in Canada!
This is just one tidbit found in the recently published; Building Local Assets: Community Investment in Canada, 2008.
The report is built on a survey the Canadian Community Investment Network Co-operative conducted this past fall and winter. Over 487 diverse community investment organizations are accounted for in the survey including credit unions, community loan funds, community development investment pools, and more. Besides numbers, there are also profiles of organizations and community investment deals. It is the most up to date information on community investment in Canada.
Executive Summary
In Canada, community investment is a relatively young financial sector with an evolving definition. At its simplest, community investment is financing that targets underserved communities to develop opportunities for income generation, housing and community renewal. These communities have development needs that are not being met fully by the mainstream financial sector. This financing can be in the form of debt, loan guarantees and equity.
Using this broad definition, in 2008 there was a minimum of $1.4 billion devoted to community investment in Canada. This represents money that is invested and receivable. This number was derived by a survey conducted by the Canadian Community Investment Network Co-operative (CCINC) in the fall of 2008 and winter of 2009. Eight networks provided aggregate data representing over four hundred separate organizations, while another forty three organizations answered the survey directly.
Quick Facts:
- 487 organizations reported having an aggregate of $1.4 billion
- Managed assets varies greatly by organization - from $7,000 to $280 million
- Organizations that reported in 2006 and 2008 have increased their assets by 11%
- Most community investment is debt - over $1.35 billion
- Nova Scotia has bucked the trend raising $30 million in equity with tax incentives
- Federally capitalized development corporations represent 66% of the sector
- Most organizations are placing a large percentage of their capital; over 60%
- A conservative demand for capital required in the next 2 years is $750 million
Growth opportunities:
- Business succession; high percentage of family businesses do not have successors
- Diversification of investments; tourism; manufacturing; resources
- Social enterprise development, buyouts and conversions to cooperatives
- Community owned energy
- Housing development
- Community renewal
Two important principles that were mentioned given the current mortgage crisis included:
- Lead and take risks while lending tightens in banks
- Incorporate blended value; de-emphasizing the race for profit alone
Common barriers to placing this capital included:
- Lack of operational resources to enable the deal flows
- The need for training and capacity as much as capital
- A further tightening of resources due to the economic downturn
- Rising cost of construction and real estate making it hard to build affordable housing
Recommendations to help grow community investment:
- Improve research of the sector itself:
- Improve the community investment scan; Mirror the Co-op Secretariat's annual scan
- Track growth and development; identify sources of capital
- Produce a digital catalogue of community investment organizations
- Improve response rates; especially from credit union sector
Get better at attracting capital and placing capital effectively
- Get better at identifying blended return, ie. the Demonstrating Value Initiative
- Promote it as a public agenda; and provide incentives to keep capital local
- Look to the NS CEDIF program as a model to get private capital into communities
- Create the processes needed to activate Program Related Investments (PRI)
Invest in housing development:
- Review housing trusts and models for housing development in North America
- Document best practices of non-profit organizations building affordable housing and incorporating their offices as a means of asset development and sustainability
Invest in business succession and social enterprise:
- Marry the issue of business succession with social enterprise
- Look into best practice and the potential demand for these conversions
- Convene Community Futures Organizations (CFs) and the Canadian Worker Coop Fed to discuss mutual benefit
Merge models and create seamless partnerships
- Investigate the potential of the CFs concept for urban based loan funds
- Credit unions are in over 1700 Canadian communities and CFs in 269, we need to work more directly with credit union centrals to build local partnerships and opportunities between the sector leaders
- Push loans up the ladder, good loans at the community loan fund level should be purchased in the credit unions, so money is freed up for more lending
- Share the practices of the leaders in the field
- CEDTAP was a wonderful resource, we need to be able to share knowledge at a better pace with a similar vehicle
Develop a national community investment framework
- Enable gatherings and roundtables to build direction
- Enable research, profiling the sector, gathering best practice
- Put forth a concise forward looking document that identifies opportunities for growth develop partnerships to ensure key sector leaders are working together
This scan shows that the community investment sector has continued to grow since 2006. With better research and development, greater collaboration and a forward looking community investment framework, this sector can provide answers for building and retaining local assets in Canadian communities.
Community investment focuses on unmet financing needs and is highly transparent with the majority of capital recruitment and financing deals overseen by community based boards. It is capital held locally, managed by people accountable to its placement. It is based on long term investment, and blended returns. It is not based on purely the profit motive. Given the current financial crisis, community based investment and building
locally controlled capital is possibly one of the wisest investment decisions governments and private investors can make.
