Community Finance Options: Sustainability Options for Resource Based Rural Communities

Abstract

This summary report is part of a project on Sustainability Options for Resource Based Rural Communities. The profound socio-economic shift occurring because of global economic restructuring has created a financing gap in many Canadian communities. Many owners of capital have invested where they can obtain higher returns, and in the wake have left many communities depleted or even deindustrialized. In rural and smaller urban Canadian communities, a range of factors have made it less profitable to invest in existing local capital. Access to capital for business development has become sparse. Mainstream financial institutions are finding it hard to fill the void. Despite these constraints, even in the most disadvantaged rural communities entrepreneurial processes are not as constrained and ground-breaking local finance initiatives are emerging. This document reviews how a number of Canadian communities are raising local capital through debt and equity mechanisms that both address current financial challenges and create strong community businesses, which bolster the local economy and foster broad based development. The first part of the paper discusses the ‘financing gap’ and dominant trends in the international world of finance and how local capital can be regarded as somewhat of an alternative to these trends. The second part analyzes how local capital not only mobilizes local investment dollars, but also other community resources to foster growth and development. The report explores some of the mechanisms for raising local capital using debt and equity to finance community owned businesses and presents some successful examples. The last section of the paper introduces several financing mechanisms that could be used by rural communities in Alberta to raise local capital.