Local Investing: Put money to work in your community

Leighton Buzzard, Ava Lily

Local investing—sometimes called locavesting‘—means putting money into businesses and projects in your community instead of investing only in large companies or global markets.

You might support a local shop, community energy project or affordable housing scheme. In return, you may receive interest, repayments or another agreed benefit. Some projects are community-focused, but they are still investments: you could lose some or all of your money.

What is local investing?

Local investing channels money into businesses and projects that benefit a particular place. Instead of investing in a national supermarket chain, for example, you might support a local grocery shop, bakery or community-owned business.

Projects can include:

• Independent shops and cafés
• Community energy schemes
• Affordable housing
• Local food businesses
• Community facilities and services
• Environmental improvements

The aim is to keep more money circulating locally. A successful business may create jobs, provide useful services and support nearby suppliers. A community project might improve a park, reduce energy costs or provide a much-needed service.

However, local benefit does not guarantee a financial return. Before investing, check how the investment works, what you might earn and what could happen if the project struggles.

How long investing can strengthen communities

Many local businesses and community projects find it difficult to access finance. Local investment can offer another way to raise money, especially when traditional lenders are unwilling to fund a project.

For example, residents might help finance a bakery or café. A community energy group might raise money to install solar panels on a school. The project could then generate electricity, lower the school’s bills and, depending on its arrangements, sell surplus power.

Local investment can also give residents a direct role in shaping their area. Rather than waiting for outside funding, people can help support projects they want to see succeed.

Local investing is not the same as donating

A donation is usually given without expecting repayment or a financial return. An investment is different: it comes with agreed terms, such as interest, repayments or a share in a business.

Some community investments offer non-financial rewards, such as bread, discounts or access to a service. These rewards do not remove the risk of losing money. Read the offer carefully and make sure you understand what you will receive and when.

Community savings with Charity Bank

Charity Bank is like having a savings account and donating to local charities at the same time. Because your savings are used to invest in small community projects.

The account opening process is really simple, then your money can get to work, creating change for local communities. So far Charity Bank has donated over £629 million to over 1,460 causes nationwide.

You can open a personal, business, charity or credit union savings account. Some examples of what these savings have funded:

• Transforming an old hotel into supported living for 11 vulnerable adults
• Funding the headquarters of an Air Ambulance
• Funding a refuge for families escaping domestic abuse
• Helping to renovate social housing properties

Charity Bank offers savings accounts for individuals and organisations. It lends money to charities and social enterprises, so savers can earn interest while their deposits help fund projects with a social purpose.

Past projects supported by social lenders such as Charity Bank have included supported housing, refuges, community facilities and improvements to social housing. Check the bank’s latest information for current account terms, rates and examples of lending.

Before opening any savings account, compare interest rates, access rules and the protection that applies to your money. A savings account is not the same as investing directly in a local project, and the risks and protections may differ.

How credit unions support local people

Credit Unions are member-owned financial organisations. Depending on the credit union, they may offer savings accounts and affordable loans to people in a particular area or community.

By joining a local credit union, you can support an organisation that serves its members rather than outside shareholders. Credit unions may lend to members for needs such as home improvements or small business costs. Their services, eligibility rules and savings protections vary, so check the details of your local credit union.

Inspiring examples of community investment

• Community Wealth Builders is based in Baltimore, USA. It helps local businesses with crowdfunded, no-interest loans to succeed in an area that suffers from high unemployment.
• The Handmade Bakery (Yorkshire) is thriving, thanks to now-paid-off ‘bread bonds’. Instead of receiving money, investors received good bread in return! Today, it bakes thousands of loaves a week, supporting the local economy.
• Spacehive is a community fundraising site. These are ‘pots of money’ that can be raised for local shops and projects.

Michael H Shuman is the author of the book Put Your Money Where Your Life Is. He says the issue is that millions of people with savings are limited to putting them into big companies and global corporations. He believes that in the future, these funds will instead be invested in local funds to build affordable housing (not destroying the countryside to do it), food and clean energy funds.

Investing through your local council

Abundance Investment is a great idea. Rather than invest in the stock market, you fund your local council, to invest in your area. It’s also safer (to date, no council has ever failed to pay back the money). A council is unlikely to go bust and run off with your money to buy yachts in the Caribbean).

Most are using your money (over 5 years) to tackle climate change and reduce carbon emissions. This is by planting trees, investing in green energy and making better public transport.

All investment has risks. But this is less risky, a bit like ‘crowdfunding for your council’. A survey found that 73% of people would be interested in lending money to councils, if it provided benefits. Especially as the average group of 100,000 people in the UK holds £4 billion in savings.

So instead of cash-strapped councils asking government for help (that often says no due to lack of funds), this is kind of do-it-yourself-improve-your-community instead. Locals lend the money (and get back something in return in the form of better communities).

You can invest from £5 (and can also choose to donate interest back to community projects). This is a fantastic idea, why is this not more widely-known? So far, just 18 councils are involved.

• Hounslow Council – community energy, grants to local community projects and places of worship, upgrading air, energy and transport for schools, cycle paths, reuse and repair events, transform unused land to grow local free food.
• Hammersmith & Fulham Council – Rain gardens to protect against floods, ‘greening the grey’ schemes), and secure bike storage.
• Greenwich Council – more LED wildlife-friendly public lighting, solar panels, improving public parks and greener public buildings.
• Southwark Council – creating more cycle spaces, transition lampposts and parks to LED lighting, run pools and  gyms on green energy, replace boilers with heat pumps at a local school, expanding a local tool library,  nature projects for local  green spaces and cemeteries and again installing rain gardens, to prevent floods.

Community energy: investing in local power

Community energy projectscan involve residents investing in or supporting renewable energy installations, such as solar panels on schools or community buildings.

The electricity produced may be used on site, reducing the building’s reliance on the grid. Depending on the project, surplus electricity may be sold, and income could help support the scheme or other community benefits.

Before investing, check who owns the equipment, how income is calculated, how long the project is expected to run and what happens if costs or energy prices change. Ask whether your money is a loan, a share or another type of investment.