Shared Interest Society Annual Review 2012

Annual Review 2012

CONTENTS

2 Review of the year4 Introducing Shared Interest6 Vision, Mission and Values8 Financial overview10 Investment12 Volunteers14 Lending20 Looking forward

2 SHARED INTEREST SOCIETY ANNUAL REVIEW 2012

REVIEW OF THE YEAR SHARED INTEREST SOCIETY CHAIR, KATE PRIESTLEY

It has been a year of sustained achievementfor the Shared Interest Society team.

In terms of lending, we worked with 120 fair tradeorganisations globally and in total, we providedpayments of more than £47 million to producersand buyers in 64 different countries. Weexperienced a rapid growth in South America withthe value of facilities there increasing by 32%.

This year saw us open our West Africa office andwe were delighted to follow this up with our firstpiece of lending. An export credit facility forhandcraft producer, Havilak, which will benefit 850weavers, many of whom are widows and singlemothers. Because of a shortage in raw material,they are looking to increase their volumes byopening a production centre in the south wherestraw is more plentiful.

With regards to investment, continued supportfrom our member base coupled with newinvestors means that our total amount of ShareCapital has continued to increase. Although this is a great achievement, the need for furtherinvestment, however, remains urgent. While wehave opened a significant number of newaccounts, we continue to face account closures.As the year came to an end, the total number ofmembers reached 8,790, with share capitaltotalling £28.67 million.

This year, we had the highest attendance figuresever for our AGM, which was held in Oxford andattracted nearly 200 members. We also carried outour very first volunteer survey, where over 75% ofrespondents indicated they were satisfied or verysatisfied in their role. The challenge we will now

embrace is looking at how we can makeimprovements to the scheme, but it is reassuringto know that the majority of our volunteers findtheir roles fulfilling.

Following increasing demand from both membersand volunteers for online facilities, SharedInterest’s Secure Area was launched in July.Allowing members to check their statementsonline and featuring new resources for volunteers,the Secure Area forms part of our overarchingwebsite development project. Our new website,which will continue to evolve, presents producercase studies and films via a dynamic mapshowing who, where and what types of productswe finance across the globe.

We also welcomed two new representatives ontoour Board of Directors this year. Pauline Cameronand Keith Sadler collectively bring with them awealth of experience from the private, public andvoluntary sectors.

Shared Interest Society was also recognised for itswork by a range of award bodies, which resultedin us becoming regional finalists in the PrivateBusiness Awards, runners up in The ObserverEthical Awards, and national finalists in the ThirdSector Awards, the Social Enterprise Awards andCo-operative Awards.

These achievements have broughtthe Shared Interest brand in frontof new audiences across the UKand we look forward to building onthese platforms going forward.

In 2010/11 we diversified into banana lending, we now makepayments to five banana co-operatives in Latin America.

Introducing Shared Interest

For over 20 years wehave been providingbespoke financialservices and a vitalmeans of support tosome of the mostdisadvantagedcommunities acrossthe globe.

The Society was launched in October 1990 withthe financial backing of the Joseph RowntreeCharitable Trust and the EcumenicalDevelopment Co-operative Society (EDCS). Bymid-1991, we had attracted £750,000 of ShareCapital and 600 members.

As an ethical investment co-operative, our membersshare our vision of a world where justice is at theheart of trade finance. We form the link between UKsocial investors and fair trade organisations needingfinance to improve their livelihoods.

We provide loans and credit services to businessesacross the globe that are registered with eitherFairtrade International (FLO) or members of the WorldFair Trade Organisation (WFTO). These businessesrange from sole trader handcraft producers to largescale coffee co-operatives and fair trade buyers.

We offer a variety of lending options that enable ourcustomers to pre-finance orders, purchase essentialmachinery and infrastructure, make advancepayments to farmers and artisans and financeinventory for new shops selling fair trade goods.

We have reached this level of performance byinspiring almost 9,000 people in the UK to invest over £28m of share capital and to share risk withcommunities in the developing world.

Shared Interest Society is unique as the world’s only 100% fair trade lender. As a co-operative, we are owned and controlled byour members who each have an equal voice andvote, regardless of account size. We also have anelected Board of Directors which is made up of eightmembers; two executives and six non-executives.The Board is responsible for setting the strategy forthe Society and making sure it is delivered within anappropriate risk framework.

Shared Interest also has a Council which is made upof nine members whose role it is to help make surethe Board sets a strategy that adheres to the missionof the organisation and then delivers this strategy tomeet the expectations of the members.

The BoardThe Board of Directors currently includes twoexecutive directors and six non-executives. Itsrole is to determine and monitor theimplementation of strategy for the Society,make sure that risks are managed appropriatelyand provide a proper account to members ofthe financial and social results of the Society.

Carol WillsCredit Committee (Chair)Remuneration CommitteeNominations Committee

Peter FreemanRemuneration Committee (Chair)Audit Committee

Kate PriestleyNominations Committee

Pauline CameronRemuneration Committee

Keith SadlerAudit Committee

David NussbaumAudit Committee (Chair)Credit Committee

Patricia AlexanderManaging DirectorNominations CommitteeCredit Committee

Tim MorganFinance Director Credit Committee


WHAT WE STAND FOR

Mission:Our mission is to provide financial services andbusiness support to make livelihoods and livingstandards better for disadvantaged communitiesin some of the world’s poorest countries. We workwith people who share our commitment to fair andjust trade. Together we take and share riskbecause we value the difference that fair andsustainable trade makes. We seek to satisfy theneeds of producers as they trade their way out ofpoverty and to meet the aspirations of our investorsand donors to support them in achieving this aim.

Values:We will conduct our business in a manner whichreflects the principles of love, justice andstewardship.

We will:

Work to recognised fair trade standards

Respect the diversity of different cultures

Value and engage with our members and supporters

Place partnership at the heart of what we do when working with others

Work with our people and encourage their commitment, talents and energy in an environment of mutual respect.

Environmental Sustainability

For Shared Interest Society, sustainability isdoing the best we can with the resources that are entrusted to us. We introduced anenvironmental policy in 2007 and through regularcommunication of objectives, appraisals andachievements, we help our staff to understandand implement the relevant aspects of the policyin their day-to-day work.

We continue to recycle paper, card, plastics andglass and other office equipment as appropriate.This year we introduced the concept of

composting coffee grounds and tea bags. Thissaves the waste from landfill as well as providingnutritious compost for local allotments.

As part of our sustainability objectives, we aim toprocure our goods and services from locally-based suppliers, both to minimise environmentalimpact and to support local businesses. Duringthe year, purchases from local suppliers totalled£326,048 – an increase of 29%.

We continue to encourage our staff to travel all orpart of their journey to work in an environmentally-friendly way (using public transport, cycling,walking or working from home). Last year, 91% ofstaff used public transport for all or part of theirjourney while only four people used their car forany part of their journey, one of whom cycles part of the way.

To incentivise staff to further use public transport,this year we have introduced a staff travel scheme.This enables staff to pay for an annual bus and/orMetro pass monthly via deduction from salary.Seven staff have taken advantage of thisopportunity, providing total savings of £1,008, an average saving of 21%.

Global Reach

Shared Interest Society is based in Newcastleupon Tyne and we have regional offices in Kenya,Peru and Ghana. The total number of staff acrossthe organisation is 34 with five of our staff teambased in our regional offices. This on the groundpresence is vital to increasing awareness andenabling us to build strong relationships with thecommunities that we work with.

Overseas travel is one way that Shared InterestSociety tries to promote a greater understandingof different cultures. This year 13 UK-based stafftravelled to various countries including Ghana,USA, Holland, Swaziland, Peru, Chile andGermany. Their experiences were shared with therest of the staff team through presentations andemail updates.

Vision:

A world wherejustice is at theheart of tradefinance.

What is Fairtrade? Fairtrade is an alternative approach to

conventional trade and is based on a partnershipbetween producers and consumers. Fairtrade offersproducers a better deal and improved terms oftrade. This allows them the opportunity to improve

their lives and plan for their future.

When a product carries the FAIRTRADE Mark itmeans the producers and traders have met FairtradeStandards. The Standards are designed to addressthe imbalance of power in trading relationships,

unstable markets and the injustices of conventionaltrade. For information on these standards pleasevisit www.fairtrade.net or www.wfto.com

FINANCIAL OVERVIEW

The 2011-12 financialyear has been asuccessful one withmany of the financialbudget targets met or exceeded.

SHARED INTEREST SOCIETY ANNUAL REVIEW 2012 9

The 2011-12 financial year has been a successfulone with many of the financial budget targets met or exceeded. This was in part due to ourregistering the Society for VAT which produced aone-off net windfall of almost £120,000. As a resultof the successful year we have decided to payinterest to members for the first time since 2010.The 0.5% interest will be paid after the AGM in2013 assuming approval of the accounts by themembers. (The VAT registration, as mentioned lastyear, should also give the Society an ongoing

annual saving in costs of around £25k). The other good news was around interest earnedon deposits, which we have again managed toincrease following the low-point of 2010. We havemade a substantial provision for bad and doubtfuldebts – albeit £57,000 less than last year. Thefinancial accounts give much more detail of thisamount but recent bad debt charges have left theSociety with a provision amounting to £992k,although we hope some of this may be recoveredin the future.

2008 2009 2010 2011 2012£’000 £’000 £’000 £’000 £’000

PROFIT AND LOSS 2012Credit Charges 1,257 1,581 1,602 1,684 1,797Bank Deposit Interest 1,191 782 530 636 784Other 54 62 93 102 68Total 2,502 2,425 2,225 2,422 2,649

Finance Costs 457 226 112 119 126Provision for Doubtful Debts 167 497 327 670 613Operating Costs 1,590 1,662 1,609 1,545 1,633Corporation Tax 18 14 22 15 11Profit before Members’ Interest 270 26 155 73 266Members’ Interest 205 21 0 0 143£/$ Exchange Rate 1.84 1.60 1.58 1.56 1.62

BALANCE SHEET 2012Tangible Fixed Assets 40 38 24 31 120Investments 0 96 97 101 90Loan to Oikocredit 2,053 1,000 0 0 0Lent to Customers 18,022 17,789 19,772 19,722 18,103Cash 7,053 9,648 9,525 10,165 13,631Debtors 368 274 286 332 382Current Assets 27,536 28,845 29,704 30,351 32,326Creditors < I Year 1,414 1,479 573 581 529Creditors > I Year 991 0 0 40 1,340Total 25,131 27,366 29,131 29,730 30,457

Capital 23,637 26,051 27,682 28,208 28,669Reserve for Lending Loss 766 766 766 766 766Profit and Loss 728 549 683 756 1,022Total 25,131 27,366 29,131 29,730 30,457

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.


INVESTMENT: our members make it all possible

Our members share our vision of a worldwhere justice is at the heart of trade finance.

Operating as a co-operative, we are ownedand controlled by our members. Ourmembership, although still predominantlyindividuals, continues to diversify and includes faith groups, Fairtrade Towns, small businesses, schools and communityorganisations.

This year we saw a net increase of 26 memberscompared to the net decrease of 74 in theprevious year. Total investment reached £28.67mand 299 new Share Accounts were openedoverall, with enquiries reaching 1,800 thanks to a new range of marketing materials both onlineand offline.

With regards to online developments, bothmembers and volunteers now have access to aSecure Area, which is part of our new website.Launched in July, this is a major development inkeeping members updated on their ShareAccount activity. The Secure Area was createdfollowing the results of our 2011 member survey,which showed that 20% of respondents wantedto manage their accounts online. Designed tocomplement our other ways of engaging withmembers, it provides a portal for members to viewtheir details and access messages and resources.

This year’s AGM had our highest attendancefigures yet and also saw the first contestedelections for our Council, which resulted in theelection of two new members to Council and there-election of one member.

In addition to our AGM we have introduced aseries of member events across the country to re-engage with our current members and raise theSociety's profile amongst new audiences. Thisyear we held events in Edinburgh and Oxford.

299 new Share Accountswere opened, and totalinvestment reached over £28.5m


CASE STUDY: Ishbel DorwardRetired GP, Ishbel Dorward, has invested in Shared Interest for over15 years. After attending our Edinburgh members’ event, Ishbelfrom Eyemouth in the Scottish Borders was inspired to get evenfurther involved...

“It was through working in hospitals in northern Malawi that Ibecame aware of the difference fair finance can make overseas. My husband and I both worked as doctors and moved there withour daughter and son.

“There we saw staff growing maize to feed their families and thehospital set up a loan fund for the purchase of seed and fertiliser.

“On our return to Scotland we discovered Shared Interest. Sincethen, my involvement has been mainly as an investor but I retired inMarch and heard more about the ambassador scheme at theirEdinburgh event. Being free of work commitments, I felt this wassomething I could do with my spare time.

“I also liked the idea of the Gift Pack, which you can send to mark a special occasion. With my granddaughter’s second birthdayapproaching and her little brother due to be born a month later, Ithought that opening Share Accounts would be a suitable way tocelebrate both events.

“When they get older, I am looking forward to explaining about theamazing things their money has been doing while they weregrowing up.”

“I am looking forwardto explaining aboutthe amazing thingsmy grandchildren’smoney has beendoing while theywere growing up.”


OUR VOLUNTEERS: spreading the message across the UK

Shared Interest Society relies upon a dedicatednetwork of 120 volunteers across the country.We use the term volunteer to encompass allindividuals who give up their time to supportthe organisation. Within this group we haveambassadors who actively promote SharedInterest Society and attract new members.

Volunteers get involved on a variety of differentlevels, from organising stalls, giving talks to theirlocal network or community to helping withadministrative tasks in the office. Depending onexperience and knowledge there is a role foreveryone within the programme.

In the past year our volunteers have attended 76events across the UK on our behalf. Our onlineSecure Area for volunteers includes a mapfunction enabling them to see who is in their areaso that, with support from Head Office, they canco-ordinate their efforts through networking,ideas-sharing and communication.

We recognise that training is vital to the on-goingdevelopment of our volunteers and this year weconducted 10 training sessions, providinginduction training to 32 new volunteers. We alsoheld a number of meet-up events enablingexisting and new volunteers to meet each otherand members of staff. To support this activity wedeveloped a toolkit of resources to equipvolunteers with the information they need topromote the organisation effectively. In order tobenchmark our progress and identify areas ofimprovement we introduced our first volunteersurvey with a 40% response rate; more details can be found in our Social Accounts here:www.shared-interest.com/social-accounts

As a thank you, we marked this year’s nationwideVolunteers’ Week, by sending a special packagecontaining a box of handmade Fairtradechocolates and a certificate in recognition of ourvolunteers’ on-going dedication and support.

volunteers andambassadorsin 2012

120


CASE STUDY: Hattie RobertsonOriginally from Oxford, Hattie is currently studying BusinessManagement at Newcastle University. Now in her second year,she is developing her skills through a volunteer work placement atShared Interest Society. Hattie says:

“Shared Interest caught my eye because of its fair trade focus. I was aware of fair trade from a young age as my mum is a keensupporter, and volunteering with Shared Interest is another wayto get involved.

“I have been helping with mail outs, updating the website andwriting news articles as well as manning stalls at events. It hasbeen interesting to see how Shared Interest engages withexisting and new supporters.

“Most importantly, it is good to know I am helping SharedInterest to support fair trade businesses in developing countries.

“It has been a really exciting thing to do, completely separate tomy University life, and I look forward to learning more.”

CASE STUDY: Stephen ThomasStephen has been a Shared Interest Society member for almost20 years. Before this, he spent time in Mozambique, Somaliaand Angola; all countries suffering from the aftermath of civil war.Most recently Stephen worked for the Welsh Centre forInternational Affairs and was delighted to see Wales become thefirst official Fairtrade nation. He lives with his partner Miriam in the Canton district of Cardiff.

Stephen says: “After working for large aid organisations, bothhere and overseas, I felt that there was also something I could do financially.

“It seemed a natural step to become a member of Shared Interestand I have remained an investor ever since. It remains a practicalway for me to support communities in the developing world.

“I extended my commitment to Shared Interest last year bybecoming an ambassador.

“When representing Shared Interest in and around Cardiff, itsurprises me how many people say: “I’m a Shared Interestinvestor too, you know.”

“Well, I did not know prior to them confiding in me. Perhaps it issomething we all should be more open about to grow support ofShared Interest and the fair trade movement as a whole.”

producergroups in 201279

83%

buyerlending

10.9 million

producerlending

£6.3 million

increase in directproducer lendingsince 2007


LENDING

At the end of September 2012, Shared InterestSociety was lending directly to 79 differentproducer groups bringing the increase over thelast five years to 83%.

We have seen the greatest increase in directproducer lending in South America; predominantlyin Peru. Over the course of the year we openednine new accounts for African customers. Thisgrowth in direct lending coincides with our in-region presence and as a result, 2012 saw usopen our West Africa office in Accra, Ghana.

By the end of the year, 41 buyer customers heldaccounts. Many customers, especially buyers, arenow in a position where they can access rateslower than those provided by Shared Interest.However our expertise in pre-finance and exportcredit and our fair trade focus helps us to retainexisting customers.

This year saw a repeat of the Shared InterestProducer Committee meetings which are hostedby our overseas staff. This year, the groupsdiscussed the current fair trade movement andclimate, a new, secure customer website, andother lending products.

The majority of our overseas payments continueto be made to coffee co-operatives; however,during the year we saw encouraging growth in ourfruit lending.

Overall, Shared Interest lends money in anunsecured manner in 64 countries to 120customers. For many, we provide a vital source of finance that may not be available locally.

Ensuring a fair rate

The lending interest rate we charge is agreed witheach customer and is linked to the prevailinginterest rates for that currency plus a margin tocover operating costs, known as the Prime Rate.Added to this is the Risk Premium based on therisk assessment of the individual customer.

Sharing risk

Our members’ capital is used to make payments to fair trade businesses in 64 countries many ofwhom operate in unstable parts of the world. Welend on an unsecured basis knowing that manycustomers either do not have any security topledge, or have already used their assets tosecure conventional borrowing which supportsnormal working capital requirements.

Fair trade offers an alternative model whereprepayments are made to producer groups andShared Interest enables UK-based investors toshare risks with customers trying to provide afairer way of doing business. Our lending portfoliois broad, with facilities stretching from £5,000 toover £2m. Our customer base varies fromorganisations with a high number of employees, tothose that operate with just a handful of people.

Average lending to all customers over the last five years

2008 2009 2010 2011 2012

Producer lending £3,431,147 £4,217,985 £4,780,929 £5,701,530 £6,266,513Buyer lending £9,534,422 £12,489,924 £11,794,492 £11,300,449 £10,873,284Total £12,965,569 £16,707,909 £16,575,421 £17,001,979 £17,139,797


LENDING: how does it work?

Shared Interest lends funds to buyer andproducer organisations. Some people aresurprised to learn that the majority of ourlending is made to buyer organisations inEurope and North America.

This money is in fact being used to supportproducers in developing countries. Even thoughwe are working to increase our direct producerlending, we will keep lending to fair trade buyerssuch as Traidcraft and Equal Exchange Incbecause through them our investors’ capital canreach producer groups who would not be able toborrow directly from us.

BUYER LENDING

Pre-financing credit facility Fair trade buyers arerequired to provide a pre-payment to producergroups of at least 50% of the order value if it isrequested. However, buyers can find themselvesstruggling to provide sufficient pre-finance fromtheir own cash reserves. We assist by offering fairtrade buyers a facility that can be used topre‑finance orders with their producers. In additiona buyer can also benefit from a further creditperiod of up to six months after the order isreceived, enabling them to sell their product andreceive an income prior to repayment of theamount borrowed.

Shop loans Shop loans are specifically designedfor buyers opening new retail stores and theyenable a business to purchase the initial fair tradestock. We agree the loan amount in consultationwith each applicant and repayment is made overan agreed period.

Term loans Term lending for buyers is relativelynew territory for Shared Interest, with the first loanbeing released in 2008. We provide the loansgenerally for the purchase of assets and forwebsite development or working capital.Borrowing is for between one and five years andrepayments are set depending upon thecircumstances of the buyer. Loan sizes aredetermined by the financial situation of the buyerand its ability to repay the loan.

PRODUCER LENDING

Pre-financing This facility provides sufficientworking capital to producer groups to enable themto complete and deliver new orders. Customerscan borrow a maximum of 80% of the value ofany order received (60% for some commodityorders). Repayment happens once delivery ismade and when the buyer pays for the order viaShared Interest. We deduct the amount borrowedand any interest due.

Term loansWe offer producer groups term loansfor the purchase of assets such as machinery,buildings or vehicles. Borrowing is for betweenone and five years and repayments are setdepending upon the circumstances of theproducer group. Loan sizes are determined by thefinancial situation of the producer group and itsability to repay the loan.

Stock facilityWe offer producer groups a shortterm revolving loan for the purchase of stock.Borrowing is for up to a 12-month period andrepayments are arranged according to the cashflow of the producer group.

Coffee remains our most prominent product, we now have 46 coffee customers across the globe

Product mix of the producer groupsto whom our lending is committed

coffee 42%

cocoa 7%

fruit 13%

handcrafts21%

sugar 3%

tea 4%

nuts 5%

honey 2%

olive oil1%

other 6%


WHERE OUR INVESTORS’ FUNDS ARE

PeruPeruvian Fairtrade cocoa producers, Naranjillo, are using financing from Shared Interest to develop their cocoaprocessing. This should increase productivity as well asimprove the co-operative’s efficiency andsustainability. Regional Development Executive, Paul Sablichsaid: “Thanks to Shared Interest, Naranjillowas able to expand its sales to Europe and theUSA. We hope to continue helping their growthin the future, for the sake of the 2,500 cocoafarmers that make up the co-operative.”

Bolivia/PeruAndean Naturals buys quinoa from smallfarmers in Bolivia and Peru and distributes it throughout North America. The operation supports some 4,000 farmersby making pre-harvest payments, funded bytheir Shared Interest facility. CEO, Sergio Nuñez de Arco said: “Farmershave the peace of mind of knowing that theywill sell their entire product at fair marketprices. I believe that Shared Interest’s lendingmodel is effective at helping business to grow.It addresses one of the key issues faced byemerging enterprises; purchase order finance.”


SUPPORTING FAIR TRADE

UgandaUganda produces only 1% of the world’stea so farmers need to ensure high qualityin order to be able to compete in theinternational marketplace. Shared Interestsupports Mpanga by providing access tofair finance. The group has been using its facility topurchase and distribute fertiliser to all of itssmallholder farmers. The fertiliser helps increase yields as well as quality. Rogers Siima, General Manager of Mpanga said: “Shared Interest has provided finance to Mpanga when it needed it most.”

KenyaKenya-based handcraft group, Namayianauses a Shared Interest facility to pre-financetheir orders of handmade beaded goods.Before Namayiana existed there was no real role for women in the local community.Now they are able to provide an income fortheir families, paying for their children’seducation, as well as food, clothing andother household items. Namayiana Project Manager, CatherineMututua said: “With Shared Interest behindus, we have more courage to work harderand feel we can go far in our business.”

Fair trade buyer organisations with Shared Interest credit accountsProducer groups receiving advance payments or loans via Shared Interest

Now that our West African office is fully operational, we will continue to

grow our on-the-ground knowledge and reach even remote communities in this region.

Back in the UK the emphasis must be on the recruitment and retention of members in order to in raise the Share Capital needed to finance our lending facilities. As always, our ambassadors will play a crucial part in this

process by representing Shared Interest at events nationwide.

With UK sales of Fairtrade products increasing by 12% lastyear, we can see there continues to be a consumer desire to help improve livelihoods in the developing world. We hope to build on this drive to enable fair trade

businesses to exist and succeed.

With this in mind, the need for fair finance has never been greater, nor the call for

investment more crucial as we move into 2013.

Looking forward to the year ahead we plan to build on our achievements

of 2011/12.

facebook.com/sharedinterest

twitter.com/SharedInterest

Shared Interest SocietyNo 2 Cathedral SquareGroat MarketNewcastle upon TyneNE1 1EH

T: (0)191 233 9100F: (0)191 233 [email protected]

The complete Directors’ Report and Accounts and the Social Accounts are available to download from our website.

Shared Interest Society Ltd is registered with the Registrar of Friendly Societies, number 27093R PRINTED ON RECYCLED PAPER

Shared Interest Society Annual Review 2012

Documents

Transcript of Shared Interest Society Annual Review 2012