Co-operative & Community Finance
the lender for social purpose
Our Story
Co-operative & Community Finance has been operating for almost 40 years, and today is one of the most successful - and sustainable - CDFIs in the UK.
1973 - the way forward
ICOF was born out of a series of informal meetings in Northampton inspired by the principles and practice of one of the largest common ownership co-operatives in the UK - Scott Bader.
The idea was to encourage successful common ownerships to lend money to ICOF which would then be lent on to new co-operative ventures - a revolving loan fund, to which money is repaid and lent again.
Donations, deposits and loans were ICOF's source of capital as the banks would not take the risk of lending to employee owners.
By the end of 1976 £60,000 had been lent to a total of 14 co-ops, cumulative losses were at 6.7%. The Net Asset value of ICOF was in deficit at just under £4,000 - a slow shaky start by all accounts.
1976 - central government support
A successful private member's bill introduced the 1976 Industrial Common Ownership Act provided £250,000 of funding to lend to co-operative enterprises. This established ICOF as "the relevant national body for co-operative finance" with central government. Under the terms of the grant funds were released on a loan by loan basis, however the money became ICOF's as the loans were repaid. Over 120 loans totalling £725,000 were made from the fund between 1976 and 1994 before loan and revenue losses made further lending impossible.
Lobbying central government for support and recognition began again in 1997 in conjunction with ICOM after the new government expressed interest in co-operation.
Support for Care Co-operatives is even more relevant today. A UK Co-operative Council study of care co-operatives (ICOM 1998) has stimulated government interest in the provision of co-operative domiciliary care. With Compulsory Competitive Tendering being replaced by Best Value approach and other practice changes the market is ripe for co-operative growth. Bringing the service providers closer to the consumer is a way of empowering both. Co-operatives are the only legal structures that can genuinely allow local people to gain a real stake in the delivery of local care.
Food is very much on the agenda with GM debate revealing how national democracy, let alone local democracy, is over ruled by international agreements on free trade and global capitalism. Things can be different, community initiatives using sustainable agriculture are slowly taking root in the third world countries which have been untouched by modern technology. In the UK there are many examples of small communities and co-operatives employing sustainable and traditional methods of working the land. Co-operative borrowers such as Housing Action Zone, Redfield Centre and Sustainable Forestry & Timber are all examples of good practice. You can find out more about current borrowers from our May 2002 newsletter.
The 1980s and local support
During the eighties ICOF expanded through being entrusted by many local authorities to administer co-operative loan funds in their areas. The West Midlands Loan Fund was the first and between 1982 and 1984 the fund uncreased to half a millioin pounds and continues supporting co-ops today.
Other local authorities recognised the value in co-operative business development, and being aware of the limited access to capital for such ventures, asked ICOF to manage their dedicated loan funds. West Glamorgan, Luton, Northampton, London and York all followed the example before the end of the decade.
Local loan funds are a cost effective way of regenerating local economies. Funds specific to co-operatives ensure sustainable job creation and wealth generation which remain in the community.
During the 1980s unemployment soared and there was a general pressure to create jobs. Local co-operative loan funds were seen as one cost effective option for job creation. High risk loans were made causing the cumulative losses to rise in 1986 at 30 percent, this was clearly not a sustainable policy.
1981 saw the cumulative loans increase to £473,000 supporting 81 co-ops with losses at 18.6 percent and Net Assets increased to £176,000.
The 1987 plc issue
It became clear in the early 1980s that there was a growing need for a new national loan fund alongside the many developing local authority funds. The Banking Act of 1978 made it no longer possible to accept deposits from individuals and successful co-operatives. A new investment vehicle was needed.
ICOF plc was formed in 1987 as a subsidiary of ICOF Ltd with the specific purpose of raising capital by public share issue. Preference shares were offered, redeemable after 10 years, and £550,000 were purchased. This was both a successful and a pioneering approach to ethical investment. It was also innovative in that it spread shareholders' money across a wide portfolio of loans to reduce risk to the investor.
1986 saw the millionth pound being lent, 163 co-ops being supported and Net Assets exceeding half a million.
By 1989 cumulative lending had topped £1.5M, supporting a total of 214 co-ops with Net Assets reaching £1.2M - a record year for lending at £232,000. Cumulative losses started to fall at the beginning of the next decade when co-operative development was no longer seen as a vehicle for the maximisation of job creation. Co-operative and commercial viability were seen to be far more important.
The caring 90s
The early nineties saw an expansion of those co-ops seeking to benefit the community through their trading activities, following the co-operative tradition of people centred value based society.
In Europe the term Social Economy was becoming popular. When it crosses the Channel this phrase usually refers to co-operatives, community businesses, voluntary sector businesses and social or green businesses.
1994 Community Capital
ICOF's first 21 years had been devoted exclusively to financing the worker co-operative sector. A review of the market and the range of products and services showed a clear way forward. Whilst retaining a commitment to common ownership and workplace democracy, lending was extended to organisations engaging in economic activity to fulfil primarily social, mutual or community objectives.
ICOF Community Capital was established in 1994 as a new UK investment society offering individuals and organisations withdrawable membership shares. £450,000 was raised and although lending got off to a slow start, ICC has become the ICOF fund in most demand. Regenerating the social economy and empowering local communities are very much political strategies for neighbourhood renewal in the late 1990s.
1994 broke all previous lending records at £387,000 in the year whilst cumulative advances reached £2.5M. The Year End Loan Balance and Write-Off graph clearly shows lending accelerating and the loss rate falling.
Net Assets topped £2M and the implemented recommendations of ICOF's 1993 Products and Services Committee were showing results. These included the introduction of single monthly repayment loans, direct debit, and improved security taking arrangments - all performance enhancing measures.
1996 and beyond
The worker co-op sector survived the recession of the late eighties and early nineties and started to grow. Enquiries and applications to ICOF from new start and established co-operatives exceeded all previous totals. One exciting development was the level of enquiries from owners of conventional firms investigating the possibility of selling the company to the workforce for reasons either of rationalisation or succession. Scaleways, PS Refrigeration, Industrial Doors, Buzz Busses and Ashington Autos are all successful examples of employee buyouts assisted with ICOF investment.
1997 was a very successful year for ICOF. Our 1987 plc investors had the opportunity to redeem their 10 year preference shares but most opted to transfer to the new issue launched in June. The second plc issue boosted the funds to over £1 million with many new investors attracted to ICOF.
The years 1996 to 1998 were the busiest on record with average lending in excess of £431,000 pa, 1998 reaching over £0.5M with losses at an all time low - only 3.2 percent in 1998. Net assets in 1998 for the Group & ICOF Community Capital reached £2.46M. Staff recruitment and restructuring, relocating the head office and upgrading the technical systems all resulted in a significant improvement in operational efficiency.
2006 - A record year
2006 proved to be a monumentally successful year for Co-operative & Community Finance. In April it relocated its head quarters to Bristol - which has a growing interest in co-operatives and social enterprises - and appointed a new HQ team. It also celebrated a record year of achievement by providing over £1.2million in loan finance to the co-operative and social enterprise sector - the highest lending figure since it was established in 1973.
Other key achievements throughout the year include successfully meeting lending targets set out by the government for CDFIs as part of its Community Interest Tax Relief scheme, and the launch of the Village CORE Programme. The programme is a partnership between Co-operative & Community Finance, the Esmee Fairbairn Foundation and ViRSA (Village Retail Services Association) to provide £2million of start-up funding to new community-owned shops over the next three years.
2007 - Record breaking support
In 2007 Co-operative & Community Finance celebrated another record year of achievement. During the year it provided more support to co-operatives and social enterprises than ever before, releasing over £1.7 million in loan finance to support the growth of the sector.
Over 70% of its borrowers in the year were co-operatives - an increase boosted by the Village CORE Programme.
2007 also saw the launch of the third share issue for ICO Fund plc.
Click here for more information and how to invest, and for how to borrow click here.
Hackney Community Transport is a not-for-profit organisation that provides transport options for people unable to use mainstream public transport, supported by finance from Co-operative & Community Finance.
