Equal Exchange creating capital for new co-ops
Workers co-operative pioneering unique financing model
Friday September 25, 2009 -- Camille Jensen
Equal Exchange, one of the largest and most successful worker co-operatives in the United States, is pioneering a model to provide capital for new co-ops.

Rodney North, Equal Exchange’s answer man, says one of the main challenges for co-ops is finding the financing to get started.

This is because co-ops often have limited access to equity capital, relying mostly on members to provide funds for the company.

Co-operatives can also borrow from traditional sources for extra financing, but given co-ops are not strictly profit-orientated, banks and capital markets are not always open to investing in co-operatives, according to North.

Equal Exchange is working to support the growth of co-operatives by using a method that is similar to practices found in Spain and Italy — two countries that have a flourishing and active co-operative business sector.

In those countries, and often required by law, co-ops must invest a certain percentage of their profits to fund the future of the co-op movement.

“In northern Italy and the Basque region of Spain, there is a very strong worker co-op movement, which can be the strongest part of the economy in some areas,” says North. 

“Certainly having a source of capital for those co-ops was an essential piece of the puzzle.”

Following the Mediterranean countries’ lead, Equal Exchange is putting money aside to benefit American co-ops. The company has always donated 10 per cent of its profit to Fair Trade, however is now investing 3 per cent of that profit to fuel co-op creation.

The company is donating money to the Co-op Fund of New England, which is a community development financial institution that serves as a bridge between socially-responsible investors and co-operatives, community oriented non-profits, and worker-owned businesses in New England.

North says creating capital funds for co-ops is helpful by providing an avenue for co-ops other than debt financing. He adds he’d like to see more co-ops contribute to a pool that will fund new co-operatives.

Equal Exchange is also working with the National Co-operative Business Association, which has plans to create a national equity fund financing co-ops.

“We are still trying to work out the details, but that would be a very exciting development,” says North.

—  Learn how Equal Exchange generates capital for its own business in an upcoming story

If you have feedback on this article, please contact the newsroom at 800-294-0051, or e-mail camille(at)axiomnews.ca.