HELPING COMMUNITIES THRIVE 2014 ANNUAL REVIEW
Providing fair finance to enrich the lives of others 2014 Review Welcome What we Do What We Stand For Financial Overview Investment Volunteers Lending Global Reach Looking Forward
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Photos: (front cover) CIPAC, Guatemala, honey; (right, clockwise from top left) GOIG, Tanzania, handcrafts; Kabuboni, Kenya, coffee/milk; ECOOKIM, Ivory Coast, coffee; Andean Naturals, USA buyer of Bolivian quinoa
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2014 Review
Andean Naturals, USA buyer of Bolivian quinoa
Welcome I look forward to writing this introduction to our Annual Review each year as it offers a valuable opportunity for reflection over the past 12 months. This year’s task holds even more resonance as it marks my final year as Chair of Shared Interest Society. It has been a delight to be part of Shared Interest over the last five years. I came into post not long after the organisation received recognition in the Sustainable Development category of the Queen’s Award in 2008, and I was fortunate enough to share in the joy of receiving this honour once again in 2013. This royal seal of approval seems to have to set the tone for a successful year ahead as we close 2014 with over £31m in share capital, almost 9,000 investors, and far exceeding our £7m target for new lending facilities. Our volunteers have represented us across the UK, attending over 60 events on Shared Interest’s behalf. It is fantastic to hear that 100% of our volunteers who responded to our survey feel motivated in their role. However, when you hear stories like Namayiana women’s group who visited us earlier this year, it is easy to see why our supporters feel such motivation. We hosted Namayiana’s stay as part of our joint initiative with Newcastle High School for Girls, where pupils created designs which were made into Maasai beadwork by the Kenyan handcraft group. Namayiana was one of the first customers I had the pleasure of meeting during a trip to Kenya when I became Chair. I will always remember how welcoming and gracious the ladies were
Shared Interest Society Chair, Kate Priestley
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 3
despite the hardships they faced. When a Shared Interest loan enabled Namayiana to install electricity in their village, I knew first-hand the difference this would make to their lives. Shared Interest Foundation’s Access to Finance project has had a similar life changing impact in Kenya, as well as Uganda, Tanzania, Ghana and Ivory Coast. Offering vital training in finance management and guidance on social lending, the project undertaken in partnership with Fairtrade Africa and Comic Relief has seen 31 businesses apply to the Society for a loan and almost £2m of lending facilities being awarded. Amidst all of these milestones, I am proud to lead Shared Interest into its 25th year in 2015. It is an honour to have helped steer Shared Interest through a period of economic austerity and continue to see the organisation go from strength to strength. Our strategic review has identified areas of new growth and development over the next five years, but our desire to work in unstable and remote areas, where other lenders are less keen to operate, will remain. I hope you enjoy reading more about Shared Interest’s achievements in the pages to follow. It is only because of the commitment of our members, staff, volunteers, customers, Board, Council and partners that we can see such fantastic progress. Without this support, we would be unable to maintain our position at the heart of the fair trade movement.
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The Board of Directors currently
includes two executive directors and six non-executives. Its role is to determine and monitor the implementation of strategy for the Society, make sure that risks are managed appropriately and provide a proper account to members of the financial and social results of the Society. Patricia Alexander Managing Director, Nominations Committee, Credit Committee David Bowman Audit Committee, Credit Committee
Pauline Cameron Remuneration Committee, Credit Committee Paul Chandler Audit Committee
Martin Kyndt, Vice Chair Remuneration Committee
Tim Morgan Finance Director, Credit Committee
Kate Priestley, Chair Nominations Committee, Credit Committee
Keith Sadler Audit Committee, Nominations Committee
What we do
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Shared Interest Society was launched in 1990 and attracted £750,000 in share capital and 600 members in the first year alone. However, our real journey started off as early as 1986 when Traidcraft Exchange found that the main challenge faced by fair trade producers was access to working capital. It was out of this revelation that Shared Interest was created. We now form the link between UK social investors and fair trade organisations needing finance to improve their livelihoods. We provide loans and credit services to businesses across the globe that are registered with either Fairtrade International (FLO), members of the World Fair Trade Organisation (WFTO), The British Association for Fair Trade Shops and Suppliers (BAFTS), Small Producer Seal (SPP) or the Fairtrade Federation. These businesses range from sole trader handcraft organisations to large scale coffee co-operatives and fair trade buyers. 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, finance the collection of harvests, and order new stock for fair trade shops. This year, for the first time, we have offered a lending product specifically for crop renewal in response to roya, a disease affecting coffee plants. By inspiring almost 9,000 people in the UK to become members and invest over £31m in share capital, we are able to share the risk of unsecured lending to people living in even the most remote areas of the globe. Our members each have an equal voice and vote, regardless of account size.
Our members have invested over
Association Ton (ATN), Burkina Faso, mangoes and cashews
£31m
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Newcastle High School for Girls with Kenyan handcraft customer Namayiana
What we stand for
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 7
We have a shared mission with Shared Interest Foundation 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 fair 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
“ I want to work for Shared Interest as I see fair trade as a tool to generate equity in the world. It is important to be part of the solution; to create the right environment for fair trade to take place. To do this, I think we need to work with wisdom and compassion.
Respect the diversity of different cultures
I t is the meeting of hearts and minds.�
Place partnership at the heart of what we do
Paul Sablich, Peru office
Work to recognised fair trade standards
UK
COSTA RICA
GHANA KENYA
PERU
Our overseas team based in Kenya, Ghana, Peru and Costa Rica ensures that we have the local knowledge we need to reach even the most remote communities across the globe.
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Association Ton (ATN), Burkina Faso, mangoes and cashews
In 2014 we made payments of
£48m to fair trade organisations
Financial overview The 2013-14 financial year saw total income rise by 5.4% with a fall in deposit income outweighed by an increase in lending income. The amount lent to customers was at a five-year high at the year-end after a very strong final quarter to the financial year. We were able to hold costs at very similar levels to the previous year despite achieving a very healthy growth of £1.8m net in capital. The net result after tax and interest, despite an increase in bad debt costs of £102,000, is a result very similar to 2012-13. This has meant that the Board is recommending the payment of a donation in the sum of £50,000 to Shared Interest Foundation to support the work of the Access to Finance project. We are once again able to pay interest to members at 0.5%.
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PROFIT AND LOSS 2014 Credit Charges Bank Deposit Interest Other Total
2010 £’000
2011 £’000
2012 £’000
2013 £’000
2014 £’000
1,602 530 93 2,225
1,684 636 102 2,422
1,797 784 68 2,649
1, 611 903 89 2,603
1,799 839 103 2,741
Finance Costs Provision for Doubtful Debts Operating Costs Corporation Tax Profit before Members’ Interest and donation Members’ Interest Donation £/$ Exchange Rate at the year-end
112 327 1,609 22 155 - - 1.58
119 670 1,545 15 73 - - 1.56
126 613 1,633 11 266 143 - 1.62
77 414 1,777 47 335 68 - 1.61
79 516 1,773 50 373 108 50 1.62
24 97 19,772 9,525 286 29,704 573 -
31 101 19,722 10,165 332 30,351 581 40
120 90 18,103 13,631 382 32,326 529 1,340
97 93 16,490 16,177 458 33,315 544 1,340
57 94 21,063 13,756 362 35,332 542 1,340
Total 29,131 Capital 27,682 Reserve for Lending Loss 766 Proposed share interest - Proposed donation to Shared Interest Foundation - Profit and Loss 683 Total 29,131
29,730 28,208 766 - - 756 29,730
30,457 28,669 766 143 - 879 30,457
31,431 29,454 766 112 - 1,099 31,431
33,450 31,255 766 115 50 1,314 33,450
BALANCE SHEET 2014 Tangible Fixed Assets Investments Lent to Customers Cash Debtors Total Assets Creditors < I Year Creditors > I Year
The summary of the financial statements above is an extract of the full audited financial statements for the Society, which are available on request from the Company Secretary or can be downloaded from our website. The figures are for the Society only and we have not shown here the combined result (“Consolidation”) with Shared Interest Foundation.
The majority of our lending and overseas payments are made in USD thus the exchange rate with sterling has a significant impact on the year end figures.
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Investment Shared Interest is owned and controlled by its 8,940 members. Our membership, although still predominantly individuals, continues to diversify and includes faith groups, Fairtrade Towns, businesses, schools, and community organisations. The main driver for most of our members is the social return offered by our lending activity rather than the interest received on investments. We currently offer 0.5% interest in order to retain members and attract new investment. 2013/14 was an exceptional year for member and investment growth with a net increase in share capital of £1.8m, resulting in a closing investment balance of £31.3m. A large proportion of this new investment came from new members, although existing members also invested a considerable sum. Another significant change to positively impact investment levels this year was an increase in the Share Account limit from £20,000 to £100,000.
This year we also invited our members to contribute to the development of a five year strategy and they played a key role in shaping the Society’s focus and direction. Our Supporter Relations Team continued to use a range of promotional activity including inserts, social media, digital marketing and PR to generate new enquiries. Word of Mouth continues to be a very important method of promotion. The 25 year anniversary appeal to reach £33m in share capital by 2015 also spurred on many members to raise the profile of the Society within their own networks.
All of our members have an equal voice, regardless of account size, and we continue to create opportunities for discussion and participation. Our Annual General Meeting (AGM) was held in London and was the largest ever with 204 members in attendance. In addition, we held a series of member events, structured to facilitate an open debate on topics suggested by members. Venues and topics included an ethical investment debate in Cardiff, and a celebration of World Fair Trade Day in Glasgow.
“ Investment in Shared Interest may not make you rich, but it will enrich the lives of others.”
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 11
“We made the decision to invest half of our modest resources into a Shared Interest Share Account.”
JOINT INVESTORS
GROUP INVESTOR
Ian and Shelagh
Tony
Ian and Shelagh live in Nottingham and have held a joint Share Account for 18 years.
Tony is chairman of the Jersey Fairtrade Island Group. Jersey became a Fairtrade Island in 2005 and the group has been a member of Shared Interest since 2007. Tony also sits on Shared Interest Council.
Ian said: “We had inherited some money and were going to donate to charity, but thought that it would be better to invest in Shared Interest as the money would be put to repeated use. Shared Interest is an investment in the future of so many people; it gives encouragement and respect to them, and is a sustainable way to help them grow.” Both Ian and Shelagh have lived in North Uganda volunteering for the Uganda Christian Institute for Professional Development, and are still actively involved in projects to help relieve poverty and provide education there. As part of their travels they have also visited fair trade producers in Kenya. In the UK, Ian spent 25 years as a Technical Manager and acknowledged expert in the design and manufacture of food cans, he was also a member of Shared Interest Council for six years. Shelagh trained and taught as an Infant Teacher for several years before spending six years as World Development Adviser to the Diocese of Southwell and Nottingham. Ian continued: “Being a Shared Interest investor I feel I get an insight into an alternative, fairer way of trading. I know that my money is being put to good use, helping those who need it most.”
Tony said: “Strangely enough, my career spent working with animals led to my interest in fair trade. It all started when I became Director of Veterinary Services at Durrell Wildlife Conservation Trust in Jersey. I was greatly inspired by Gerald Durrell’s philosophy of captive breeding of endangered species and conservation of the environment through sustainable farming. “My work took me to the Windward Islands in the West Indies, where I was studying the native parrot species. While I was there, I witnessed the dramatic impact of frequent hurricanes on not only the wildlife, but also the livelihoods of the banana farmers living and working there. “Coincidentally, a Fairtrade banana producer called Simeon Greene visited Jersey from Saint Vincent in the West Indies many years later in 2005, and presented us with our Fairtrade Island certificate. “Two years later, the Fairtrade Group made the decision to invest half of our modest resources into a Shared Interest Share Account. “We all wanted to see our surplus funds working hard for Fairtrade, not languishing in a bank. That initial £500 has grown year by year and has now increased tenfold. “We take great pride in knowing that our funds are being used purposefully and we hope that other clubs and organisations may want to do the same.”
“ I know that my money is being put to good use, helping those who need it most.”
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Volunteers We are proud of our network of 96 volunteers across the UK; they all support the organisation in different ways. Some of our volunteers help at events or behind the scenes with administrative tasks. Others take on a more public role, and become ambassadors, promoting Shared Interest Society in their local community to attract new members. Ambassadors play a vital part in raising awareness of the Society both locally and nationally. They get involved in running stalls, sending out information, and giving presentations to local groups.
The majority of our volunteers are members, and this enables them to speak knowledgeably about investing in Shared Interest. Ambassador activity, combined with our other methods of profile-raising, has led to a substantial increase in new member enquiries over the past year. We are keen to help ambassadors stay in touch with one another. In addition to our e-newsletter we have introduced networking events and a Skype forum to discuss events and best practice. We also gave our volunteers the opportunity to meet producers like Kenyan handcraft cooperative Namayiana, during visits to the UK.
In a recent survey of our volunteers, all respondents said they were motivated
67% would recommend their role to others
In 2014, our volunteers attended over
64 events
across the UK
70% have volunteered with Shared Interest for more than three years
80 % feel that Shared Interest Society is working towards its mission
90%
are members of Shared Interest Society
100%
feel motivated in their role
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 13
AMBASSADOR
Shweta
Shweta lives and works in North London and has been a Shared Interest ambassador for over 10 years. Shweta explains: “I am of Indian parentage (Maharashtrian), so the Indian sub-continent is close to my heart. I have relatives in Maharashtra and Gurarat. I once went on a development tour of India with Oxfam and a group of volunteers. The organisations we visited included a group of forest dwellers in Orissa and a large slum settlement and crafts and textile producers in Ahmedabad. I learnt a lot about sustainability during that visit. I also have an interest in Haiti and Cuba which developed when I spent a few months in the region. “I gained a deeper insight into Shared Interest by serving on the Council for six years and wanted to continue to support the growth of this unique organisation by playing a part in encouraging ethical investment and fair trade.
“As an ambassador ... it’s a pleasure working with people who share the same values.”
“Being an ambassador is a great way to promote fair trade principles here in the UK and empower producers in developing countries – independent producers who make food and crafts products that we love buying and who deserve a fair price for their work. As ambassadors we provide information to prospective investors and for those who do invest in Shared Interest their money will work hard in support of those principles. It’s also fun and a pleasure working with people who share the same values.” Shweta says that through her work as a Shared Interest ambassador she has gained a better understanding of the unfairness of international trade rules and learned more about sustainable communities.
Volunteer work in your own community is transforming lives across the globe
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SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 15
Lending Broadly speaking, our lending falls into two categories: funds lent directly to fair trade producer groups in developing countries, and funds lent to fair trade wholesale or retail businesses in developed countries (buyers). This year we made an overall total of £48m in payments – an increase of £1.2m on last year. This represents 160% of the value of our share capital, which is possible because when loans are repaid, we are able to lend the money out again. This year’s increase in lending directly to producers was the highest in the history of Shared Interest. While we still lend significant funds for coffee, we have also pursued a broadening in our range of commodities for which we lend. You can see the product mix of where our lending is committed over the page.
“ The way we work we have learned from the bees. Back to back. Shoulder to shoulder. If we are capable of putting into practice 1% of the way that bees in a hive work together, I believe we could solve 99% of our problems.”
In 2014 we lent money to
133 9,135 182,280 69,460 producer groups with
permanent employees, representing
individuals, including
women.
Shared Interest customer, Chino Henriquez, Apicoop, honey and blueberries
Average lending to all customers over the last five years Producer lending Buyer lending Total
2010 £4,780,929 £11,794,492 £16,575,421
2011 £5,701,530 £11,300,449 £17,001,979
2012 £6,266,513 £10,873,284 £17,139,797
2013 2014 £6,947,219 £8,530,062 £8,994,711 £5,812,330 £15,941,930 £14,342,392
Note: the majority of our lending and overseas payments are made in USD, so the exchange rate with sterling has a significant impact on the lending figures above. To see the exchange rate per year, please refer to page 9.
(photos, clockwise from top left) Global Groove, Thailand, handcrafts; Cepibo, Peru, bananas; CIPAC, Guatemala, honey; Association Ton (ATN), Burkina Faso, mangoes and cashews
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Lending Shared Interest Society lends funds to buyer and producer organisations. Even though we are working to increase our direct producer lending, we will keep lending to fair trade buyers such as Traidcraft and Equal Exchange Inc because through them our investorsâ&#x20AC;&#x2122; capital can reach producer groups who would not be able to borrow directly from us.
PRODUCER LENDING Pre-financing This facility provides sufficient working capital to producer groups to enable them to complete and deliver new orders. Customers can borrow a maximum of 80% of the value of any order received (60% for some commodity orders). Repayment happens once delivery is made and when the buyer pays for the order via Shared Interest Society. We deduct the amount borrowed and any interest due. Term loans We offer producer groups term loans primarily for the purchase of assets such as a coffee washing station, cableway for transporting bananas or trucks to transport the produce. Borrowing is usually for between one and five years and repayments are set depending upon the circumstances of the producer group. Loan sizes are determined by the financial situation of the producer group and its ability to repay the loan. We have extended the maximum duration of our term loans from five to seven years in order to assist producer organisations with both pests/disease and climate change, particularly coffee producers who need to renew crops that have suffered with leaf rust in recent years.
In 2014, we made
2,712
...how does it work?
Stock facility We offer producer groups a short term revolving loan for the purchase of stock. Borrowing is for up to a 12-month period and repayments are arranged according to the cash flow of the producer group. Pre-harvest loan Similar to a stock facility, this product is available to help producer groups maintain and improve their crops by purchasing fertilisers ahead of the harvest and the setting of contracts.
BUYER LENDING Pre-financing credit facility Fair trade buyers are required to provide a pre-payment to producer groups of at least 50% of the order value if it is requested. However, buyers can find themselves struggling to provide sufficient pre-finance from their own cash reserves. We assist by offering fair trade buyers a facility that can be used to preâ&#x20AC;&#x2018;finance orders with their producers. In addition a buyer can also benefit from a further credit period of up to six months after the order is received, enabling them to sell their product and receive an income prior to repayment of the amount borrowed. Shop loans Shop loans are specifically designed for buyers opening new retail stores and they enable a business to purchase the initial fair trade stock. We agree the loan amount in consultation with each applicant and repayment is made over an agreed period. Term loans Our first term lending for buyers was approved in 2008. We provide the loans generally for the purchase of assets and for website development or working capital. Borrowing is for between one and five years and repayments are set depending upon the circumstances of the buyer. Loan sizes are determined by the financial situation of the buyer and its ability to repay the loan.
payments in 65 countries
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 17
COFFEE
47%
TEA
1%
Product mix of the producer groups where our lending is committed
GARMENTS
4%
OTHER
14%
FRUIT
6%
COCOA
NUTS
11%
7%
HANDCRAFTS
10%
Association Ton (ATN), Burkina Faso, mangoes and cashews
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Global reach Where our investors’ funds are supporting fair trade Guatemala CIPAC is small honey producer which has recently diversified into Fairtrade coffee based in the North West region of Guatemala. General Manager, Carlos Garcia, said: “On behalf of CIPAC, their members and the community, I would like to thank Shared Interest Society investors for their efforts to destine funds to support us to improve economically and socially.”
Chile Mi Fruta is the first ever raisin and grape producer to become a customer with Shared Interest Society. Based in the central region of Chile, this small fruit organisation was created when Traidcraft visited the area looking for an alternative supplier of raisins. Mi Fruta is only small yet it has managed to secure contracts to supply Morrisons and Asda in the UK. Managing Director, Eugenio Navarro said: “We chose Shared Interest primarily for the trust and reliability but especially for the social significance that inspires the organisation as it is in contrast with the capitalist spirit observed in traditional banking.”
Fair trade buyer organisations with Shared Interest credit accounts Producer groups with Shared Interest credit accounts Other producer groups receiving advance payment via Shared Interest (recipient producers)
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 19
Thailand Global Groove develops lifestyle products in South East Asia, Nepal and India. The producers are predominantly women, all from different ethnic minority groups indigenous to the hills of Northern Thailand and Burma. Managing Director, Greg Hope, said: “Global Groove’s goal is to expand our reach and help women organise cooperatives in their villages giving them the opportunity to educate their children. We believe the support from Shared Interest Society will be integral in helping us achieve this.”
Ivory Coast Cocoa co-operative ECOOKIM provides a livelihood for 3,620 farmers. Our charity, Shared Interest Foundation runs an Access to Finance programme with Fairtrade Africa. Funded by Comic Relief, the project makes finance possible for farmers in Kenya, Tanzania, Uganda, Ghana, and Ivory Coast. To date, 31 organisations have applied for a Shared Interest facility, resulting in almost £2m of approved lending facilities. Following their bespoke financial training, cocoa co-operative, ECOOKIM secured a loan from us, which will allow them to grow their business, pay farmers each harvest, and look to the future with confidence. Managing Director, Bamba Mamadou, said: “We are delighted to become a Shared Interest Society customer. Our loan will benefit nearly 12,000 farmers in some of the most remote parts of Ivory Coast.”
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Looking to the future This year we carried out a full strategic review of Shared Interest Society and have identified critical areas of growth and development over the next five years. We will continue to keep members at the heart of our work. We will continue to shine a light on fair finance and innovative lending. We will deepen our support for fair trade, helping producers and artisans to diversify into new markets and new commodities. And finally, we will widen our support for fair trade, extending our lending to organisations working towards fair trade certification. Most importantly, we will continue to work where other lenders are less keen to operate; in unstable and remote geographic locations. The new initiatives we will explore will only represent a small proportion of our overall lending. However, the world is changing rapidly, presenting new challenges and opportunities, and our aim is to remain inspiring and relevant for current members â&#x20AC;&#x201C; as well as future generations of investors and borrowing customers.
SHARED INTEREST SOCIETY ANNUAL REVIEW 2014 21
Photo of children playing nearby customer Association Ton in Burkina Faso
We have identified five critical areas of growth and development over the next five years: Widening impact › Members at our heart › Deepening impact › Ways of working › Influencing/transforming
Shared Interest Society 2 Cathedral Square Groat Market Newcastle NE1 1EH
T: (0)191 233 9100 F: (0)191 233 9110 info@shared-interest.com www.shared-interest.com @SharedInterest The complete Directorsâ&#x20AC;&#x2122; Report and Accounts and the Social Accounts are available to download from our website. Shared Interest Society Ltd is registered with the Registrar of Mutual Societies, number 27093R Printed on paper from sustainable well managed sources certified by the Forest Stewardship Council