Principle 3 (Member Economic Participation)

The International Cooperative Alliance (ICA) is the voice of cooperatives worldwide, established in 1895 to promote the cooperative model. The ICA’s report, Blueprint for a Cooperative Decade (2013), explains that “cooperatives need access to capital if they are to be established, grow and flourish”, and “the aim is to secure reliable cooperative capital while guaranteeing member control”. The ICA’s Survey of Co-operative Capital (2015) goes further, stating that “capital from external sources and adhering to co-operative principles is not an either-or proposition” and that “non-voting shares can be used to preserve member democratic control while creating one or more classes of shares that can attract member or non-member investment by participating in the appreciation in [the] value of the co-operative”.

The survey explains that “the attractiveness of these shares increases if they are liquid [and] with advancing technology, this can be easily provided through an online platform”. The ICA’s Capital Conundrum for Co-operatives report (2016) suggests that “a typical solution consists of issuing non-withdrawable investment shares that do not carry voting rights …. [and] these may or may not be tradeable”.

Currently, the solutions described above to raise capital do not exist, meaning in the rare occasions larger coops issue tradable shares, they must participate on established stock exchanges which do not recognise or understand cooperative values and principles.

That is why we created Coop Exchange – a cooperative home for cooperative capital.

Coops traditionally have been reliant on debt instead of equity – for example, bonds – however, this doesn’t guarantee member control. There are cases of coops that issued debt instruments on the (non cooperative) existing capital markets being forced to renegotiate with the owners of its debt, resulting in one case having its ownership of a substantial subsidiary going from 75% to 30%.

Coop Exchange’s value add is that will offer access to capital, debt or equity, whilst guaranteeing member control and eliminating the liquidity risks associated with withdrawable share capital (i.e., a potential run on capital).

Coop Exchange’s key differentiators (as compared to other means of raising cooperative capital) are that:

• Liquidity risk will be undertaken by the market, not by the cooperative, which does not have to worry about a sudden influx of share withdrawals;
• with access to a large volume of investors, cooperatives can raise significantly larger sums of money thus supporting capital-intensive programmes and enabling them to compete at scale; and
• refinancing is more straightforward as the cooperative can simply list further shares on the platform.

Listing coops will need to be ‘listing ready’ by reference to finance, governance and management acumen. However, with technology and process management, the typical listing costs can be significantly reduced and so Coop Exchange will seek to lower listing costs without compromising on compliance.

Please note that the content of this page is for general information and educational purposes only. In so far as it refers to Coop Exchange’s potential services these relate to a future state once the Coop Exchange platform is launched and appropriately regulated. The information is not provided, and should not be construed as the provision of financial advice, the promotion of an investment product, or dealings or arrangements in investments. Investments bring risk and so anyone wishing to invest (whether in coops equities, debt or other securities) should first obtain appropriate advice from an authorised person, please see our Regulatory Notice.