From a grassroots perspective, let’s explore the power of community wealth building through the lens of capital democratization, a strategy to create economic resilience and opportunity within communities through local investment initiatives. A space where stakeholders can harness the community’s assets - businesses, properties, and human capital – then develop pathways to “invest from within.”
There are many different thoughts on introducing community wealth building, some as well known as your local Community Development Corps through profit and non-profit Cooperatives. This Series will introduce some not as well-known tools such as local investment clubs, community investment funds and perhaps sprinkle in a bit of Program and Mission Related Investments. When building and growing, especially in disinvested communities, you need to understand how to access non-traditional capital resources; s your already steep challenge to access capital has grown exponentially depending upon the business’s zip code.
Additionally, this Series is designed to flush out some strategies of mutual benefit to local businesses and stakeholders alike. I envision that the local democratization of capital fosters an alignment of interest locally to provide a multiplier for the dollar circulation. Where robust local commerce increases business revenue and profitability, which increases the tax base, which increases services that increase the quality of life, property values, and aides in community wealth building resulting in respectable investor returns. Now, image the community members as the investors!
We will explore how small businesses can attract local investors, and steps stakeholders can take to form local investment clubs, and other ways to champion and support investments for projects or businesses within the community.
It is well-known that investing is one way of achieving your financial goals for the short and long term. That said, investing is not only for the “big” investor. There is power in small local collectives pooling their “small” dollars, and I propose “invest from within.” It does not only help you grow your money, but it also provides you with a team effect of like-minded investors. At the same time, you collectively support a developing community whose voice may not otherwise be heard.
Local investing can help communities build wealth in several ways:
- It brings investment dollars into the community. Investments in community-based businesses help develop commercial corridors that spur local jobs for the benefit of community members.
- It helps build community ties because community members act as resources for each other. Investments in community-based businesses enhance connection and neighbor atmosphere, developing an engaged citizenry.
- It is foundational for underinvested communities. Investment from within strategy helps build community wealth that incorporates pride of ownership, quality of life environment, and blight-to-beauty development projects.
Community wealth building is a people-centered way of directing the flow of capital back to the local economy. Too often, revenue from local commerce is extracted from the community by non-local investors as profits and dividends before the dollar can circulate in the community once. Changing where the profits flow can help modify the dollar circulation, thereby enhancing local investment opportunities, employment, and commerce within the local economy. Capital democratization with investment at the top of that list, where locals can impact this measure through investment clubs and funds for community-focused projects, can be instrumental in rebuilding the connection between stakeholders and small businesses for the benefit of the community at large.
Community wealth building is about more than just improving the business climate. It’s also about the lives lived in the community, where commercial and residential members come together to work to solve problems and promote mutually beneficial opportunities. When people work together on business projects - like starting a bookstore or opening a restaurant - they strengthen their community’s ties. Community wealth building is about community resilience.
Small businesses are building blocks that make a community flourish; they help promote the fabric and character within its locality. Healthy community wealth building initiatives incorporate:
- Community Involvement of Business Owners. Involving yourself in community events creates awareness, helps you know your neighbors, and serves as a platform to introduce your products or services. It is essential to build relationships and connections with your local community and is highly effective when seeking local investments.
- Rise on Local Tax Base. The taxes local shoppers pay benefit their community. For example, local taxes improve roads, schools, and other public spaces. In addition to that, small business owners also spend their money locally, which means the taxes they pay to purchase raw materials for their products or services boost a community’s economic health.
- Local Job Creation. Having a robust business community creates a give-and-take relationship between its members through increasing local employment, which supports the area’s income, creating a multiplier for the dollar circulation in the community.
- Create Opportunities. Increasing your profile in your local community could also attract local investors. Local investing gives small entrepreneurs a chance to establish business partnerships and joint venture opportunities. Having such a connection allows you to significantly impact your local community, contributing to its economic advancement.
Community wealth building has many benefits for the community and its members. Overall, it increases local economic development. It promotes local goods and services, improves the skills and abilities of individuals within the community, increases asset ownership, creates shared prosperity, and ensures local community economic stability. In addition, local businesses act as the backbone of a community.
We will discuss how local businesses can source capital in Part 1 - Tips for Small Businesses to Attract Local Investment
6 Part Community Wealth Building Series
Part 1 – Tips for Small Businesses to Attract Local Investment
Part 2 – Guide to Starting a Local Investment Club
Part 3 – Overview: Community Investment Funds (CIF)
Part 4 – Real Estate Revitalization Fund (CIF)
Part 5 – Diversified Opportunity Fund (CIF)
Part 6 – Program Related Investments (PRI)