Small town residents everywhere know the feeling of declining populations, services, and businesses. But what if rural communities could use their investment dollars to bolster their own economies? With a co-operative, they can.

More rural communities are learning how to use the co-operative model to capture local money — including RRSP contributions — to invest in local businesses. Across Canada, Community Investment Co-operatives (CIC) allow people to pool their money and lend it to local business owners.

In Sangudo, Alberta, an investment co-op was used to retain a local meat packing facility that may have otherwise closed with the owner’s retirement. The FarmWorks Investment Co-operative in Wolfville Nova Scotia provides loans for farms, food processors, and value-added food producers.

One of the newest CICs to incorporate is the Creston and District Community Investment Co-op (CDCI Co-op) in British Columbia. Project leader Eden Yesh got a resounding “yes” when he proposed the idea of community finance models to the area, and facilitated a feasibility study to see what model would work best. The co-op model won out.

“We ended up deciding on the co-op model because we wanted to move money that either exists in our investment portfolios sitting on Wall Street or Bay Street or around the world in global mutual funds back to our own community. We wanted to do it with existing money or new money, so we were having community members pitch in money together into one pool, and then lending it out to our neighbours.”

The model appealed to Yesh and the stakeholder committee for a number of reasons: its one-member, one-vote structure, its community owned and controlled nature, and the fact that it can’t be bought out.

“The co-op model allowed us to start with loans,” he said, “… and then a few years into it once we build some capacity in loans we can move to equity investing and we could do ownership of projects, we could do community infrastructure. The co-op model allowed us to just go back and forth between all of those lending tools, financing tools.”

Here’s how CDCI Co-op works:

1. Co-op members pool their money to create a revolving loan fund.

2. Local entrepreneurs apply for financing from the co-op; applicants must show their venture will:

• encourage economic development in the region; and/or
• improve a social issue; and/or
• advance environmental sustainability; and/or
• enhance local agriculture and food systems

3. If the applicant is successful, the co-op provides funding, but also assists them with business development supports. This may include mentorship, promotion, referrals to business development services, and advocacy to encourage other lenders to provide financing.

CDCI Co-op members purchase a $500 common share, and then are encouraged to purchase up to three investment shares for $1,500 each. So far, the co-op has invested in a local bakery, and has three other pending applications.

Nova Scotia has led the way in Canada with its Community Economic Development Investment Fund (CEDIF) program, which provides tax incentives for people who invest locally: since the early 2000s, $75 million has remained in the province to support small businesses. Alberta, too, has conditions that allow CICs to thrive.

In BC, legislation restricts the effectiveness of the community investment model in a few ways: members are allowed to invest a $5,000 lifetime maximum in the co-op, and non-founding members must wait a year after joining to invest. Though only three people are needed to incorporate a co-operative in BC, the Creston group set out to recruit as many founding members as possible to avoid the one-year wait on investment. They decided they needed at least 55 founding members to be viable, and held a few community dinners to pitch the idea: 107 people signed up.

Yesh also helped form the British Columbia Impact Investment Coalition, which is lobbying the government to make policy changes — such as lifting the $5,000 limit and the one-year wait period, and providing tax credit incentives to local investment. BC could learn a lot from provinces like Nova Scotia and Alberta, whose policy environments are more favourable to this type of investment.

“We’re saying increase that cap or make it $5,000 per year, not $5,000 once forever. If you like your co-op and you want to help them capitalize on some projects and whatnot, allow members to invest in the co-op they believe in.”