Community Bonds - The idea

Members of a neighborhood or community don’t have direct control over the businesses that are nearby. Sometimes there is a pent up demand for a good or service in a neighborhood. For example, people cite “food deserts” in inner cities. But it doesn’t just happen to inner cities, the suburbs can have the same problems. The primary problem is a disconnect between the desires of the people and the supply from the market. The solution is to show those desires and force the market to react to them. The way this would happen is through a community bond.

Members of a neighborhood would come together and say they want a business that currently isn’t in their neighborhood. They would all put money forward to prove their interest. This money would serve as part of the loan to open the business in the neighborhood. Let’s go through a couple of examples.

High-end Baby Store

There is a neighborhood that wants a store to buy organic and fairtrade clothing and toys for their babies. They start a campaign on the community bonds website. Five hundred members of the community put in $200 each, which they will get back in goods if a store moves in or will be refunded if not. That money is put into the bond (a total of $100,000). Community Bonds then searches for high-end baby stores that may want to expand into the neighborhood and local entrepreneurs who would want to start their own high-end baby store. Community Bonds then works with local banks to get a low interest loan for the business that makes the best proposal.  The loan would phase in as the community members take their money out by purchasing baby things on their $200 credit. From the bank’s point of view, this is a very low risk business, people have expressed demand for the store and there are several months of sales guaranteed. The only concern that the bank could have is that the demand might dry up quickly. To ease that concern, members of the community are only allowed to get back at most $20 a month through purchases.

Local Organic Food

The problem of satisfying demand is easier the more direct it is. The further up the supply chain you need to go to satisfy the demand, the worse the free market does. For example, a community might not have access to local organic produce, not because of the climate, but because the land is used for other purposes. In this case, the community would again raise money from citizens who promise to buy produce once it’s available. Community Bonds would work to find farmers who wanted to move into the area to grow crops as well as land that would be good for the farmers. Community Bonds would then work with the banks to get the farmers’ loans for the land. There would again be a voucher system where the bonds are paid back as customers bought produce.

For larger changes, there would be national campaigns, where tens of millions could be be put into bonds.