Case Study: Free Community Bank
Know each other
Headquartered in Basel, the Free Community Bank was established in 1984 as a cooperative based on Rudolf Steiner’s monetary and social insights. Its statutes forbid it to trade or speculate in money. As a pure credit bank that depends on the interest margin between deposit rates and lending rates, the Bank is dedicated to supporting the real economy and raising awareness in regard to our dealings with money. The cooperative shares of the Free Community Bank do not bear interest, and are only repayable in the case of bankruptcy. Money is not treated as a commodity, but as a means of enabling projects for the future – as a consciously creative connection between human beings. A special feature of the Free Community Bank is its close acquaintance with its borrowers and its depositors. We visit all the borrowers on the ground and talk at length with our depositors about their needs and wishes in dealing with money.
The 19 employees of the Free Community Bank service a balance sheet with total assets of CHF 226.3 million with CHF 45.3 million in fiduciary funds.
Credit, or in other words, loan money
Money is not just money. We need to recognise its different qualities. In his 1922 economics course Rudolf Steiner coined the terms ‘purchase money’, ‘loan money’ and ‘gift money’.
The most important characteristic of money is that it is a ‘flow agent’. It flows from one person to another; it connects people. In this way, for example, everyone who uses the euro is connected with the people of the financially weak European Union countries in southern Europe.
When lending, the key point is that the money is used to create something, to fund something – like farms, enterprises, projects. Depending on what is made possible with this money, it plays a very specific role. Something new can come into the world, something that was not there before, something that may be crucial for positive development. For example, meaningful and value-oriented educational, medical, agricultural, technical or artistic projects.
Money in itself is neutral
Money in itself has no ethical dimension; it is neutral. It depends on how it is used. For example, money can be used for the production of weapons and polluting technologies. So for me as a banker what happens with money is not a matter of indifference – because money does not care what happens to it, this responsibility attaches to the lender (whether a bank, or a private person). He is also responsible for what happens to his money and for how he treats those who borrow it. However, the borrower is responsible for the implementation of the project and for servicing the loan (interest rate, repayment). Awareness of such processes is gaining in importance in the face of an increasingly-anonymous financial world characterised by transactions constantly taking place without responsibility for what happens, the most extreme example of which is speculation.
No credit, no development
The quality of loan money is not about money multiplying and accumulating; it is about making something possible. Without credit, economic and social development would not be possible. It is in the nature of things that in order to fulfil his ideas and abilities a person needs money that he at that moment does not have. If he had to wait to give effect to his impulses until he had saved enough money, there would be no progress. But there are also people who do not implement their abilities and ideas directly, but who want to use their surplus money to make something happen. This money can then flow from the one who has or owns it to the one who needs it. To where it is needed – a healthy stream enabling the future. In this sense, savings represent dead money brought back to life through credit, but only if the money is used to serve life and not accumulation.
Case Study: L'Aubier
Loan money through direct participation
L'Aubier, a group of companies in Montezillon near Neuchâtel, comprises a 40 hectare biodynamic farm with food processing and direct marketing, an adjacent 120-seat restaurant, shop, and eco-hotel with 25 rooms and seminar rooms, a café hotel in the nearby town of Neuchâtel, and an inter-generational housing project for families and senior citizens.
From small farmyard to large project
As the owner of the land and buildings, L'Aubier Ltd provides a financial framework in cooperation with L’Aubier Foundation, L’Aubier Farm and L'Aubier Partners. L'Aubier was created in the autumn of 1979, based on a small farm. The company was created out of a direct marketing group of clients and friends that had formed around the farm in order to finance the purchase of a restaurant that had come up for sale next door. Further development took place step by step without any preconceived concept but on the basis of specific projects.
Developed over the years, L’Aubier’s legal and financial structure shows how responsible people working within a supportive circle can get the freedom to be creative. The individual aspects of the business are economically independent. Great value is placed on transparency and collegial management. Grouped around the people working in the company, the shareholders and lenders provide capital without the power usually associated with shareholding rights because this is vested in a public benefit association dedicated to the ‘L’Aubier Idea’.
Using various forms of participation, over 1300 people now share in the provision of about CHF 24 million, including 705 shareholders, 143 participation certificate holders, 192 lenders and 422 bondholders. They have entrusted their money to L'Aubier, because for them getting a return is not the most important thing, but how their money is used. They know the people concerned and for them the relationship between people is important.
Communication with the circle of investors and friends is a central concern of L'Aubier. Twice a year, a 4-10 page newsletter, L'Aubier News, is issued, while the annual report provides detailed and intelligible financial information concerning the events and results of the previous year.