SOCIAL ACCOUNTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
CONTENTS Page
Chapter
1
Welcome
2
Social Audit Statement
3
Why We Exist and What We Do
4
Where We Work
6
Our Performance against Aims and Activities
7 23 30
Aim 1: Provide financial services and business support which make livelihoods
and living standards better for people as they trade their way out of poverty
Aim 2: Develop our community of investors, the support of donors and
volunteers, and partnerships with those who share our commitment to fair and just trade Aim 3: Manage our resources in line with our principles of love, justice and stewardship
34
About Shared Interest
37
Stakeholders and Consultations
40
Conclusions
46
Glossary and Abbreviations List of Annexes and Supplementary Information
ACKNOWLEDGEMENTS Drafting of this report was undertaken by the Social Reporting Team at Shared Interest: Kerrey Baker, Laura Carrick, Jo Hall, Lucy McMahon, Chris Pay, Stina Porter, Andrew Ridley, Denise Sumner, Jo Tong, Mark Vassallo and France Villeneuve. We are grateful to Dr Matthew Anderson, Yvonne Ewington, Alan Kay (Chair) and Stuart Raistrick, for providing our independent verification this year. Front cover image: TraidAID Integrated, Ghana Editing and illustrations provided by Alpha Communication
WELCOME Welcome to Shared Interest’s eleventh Social Accounts and the first since I became Chair. This report covers 12 months from 1 October 2014 to 30 September 2015. Shared Interest’s 25th year has been full of achievement. Not only have we surpassed our target of reaching £33m in Share Capital, but our lending has also continued to increase. With customers across the globe, we have recruited additional staff overseas to support our regional managers and also have a regional manager and regional representatives here in our Newcastle office, responsible for customers in Europe, North America, Asia and Pacific Rim. Shortlisted for 13 awards this year and winner of the prestigious Third Sector Award in the Enterprise category, we can be sure that this commemorative year has reflected the progress made since our inception in 1990. Shared Interest Foundation has continued to help small and medium sized businesses in the developing world to create jobs and increase incomes in disadvantaged communities. Our evaluation of the Access to Finance project has seen our charity more than double its target in helping businesses benefit from over £2.5m of finance. This means that 31,260 members of 24 organisations will see improved trading opportunities, new equipment and product diversification opportunities. It is a pleasure to introduce a set of Social Accounts that detail the real impact behind our activities. We hope you enjoy reading this report, and welcome any feedback. Please email any comments to membership@shared-interest.com.
Mary Coyle MBE Chair of Shared Interest
SCOPE AND METHODOLOGY These accounts cover Shared Interest’s financial year from 1 October 2014 to 30 September 2015. References to ‘this year’ and ‘2015’ should therefore be read as the above 12-month period. They cover the operations of both Shared Interest Society and Shared Interest Foundation, which are summarised in the aims and activities listed on page 5. These aims cover the substantive activities of both organisations. A full picture of our work can be gained by reading this report in conjunction with the Directors’ Report and Financial Statements which are available for both Shared Interest Society and Shared Interest Foundation at shared-interest.com/SA15/Annex21 and shared-interest.com/SA15/Annex22. This report was produced in accordance with the process recommended by the Social Audit Network UK (SAN). This includes audit by an independent panel, chaired by a SAN qualified social auditor, members of which are listed on the previous page. In accordance with this approach, we compile these accounts using a combination of internally generated data and consultations with key stakeholders. Full details of our stakeholders and our methods of consultation can be found on pages 34-36. Where we have quoted comments in the accounts, we have selected these to be a representative sample of the balance of opinions from the consultations conducted.
Social Accounts for the year ended 30 September 2015 | 1
SOCIAL AUDIT STATEMENT The Social Audit Panel has examined the draft Social Accounts submitted to us and discussed them in detail with Patricia Alexander (MD), Kerrey Baker, Tim Morgan, Frances Villeneuve and Jo Hall at the Social Audit Panel meeting held on 17 November 2015. I have examined the revised Social Accounts which were prepared following the Social Audit Panel meeting and which have taken into account various points identified in the notes* of the Social Audit Panel Meeting. We also examined a sample of the data and the sources of information on which the Social Accounts have been based. We believe that the process outlined above has given us sufficient information on which to base our opinion. We are satisfied that, given the scope of the social accounting explained in the revised draft and given the limitations of time available to us, the Social Accounts are free from material mis-statement and present a fair and balanced view of the performance and impact of Shared Interest as measured against its stated values and aims and the views of the stakeholders who were consulted. The Social Audit Panel was unanimous in affirming that the accounts were clear, comprehensive and thorough, and that much progress had been made in responding to the Panel’s recommendations from previous years. We identified a number of important issues to be taken into consideration during the next social audit cycle. In particular, we would refer to the following: • There has been progress in Shared Interest reporting more on the outcomes and the wider impact of their work. However further progress can be made through development of the Theory of Change model which will enable a closer examination of the degree of impact achieved and enable Shared Interest to reflect on issues of wider strategic significance. • Consider linking the key findings from the social accounts directly to Shared Interest’s use of finance, its strategic outlook and plans for future development. • Suggest re-looking at how the breadth and extent of Shared Interest’s work is presented. More specifically, the use of maps could be reviewed and it may be possible to create a map that will allow ‘drilling down’ to more community-based information. • The current format for the Social Accounts contains a considerable amount of information held within 50 pages. Arguably more attention could be given to interpreting that information and linking it more directly back to the aims and ultimately to the overall mission and values. The members of the Social Audit Panel were: Alan Kay (SAN Social Auditor, Chair) Matthew Anderson, Portsmouth Business School, University of Portsmouth Yvonne Ewington, Partnership Engagement Officer, Sunderland Partnership Stuart Raistrick, Hexham, Northumberland
Alan Kay, Chair of the Social Audit Panel 17 December 2015 * The notes of the Social Audit Panel meeting form part of the social accounting and auditing process and may, by arrangement, be inspected along with the full Social Accounts at the offices of Shared Interest, Pearl Assurance House, 7 New Bridge Street West, Newcastle upon Tyne NE1 8AQ Members of the Social Audit Panel have acted in an individual capacity.
2 | Social Accounts for the year ended 30 September 2015
WHY WE EXIST AND WHAT WE DO Shared Interest Society plays a crucial role in the fair trade movement. With 9,045 members, each investing between £100 and £100,000, we are able to lend money directly to fair trade businesses across the globe. You can read more about our lending products at shared-interest.com/SA15/Annex1 These businesses range from sole trader handcraft producers to large scale coffee co-operatives in the developing world, to buyers mostly in Europe and North America. We offer a variety of lending options that enable our customers to pre-finance orders, purchase essential machinery and infrastructure, make advance payments to farmers and artisans and finance inventory for new shops selling fair trade goods. In addition to fair finance, through Shared Interest Foundation, we continue to provide financial training and business support to fair trade producers. This is supported by donations and grants from over 390 donors. You can read more about Shared Interest and our achievements over the last 25 years at shared-interest.com/about-us/our-history. Our Society and Foundation have a shared mission and set of values:
MISSION Our mission is to provide financial services and business support to make livelihoods and living standards better for people as they trade their way out of poverty. We work collaboratively and innovatively with those who share our commitment to fair and just trade. With a community of investors and the support of donors and volunteers, we seek to contribute to a world where justice is at the heart of trade finance.
VALUES We will conduct our business in a manner which reflects the principles of love, justice and stewardship. We will: • Work co-operatively with our members as we take and share risk • Value and engage our donors and supporters • Encourage the commitment, talents and energy of our staff in an environment of mutual respect • Work to recognised fair trade standards* • Respect the diversity of different cultures • Place partnership at the heart of what we do *
World Fair Trade Organisation (WFTO) 10 principles of fair trade at http://www.wfto.com/fair-trade/10-principles-fair-trade
Social Accounts for the year ended 30 September 2015 | 3
Location of Shared Interest Customers and Beneficiaries
Producer customers 1-5
You can read case studies of different customers on our website at shared-interest.com/SA15/Annex4
4 | Social Accounts for the year ended 30 September 2015
Buyer customers 1-5
6-10
6-10
11-20
11+
20+
Training and support projects Shared Interest offices
Where the funds of Shared Interest members are used This year we made payments totalling £51.4m to 401 organisations in 58 countries
3 4 3
12 1
3 2
1
1
2
1
17
6
17
4
2
51
1 2
8 6 4 5 3
1
1 9
5 13 14
8
12
1
2 1
13
2
4
7
4 5
10
27
11
5 1
51 13
1
2
4
1
3 8
10
1
Total payments to country Less than £100k £100k - £500k £500k - £1m £1m - £5m More than £5m Numbers on map indicate number of organisations paid in country
5 | Social Accounts for the year ended 30 September 2015
OUR PERFORMANCE AGAINST AIMS AND ACTIVITIES We report on our performance during the year under the three headings below. These organisational aims contribute to the achievement of our Mission and Values. All aims and accompanying activities are reviewed annually by the Social Reporting Team and approved by the Board of Directors. This year we have reduced our aims from four to three, and have revised our activities accordingly. The key stakeholder groups within each aim are listed but a full stakeholder list is available on page 34.
Aim 1: Provide financial services and business support which make livelihoods and living standards better for people as they trade their way out of poverty Key stakeholders: customers and beneficiaries Activities • Provide lending directly to producer businesses • Enable more producer businesses to access finance by providing financial services to their buyers and by delivering training • Build sustainable support for fair trade businesses
Aim 2: Develop our community of investors, the support of donors and volunteers, and partnerships with those who share our commitment to fair and just trade Key stakeholders: members, donors, volunteers and partners Activities • Attract and retain investors, donors and volunteers • Act co-operatively, valuing the views of our membership and wider supporters • Collaborate and innovate with partners
Aim 3: Manage our resources in line with our principles of love, justice and stewardship Key stakeholders: staff Activities: • Ensure good financial stewardship of our investments and donations • Encourage staff’s talent and commitment in an environment of mutual respect • Practise good environmental stewardship
6 | Social Accounts for the year ended 30 September 2015
AIM 1: PROVIDE FINANCIAL SERVICES AND BUSINESS SUPPORT WHICH MAKE LIVELIHOODS AND LIVING STANDARDS BETTER FOR PEOPLE AS THEY TRADE THEIR WAY OUT OF POVERTY Broadly speaking, our lending falls into two categories: funds lent directly to fair trade producer groups in developing countries (producer lending) and funds lent to fair trade wholesale or retail businesses in developed countries (buyer lending). In the instance of funds lent to buyers most are used to pre-finance orders and we send this money to producers, on behalf of the buyer. These are referred to as ‘recipient producer payments’. Some payments are also supplemented with funds which are not borrowed from us, but are part of the payment from commercial buyers for specific orders against which we have lent. This means that the value of payments made is greater than the value of lending facilities provided. Although we do offer term loans primarily for the purchase of assets such as a cableway for transporting bananas, the majority of our lending can be classed as short term rolling facilities, designed to be repaid as contracts are fulfilled so that the funds become available again. Each year we review our lending and analyse the type of products we have been lending against, as well as the geographical reach and the rates of interest we charge. This year’s approach differs from previous years as we have separated the analysis of lending provided to fair trade producer organisations and lending provided to fair trade buyer organisations. The chart below shows how over the last three years the proportion of our total payments that goes directly to producer groups has increased. Payments made to producers on behalf of the buyers has decreased. This trend is analysed in the following pages. Payments made to producers and on behalf of our buyer customers over the last three years £60m £50m £40m
Buyers
£30m
Producers
£20m £10m £0m 2013
2014
2015
The chart below shows that producer and buyer lending varies significantly between regions. It is particularly important to note that a large proportion of payments made on behalf of buyers go to Asia/Middle East where we would otherwise be unable to work. Payments made to producers and on behalf of our buyer customers by region, 2015 £25m £20m Buyers
£15m
£5m £0m Asia / Middle East
South America
Central America
East Africa
West Africa
Europe / North America
Social Accounts for the year ended 30 September 2015 | 7
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Producers
£10m
Activity 1 – Provide lending directly to producer businesses This year, we made payments of £32.2m to producer customers, which is £5.2m higher than the previous year as shown in the graph below. This exceeds the total amount committed to producer customers by £4.5m; a good indication that credit facilities successfully allowed producer organisations to re-use their facility over the space of the year. A full list of our producer customers can be found at shared-interest/SA15/Annex 2 Committed lending and payments to producer c ustomers in relation to Share Capital £35m £30m £25m £20m
Share Capital
£15m
Committed
£10m
Payments
£5m 2013
2014
2015
Our regional presence in Kenya, Peru, Ghana, and Costa Rica has helped our strategy of growing the proportion of direct producer lending. Annual Producer Committee meetings are held to ensure that we understand the regional needs of our customers. A greater proportion of our members’ Share Capital is now being used to support producers as shown above. Payments to South America are significantly greater than other regions due to the larger number of facilities provided to coffee producers where the value is typically higher than that of fruit or handcraft producers. Payments to producer customers by region £20m
2013 2014
£15m
2015
£10m £5m
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Asia
South America
8 | Social Accounts for the year ended 30 September 2015
Central America
East Africa
West Africa
To ensure we achieve the greatest utilisation of our Share Capital we take advantage of the seasonality across different products and regions. When the coffee harvest in South America finishes, the Central American harvest begins, meaning that their borrowing peaks never coincide. This allows us to commit to lend more money than our capital value total. In addition we control the risk to capital by setting a prudential limit on approved facilities of 125% of our Share Capital and reserves. Based on year-end figures this currently equates to £8.3m more than our current Share Capital total. Payments to producer customers 2015
Largest payment in Latin America - Peru was to coffee producer for £659,261
Smallest payment in Africa - Ghana, was to pineapple producer for £90
Most payments were made to Peru - 340 totalling £16.9m
Smallest payment in Latin America - Chile was to a fruit producer for £57
Largest payment in Africa - Ivory Coast was to cocoa co-operative for £548,561
Lending for different type of products We have continued to diversify the products within our lending portfolio to mitigate against our risk exposure in coffee and as a result we have seen growth in lending to producers trading in fresh fruit, nuts and cocoa. The chart below show lending for different types of products as a percentage of our approved lending.
47% Coffee 11% Cocoa 10% Handcrafts 7% Nuts 6% Fruit 4% Garments /Textiles
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16% Other products
Social Accounts for the year ended 30 September 2015 | 9
10
8
Number of Products
The chart below shows the countries and diversity of commodities involved in our work. The size of the circle is representative of the total value of payments and the position indicates the number of customers and products in the country. It highlights the importance of Peru in our lending portfolio: we have 50 customers in Peru to whom we made payments totalling £17m during the year. This is understandable as more than 50% of the world’s Fairtrade coffee and cocoa is produced in Latin America.
Peru
Ghana
Uganda
6
Kenya
Tanzania Costa Rica
4 Malawi/Mauritius
Ivory Coast Chile
Guatemala
Honduras
2 Benin Bolivia Brazil Brazil 0 El Salvador El Salvador 0 Kyrgyzstan Kyrgyzstan Philippines
Burkina Faso
Mexico/Rwanda 2
East Africa West Africa South America Central America Rest of the World
4
6
Number of Customers
Nicaragua 8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
New lending In 2015, we approved 41 producer lending proposals. This included 25 new customers and 16 existing customer increases. These facilities were in 7 different countries in 5 different product categories. For a total of £4.8m.
New approved facilities for new and existing customers 10
New business Existing customer increases 6 4
7
4
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2 Coffee
Cocoa
Fruit
10 | Social Accounts for the year ended 30 September 2015
1
2
Handcrafts
3
2
Other
50
Interest rates The graph below shows the types of lending and interest rates available in Latin America and Africa from Shared Interest and other alternative lenders. (Our two producer customers from outside Africa and Latin America have been excluded from this analysis because they would be easily identifiable.) The rates of interest we charge are higher across all regions apart from in Latin America for credit facilities. We do know, however, through discussions with customers, that in many cases the effective cost of our lending is considerably lower than other lenders because of the way our facilities are structured. 11.50% 11.00%
10.98% 10.72%
10.50% 10.00%
10.38% 10.06%
10.11%
9.50%
9.37% 8.90%
9.00%
9.59% 9.03%
8.83% 8.27%
8.50% 8.00%
7.77%
7.50% Latin America
Africa
Latin America
Term loan
Line of credit Alternative lender
Africa
Mid Point
Shared Interest
The table below shows that the security we hold over assets is also minimal compared with other lenders. Lending Line of credit
Region Latin America Africa Latin America
Term loan Africa
Source of finance
Average interest rate
Number of loans Secured Unsecured
Shared Interest
10.11%
5
22
Alternative lender
10.98%
33
28
Shared Interest
9.59%
4
17
Alternative lender
8.90%
13
14
Shared Interest
10.38%
1
22
Alternative lender
8.27%
58
24
Shared Interest
10.06%
2
21
Alternative lender
7.77%
18
29
* This table shows customers where we have been able to identify a comparable interest rate from alternative lenders.
Country risk
The chart on the next page shows the countries in which we lend, and the number of producers with whom we work, in relation to their country risk category. Although we have a large number of producer organisations based in category A countries; the producers we reach here are typically marginalised rural organisations taking little benefit from the country’s infrastructure. We operate a facility in excess of £500k in the highest risk category, D. Social Accounts for the year ended 30 September 2015 | 11
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We balance the desire for our lending to reach those who need it most, with the need to avoid placing our members’ capital at excessive risk. To control our country-related risk we use an independent evaluator organisation, Coface, which provides a country categorisation, A to D, with D being the most risky, and we use prudential limits to control our exposure to countries in C and D categories. A more detailed explanation of country risk can be found at shared-interest/SA15/Annex5.
B
C
Burkina Faso (2) Tanzania (1) Ivory Coast (1)
Kenya (10)
Ghana (10)
Benin (1)
Bolivia (2) Burkina Faso (2)
Kenya (4) Benin (1) Tanzania (6)
Philippines (1)
A
Peru (5)
El Salvador (1)
Uganda (5) Ghana (1) Ivory Coast (2)
Peru (28)
Costa Rica (1)
Mexico (1) Peru (10)
Chile (1)
£0-50k
Chile (3)
£50-250k
Costa Rica (2)
£250-500k
Kyrgystan (1)
Ni Ug ca an r a da ( gu 1) a (2 )
Mexico (2)
Peru (5)
D
Burkina Faso (1) Bolivia (1) Uganda (3)
Brazil (1)
Mauritius (1)
Costa Rica (2)
Uganda (2)
Ivory Coast (10) Ghana (2) Rwanda (3) Guatemala (1) Honduras (6) Nicaragua (3)
Costa Rica (1)
£500k+
Malawi (1)
£500k+
£250-500k
£50-250k
£0-50k
Lending to producer customers by turnover band
£0-£500k £500k-£1m £1m-£2m £2m-£5m
The chart on the left shows that the majority of our lending to producers is directed towards smaller groups, with 52% falling in the turnover band of below £500,000.
£5m+
The Monitoring and Evaluating committee was formed in 2014 with the specific purpose of refining and reviewing data collected on the lending portfolio. They have identified four key indicators; business performance, financial performance, socio-economic impact and environment.
In 2015 … We lent money to 150 producer groups With 6,039 permanent employees These groups represent 247,348 individuals Including 93,478 women These businesses collectively earned revenues* of £226.3m
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And paid £152.4m to their members The 111 groups producing crops sustainably cultivated 276,177 hectares And exported 256m kg into sustainable supply chains. * Although we contribute to this revenue we are currently unable to quantify the proportion directly related to Shared Interest's support
12 | Social Accounts for the year ended 30 September 2015
PAID EMPLOYEES
FARMERS & ARTISANS
The total number of employees across all of our producer customers
The total number of individuals across all of our producer customers
2,536 are women
93,478 are women
6,039
1
650
The smallest to the largest number of employees in any one organisation
247,348
4
65,000
The smallest to the largest number of individuals in any one organisation
Producer consultations This year a consultation was undertaken with our producer customers in South America with 25 producer organisations participating (shared-interest/SA15/Annex6). One of the areas of discussion was their relationship with Shared Interest and 60% said that it had had a direct impact on the growth and sustainability of their business. The chart shows the producers’ views on the benefits of working within fair trade. Views on the benefits of fair trade The farmers/artisans have seen an improvement in their quality of life as a result of being part of a fair trade organisation
1. Agree 2.
My business would be sustainable if i was not involved in fair trade
3. 4.
I have seen an increase in sales through being involved in fair trade
5. Disagree
When asked about the internal challenges they faced, the producers generally felt that they had open and transparent board meetings with clear hierarchical structure but many felt that they needed to improve their management so they could better manage their finances. The next table shows some of the external challenges identified.
Social Accounts for the year ended 30 September 2015 | 13
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Views on external challenges faced Pests and disease
1. Highly challenged
Climate change
2. Accessing finance
3. 4.
Finding buyers
5. Not challenged
Market prices
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Activity 2 – Enable more producer businesses to access finance by providing financial services to their buyers and by delivering training We lend to fair trade buyer organisations to assist with the payment of pre-finance, which can often place pressure on cash flow. A full list of buyer customers can be found at shared-interest.com/ SA15/Annex3. Here we explore our additional reach to producer organisations who do not hold an account with Shared Interest but who do receive payment from us on behalf of their buyer partner. Committed lending and drawn balance for buyer customers in relation to Share Capital £40m £30m
Share capital
£20m
Committed Average drawn balance
£10m 2013
2014
2015
The decline in lending to buyer organisations is evident in the graph above, where the ‘average facility drawn’ amount has seen a steady decline. This is a result of our policy to lend more directly to producers and the availability of cheaper credit from conventional financial sources. The average drawn balance for buyer customer accounts has decreased by £1.1m, but at a slower rate than the previous year’s £5.6m. This is due to new buyer facilities, which have increased the committed lending value by £2.1m. Payments on behalf of buyer customers by region
£12m £10m
2013 2014
£8m
2015
£6m
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£4m £2m Asia / Middle East
South America
Central America
14 | Social Accounts for the year ended 30 September 2015
East Africa
West Africa
Europe / North America
In direct contrast to producer customers, the majority of payments made on behalf of buyer customers are sent to Asia, primarily to Nepal, Bangladesh, India and Pakistan where there is a large concentration of fair trade producer organisations. We are unable to lend directly to producer organisations there because of financial regulations in these countries. Payments on behalf of buyer customers 2015
The highest number of payments made was to India - 427 totalling £3.7m
The largest payment made was to a coffee cooperative in Peru for £436,505
Smallest payment made was to a handcraft producer in Kenya for £14
On behalf of buyer organisations we made a total of 1,962 payments to 289 organisations in 55 countries totalling £19.2m Consultations with recipient producers in receipt of buyer pre-finance This year we surveyed producer organisations in receipt of a payment from one of our buyer customers. A total of 376 representatives of our 289 recipient producer customers were invited to complete an online survey asking about their experiences working in the fair trade market place, what challenged them, and how was their experience of working with Shared Interest. A total of 40 responses were received. Details of the survey can be found at shared-interest.com/SA15/Annex6. Views on the benefits of fair trade The farmers/artisans have seen an improvement in their quality of life as a result of being part of a fair trade organisation
1. Agree 2.
My business would be sustainable if i was not involved in fair trade
3. 4.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Social Accounts for the year ended 30 September 2015 | 15
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5. Disagree
I have seen an increase in sales through being involved in fair trade
Views on external challenged faced Pests and disease
1. Highly challenged
Climate change
2. Accessing finance
3. 4.
Finding buyers
5. Not Challenged Market prices
0% 10% 20% 30%
40%
50% 60% 70%
80% 90% 100%
Views on working with Shared Interest If I needed to borrow more funds Shared Interest would be our first option
1. Agree 2.
Shared Interest directly impacts the livelihoods of our members
3. 4.
Working with Shared Interest has had a direct impact on the growth / sustainability of our business
5. Disagree
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Direct training to support producers This year we have provided direct training, mentoring, and support to 130 producer businesses to help them improve their financial systems and to increase their awareness of affordable finance. This took place through two projects delivered by our charity, Shared Interest Foundation. These projects are explained below. Project 1: Improving access to finance in East and West Africa, April 2013 – March 2015
Trained 122
Approved
ÂŁ2.5M of
producer
loans to producer organisations in Africa
organisations
5
Applied
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to other lenders
Mentored 47
producer
organisations
48
producer organisations applied to Shared Interest for finance
Funded by Comic Relief, the Access to Finance project was delivered in partnership with Fairtrade Africa. This joint project aimed to make fair finance more accessible for 150 Fairtrade farmer co‑operatives in Kenya, Tanzania, Uganda, Ghana and Ivory Coast. The project achieved higher than expected approved lending levels, but trained slightly fewer businesses than planned. The majority of lending was to businesses in Ivory Coast. This was partly attributable to the vibrancy of the cocoa sector in the country but also due to the innovation of the local Fairtrade network, Reseau Ivoirien du commerce equitable (RICE), who worked with the project team to propose and support a new method of lending to the smaller cocoa producers, with the assistance of the larger direct exporters. This agreement allowed finance to reach six businesses that ordinarily would not have been able to apply.
16 | Social Accounts for the year ended 30 September 2015
Loan applications to Shared Interest as a result of the project No. of loan applications
No. of loans approved
Value of loans approved
Kenya
10
3
£122,000
Uganda
4
4
£653,000
Tanzania
5
2
£136,000
Ivory Coast
21
11
£1,626,000
Ghana
8
4
£119,000
Totals
48
24
£2,656,000
Country
Overall, 122 businesses received financial training across all five target countries. Following an evaluation of 30% of the businesses at the end of the project, we found that 92% felt the training had filled gaps in their understanding. Moreover, 81% implemented learning into their operations, particularly in operating accounts, the budgeting process and formal financial reporting. Participants gave the training a rating of four out of five. Comments included: “We used to do income and expenditure but after the training we knew that there is a balance sheet.” (Admin Clerk, Wakulima wa Macademia) “I fully trained my fellow managers on budgeting controls, social lenders and basic financial management skills which I acquired.” (Programme Accountant, Bombolulu workshop) The project also improved participants’ knowledge of social lenders operating in their region. Prior to the training, very few organisations could name social lenders or knew how they functioned. To date, we know that 54 businesses have applied to Shared Interest Society (six since the official project period concluded) and five to other social lenders. This shows a basic understanding of how to access this type of lending and what is required as part of this process.
Ahafo Ano Ahafo Ano is a smallholder citrus co-operative in Ghana with 360 members (36 female). Prior to entering the programme they had experienced severe difficulties in accessing finance to grow their business. The co-operative requires huge outlays for farm maintenance and to increase the yield and quality of the fresh fruit product. Restricted access to funding meant farmers could not afford the inputs they needed and many had been forced to reduce the size for their farms. Local banks told the co‑operative that lending to them would be classed as high risk, even with the offer of members’ farms as security. After attending the training session, the co-operative was selected to be part of the mentoring process. This involved them working closely with an expert consultant over the course of six months to improve their skills and knowledge. Previously they did not have books of accounts but are now using them appropriately to enhance their financial management practices. They accessed a loan through Shared Interest Society in January 2015, the first external financing in their organisation’s history. Producers now have a renewed trust in the ability of the association to deliver and the executives are very positive about their future.
• Commodity-specific or tailored training is a preference among participants to provide relevant examples from their sector. • Mentoring is the most effective form of support but also the most costly. We are currently exploring different options for reducing costs. Social Accounts for the year ended 30 September 2015 | 17
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Findings from the project also confirmed the following points that will be incorporated into future training:
• Basic governance principles need to be in use before financial management training can be effective. This was particularly clear in Ghana where we piloted governance training in advance of financial management. • Financial management support should not cease once a loan is accessed. There are clear needs among the groups to continue learning how to manage the loan and repayments. An independent evaluation of the project confirmed that it had achieved: • 256% of its target for loans approved • 81% of the target for businesses trained • 104% of the target for businesses mentored The evaluation also highlighted that the management of the project had been good throughout, though there were some issues with under-budgeting. Since the official project period concluded in March 2015, an additional three participating organisations have had loans approved, equating to a further £331,000 in lending generated. Project 2: Malawi financial training project This year we worked with eight Malawian tea and sugar co-operatives, all members of the Malawi Fair Trade Network (MFTN), to improve their financial management capacity. The project developed following a needs analysis by MFTN, which identified tea and sugar producers as the weakest members of the network in terms of their understanding and systems for managing finances. We developed a short programme to meet this need, based on our learning from the Access to Finance project. The project activities took place from June to September, split geographically between central and southern Malawi. A two-day training session was held in each location to cover the basic principles of the course, to introduce the participants to the trainers, and to analyse the capacity of each participating co-operative. During the follow-up mentoring visits, four of the eight organisations were found to be using the new skills and knowledge learned. From the four remaining, one felt that they needed more assistance and three were unclear because key personnel were on leave. It was generally evident that where the organisations rely solely on farmers, with no professional staff, then capacity is much lower and managing finances well is a major challenge. The initial full evaluation of the project with the co-operatives will be carried out in December, with a subsequent evaluation 12 months later.
Activity 3: Build sustainable support for fair trade businesses This year we have continued supporting our partner networks through the following projects: • Improving producer livelihoods in Swaziland • RWAFAT capacity building support • Best practice in fair trade networks
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i) Improving producer livelihoods in Swaziland Following the completion of our previous project with Swazi partners SWIFT (Swaziland Fair Trade) we were granted new funding for a four year follow-on project beginning in January 2015 (you can read more at shared-interest.com/SA15/Annex9). The new project has four main outcomes: 1. Swazi micro-enterprises are operating as sustainable businesses providing local employment. 18 | Social Accounts for the year ended 30 September 2015
2. Medium and higher level enterprises have increased incomes for producers and created new jobs through increased sales. 3. SWIFT operates as a viable and sustainable membership network providing quality services to members and advocating for fair trade in Swaziland. 4. Employees and producers of SWIFT member businesses have improved support for HIV/ AIDs and wellbeing issues in the workplace. Following the success of the previous project, we focused on the development of SWIFT as an organisation, as well as looking at improving livelihoods for the artisans and producers. We are helping to strengthen SWIFT’s internal systems, legacy planning, stakeholder relationships and income generating activities, ultimately making the organisation more sustainable. Outcome 4 was included after the evaluation of the last project revealed a clear feeling among producers and business leaders that more could be done to improve the support offered within the workplace. During the first nine months, SWIFT recruited three new members of staff and made good progress establishing a commercial arm called SWIFT Pty which has raised approximately £25,000 to contribute towards the sustainability of the NGO. A detailed baseline study which was undertaken has given new insights into the producers and business owners with whom we work. SWIFT have also attended three trade shows in Swaziland, South Africa and the US, promoting their member businesses and developing themselves as an intermediary marketing organisation. The three-year training programme has recommenced with 30 new entry level artisans enrolled and we expect to work with 84 businesses in total.
2696
Over 50% have 5 dependants or more
8%
92%
Producers
are male
are female
and are sole income earners
they make jewellery, accessories, home décor
and food products (sauces & honey)
ii) RWAFAT capacity building support To strengthen our partnership with the Rwandan Forum for Alternative Trade (RWAFAT) we agreed to fund a business development post for a year. It is hoped that the role will help RWAFAT gain a better understanding of their membership needs. A former trainer with business experience was recruited and he has spent six months visiting each of the 38 RWAFAT member businesses to assess their status and understand their development needs. RWAFAT has recently provided training in trade show attendance and has been pleased to see the enthusiasm from the businesses returning as they begin to pay their membership fees once more. We are working with RWAFAT to seek ongoing funding to support them and have already been successful in securing a grant for the next two years.
This project brings together three core Shared Interest Foundation partners; SWIFT, RWAFAT and MFTN into one project to facilitate greater learning and support (shared-interest.com/SA15/ Annex8). A number of different activities have taken place between the networks: • MFTN undertook a strategic planning process, facilitated by SWIFT, which helped them and their Board plan for the future. Social Accounts for the year ended 30 September 2015 | 19
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iii) Best practice in fair trade networks
• SWIFT visited RWAFAT’s Business Manager and offered training on preparing businesses for trade shows. • RWAFAT took nine businesses to a trade show in Kigali. • SWIFT attended two South African trade shows with five businesses making good contacts. All three organisations conducted thorough membership surveys and have begun to think about new income generating ideas to help contribute towards their running costs. In September we conducted a final evaluation of the project in Malawi, with attendance from one representative of each of the three networks. The evaluation concluded that there has been some good cross-organisation learning between the partners and that they valued the opportunity to share their ideas and concerns with others in similar positions to themselves. The key overall learning gained from project has been: • Networks need to know their membership and to thoroughly understand their needs. This can be a challenge when sustainability of the network is a top priority and resources are scarce. • Best practice exchanges can be beneficial in developing new ideas and delivery methods. However, to fully engage in the process, a network has to be honest about its situation and what it actually delivers. • Staff from these networks need a variety of skills that include resource mobilisation, project management, organisational management and leadership, partnership development, financial management lobbying and advocacy, marketing and sales and training and facilitation. Recognising this challenge of upskilling the staff will allow Shared Interest Foundation to better tailor its support for these networks in future. Our M & E Officer based in Ghana has been working with producer customers to measure impact and below is a case study of one such organisation. A more detailed report can be found at shared-interest.com/SA15/Annex11.
Case study - Mpanga Tea Growers Factory Mpanga Tea Growers Factory (Mpanga) is based in Sebitoli, a rural area of the Kabarole district in Western Uganda. Sebitoli is 12 kms away from Fort Portal, the district capital, and about 300 kms from Kampala. Mpanga was incorporated in 1995 as a public limited company wholly owned by smallholder tea farmers in the Kabarole and Kyenjojo districts. As of 2014, the company had a total of 1,046 members and an employee population of 633. Mpanga’s mission is to process tea leaves and market the high quality grown by their shareholder farmers.
93% is
62,000 Jobs*
Tea in
Uganda
500,000 Livelihoods*
28 Processing factories (including Mpanga)
Exported
* Data from Bank of Uganda report 2011
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Business performance Mpanga had a very difficult beginning. Of the many tea factories incorporated in Uganda in 1995, Mpanga was the smallest in terms of membership, production level, and infrastructure. According to Mpanga’s former accountant, many doubted the ability of Mpanga to operate independently. 20 | Social Accounts for the year ended 30 September 2015
After taking over Kasunga Tea Estate, Mpanga was able to effectively and rigorously monitor quality processes on-site, leading to improvement in the quality of tea, which in turn attracted better prices at auction. Mpanga also benefited from this acquisition due to the supply of fuel wood from the Kasunga forest. The forest was populated with eucalyptus, renewable trees providing wood to fuel the tea processing facilities. Sales volume (tonnes) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2005
2006
2007 - Mpanga aquires Kasunga Estate with financial support from Shared Interest. This is the first piece of lending Mpanga receives from Shared Interest
2007
2008
2009
2007 - Decline in the average price of tea at the auction house. The average price dropped from $1.68/kg to $1.56/kg
2010
2011
2009 - Mpanga saw a decline in quality of tea leaves due to inadequate supply of inputs
2012
2013
2014
2012 - Shared interest provides financial support for the purchase of fertilisers to address quality issues
2014 - Another sharp decline in average tea prices from $2.2/kg in 2013 to $0.9/kg in 2014
Mpanga has taken a number of steps to buffer the business and to recover quickly from their challenges. These steps include green leaf quality improvement, the search for alternative market, and increase in local sales through value addition. Number of employees 700 600 500 400 300 200 100 0 2006
2010 to 2013 - Decline in growth of employees due to restructure and introduction of automated plucking machines
2007
2008
2009
2013 - Construction of a blending unit leading to increased staff numbers
2010
2011
2012
2013 to 2014 - Mpanga hired tea estate workers and therefore engaged new employees
2013
2014
2014 Construction of workers’ quarters using Shared Interest loan
Social Accounts for the year ended 30 September 2015 | 21
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2005
Social and environmental impact In 2014, Mpanga was awarded the Employer of the Year Award by the President of Uganda. One of the key areas of improvement in staff welfare was the provision of decent accommodation. In 2009, the organisation began constructing staff quarters to provide estate workers with somewhere to live. Further results from the 2014 employee survey revealed that Mpanga workers were satisfied with their working conditions. The majority of employees interviewed indicated that their working conditions have improved over time. Number of Producers 2009 - Revision of producer list indicated some no longer supply Mpanga
2,000 1,800 1,600 1,400
2010 onwards - Rise in numbers as new producers join
1,200 1,000 800 600 400 200 0 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2014 to 2015 Significant increase due to registration of high numbers of new farmers over the year
Producers have also benefited from the developments at Mpanga. The average price per unit paid to the producer went up from $0.10 / kg in 2005 to $0.17 / kg in 2014, representing 70% growth rate over the period. Miramaso Stephen, aged 71, has been a producer at Mpanga since 1996, He has seven hectares of tea gardens from which he supplies between 2,500kg and 3,000kg of green leaf tea to Mpanga each season. He pointed out that the cost of inputs kept rising and he wouldn’t be able to afford them without Mpanga’s support. He indicated that his income has enabled him to take care of the educational needs of his children. He supported his daughter to complete her degree in laboratory technology. One other child has also successfully completed a university-level training in mechanical engineering and has been employed by a cement manufacturing company; another one was trained as a teacher. He revealed that he was still financing the education of one more child who was in his third year at medical school.
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Mpanga has established three clinics and one maternity unit in the local community. Each clinic has a resident nurse, and a doctor who visits once a week. Furthermore, Mpanga has constructed shallow wells in seven communities between 2007 and 2011. People no longer walk long distances to access water for domestic use. Since 2005, Mpanga has dug a total of 23 latrines in 12 communities as part of their effort to promote hygiene and sanitation in the respective beneficiary communities. These interventions have helped control the spread of disease such as cholera. Mpanga continues to train producers on environmentally-friendly farming practices for sustainable agriculture. They also undertake climate change awareness campaigns and build the capacity of their producers on climate change mitigation strategies to improve yield. These interventions have led to the minimisation of the effects of climate change on production and to the conservation of the environment.
22 | Social Accounts for the year ended 30 September 2015
AIM 2: DEVELOP OUR COMMUNITY OF INVESTORS, THE SUPPORT OF DONORS AND VOLUNTEERS, AND PARTNERSHIPS WITH THOSE WHO SHARE OUR COMMITMENT TO FAIR AND JUST TRADE Shared Interest Society is a registered community benefit society and a member of Co-operatives UK. It is owned and controlled by its 9,045 members. Our membership continues to diversify and includes faith groups, fair trade partnerships, small businesses, schools and community organisations as well as individuals. In 2004, Shared Interest Society established a registered charity, Shared Interest Foundation, which is funded by donations and grants. Between the two organisations, we also have a range of volunteers and supporters, not all of whom are members or donors. In this section we explain how we develop our community of investors, donors, volunteers and partnerships.
Activity 1: Attract and retain investors, donors and volunteers Investors Of the 9,045 Share Accounts, 7,431 are individual or joint accounts and 1,614 are accounts held by groups or organisations. In total there are 10,772 individuals named on Shared Interest Share Accounts. Share Accounts closed in the year totalled 262, but overall we saw a net increase of 105 accounts. Alongside the increase in members, we significantly increased investment with a closing Share Capital total of £33,289,118, a net increase of £2,035,440. The average investment from a new member is £1,839; 8% up on the previous year and the average balance when a Share Account is closed equals £3,223, highlighting the ongoing need to recruit new investors. The average age of a member is 63 and the average length of time a member holds a Share Account is 13 years.
Donors
Number of Donors
Total Unrestricted Income
Total Restricted Income
Total Income
2011
153
£82k
£68k
£151k
2012
134
£132k
£120k
£252k
2013
244
£131k
£177k
£308k
2014
381
£181k
£89k
£270k
2015
390
£130k
£258k
£388k
Social Accounts for the year ended 30 September 2015 | 23
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Restricted income for Shared Interest Foundation increased as we successfully attracted a number of institutional grants, trust funds, and individuals donations. There was a decrease in unrestricted income this year, partly due to a reduction in the amount of donated funds from Society Share Accounts. However, a successful Shared Interest Society member legacy campaign saw a 17% increase in future income for the Foundation through nominations of over £1.7m. In total we have 390 donors, an increase of nine from last year.
Volunteers A network of 77 volunteers supports the work of the Foundation and Society. We engage with our volunteers in a variety of ways including training days, meet ups and a group Skype forum. This year our volunteers attended 79 events, provided literature at over 120 venues, and contributed 682 hours of their own time. Over the year we recruited nine new volunteers. Three ambassadors received training to support Shared Interest Foundation. Volunteer case studies can be found at shared-interest/SA15/Annex15.
Website We continued to build our website content, increasing the number of investor and lending case studies to illustrate our work. We launched an online application form and developed a new members’ portal, called Our Shared Interest, which gives investors the ability to view their statements and transactions, and change personal details as well as make withdrawals. By November 2015, members will also be able to invest online using a debit card. We currently have over 2,500 members using Our Shared Interest and we continue to highlight the economic and environmental benefits of online communications to the remainder of our membership.
17,995 Visitors to
www.shared-interest.com
3% more than last year
Social media This year we have further developed our social media activity, increasing the number of Twitter followers on our main account @SharedInterest to 7,505 and likes on Facebook to 1,077. In addition to this, the Shared Interest Foundation Twitter account @SharedIntFdn has 691 followers. The Managing Director is also now an active user of Twitter.
24%
@SharedInterest
8% increase on last year
INCREASE
1077
LIKES
Newsletters The 97th issue of our Society newsletter, Quarterly Return (QR) was published this year, and in our recent members’ survey 85% of members said they read QR regularly. We send a quarterly e-newsletter to members (who have an email address registered with us) and this achieves an average open rate of 57%. Shared Interest Foundation also sends a regular newsletter to donors. Copies our newsletters are available on our website.
Photography and films
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Two overseas photography shoots were commissioned this year and were used in online and offline publications. We use in-country photographers for all of our overseas photography. To commemorate our 25th anniversary, a film was created to highlight our achievements; this can be found at shared-interest.com/SA15/Annex14.
Media coverage During the year we had media coverage in The Journal, News Post Leader, Sunderland Echo and the Northern Echo newspaper. We appeared as a page lead in The Journal as part of a feature 24 | Social Accounts for the year ended 30 September 2015
into Co-operatives UK. We had widespread coverage of our award success online. We also ran an advertorial in the Big Issue magazine. With a total of 77 articles, we have achieved editorial media space with an equivalent advertising value of £180,454.
Advertising A total of eight insert campaigns were placed this year in The Big Issue, The Guardian Weekend magazine, RSPCA magazine and National Trust magazine. We recoup the money we spend on insert campaigns within two years from new investment.
8 CAMPAIGNS
376 NEW MEMBERS
£3,986,491 NEW INVESTMENT
50% of enquires converted into new investment
Materials A new Share Account application form was produced this year. The new materials were accredited with the Community Shares Standard, a new initiative to bring greater standardisation into the open and time bound community shares market. Shared Interest is the first organisation to receive the standard for open share offers. Following consultation with members, we will incorporate our Annual Review publication into our winter issue of QR, thus reducing print and postage.
Awards This year we entered 24 awards in total, 21 for the Society and three for the Foundation. We were shortlisted for 13 awards, and won the Third Sector Award for Enterprise. We were highly commended at the Sustainable City Awards in the Sustainable Finance category and reaccredited at The Responsible Business Awards in the Unilever International category. Shortlisted awards included The Guardian Sustainable Business Awards, North East Business Awards, Private Business Awards and the Social Enterprise Awards. Shared Interest Foundation was shortlisted at The Charity Times Awards. As a result of being recognised the Society gained substantial free publicity in the national press. The awards also boosted staff morale and reinforced our credibility with new investors and stakeholders.
25th Anniversary This year, Shared Interest Society celebrated its 25th anniversary. In the run up to the celebration, we launched a campaign in 2013 to increase membership and investment. Our goal was to reach to £33m in Share Capital by 2015. In July 2015 we hit this target, three months ahead of our set deadline.
Our 25th anniversary Annual General Meeting (AGM) was held at Sage Gateshead. Over 100 members attended and 17% of our total membership took part in the postal votes. Former Fairtrade International CEO Harriet Lamb was a guest speaker, along with Shared Interest customer, Chino Henriquez, General Manager of Apicoop – a honey and blueberry co-operative based in Chile. While Chino was in the UK he also took part in a schools project with Newcastle High School for Girls. In addition to our AGM we also held a member event in Bristol. Social Accounts for the year ended 30 September 2015 | 25
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Events
Activity 2: Act co-operatively, valuing the views of our membership and wider supporters Members’ survey In July 2015, Shared Interest conducted its fifth members’ survey. We do this every two years, alternating with our volunteers’ survey. A total of 8,382 surveys were distributed to members via post or email invite. This figure is slightly less than the total membership as we excluded people marked to receive no mail. In total, we received 2,175 responses to the survey; 1,367 paper copies and 808 online - a response rate of 26%. A copy of the survey can be found at shared-interest. com/SA15/Annex12. Data from the members’ survey not only helps in the production of the Social Accounts but also directs the membership engagement strategy. However, as our members invest for an average of 13 years and the survey results do not change substantially in a two-year period we will look to undertake a full survey our members every four years in the future. In the interim time we will utilise our new members portal to look at specific issues and questions as they arise. Our communication
HOW DO YOU RECEIVE YOUR COMMUNICATION?
POST
DO YOU READ OUR SOCIAL ACCOUNTS?
68% 32%
87%
ARE HAPPY WITH THE COMMUNICATION THEY RECEIVE
55% 45%
Both - 7%
94%
88% OF MEMBERS
SAID QR PROVIDES A SENSE OF OUR SOCIAL IMPACT
HAVE ONLINE ACCESS 8% MORE THAN IN 2013 Democratic structure When asked about participation in the Society, 56% of respondents indicated that they submit postal votes if they cannot attend an AGM. However, 31% said they had never been involved with an AGM or postal vote. The rise in our members’ understanding of the Board’s role could be due to the extensive Strategic Review consultation last year and the increase in member events.
79%
Understand the role of the Council (this has increased from 74% in 2013)
94%
Understand the role of the Board (increased from 77% in 2013)
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Members’ perceptions When we asked respondents the best phrase to describe their view of investment we found similar results to 2013, with support for fair trade being the most popular motivator followed closely by ethical investment and charitable donation. When asked ‘If we had to use members’ funds to write off customer debts, how much of your investment would you be prepared to lose?’ 31% of respondents said they would be prepared to lose up to 10% of their investment, 22% said they would be prepared to lose 10-25% and 18% said they would be prepared to lose 75-100% of their investment. 29% did not comment. 26 | Social Accounts for the year ended 30 September 2015
Results of the survey show that members with more money invested tend to view their investment as higher risk. They would also be willing to lose more of their funds to write off customer debts. As can be seen from the below graph, over 60% of investors are motivated by their support for fair trade. This view remains unchanged from previous surveys and was particulary evident in the 2014 Strategic Review (shared-interest.com/SA15/Annex24). 100%
Which of the following phrase(s) best describes how you view your investment in Shared Interest?
80% 61% 60%
54%
47%
40%
33%
20% 0% As part of your charitable giving
Specifically as ethical investment
Support for fair trade
Support for a co-operative business
Environmental work For the first time we asked members about their thoughts on environmental issues and 99% of respondents said they were deeply or somewhat interested. Our charity Overall, 52% of respondents said they were aware of the activities of Shared Interest Foundation. It is interesting to note that members who read the Social Accounts are more aware of the activities of Shared Interest Foundation. Demographics 58% of respondents to the survey were female and 41% male (1% would rather not say). 66% are retired with 12% in full time paid employment. 67% percent of respondents stated Christian as their faith, and 28% stated no religion. The highest proportion of members were in the 65-74 age category (33%), 23% were aged 55-64, and 19% were in the bracket of 75-84.
Donor survey In November 2014, Shared Interest Foundation carried out its first donor survey (shared-interest. com/SA15/Annex13). We surveyed 546 individual donors and enquirers and we received 130 responses, a 24% response rate (40% men and 60% women). Nearly 60% of respondents have been a donor for more than five years, and 83% feel that their donations do make a difference. On average they each support at least five different charities. 90% stated that they read ‘most or all’ issues of our newsletter. Some of the most popular reasons people stated for supporting Shared Interest Foundation were: Ethical Fair trade Help others Help people help themselves Make a difference Support Shared Interest ‘mission’ Supporting business
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• • • • • • •
Social Accounts for the year ended 30 September 2015 | 27
Activity 3: Collaborate and innovate with partners The work undertaken by Shared Interest would be impossible without our partners’ support. Over the year we worked with more than 50 different organisations. This enabled us to increase our impact, share learning and - most importantly - to spread the message about fair trade. You can find a list of these and all other partners shared-interest.com/SA15/Annex16.
Delivery partners Shared Interest Foundation is currently working with five delivery partners across Africa and Latin America. In-country support networks provide a vital resource to fair trade local businesses, and have an inherent understanding of their members’ needs. This helps ensure that we deliver the most appropriate support in the most effective way. We work directly with our partners on strengthening and growing their networks. This helps to create a sustainable future for their members and the communities that they support.
Funders To deliver our larger charitable projects we must attract funding from large, institutional donors and trusts and foundations. Over the past year, we have worked closely with three key funders who have enabled us to launch and deliver a project in Malawi, a project linking three of our delivery partners to share learning and a new four year project in Swaziland.
Strategic partners We count our strategic partners as organisations in our sector with whom we share joint marketing activity due to having similar values. Strategic partners also represent organisations who we are members of, or have a representative on the Board.
Groups and networks Over the year we work with many different groups and networks, all of whom are working towards similar goals, share our values or support our work. These organisations are vital to sharing information at a local level and we have participated in many events and activities in a positive and collaborative way with them.
Case study - Fairtrade Foundation Shared Interest Foundation has been a member of the Fairtrade Foundation since 2008. Since then we have carried out several joint activities together. Here is one example of how we worked together to make a difference: The beginning of 2015 saw Malawi suffering from the worst flooding seen for centuries. Farmers saw crops washed away and homes destroyed. Shared Interest Foundation worked with the Fairtrade Foundation to launch an appeal to help replace the vital crops that had been lost. The fundraising appeal was promoted on both websites and a newsletter detailing the appeal was sent to Shared Interest Foundation supporters. In total over ÂŁ35,000 was raised and sent to Malawi in time for the planting season.
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What was the impact? By working together, Shared Interest Foundation and the Fairtrade Foundation were able to raise more awareness for this appeal, which led to such a significant amount in donations. Through collaboration we were both able to understand the most urgent needs of the farmers and ensure that we both responded appropriately to help those affected get back on their feet as quickly as possible. 28 | Social Accounts for the year ended 30 September 2015
Case study - CSAF In 2013, Shared Interest Society joined six other international social lending institutions to announce the launch of the Council on Smallholder Agricultural Finance (CSAF). CSAF describes itself as ‘an alliance focused on creating a thriving, sustainable and transparent financial market to serve the financing needs of small and growing agricultural businesses in low- and middle-income countries worldwide.’ The founding members of CSAF are Alterfin, Oikocredit, Rabobank’s Rabo Rural Fund, responsAbility Investments AG, Root Capital, Triodos Sustainable Trade Fund and Shared Interest. What we have done so far: • Agreed a set of responsible lending practices • Created links to encourage better collaboration • Strengthened social and environmental due diligence • Organised training on price risk management for 71 staff in three countries led by TWIN • Agreed upon six shared impact metrics and published a report
IN 2014, CSAF
MEMBERS SUPPORTED
658
BUSINESSES REPRESENTING MORE THAN 1,175,000 FARMER HOUSEHOLDS
68% 27% 5%
WERE PRODUCER GROUPS (eg. FARMER CO-OPERATIVES) WERE OTHER SMALL & GROWING BUSINESSES WERE OTHER ORGANISATIONS
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“As CSAF members, we are achieving increasing impact yet reaching a relatively small portion of a large market. As more capital flows into this sector, we believe it is essential to draw on our collective experiences and help build a supportive infrastructure from which the entire sector will benefit.” - CSAF Annual Review
Social Accounts for the year ended 30 September 2015 | 29
AIM 3: MANAGE OUR RESOURCES IN LINE WITH OUR PRINCIPLES OF LOVE, JUSTICE AND STEWARDSHIP Activity 1: Ensure good financial stewardship of our investments and donations For Shared Interest, stewardship is about doing the best we can with the resources entrusted to us. We consider stewardship in all aspects of our financial and environmental work. More details on the operational finances of Shared Interest Society and Shared Interest Foundation can be found in our 2015 Financial Accounts at shared-interest.com/SA15/Annex21 and shared-interest. com/SA15/Annex22.
Financial controls Significant emphasis is placed on robust financial controls. Our procedures for budgeting, financial reporting and secure payment authorisation can be found at shared-interest.com/SA15/Annex17. Our internal controls are regularly reviewed, updated and audited. This year’s audits again raised no concerns.
Procurement We also follow an approach to procurement as set out at shared-interest.com/SA15/Annex18. This ensures that as far as possible and practical we source products and services that are fair trade, environmentally friendly, and locally produced. This page also includes a link to our green policy and checklist for purchasing.
Lending Our lending decisions are made within credit policies, which help in managing our exposure to risk. Prudential lending limits specify the proportion of our Share Capital, which can be lent by commodity, country risk category, region and product. These limits are approved by the Board of Directors. During the year we introduced a new limit for stock facility lending of 15% and also a set of new limits relating to lending outside of our core areas, an avenue we are pursuing following our 2014 Strategic Review (shared-interest.com/SA15/Annex24). The annual statutory financial accounts, as well as the presentation given at the AGM, provide further details of the management of risk by Shared Interest and in particular, the management of credit risk (defaults) arising from customers who have borrowed from the Society and are unable to repay Shared Interest when due.
Liquidity and investment The majority of our £33.3m Share Capital is deposited in GBP in fixed rate deposit accounts. The funds lent to our customers in foreign currency (we offer facilities in GBP, USD, EUR and AUD and we also have a small loan in Kenyan Shillings) are from foreign currency loans secured against the deposited Share Capital.
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The Co‑operative Bank remains our main banking partner but we continue to review alternatives and assess the strength and ethical performance of the Co-operative Bank under its new ownership. Our deposits held at other banks and institutions equals 14% of our total investment (2014: 18%). These figures include Share Capital, reserves, and a loan from Comic Relief. Cash Investments:
2011
2012
2013
2014
2015
Co-operative Bank
£27.5m
£30.3m
£30.5m
£28.9m
£31.3m
Others
£0.3m
£0.3m
£2.3m
£6.5m
£5.1m
Others (No.)
3
2
4
4
6
30 | Social Accounts for the year ended 30 September 2015
Fundraising ratios In addition to the Share Capital of Shared Interest Society members, we manage donations made to Shared Interest Foundation. In order to ensure we do this efficiently and effectively, we monitor two key ratios. Management costs as a percentage of charitable expenditure were this year 27% (2014: 27%) and fundraising costs as a percentage of income were 11% (2014: 16%). Increased overall income, mainly restricted funding, has caused this ratio to improve. We also monitor the running costs and reserves of Shared Interest Foundation, operating a policy of keeping 3 - 6 months of total expenditure in reserves, with a year end figure of 3.6 months (2014: 4.7 months).
Activity 2: Encourage staff’s talent and commitment in an environment of mutual respect Shared Interest employed a team of 37 staff at 30 September 2015, compared with 36 the previous year. Five staff joined the team this year and four left. These figures included four new staff recruited as a result of the restructure in the Lending Team, and one maternity cover position in the Finance Team. An organisational chart can be found at shared-interest.com/SA15/Annex25. The number of sickness days increased slightly during the year, as a result of an increase in long term sickness absence.
57%
43%
KENYA 2 FEMALE 2 MALE
PERU 2 FEMALE 2 MALE
COSTA RICA 0 FEMALE 1 MALE
GHANA 1 FEMALE 2 MALE
UK 16 FEMALE 9 MALE 37 Staff 36 full-time and 1 part-time
There has been an increase in training costs overall this year. This is due to an increase in Senior and Middle Management leadership development training and the number of courses leading to a professional qualification. However, this type of training is often distance, evening, or online, and this has resulted in a reduction in staff time costs and the number of training days undertaken this year by staff. Description
2013
2014
2015
Training cost (course/trainer fees)
£35,545
£24,865
£30,889
Staff time cost (while on courses)
£28,592
£30,285
£28,138
Inductions (staff time cost carrying out and attending inductions)
£5,792
£6,990
£4,496
Number of hours spent training
2,634
2,102
1,834
£69,929
£62,140
£63,523
360
283
255
Total Number of training days
Staff have weekly team meetings as well as one-to-one meetings with their line manager. Monthly updates on forthcoming activities in each department are held in the Newcastle office, with minutes sent to all staff. A Staff Forum meets regularly and liaises with Senior Management to improve general communication. Staff also had significant input into our Strategic Review process which took place in 2014. This subsequently resulted in a restructure of the Customer Service and Business Development Teams, which merged to become the Lending Team, increasing our staff presence in Africa and Latin America and providing better customer support. Social Accounts for the year ended 30 September 2015 | 31
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Communication
schem
e
sc
he
m
e
m e
n
ex iti
io
Fl
ns
Shared Interest aims to provide staff with job satisfaction by offering interesting and varied work combined with generous and flexible benefits. Benefits, including contributions of 9% into a group personal pension scheme, are illustrated in the diagram adjacent.
Childca re v
pe
e hem k sc wor
p
oucher
le to Cyc
Gr ou
Benefits and salary
Trainin g/deve lo progra mmes pment
ily
Fam
ve n co
ctio
te pro me
Fr ee
e cove
pa y
Life as
suranc
C sc om he p a m ny e si ck
a
an
se ha e urc t p chem ke s tic
Staff survey
te
vel Tra
r
Inco
fri
d
co
ffe
e
A five-point survey focusing on communication, leadership, respect, equitable treatment and the organisation’s direction is sent to staff twice a year. Comparison of the results showed an increase in participation from 32 staff in January (89%) to 35 staff in September (92%). In addition, there was an overall increase in positive responses. We also carry out an annual staff engagement survey. Having used the same People Gauge online survey as last year, it was very helpful to be able to compare results. Results showed that 33% of staff are actively engaged (41% last year), 64% engaged (57% last year) and the remaining 3% actively disengaged (2% last year). Although there has been a move from actively engaged to engaged, particularly in the expectations and understanding and communication sections, 97% of staff still remain actively engaged or engaged. The results can be seen below broken down into five key areas. Actively Actively engaged engaged Engaged
36.4% 31.4%
36.4% 40.0%
30.3% 48.6%
27.3% 34.7%
33.3% 48.6%
Actively engaged
Engaged
Actively disengaged
Actively disengaged
Engaged
36.4% 60.6%
60.6% 3.0%
65.7% 31.4%
2.9% 65.7%
36.4%
60.6%
60.0% 40.0%
0.0% 60.0%
30.3% 66.7%
66.7% 3.0%
48.6%
48.6%
60.6%
48.6% 27.3% 66.7%
60.0%
34.7% 66.7%
3.0%
2.9%
66.7% 6.1%
5.7%
60.0% 0.0%
33.3%
66.7%
48.6%
51.4%
51.4%
0.0%
Actively disengaged
3.0%
Development Value Stretch
2.9%
2014 results
3.0%
Recognition Pride My View
0.0%
2014 results
3.0%
Team Communication
2.9%
2014 results
Development Value Stretch 2014 results
Recognition Pride My View 2014 results
Team Communication 2014 results
Manager Feedback Support
6.1%
2014 results
5.7%
Time Expectations Ability
Manager Feedback Support 2014 results
0.0%
Time Expectations Ability
0.0%
2014 results
2014 results
Two additional questions enabled us to ascertain that: • 88% of respondents felt that Shared Interest fulfils its mission and values (2014: 89%)
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• 79% felt that staff are encouraged to understand other cultures (2014: 91%) The survey also asked staff how Shared Interest could help improve individual and team effectiveness and the suggestions will be considered by the Senior Management Team. Staff were asked to provide three words to describe what it’s like to work at Shared Interest and the top 40 most commonly suggested were used to produce a word cloud. 32 | Social Accounts for the year ended 30 September 2015
es
lici
po
Enhanced holiday entitlement
r
Salaries are reviewed annually with the cost of living, individual performance, and an annual salary benchmarking exercise all considered in the process. A comparison of the highest salary against the lowest salary in the organisation provides a ratio of 3.8 to 1.
ly end
The size of the words below corresponds to how frequently they were used. The word ‘challenging’ can be used in a positive or negative way. As it is surrounded by positive words it should be considered in this context.
Activity 3: Practice good environmental stewardship One of the key areas considered during our Strategic Review in 2014, was the global trend of environmental uncertainty. It is likely that this will involve a strain on food security with a global population estimated to be nine billion by 2050. As a result of the review, one of our new five strategic paths includes deepening impact. Within this, we will assist businesses in adapting to the challenge of climate change, encouraging them to invest in water and energy. In addition to this strategic approach, we continue to aim to reduce the environmental impact of our own operations with the assistance of our staff Environmental Team.
Recycling Staff continue to recycle paper, plastics, and glass. Paper used for printing in our UK office increased by 35.5% this year to 136,000 sheets. Paper recycling remained the same as last year at 52 wheelie bins.
Procurement Procurement of goods and services from local suppliers helps to minimise environmental impact and support the sustainability of businesses in our region. During the year, purchases from suppliers in North East England totalled £235,000. This represents 36% of our purchases (2014: 39%). You can read more about our procurement policy at shared-interest.com/SA15/Annex18.
Newcastle office and business travel The main contributors to our carbon emissions are in our office operations and business travel. Our electricity usage this year was 61,471 Kwh which is an 18.5% increase from 2014. Adding office electricity and business travel, we estimate total carbon emissions this year of 78.3 tonnes. This is an increase of 31.7% on 2014.
We offset our annual carbon dioxide emissions by donating to environmental projects linked to our work. We use the Climate Care website and carbon calculator www.co2balance.com to determine an appropriate offsetting donation, which this year will amount to £820.94. We rolled over last year’s carbon offset fund to create a bigger project and impact giving us a total of £1620.94 and are currently investigating how best to use this.
Social Accounts for the year ended 30 September 2015 | 33
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Carbon offsetting
ABOUT SHARED INTEREST HISTORY Our journey started in 1986 when development agency Traidcraft Exchange sponsored research into the role of banking and investment within the fair trade movement. It was discovered that the main challenge faced by those producing fair trade goods was access to working capital. It was out of this that Shared Interest was created; a unique financial organisation aiming to do business for mutual service rather than for investor profit. The Society was publicly launched in October 1990 with the financial backing of the Joseph Rowntree Charitable Trust and the Ecumenical Development Co-operative Society (EDCS). Within a year, we had attracted £750,000 of Share Capital and 600 members. Today, we have over 9,000 members in the UK, each investing between £100 and £100,000. With an average investment of £3,680, this provides Share Capital of £33,289,118. In 2004, Shared Interest established a subsidiary, Shared Interest Foundation. The charity delivers practical business support in the developing world, helping fair trade businesses to improve their financial management and other business skills. Shared Interest has been awarded the Queens Award for Enterprise in the category of Sustainable Development on two occasions. This year, we achieved the Third Sector Enterprise Award, and won the title of ‘most ethical finance institution working in the fair trade sector’ from the Price Project. The story of our past 25 years is detailed at shared-interest.com/SA14/Annex23.
OWNERSHIP AND GOVERNANCE Shared Interest is an independent organisation with its headquarters in the UK and further staff based in Kenya, Ghana, Peru, and Costa Rica. Shared Interest consists of Shared Interest Society and a charitable subsidiary, Shared Interest Foundation. Shared Interest Society is owned and controlled by its membership of over 9,000 investors. It is the sole member of Shared Interest Foundation. Shared Interest Society is governed by a Board of Directors which is currently made up of eight members; two executives and six non-executives. Seven of these eight Directors also form the Trustee Board which governs Shared Interest Foundation. A Council of nine Society members monitors the work of the Society’s Board of Directors. The Council has the power to question the Directors and Management Team and, if it sees fit, to address the membership independently. To ensure the Council is a representative body, six members have been randomly selected for nomination, while the other three members applied for their roles; all were subject to a ballot of members.
LEGAL STRUCTURE AND REPORTING Shared Interest Society is incorporated with limited liability under the Co-operative and Community Benefit Societies Acts 2014, Number 27093R. The Society has submitted timely annual returns to the Financial Conduct Authority as its registrar. Shared Interest Foundation is registered as a company limited by guarantee in England, Number 4833073, and is a registered charity, Number 1102375. It has submitted timely annual returns to the Charity Commission and to the Registrar of Companies. Shared Interest has an annual compliance action plan ensuring a regular routine of internal reviews and external audits against the relevant statutory and voluntary codes. This covers areas such as money laundering and bribery checks; health and safety compliance; risk reviews and data protection. An update on these areas is at shared-interest.com/SA15/Annex19. These topics are also included in induction schedules for all new staff. In addition, a key aspects checklist is produced by the Social Audit Network to enable standardised reporting on areas such as HR, governance, finance, and environmental / economic aspects. This can be found at shared-interest.com/SA15/Annex20. 34 | Social Accounts for the year ended 30 September 2015
STAKEHOLDERS AND CONSULTATIONS STAKEHOLDERS In pursuit of our mission, the following stakeholders are key to Shared Interest (the list is reviewed and updated annually by the Social Reporting Team): Stakeholders
Definition
Description
Potential customers
Organisations that enquire about receiving finance from Shared Interest Society
Potential customers
Customers
2014
2015
63
57
133
150
37
37
Recipient producers*
267
289
Commercial buyers
88
88
Producers trained
101
130
Producer groups receiving grants
0
4
Borrower organisations that enter into a Producer group customers business contract with Shared Interest Society Buyer customers Other organisations that receive or make payments via Shared Interest Society
Number of stakeholders
Beneficiaries
Organisations that benefit from the support of Shared Interest Foundation
Members
Shared Interest Society investors
Members
8,940
9,045
Volunteers
Individuals who volunteer their time and expertise to Shared Interest
Ambassadors and volunteers
96
77
Board of Directors
Collectively responsible for the direction and management of the Society, 7 of these 8 are also Trustees of Shared Interest Foundation
Elected Shared Interest Society members
8
8
Council
Body which serves to keep the Board ‘on mission’ and be representative of the views of members
Elected Shared Interest Society members
9
9
Individual donors
360
372
Donors
Shared Interest Foundation donors
Corporate donors
5
2
Churches and other groups
8
7
Grant-making bodies
8
9
Employees
Staff
Staff
36
37
Partners
Those with whom we collaborate for mutual benefit
People, groups and organisations we work with and umbrella groups of which we are members
54
54
* Recipient producers are those producers who do not have a credit facility with Shared Interest but who receive payments through Shared Interest on behalf of their buyers.
There are wider stakeholders with whom it is not practical for us to consult. These include friends and family of staff, the local community, potential members and regulators such as the financial conduct authority (FCA) and HM Treasury.
Social Accounts for the year ended 30 September 2015 | 35
CONSULTATIONS We are keen to understand our stakeholders’ view of our performance against the Mission and Values which we espouse. We therefore consulted with them in a number of ways this year.
Potential customers No formal research or consultations were carried out with this group this year, beyond our normal business development activities to find, and interact with, potential new customers.
Customers In addition to our daily contact with customers and annual reviews undertaken by the Lending Team, we carried out three specific consultation exercises, which gathered views from a total of 90 of our 564 customers (16%). This involved: • Direct consultations with producer group customers in South America (25 selected randomly out of a portfolio of 50) • An electronic survey was sent to 376 representatives of our 289 recipient producer customers and 40 responses were received. This low response rate was due to the fact that recipient producers have a direct relationship with their buyers and not Shared Interest • Producer committee meetings take place annually and allow the Lending Team to gain a greater understanding of the producers’ challenges and experiences. This year 25 producers participated: Peru (8), Ghana (10) and Kenya (7).
Beneficiaries Information from organisations benefiting from the work of Shared Interest Foundation were consulted on a project basis:
1 Improving access to finance in East and West Africa We conducted a final evaluation for this project, combining the survey responses received in Year 1 with new responses received in Year 2. Overall, 42 businesses were surveyed from five countries: Kenya, Tanzania, Uganda, Ghana and Ivory Coast. This represented 34% of the 122 businesses trained. Details of the evaluation can be found at shared-interest.com/SA15/Annex10.
2 Malawi financial training project A full evaluation of our project to improve financial management capacity in eight Malawian tea and sugar co-operatives will take place in December 2015.
3 Improving producer livelihoods in Swaziland As part of the start-up of our new project with partners SWIFT in Swaziland, we conducted a full baseline study. In total, 605 people were surveyed, a combination of handcraft producers and business owners. Details of the study can be found at shared-interest.com/SA15/Annex9.
4 RWAFAT capacity building support A Fair Trade Business Manager working at the Rwandan Forum for Alternative Trade (RWAFAT), funded by Shared Interest, visited each of the 38 RWAFAT members to conduct a thorough needs assessment. These co-operative businesses represent 1,369 individuals and 114 additional workers.
5 Best practice in fair trade networks An external evaluation was conducted in Malawi with seven people in total. These were as follows; one representative from SWIFT in Swaziland, one representative from RWAFAT in Rwanda, one 36 | Social Accounts for the year ended 30 September 2015
staff member from MFTN in Malawi, three member business representatives from MFTN, and one Fairtrade liaison officer based in Malawi. Details of the evaluation can be found at shared-interest. com/SA15/Annex8.
Members We conducted a full members’ survey and received a 26% response rate. We also held workshops at the AGM in Gateshead in March 2015 and a member event in Bristol. Correspondence with members is also shared with the Board on a regular basis. Details of the survey can be found at shared-interest.com/SA15/Annex12. A more detailed report is available on request.
Volunteers and ambassadors All new volunteers receive induction training and are invited to participate in Skype discussions every six weeks. We also held meet up events with volunteers to encourage networking and receive feedback on events. We undertake a full survey of volunteers every two years and the last survey was carried out in 2014.
Board of Directors / Trustees The Shared Interest Board meets five times a year and considers aspects of Social Accounts at three of those meetings. This year they discussed and approved the Strategic Review, and some were part of a sub-committee overseeing the process. The Board responds to members at the AGM.
Council Council is not consulted separately from members as part of the Social Accounts process. It meets three times during the year and provides input to Board meetings and the AGM. The Council was also closely involved in the Strategic Review. There is a joint Board and Council meeting annually.
Donors We have had face-to-face meetings during the year with Comic Relief and Commonwealth Foundation, who provide funding for some of our business support projects. This year we carried out a full postal survey of 372 individual donors and 174 enquirers. We received 130 responses, a 24% response rate. Details of the survey can be found at shared-interest.com/SA15/Annex13. A more detailed report is available on request.
Employees We send out a five point survey twice a year in February and September to all staff. This looks at the areas of communication, leadership, respect and equitable treatment. The survey is anonymous and completed online and results are communicated to all staff. In February we had 32 responses from 36 staff and in September we had 35 responses from 37 staff. Results are compared and if any changes or trends are identified, further discussions are held with staff within their teams to try and establish any positive changes that may be required. We also carry out an annual staff survey. As with the previous year, we worked with People Gauge, an online survey and analysis provider. The survey was completed by 35 of the 38 staff who were employed at the time of the survey in July 2015 (94%). Presentations of the results were fed back to staff with discussions taking place on the results and how they compared with the previous year.
Partners We did not carry out a partner survey this year. However, we have featured two keys partners in short case studies. We selected the Fairtrade Foundation and the Council of Smallholder Agricultural Farmers (CSAF) to provide a balance between a partner working primarily with Shared Interest Foundation and another working with Shared Interest Society. Please refer to pages 28-29. Social Accounts for the year ended 30 September 2015 | 37
Consultations with stakeholders over the last four years Stakeholders
2012
2013
2014
2015
Potential customers
Survey sent out to prospective customers by Regional Development Executives and BD Officer (17/50)
Research by consultant via questionnaires to members of WFTO Africa and Fairtrade Africa (109/400)
No formal research or consultations took place with this group, beyond our normal business development activities
No formal research or consultations took place with this group, beyond our normal business development activities
Online survey to recipient producers (33/862) and commercial buyers (9/126) Telephone survey to customers (9 buyers and 13 producers) Producer committees
Online survey to recipient producers (18/196) Online survey sent to South American producer customers (14/37) Producer committees
Online survey to recipient producers (32/267) Online survey sent to buyer customers (20/37) Direct consultations with producer customers in East Africa (16/35) Producer committees
Online survey to recipient producers (32/267) Online survey sent to buyer customers (20/37) Direct consultations with producer customers in East Africa (16/35) Producer committees
Customers
Evaluation forms completed after each training session and by each grant recipient Project reports including interviews with service receivers, site visits Beneficiaries and stakeholder meetings
Feedback forms at AGM and members meetings (109)
Questionnaire sent to all members who are happy to receive mailings (1,993/7,446) Feedback forms at AGM and members meetings
Feedback forms at AGM and members meetings (109) All consulted on the Society Strategic Review
Questionnaire sent to all members who are happy to receive mailings (1,993/7,446) Feedback forms at AGM and members meetings
Volunteer survey (36/91) Some consulted for Foundation Strategic Review
Evaluation forms from events Feedback on resources and newsletters
Volunteer survey (46/91) Some consulted for Society Strategic Review
Regular Skype discussions took place as well as regional meet-up events
Members
Volunteers
Consultations via External evaluation Final evaluation of SWIFT with artisans with SWIFT. Four the Improving access in Swaziland re focus groups to finance project training Farm and took place and involved 42 of 122 household level 13 interviews. A businesses. A full research with coffee survey of 262 rural baseline survey of farmers in Ethiopia producers took place 605 people took place Needs analysis with 60% response. for the Improving visit to co-ops Producer Livelihoods 21 businesses were and producers in in Swaziland project. surveyed in five Rwanda A needs analysis of 38 countries and two businesses in Rwanda Financial profiling focus groups took with 94 businesses place to evaluate the was undertaken by our partner RWAFAT. An across 5 countries in Access to Finance external evaluation of Africa. project. best practice networks in fair trade networks took place and seven people participated.
38 | Social Accounts for the year ended 30 September 2015
Consultations with stakeholders over the last four years (continued) Stakeholders
2012
2013
2014
2015
Board of Directors
Consulted for Foundation Strategic Review
Consulted as members
Consulted for Society Strategic Review
Consulted as members
Consulted for Foundation Strategic Review
Consulted as members
Consulted for Society Strategic Review
Consulted as members
On-going dialogue with Comic Relief. Regular donors consulted for Foundation Strategic Review
Comic Relief as recipient of partner survey below. Many donors also receive the membership survey as 80% of Foundation donors are also Society members.
On-going dialogue with key funders.
A full postal survey of 372 individual donors and 174 enquirers. (130/546).
5 point survey 5 point survey (28/33) (30/33) Staff Survey (31/33) Staff Survey (26/33) Consulted for Foundation Strategic Review
5 point survey (30/38) Staff Survey (35/38) Staff working groups to discuss Strategic Review themes
5 point survey carried out twice (32/36) (35/37) Staff Survey (35/38)
Questionnaire (16/44) Questionnaire (9/10) Consulted for Foundation Strategic Review
Two key partners were asked to complete a survey
No formal consultation took place
Council
Donors
Employees
Partners
Social Accounts for the year ended 30 September 2015 | 39
CONCLUSIONS PROGRESS ON LAST YEAR’S RECOMMENDATIONS Progress on the recommendations we made in last years Social Accounts is organised into the four aims on which we reported last year: Recommendation Progress Aim 1: Provide financial services which make livelihoods and living standards better for disadvantaged communities in some of the world’s poorest countries • Increase lending, and continue • Committed facilities have increased by £6.1m this year. increasing the proportion of Committed lending direct to producers now represents 66% lending going directly to our of our portfolio. We have a total of 52 prospects/potential producer customers increases with estimated total facilities of £5.2m, 46 of which and £4.4m of which are attributed to producers. • We are looking to improve our impact measurements and the • Embed work of M&E M&E committee was formalised this year. This group meets committee and develop impact indicators regularly and has begun comparing the differing information currently collected on the impact of lending in different parts of the organisation. Key indicators have been identified to establish common ways to collect and report on impact. • Diversify lending products • We have adapted our processes and assessments for in response to new strategic lending, which has allowed us to lend to FLO traders. direction • Our stock facility product has been amended to enable relevant customers to borrow more. Aim 2: Provide business support which makes livelihoods and living standards better for disadvantaged communities in some of the world’s poorest countries • Build on Access to Finance • The Access to Finance project received a positive project and look for ways to evaluation and the funder, Comic Relief, has indicated that continue this work beyond they were pleased with the results achieved. We have since current funded project delivered the first two stages of a small project in Malawi using the model developed in this project. This involves working with eight tea and sugar co-operatives to build their financial capacity. The results so far have been positive and we will conduct a formal evaluation by December 2015. We have developed a partnership with CLAC (the Fairtrade network in South America) to deliver a financial management training project in Peru and Colombia, starting in October 2015. We were unsuccessful with our application to Comic Relief with UK partners iDE, where we wanted to provide the Access to Finance element of a wider technical capacity project. • Diversify sources of income for • While we maintain a healthy balance of restricted and Shared Interest Foundation unrestricted funding, we remain highly reliant on Society Share Account legacies and account transfers as a key source of unrestricted funds. Our number of individual donors is growing, but progress is slow. We currently receive restricted income from small trusts, Commonwealth Foundation and Comic Relief, and this year a donation in the sum of £50k from the Shared Interest Society. • Create opportunities to share • We continue to plan for our involvement in the Fairtrade learning about sustainable Africa convention in February 2016. We have been asked local business support to speak at a panel event and plan to host an evening networks coming from best reception where we analyse the learning of our projects to practice project date and discuss wider access to finance issues for African co-operatives. 40 | Social Accounts for the year ended 30 September 2015
Aim 3: Provide members and donors with a social return which attracts new Share Capital and donations and retains existing investments • Develop our offer to be • The online application form went live in February and now inspiring and relevant for both allows people to invest in Shared Interest via our website. current members and future • A new interactive members’ online area was also generations of investors introduced in September 2015. • Respond to volunteers’ survey result by increasing networking opportunities and engagement • Use 25th Anniversary to increase engagement and reach goals of 10,000 members with £33m of Share Capital
• We continue to maintain close contact with our volunteers. Regular Skype calls allow discussion of ideas and volunteers are taking more ownership of the agenda. • Members took up the challenge of helping us raise our profile and have participated in more events than ever before. • A flag commissioned for our 25th anniversary was divided into four sections and was sent to each regional office. Each was signed with messages of support. The individual sections came back to the UK and were joined together for the AGM.
• Total Share Accounts stand at 9,045 at 30 September 2015 and Share Capital at £33.3m but the requirement is increasing due to the recent growth in lending. Aim 4: Conduct our business in a manner which reflects our values • Develop our approach to • We actively continue to develop our partnerships but as identifying key partnerships and yet we have not identified a suitable way to measure their useful ways to measure this value. • Repeat People Gauge staff • We repeated the People Gauge survey and compared survey format to enable the results against last year. The results showed that 97% comparison of results with of staff are engaged or actively engaged compared with current year 97.7% in 2014. We are planning to repeat the survey again next year, which will enable us to further compare results. • Explore introduction of lending • We are in discussions regarding the Working Capital Fund products which would support for Africa; meetings have been held with Christian Aid producers with the challenges regarding their ACRE fund – these may lead to lending for created by climate change producers affected by climate change. • Lending staff received training about the Strategic Review changes and will suggest product changes as needed.
Social Accounts for the year ended 30 September 2015 | 41
Recommendations by Social Audit Panel last year In addition, we have considered the following recommendations made by the Social Audit Panel of last year’s Social Accounts and have progressed the first three. We are looking to develop the Theory of Change next year and decided not to pursue the fifth at this time. • Recognising the progress already made in these Social Accounts, continue to research methods whereby Shared Interest can account for their outcomes and the impact on people and communities • Consider including specific KPIs and quantitative targets in future Social Accounts • Consider linking the key findings from the Social Accounts directly to Shared Interest’s strategic plans and business plans for future development • Extend and develop Shared Interest Foundation’s Theory of Change model to the work of the Society which will enable it to examine the degree of impact achieved and reflect on issues of wider strategic significance • Suggest re-looking at taking a social capital approach based around networking/partnership, information exchange, mutuality and the development of trust. Last year’s panel unanimously affirmed that the accounts were clear, comprehensive and thorough, and that much progress has been made on responding to previous recommendations.
42 | Social Accounts for the year ended 30 September 2015
CONCLUSIONS FROM THIS YEAR The 2015 Social Accounts report a very successful year with the results reflecting substantial achievements, across all departments and within each aim, ultimately meeting our Mission and Values.
Aim 1: Provide financial services and business support which make livelihoods and living standards better for people as they trade their way out of poverty This year we made payments totalling £51.4m, reaching 401 organisations in 58 countries. We continued to increase our lending to producers and specifically smaller groups with payments to producer customers totalling £32.2m; an increase of £5.2m on the previous year. In addition to working with more producers we have also diversified the products within our lending portfolio to include citrus and walnuts. The value of payments on behalf of buyer customers has decreased. The £1.1m reduction is slightly lower rate than last year but overall this trend is largely due to the strengthening financial position of buyers and their ability to lever cheaper credit from conventional financial sources. We continue to consult with our stakeholders and beneficiaries to gauge our performance and ensure we continue to remain true to our values. During the consultation with 25 South American producer customers 60% said that their relationship with Shared Interest had a direct impact on the growth and sustainability of their business. We have been working hard to improve our impact metrics and evaluation data with our Monitoring and Evaluation Officer producing the first study following a producer organisation over a 10 year period. We have also linked with other social lenders in the Council on Smallholder Agricultural Finance (CSAF) and believe that our producer lending has impacted nearly 250,000 individuals. We were delighted that, following the completion of our previous project with our Swazi partners SWIFT (Swaziland Fair Trade), we were granted new funding for a four year follow-on project beginning in January 2015. This saw us focusing on the development of SWIFT as an organisation, as well as looking at improving livelihoods for the artisans and producers. As a result we have helped strengthen SWIFT’s internal systems, legacy planning, stakeholder relationships and income generating activities, ultimately making the organisation more sustainable. On completion of our Access to Finance project, funded by Comic Relief, we carried out an evaluation of the 122 businesses that received financial training. The evaluation involved 30% of the businesses across five African countries and we found that 92% felt the training had filled gaps in their understanding. Moreover, 81% implemented learning into their operations, particularly in operating accounts, the budgeting process and formal financial reporting.
Aim 2: Develop our community of investors, the support of donors and volunteers, and partnerships with those who share our commitment to fair and just trade Shared Interest is owned and controlled by its 9,045 members. Our membership, although still predominantly individuals, continues to diversify and includes faith groups, Fairtrade Towns, businesses, schools, and community organisations. In terms of Share Capital, we surpassed our target of reaching £33m with a closing total of £33.3m. This is a very encouraging net increase of £2m which will allow us to meet the increasing lending opportunities available. Member numbers continued to increase with a net growth of 105 in the year. We know, however, that the closing balance is on average higher than the initial investment made by a new member highlighting the ongoing need to recruit new investors. As with previous Social Accounts for the year ended 30 September 2015 | 43
years the majority of new investment is from existing members as they learn more about the Society and the impact of their funds. Restricted income for Shared Interest Foundation also increased as we successfully attracted a number of institutional grants, trust funds, and individuals donations. Unfortunately there was a decrease in unrestricted income this year, partly due to a reduction in the amount of donated funds from Society Share Accounts. However, a successful Shared Interest Society member legacy campaign saw a 17% increase in future income for the Foundation through nominations of over £1.7m. A valuable network of 77 volunteers continues to help raise awareness of Shared Interest both locally and nationally. They get involved in running stalls, sending out information, and giving presentations to local groups. This year our volunteers attended 79 events, provided literature at a further 120 venues, and contributed 682 hours of their own time. Continuing our aim to build our investor base and provide greater flexibility to members to manage their Share Accounts we launched an online application form and developed a new members’ portal, called Our Shared Interest. We currently have over 2,500 members using Our Shared Interest and we continue to highlight the economic and environmental benefits of online communications. The Society was recognised in 13 awards including Sustainable City Awards in the Sustainable Finance category and Third Sector Award for Enterprise. Shared Interest Foundation was also shortlisted for the Charity Times Awards. Such accolades give a boost to staff morale and the recognition levers substantial free publicity which provides a level of confidence to investors and stakeholders.
Aim 3: Manage our resources in line with our principles of love, justice and stewardship 37 staff are employed across the five international offices in Ghana, Peru, Costa Rica, Kenya and the UK. This year we restructured our Lending Team to provide greater customer support in region by combining the two departments of Business Development and Customer Services and increasing our staff presence in Africa and Latin America. We remain committed to our staff team and have continued to invest in training, investing a total of £30,889 on 255 training days. This year both the Middle and Senior Managers participated in a leadership development programme and a number of staff embarked on professional qualifications. Our annual staff survey revealed that 88% of respondents feel that Shared Interest fulfils its mission and values and 97% were either engaged or actively engaged in the organisation. When surveyed, staff gave three words to describe working at Shared Interest, and the majority stated ‘challenging, rewarding, and interesting’. The practice of good environmental stewardship is embedded throughout the organisation and our staff hold meetings through Skype to reduce travel requirements, recycle where appropriate and procure goods and services from local suppliers. This year we agreed to offset our annual carbon dioxide emissions to the value of £820.
44 | Social Accounts for the year ended 30 September 2015
RECOMMENDATIONS FOR NEXT YEAR Aim 1: Provide financial services and business support which make livelihoods and living standards better for people as they trade their way out of poverty • Increase lending, and continue increasing the proportion of lending going directly to our producer customers • Embed and develop the new Lending Team structure to support customers and build the pipeline of lending opportunities • Review lending processes, scope out, source and implement a new lending IT system • Continue to develop new access to finance themed projects and spread our work to supporting producers in Latin America • Refine our training package to support producer businesses in improving their financial management including looking at tailored packages of support for particular commodities Aim 2: Develop our community of investors, the support of donors and volunteers, and partnerships with those who share our commitment to fair and just trade. • Increase Share Capital and membership to support lending opportunities • Provide members with more online and flexible access to their Share Accounts, introduce debit card payment ability and tailor communication depending upon their preferences • Create more regional opportunities for members to meet other investors, ask questions of staff and Board, participate in debate and offer their views • Build awareness of Shared Interest Foundation within the current member base • Diversify and develop funding sources for Shared Interest Foundation Aim 3: Manage our resources in line with our principles of love, justice and stewardship • Carry out a further staff engagement survey and compare the results with the current year • Continue to manage our resources to ensure we minimise the environmental impact of our operations particularly in relation to the Newcastle office relocation • Continue to maintain robust financial controls managing our exposure to risk
NEXT STEPS Following review of these accounts by an audit panel with SAN qualified Chair, they are approved by the Boards of Shared Interest Society and Foundation. They will then be available for download from the Shared Interest website shared-interest.com/social-accounts and will be presented along with Financial Accounts to the Shared Interest AGM for adoption in March 2016. Information from the accounts will be disseminated to our different stakeholder groups throughout 2016, and any feedback will feed in to our next annual process. Please feel free to email membership@shared-interest.com with any comments or queries.
GLOSSARY AND ABBREVIATIONS ACRE
A fund to assist agricultural farmers in remote areas
AGM
Annual General Meeting - Meeting of Shared Interest Society members which reports on progress of the Society and Foundation
Ambassadors
Shared Interest ambassadors actively promote the organisation to the general public through talks, presentations and stands at events
Beneficiaries
Those benefiting from Shared Interest Foundation projects
Board
Those elected members who are collectively responsible for the direction and management of Shared Interest Society
Buyer customers Wholesale or retail businesses which borrow money from Shared Interest to finance the purchase of fair trade products CLAC
Coordinadora latinoamericana (de comercio justo) y del Caribe - a fair trade network of small producers in Latin America
Comic Relief
A UK based charity that funds UK and international projects to alleviate poverty
Commonwealth Foundation
A development organisation linked to the Commonwealth institutions which provides grants to encourage collaboration between Commonwealth countries
Co-operatives UK A body that seeks to promote and develop co-operative enterprises in the UK. Regional bodies such as Co-operatives SE, SW etc work in partnership with Co-operatives UK Committed lending
Upon approval of a new line of credit or term loan there are certain conditions which must be met before we are in a position to release any funds. Once all of the conditions have been met we consider a facility or loan to be committed and funds can be released. There is typically a difference between the approved lending facilities and those committed as we are waiting for documents to be received
Community Awarded by the Community Shares Unit (CSU) and indicates that the share offer Shares Standard document complies with their good practice guidlines Council
A body consisting of 9 members of Shared Interest Society which serves to represent and reflect the views of the membership
CSAF
The Council on Smallholder Agricultural Finance - a global alliance of social lenders of which Shared Interest is a member, focused on serving the financing needs of small and growing agricultural businesses in low- and middle-income countries worldwide
Donors
Individuals, groups or organisations (including corporates and charitable trusts) who donate money to Shared Interest Foundation
ECCR
The Ecumenical Council for Corporate Responsibility - a UK coalition of church-based investors, coporate members (including Shared Interest) and individual supporters, carrying out advocacy on issues of business, human rights and environmental stewardship
Export Credit
Financial product designed for producer organisations to provide them with sufficient working capital to complete and deliver new orders or contracts
Facility A type of loan (short or long term) made in a business or corporate finance context. (or Credit Facility) Specific types of credit facilities for Shared Interest Society are: revolving credit (Export Credit and Buyer Credit) and term loans (including also Stock Facility) Fairtrade Africa
The organisation representing all Fairtrade certified producers in Africa. It shares premises with Shared Interest in Ghana
Fairtrade Federation
A trade association that strengthens and promotes North American fair trade organisations
Fairtrade Foundation
The organisation that licenses the use of the Fairtrade Mark in the UK. It also plays a key part in promoting Fairtrade in the UK
Fairtrade International
The organisation that co-ordinates Fairtrade labelling at an international level (formerly known as FLO)
46 | Social Accounts for the year ended 30 September 2015
FCA
Financial Conduct Authority - a regulatory body of firms which provide financial services to consumers in the UK
FLO
See Fairtrade International
FLO Trader
An organisation that buys and/or sells fair trade products and has obtained product certification as per the relevant Fairtrade standards via FLO Certification
GBP, USD, EUR, AUD
The main currencies in which Shared Interest lends - GBP: Pounds Sterling; USD: US Dollars; EUR: Euros; AUD: Australian Dollars
HR
Human Resources - the function responsbile for staffing issues within Shared Interest
iDE UK
Supports entrepreneur activity in poor rural communities around the world
Impact metrics
Specific measurements that we make to assess the extent of change in individuals’ lives as a result of our work
KPI
Key Performance Indicator - a measure of progress towards organisational goals
Line of Credit
An arrangement between Shared Interest Society and a customer that establishes a maximum loan balance. The borrower can draw down on the line of credit at any time, as they do not exceed the maximum balance. For Shared Interest this refers to revolving and short term lending such as Export Credit and Buyer Credit
M&E
Monitoring and Evaluation - the ongoing process of measuring changes and analysing the extent to which these have derived from our work and achieved the intended aims
Market access
Ability of those producing products or services to find buyers
Members
Individuals, groups or organisations who invest between £100 and £100,000 in a Share Account with Shared Interest. Shared Interest Society is owned by its members, and each has one vote irrespective of the size of their investment
MFTN
Malawi Fairtrade Network - umbrella body of Fairtrade producer organisations in Malawi. Providing advocacy, research and market development
NGO
Non-Governmental Organisation - voluntary group of individuals or organisations, not affiliated with government, formed to provide services or to advocate public policy
People Gauge
An online survey tool designed to measure levels of employeee engagement
Producer customers
Businesses which supply fair trade products and have a contract with Shared Interest to borrow money in order to finance that trade
QR
Quarterly Return, the quarterly magazine for Shared Interest members
Recipient producers
Producer businesses which do not have a credit facility with Shared Interest, but who receive payments from Shared Interest on behalf of their buyers
RWAFAT
The Rwanda Forum for Alternative Trade - Partner organisation to Shared Interest Foundation, providing business support to fair trade handcraft businesses in Rwanda
Share Account
Members of Shared Interest Society invest between £100 and £100,000 in a Share Account, which can be opened by UK residents aged over 16. Accounts can be held individually, jointly, or by groups
Share Capital
The pooled investments of Shared Interest Society members in Share Accounts which provides the capital required for Shared Interest to be able to lend money to fair trade businesses around the world
SAN
The Social Audit Network is a not-for-profit organisation which facilitates the exchange of information and experience between practitioners of social accounting and audit. Maintains a register of accredited social auditors Groups of people that can affect or are affected by the actions of a business
Stakeholder SWIFT
Swaziland Fair Trade - Partner organisation to Shared Interest Foundation, providing business support to fair trade businesses (mainly handcraft) in Swaziland
Term Loan:
A loan from Shared Interest for a specific amount that has a specified repayment schedule and interest rate. Term loans will mature between one and 5 years to the exception of loans provided for Roya which will be extend to 7 years Social Accounts for the year ended 30 September 2015 | 47
Theory of change Articulation of the way in which planned activities lead to changes in peoples lives, recognising the other factors that influence this process, and the assumptions that are made in our logic of cause and effect Trustees
Those elected representatives who who are collectivelt responsible for the direction and management of Shared Interest Foundation
TWIN
A development through trade NGO working with 33 producer organisations representing 300,000 coffee, cocoa and nut smallholders in 17 countries across Latin America, Africa and Asia
UK Fairtrade Leaders Forum
An informal framework for co-operation between the Chief Executives of the UK’s principal fair trade organisations
Volunteers
Shared Interest volunteers assist us in a variety of ways, from administrative support at our Head Office, to taking photographs for us at events
WFTO
World Fair Trade Organisation - a global network of fair trade organisations (formerly known as IFAT - the International Federation for Alternative Trade) with regional branches such as WFTO Europe
48 | Social Accounts for the year ended 30 September 2015
List of Annexes AND Supplementary Information All of these Annexes can be accessed online at shared-interest.com/SA15/Annex# (replacing the # with the Annex number). 1
Explanation of our lending products
2
List of our producer customers
3
List of our buyer customers
4
Customer case studies
5
Country risk analysis of producer lending
6
Producer online survey
7
Access to Finance - year 2 final report
8
Best Practice in Fair Trade Networks - evaluation report
9
SWIFT baseline report
10
Improving Access to Finance in E and W Africa - final project evaluation
11
Mpanga Impact Study
12
Members’ survey
13
Shared Interest Foundation Donor Survey
14
Social impact films
15
Volunteer case studies
16
List of our partners
17
Budgetary control, financial reporting and authorisation
18
Our approach to procurement
19
Compliance with statutory and voluntary codes
20
Social Audit Network key aspects checklist
21
Shared Interest Society Financial Accounts for 2014/15
22
Shared Interest Foundation Financial Accounts for 2014/15
23
The history of Shared Interest
24
Strategic Review booklet
25
Organisational chart
In addition to internal data systems, and the Annexes above, a list of consultations, reports and further information contributing to the Social Accounts which was made available for inspection by the Social Audit Panel can be found at shared-interest.com/SA15/supplementary.
CONTACT Shared Interest Pearl Assurance House 7 New Bridge Street West Newcastle upon Tyne NE1 8AQ Tel 0191 233 9102 membership@shared-interest.com
Shared Interest Society Limited Registered Society Number 27093R
www.shared-interest.com www.shared-interest.com/foundation
Shared Interest Foundation Registered Charity Number 1102375
@SharedInterest @SharedIntFdn