Covestment with Community Currencies

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= "Financing the future and creating economic resilience by weaving innovations in network currencies, crowdfunding and community microlending".



By Jordan Bober with Michael Linton:

In the post-2008 world of high unemployment, government austerity, constrained personal finances and restricted access to credit, it has become a matter of considerable challenge for new entrepreneurs to obtain the financing they need in order to create viable livelihoods for themselves and other community members while building the sustainable business ecology of the future. The old methods of financing business enterprises have not yet caught up with the business models and types of the emerging new economy. Meanwhile, “financing the future” has become a question of considerable urgency as threats posed by economic instability, climate change and peak oil demand that communities act quickly to adapt and build resilience.

This idea paper presents the outlines of a new concept that we are coining as “covestment”, an idea that we believe has the potential to transform the way sustainable enterprises and community projects are financed.

Covestment refers to a highly collaborative, convivial, and community-based approach to the financing of new community enterprises. It weaves together the most exciting innovations in business-backed, mutual credit-based community currencies, crowdfunding and community-based microlending. It is designed to be highly beneficial to all stakeholders in the community economic ecosystem, of very low financial risk, and resilient to external financial shocks. This is possible thanks to a community currency designed to capitalise on the surplus capacity of local businesses, part of which is used to create a community credit commons in partnership with local citizens and consumers."


How does covestment differ from investment?

"Classically, investment refers to an arrangement whereby a person or institution contributes financial or other capital to an enterprise or project. Because investors are assumed to be deferring gratification into the future by investing scarce resources rather than consuming them, and to be taking a risk that they may never see those resources again, investment typically comes with an expectation of returns – not only of interest or dividends, but of the original investment principal. Often investment entails the purchase of equity in the enterprise being invested in, and in any case almost always provides the investor with a legal claim on the enterprise’s assets and income stream.

Furthermore, Linton notes that in cases where various types of inputs are invested into a project or enterprise (eg. money, materials, time, creativity), there is typically an in-built assumption of the primacy of financial investment over other forms of investment. Thus, if an enterprise should fail, those who had in some manner invested in the enterprise financially often have legal recourse available to attempt to recover their investments. Meanwhile, those who had merely invested time and effort in the enterprise usually have no such recourse, even though it can be argued that their loss is the greater, time and effort being of absolutely finite and inelastic supply, and completely unrecoverable once expended.

Covestment, on the other hand, is a new collaborative and community-based financing method being proposed here which weaves together some of the most cutting-edge innovations in community-based economics to create a powerful new community economic development tool."