From building community to growing a portfolio, the reasons to invest local are as diverse as the members of our movement.
Investing Local is the simple choice to place some of our investments in local businesses, neighbors, or communities. From crowdsourcing, to peer-to-peer loans, to joint investment clubs, there are many ways to keep our money local. These are just some of the reasons why individuals, both near and far, are choosing to invest in their local businesses and neighborhoods:
Build a Stronger Local Economy
Buy local, play local, invest local. The number one reason we’ve seen folks choose to Invest Local is to support and help build the type of community and economy we want to live in. From small businesses to our next door neighbor, there are many local voices working to build a better community who aren’t being fully served by local banks or other financial institutions. Local Investing connects local needs with local resources for a more vibrant, interconnected community.
Support Friends & Neighbors
High-interest rate credit cards and pay-day loans are too often the only sources of capital available through traditional channels to local entrepreneurs and community residents. Not only do these high interest rates hurt the borrowers, the profits from the loan generally leave the community to larger banks or corporations. Crowdsourcing and peer-to-peer loans are increasingly common ways of supporting friends, relatives, and coworkers to access needed capital, while keeping the interest and other returns circulating within the local community.
Align Values & Investments
Many long-time local economy supporters are accustomed to the “buy local” ethos: using our purchasing power to support the types of ethical, green, or locally-based businesses that are aligned with our values. While these “go local” campaigns have impacted our perspective as consumers, they remain even more relevant to our roles as investors. From divestiture movements during the South African Apartheid to modern day fossil fuel divestment campaigns, activists around the world are increasingly connecting the dots between what we believe in, and what our money supports.
“People of conscience need to break their ties with corporations financing the injustice of climate change…It makes no sense to invest in companies that undermine our future.” — Desmond Tutu, April 2014
Local Investing is not an all-nothing-game. Many investors are using local investments as a way to further diversify their investment portfolios, creating a dynamic local additional to the usual list of stocks, bonds, and money market accounts. Further, even small percentage shifts can have a big impact on access to capital for local businesses, who have traditionally been bypassed by most investment vehicles:
“Americans’ long-term savings in stocks, bonds, mutual funds, pension funds, and life insurance funds total about $30 trillion. But not even 1 percent of these savings touch local small business—even though roughly half the jobs and the output in the private economy come from them.” — Michael Shuman, Local Dollars, Local Sense
Increase Knowledge About Investments
Many investors turn to local investments for the same reason we love going to the local bookseller who remembers our name: knowledge, connection, and familiarity. For all the annual corporate reports that can be read, many investors find their best insights come from having an ongoing relationship with those they choose to do business with.
Return on Investment
Interest, capital gains, and dividends are the dominant language of modern big-business finance — and they can all apply at a local scale. Loan interest rates and equity terms are all negotiated individually between the local investor and the borrower.
Many local investors think about additional returns as well: being able to buy food from a local co-op grocery story that couldn’t have opened without local finance, or the comfort of living in a more resilient local economy. These are called “social returns” and while they aren’t measured in strictly monetary terms, they generate their own forms of satisfaction and value.
This chart is not predictive. Rather, it illustrates how many local investors are thinking about the diverse benefits of their local investment strategy.
All work by www.invest-local.org is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Invest Local is a project of the Staunton Creative Community Fund.