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Providing fair finance to enrich the lives of others

2013 Review 2 Introducing Shared Interest Society 4 Mission and values 6 Financial overview 8 Investment 10 Volunteers 12 Lending 14 Where our investors’ funds are supporting fair trade 18 Looking forward to the year ahead 20



2013 Review

Shared Interest Society Chair, Kate Priestley

As 2013 comes to a close, we can look back on a year that has seen several successes. This includes reaching a significant milestone in the proportion of direct lending made to smallholder farmers and handcrafters in the developing world. For the first time in our history, this has surpassed the amount lent to buyers. Our lending to buyers in Europe and North America does still help us reach producers in remote areas, who may not be able to borrow from us directly. However, we recognise the value of lending directly to producers as this is a vital part of supporting their business growth. From our largest single payment of just under £700,000 made to a coffee farmer in Peru, to our smallest payment of £64 made to a handcraft producer in Kenya, direct lending continues to be an on-going aim for us. This year we were also thrilled to achieve the Queen’s Award for Enterprise in the category of Sustainable Development for the second time. It is an honour to be recognised as an organisation that benefits the environment, society and the wider economy.

Of course, it is our UK supporters who make our overseas impact possible. We wish to thank our 138 volunteers who gave up over 250 hours of their time to help us achieve our goals. As we end the financial year with over £29m in Share Capital, we continue to offer our investors 0.5% interest on Share Accounts as part of our drive to retain our current membership and attract new members. With over 20% of this current membership now opting to view their accounts online through our Secure Area, we hope that developments like these help us to continue to diversify our investor base as we approach our 25th anniversary in 2015. I hope you enjoy reading this year’s Annual Review, especially the insights into the lives of both those who invest time and money in Shared Interest Society, and those who borrow from us. These are the people who ensure that the Society continues to play an instrumental role in fair trade.

Shared Interest Society is the world’s only


fair trade lender

Introducing Shared Interest Society

For over 20 years we have been providing bespoke financial services and a vital means of support to some of the most disadvantaged communities across the globe.


The Society was launched in October 1990 with the financial backing of the Joseph Rowntree Charitable Trust and the Ecumenical Development Co-operative Society (EDCS). By mid-1991, we had attracted ÂŁ750,000 of Share Capital and 600 members. As a community benefit society, that acts co-operatively, our members share our vision of a world where justice is at the heart of trade finance. We 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) or members of the World Fair Trade Organisation (WFTO). These businesses range from sole trader handcraft producers to large scale coffee cooperatives 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 and finance inventory for new shops selling fair trade goods. We have reached this level of performance by inspiring almost 9,000 people in the UK to invest over ÂŁ29m of share capital and to share risk with communities in the developing world. As a community benefit society that acts co-operatively, we are owned and controlled by our members who each have an equal voice and vote, regardless of account size. We have an elected Board of Directors which is made up of nine members; two executives and seven nonexecutives. The Board is responsible for setting the strategy for the Society and making sure it is delivered within an appropriate risk framework. Shared Interest also has a Council which is made up of nine members. Their role is to help make sure the Board sets a strategy that adheres to the mission of the organisation, and then delivers this to meet the expectations of the members.

The Board of Directors currently includes two executive directors and seven 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

Martin Kyndt Remuneration Committee

Kate Priestley Nominations Committee, Credit Committee

David Bowman Audit Committee

Tim Morgan Finance Director, Credit Committee

Keith Sadler Audit Committee, Nominations Committee

Pauline Cameron Remuneration Committee

David Nussbaum Audit Committee (Chair), Credit Committee

Carol Wills Credit Committee (Chair), Remuneration Committee (Chair)




Mission and values Mission: Our mission is to provide financial services and business support to make livelihoods and living standards better for disadvantaged communities in some of the world’s poorest countries. We work with people who share our commitment to fair and just trade. Together we take and share risk because we value the difference that fair and sustainable trade makes. We seek to satisfy the needs of producers as they trade their way out of poverty and to meet the aspirations of our investors and donors to support them in achieving this aim.

Values: We will conduct our business in a manner which reflects the principles of love, justice and stewardship. 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 is doing the best we can with the resources that are entrusted to us. We introduced an environmental policy in 2007 and through regular communication of objectives, appraisals and achievements, we help our staff to understand and implement the relevant aspects of the policy in their day-to-day work. We continue to recycle paper, card, plastics and glass and other office equipment as appropriate. This year, we

replaced office IT equipment, and 22 PCs were offered to staff. We also recycled over 2,500 items of plastic and glass, and 38 wheelie bins of paper. As part of our sustainability objectives, we aim to procure our goods and services from locally-based suppliers, both to minimise environmental impact and to support local businesses. During the year, purchases from local suppliers totalled £287,000 – this represents 44% of our purchases in the year. We continue to encourage our staff to travel all or part of their journey to work in an environmentally-friendly way (using public transport, cycling, walking or working from home). Last year, 72% of staff used public transport for all or part of their journey while only four people used their car for any 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/or Metro pass monthly via deduction from salary. This year, nine staff have taken advantage of this opportunity, providing an average saving of 20%. Global reach Shared Interest Society is based in Newcastle upon Tyne and we have regional offices in Kenya, Costa Rica, Peru and Ghana. The total number of staff across the organisation is 31 with seven of our staff team based in our regional offices. This on the ground presence is vital to increasing awareness and enabling us to build strong relationships with the communities that we work with. Overseas travel is one way that Shared Interest Society tries to promote a greater understanding of different cultures. This year ten UK-based staff travelled to various countries including Benin, Brazil, Kenya, Rwanda, Swaziland, USA, Netherlands and France. Their experiences were shared with the rest of the staff team through presentations and email updates.


A world where justice is at the heart of trade finance What is fair trade? Fair trade is an alternative approach to conventional trade and is based on a partnership between producers and consumers. Fair trade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. When a product carries the FAIRTRADE Mark it means the producers and traders have met Fairtrade standards. The standards are designed to address the imbalance of power in trading relationships, unstable markets and the injustices of conventional trade. For information on these standards please visit or



Financial overview The 2012-13 financial year saw a 1.7% fall in total income but this disguised the fact that lending income fell by over 10% whilst deposit interest and donations grew substantially. There are a number of reasons for the reduction in lending including falling coffee prices and some buyer customers switching or needing less borrowing. For the last few months of the year, lending to producers exceeded lending to buyers. Operating costs were kept at very similar levels to 2011-12 after adjusting for the

one-off VAT win which reduced these costs in last year’s accounts. Our provision for bad and doubtful debts is again substantial but almost £200,000 less than last year and about 16% of total income as opposed to 21.5% which it has averaged in the last four years. With the cost of borrowing funds in currency to lend also reduced by around £50,000, we are able to provide for interest to members at 0.5% and end the year with a surplus after tax of £220,000.

We made payments of


to fair trade organisations during 2013


2009 £’000

2010 £’000

2011 £’000

2012 £’000

2013 £’000


1,684 636 102 2,422

1,797 784 68 2,649

1, 611 903 89 2,603

PROFIT AND LOSS 2013 Credit Charges Bank Deposit Interest Other Total

62 2,425

1,602 530 93 2,225

Finance Costs Provision for Doubtful Debts Operating Costs Corporation Tax Profit before Members’ Interest Members’ Interest £/$ Exchange Rate

226 497 1,662 14 26 21 1.60

112 327 1,609 22 155 0 1.58

119 670 1,545 15 73 0 1.56

126 613 1,633 11 266 143 1.62

77 414 1,777 47 335 68 1.61

BALANCE SHEET 2013 Tangible Fixed Assets Investments Loan to Oikocredit Lent to Customers Cash Debtors Current Assets Creditors < I Year Creditors > I Year Total

38 96 1,000 17,789 9,648 274 28,845 1,479 0 27,366

24 97 0 19,772 9,525 286 29,704 573 0 29,131

31 101 0 19,722 10,165 332 30,351 581 40 29,730

120 90 0 18,103 13,631 382 32,326 529 1,340 30,457

97 93 0 16,490 16,177 458 33,315 544 1,340 31,431

Capital Reserve for Lending Loss Profit and Loss Total

26,051 766 549 27,366

27,682 766 683 29,131

28,208 766 756 29,730

28,669 766 1,022 30,457

29,454 766 1,211 31,431

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.





...our members make it all possible

Our members share our vision of a world where justice is at the heart of trade finance. As a community benefit society, that acts co-operatively, we are owned and controlled by our 8,805 members. Our membership, although still predominantly individuals, continues to diversify and includes faith groups, Fairtrade Towns, small 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 investors, and 65% of the members responding to our recent members survey strongly agreed or agreed with this policy.

In response to demand from our 2011 membership survey, we launched a Secure Area on our website last year. This provides a portal for members to view their share account statements, balance, and personal details as well as accessing messages and resources. This facility is now well used with 2,076 members registered. Our Supporter Relations Team provides a range of activities to proactively engage with our members and understand their views. In addition to our Annual General Meeting (AGM) 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 Oxford, and a celebration of World Fair Trade Day in Brighton.

Our biennial membership survey this year attracted responses from 1,993 (27%) of our members. 42% of respondents were completing the survey for the first time. Although Shared Interest Society share capital is not protected by the FCA Compensation Scheme, 62% of our member survey respondents saw their investment as low risk. This is as a result of our strong track record and our relationships with our producers. Indeed, over the last decade, there has been an increase in the percentage of members wanting us to take more risk.



people whose investment is now supporting communities in the developing world




Daily Bread

David Archer

Daily Bread is an ethical wholefood co-operative, with stores in Northampton and Cambridge, selling a range of organic and Fairtrade products. Staff at the Northampton store opened a group Share Account in 2009.

David Archer lives in the North East and has been an investor with Shared Interest for fifteen years.

John Clarke, one of the longest serving members of the co-operative, suggested the group make the investment. “I took the idea to one of our weekly meetings. Fair trade is at the heart of Daily Bread, and a Shared Interest Society account seemed to fit with everything that is important to us.” Daily Bread values the principles of fair trade and has been selling fair trade products for over 20 years. Engagement Manager, Sally Reith, met with the group soon after they opened their account, and spoke about the impact their investment would have on fair trade producers, many of whose products are sold in their shop. For Daily Bread, it is important that their money is used to support trade, and that it is invested in projects in developing countries. John said: “Rather than make a one-off donation, we were excited to invest our money for the use of producers in developing countries, and for it to go on providing support as it is repaid and reinvested.”

David spent many years working on rural development projects in countries overseas. He worked for some time in India, Pakistan, Bosnia, and Kosovo, as well as Zambia, Malawi, and Kenya. In the UK, David spent twenty years with Northumbrian Water and the National Rivers Authority. “My former colleague at Northumbrian Water was involved with Shared Interest Society. I met him one day by chance, and he told me all about Share Accounts. I was immediately hooked. I think that was about fifteen years ago.” David has a particular interest in Africa, where he spent seven years. “I learned a lot from my experience there, and owe it to the inhabitants to pay back some of my debt. I am also aware of the difficulties under which development agencies and the local population strain to improve their conditions in some parts of the world. The divide between our plenty and the frugality of others elsewhere is hard to ignore.”





...spreading the message across the UK

Shared Interest Society relies on a network of volunteers across the UK. In 2013, these volunteers represented the Society at over 85 events, and through this contributed 265 hours of their own time. Some of our volunteers support us with our administration; collating data, or helping at our events. Others choose to take on a more public role, as an ambassador, promoting Shared Interest Society in their local area to attract new members. Ambassadors play a vital part in finding opportunities to raise awareness of the Society both locally and nationally. They get involved in a variety of activities including running stalls, sending out information, and giving presentations to local groups. Many are also investors who are keen to develop their involvement with Shared Interest Society further. We are pleased to be building a strong network of ambassadors, most of who get involved through word of mouth or simply talking to other volunteers. We are keen to help ambassadors stay in touch with each other, and our e-newsletter is one way of making sure everyone has the latest information to help them in their role. In June this year, some of our ambassadors visited the Houses of Parliament during National Volunteer Week.



Ben Quashie Ben Quashie, aged 67, is married with three children. Ben is a Shared Interest Society ambassador, as well as an investor. Ben explains: “I became interested in fair trade during my last year at Middlesex University, and was encouraged by my lecturer to do my final project on fair trade.” Born in Ghana, Ben started working life as a civil servant. He then studied nursing in the UK and became a staff nurse. He spent much of his career in social care, before retiring in 2006 to pursue a part time degree in Development Studies at Middlesex University. The principles of fair trade inspired Ben to join the Enfield Fairtrade Campaign Group. It was there he was introduced to Shared Interest Society. Ben says: “I wanted to help raise awareness of Share Accounts. I became an ambassador so I could tell others about what the Society does. It is a new challenge for me.” Since then, Ben has been working as an ambassador to promote awareness of Shared Interest Society at conferences and local libraries.


volunteers attended


events across the country this year


In 2013


payments were made to




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. This year our members’ capital was used to make payments to fair trade businesses across 62 countries, many operating in unstable parts of the world. This lending, with few exceptions, was largely unsecured as many customers either do not have any security to pledge, or have already used their assets to secure conventional borrowing which supports normal working capital requirements. Our lending portfolio is broad, with facilities stretching from £5, 000 to over £2 million. Our customer base varies from organisations with a high number of employees, to those that operate with just a handful of people. For a number of years, we have been following a strategy to increase the proportion of our direct lending to producers, recognising the value of this in supporting their business growth. From May to September 2013, for the first time in our history, we had more money out on loan to producers than to buyers. Increasing the number of producer groups we lend to by 18 during the year, we now lend directly to 97 producer groups in 24 countries. There was also growth of 11% on the average amount of drawn lending by producers during the year. Unfortunately, lending to buyer organisations declined by 17% during the year so that our total average lending decreased by

6% overall. This was due to a number of factors including a fall in the international coffee price, which resulted in a lower demand for credit against contracts, and an overall decline in the handcraft market. Additionally, cost cutting exercises by many of our buyer customers have seen them move to cheaper sources of credit, typically with a local commercial bank. Although this has reduced our lending we are pleased that some of our buyer customers are now able to source conventional finance for their alternative trading model. We believe it has been our support (sometimes for many years) during their early growth stage that has enabled this to occur and ultimately this change frees up share capital for us to lend directly to producers. During 2012/13, our finance reached 375 fair trade organisations globally and we made payments of £46.8m to producers and buyers across the world. While we have continued to approve new coffee facilities, we have also approved other lending in foods, such as pineapples, cashews and bananas. We continued to maintain offices in Kenya, Peru and Ghana, as well as our head office in the UK. Staffed fully by local people with familiarity and knowledge within the region, we find that this local presence helps us reach prospective customers. For the first time since 2011, we also employed a representative in Costa Rica. This year, we also recruited a Monitoring and Evaluation Officer (MEO) based in our East Africa office. This post is responsible for both collecting and monitoring data on individual African producers, and developing the framework used to capture social impact data.

Average lending to all customers over the last five years Producer lending Buyer lending Total






£4,217,985 £12,489,924 £16,707,909

£4,780,929 £11,794,492 £16,575,421

£5,701,530 £11,300,449 £17,001,979

£6,266,513 £10,873,284 £17,139,797

£6,947,219 £8,994,711 £15,941,930

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.




Lending does it work?

Shared Interest Society lends funds to buyer and producer organisations.

maximum limit was increased this year and this product was made available to new customers for the first time.

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.

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.

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. An extension to seven years was granted this year specifically to combat the roya disease in Latin America. Loan sizes are determined by the financial situation of the producer group and its ability to repay the loan. 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. The

While coffee remains a prominent product, we have also approved other lending in foods, such as pineapples, cashews and bananas.

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.

Product mix of the producer groups where our lending is committed

fruit 14% nuts 10%

handcrafts 18% sugar 2%

tea 2%

other 8%

cocoa 7%

coffee 38%



Where our invest are supporting

Peru Raymisa works with more than 300 artisans and over 3,000 alpaca farmers across Peru, securing sustainable and reliable incomes. Orlando Vasquez Buenaño, General Manager of Raymisa said: “We are currently looking to expand our markets and ultimately generate more employment for artisans through orders generated. For us, working with Shared Interest Society means we have a more friendly line of credit than with commercial banks, so we can finance the purchase orders and productions smoothly.”

Chile Apicoop started out as a church-led community project that aimed to support smallholder beekeepers. Today, the group has over 300 producers spread throughout the country. Thanks, in part, to Shared Interest Society financing, the group recently became the world’s first producer of Fairtrade blueberries. General Manager, Chino Henriquez said: “We really want Shared Interest Society members to understand how much impact their investment has. Although they can’t see or touch our blueberry field, it has been worth it and will continue to benefit future generations.”


stors’ funds fair trade

Uganda Gumutindo has nearly 9,000 members farming organic and Fairtrade coffee in the Mbale district of eastern Uganda. In 2006, Shared Interest Society provided a Term Loan enabling the group to refurbish a factory and warehouse. More recently we opened an Export Credit facility to enable them to pre-finance orders from European buyers. Managing Director, Willington Wamayeye, said: “We want all of our members to benefit from the unique combination of minimum price, Fairtrade Premium, and long term relationship benefits offered by the fair trade market. We would not be where we are today without them.”

Democratic Republic of Congo Gourmet Gardens is a supplier of vanilla and cocoa. Many of the farmers are based in the Eastern Democratic Republic of Congo, one of the most dangerous and difficult parts of Africa.

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

Operations Manager, Clemens Fehr said: “Establishing and running an organic and Fairtrade certified farmer group within this area is challenging. We believe that the support of Shared Interest Society means adequate and long term access to finance.”

Looking forward to the year ahead With an in-country presence in Peru, Kenya, Ghana and Costa Rica, we are keen to support our overseas team further in reaching those in greatest need of finance. Increasingly, farmers are highlighting the environment as a potential threat to their livelihood, and Shared Interest Society is looking to provide potential solutions to this problem through long term loans for aspects like plant renewal or for crop support. For the first time, we will explore ways of raising our profile internationally to those seeking lending facilities, as well as attracting further investors here in the UK. Our aim, when it comes to UK investment, is to see our member base diversify even further. We launched our 25th anniversary appeal in July, and will be working towards our goal of 10,000 members and share capital of £33 million by 2015. As the Fairtrade Foundation announces that Britain leads the world on Fairtrade, we can be more proud than ever to be the world’s only 100 per cent fair trade lender. Fairtrade currently touches the lives of more than 1.24 million people – farmers and workers – across more than 66 developing countries. This gives us further incentive to help make those businesses sustainable by providing the fair finance they are unable to receive elsewhere. However, it is only with the help of our UK supporters that we are able to achieve this aim. Finally, 2014 will see us undertake a full strategic review in consultation with our stakeholders.

As we move into 2014, we hope to encourage more people to invest their time and money in Shared Interest Society so that we can help more businesses to thrive.

Our goal:


members by 2015

SI_AR13_AW_SI Society AR 06/01/2014 14:34 Page i

Shared Interest Society No 2 Cathedral Square Groat Market Newcastle upon Tyne NE1 1EH T: 0191 233 9100 F: 0191 233 9110 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 Friendly Societies, number 27093R Printed on paper from sustainable well managed sources certified by the Forest Stewardship Council

Shared Interest Society Annual Review  
Shared Interest Society Annual Review  

A review of the year 2012 - 2013