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What’s Your Money Doing Tonight?

Article by Fred Zahradnik in the January 1984 issue of New Farm.

Monterey, Mass: ­With no credit rating, only seven acres of land, and a not-quite-ready goat cheese production facility, Sue Sellew was an unlikely prospect for a business loan. The banks turned her down. But now she is busy selling goat cheese, thanks to a loan from a newly formed credit fund just for small farms and cottage industries.

“I had reached a critical point in the development of the farm,” says Sellew. “I was making improvements slowly but surely ­clearing the land, building fence and the barn but I needed money to finish the milking parlor and processing room so we could finally start production.”

This is the type of situation where the non-profit Self-Help Association for a Regional Economy (SHARE) credit fund can be most effective, says board member Susan Witt, “Sometimes a modest amount of money can produce big benefits for the loan recipient and the community.”

Using the financial resources of a group of like-minded community residents, SHARE evaluates loan requests and makes loans based on the applicant’s potential to:

  • Increase local employment, use local resources, conserve energy and work in harmony with the environment.
  • Create greater regional self-sufficiency in production of basic necessities, such as food shelter and energy.
  • Provide basic community services, including transportation, health care, job training and legal advice.
  • Repay the loan.

SHARE is easy to run once it’s started, and the Massachusetts program could serve as a model for similar groups anywhere in the country, Witt says. In fact, a program patterned after SHARE is already being set up in Oregon.

SHARE pays depositors 6 percent interest, and loans money at 10 percent. How does it handle all the complex accounting, interest computing, billing and red tape involved in such a program? “We got the bank to do it,” says Witt.

Is that any way to run a bank? “You bet it is,” says Dave Whitcomb, executive vice president of the Great Barrington Savings Bank, Great Barrington, MA. While the bank makes no profit from SHARE transactions, it benefits in other ways. “SHARE fits in with our philosophy as a community-oriented bank. Besides, it’s brought in at least 50 new accounts and they’re doing other business with us as well,” he says. Becoming a member of SHARE is simply a matter of opening an account designated for the group, explains Whitcomb. But a SHARE account differs from a regular savings account in two ways. First, SHARE members must notify the bank in writing 120 days before making a withdrawal.

Also, the deposit becomes part of a joint account with other members. On opening the account, the depositor signs a form authorizing SHARE to earmark the deposit balance as cash collateral in support of loans that meet SHARE criteria. But the depositor controls the deposit balance and only the depositor may make withdrawals, unless there is a loan default.

That means a share account is subject to some risk. If there is a loan loss, a percentage of each account is used to make up the difference. For example, if the loan loss was $500, and the total amount deposited into SHARE were $25,000, a withdrawal of 2 percent would be made from each account. So if a depositor’s account had a balance of $1,000, the depositor would lose $20. Among the steps taken to minimize this risk, SHARE loans are limited to $3,000 maximum with a two-year term.

What do depositors get in exchange for exposing savings to this risk? “You get the assurance that your money is being put to good use,” says Jane Burke, a depositor who serves on SHARE’s agricultural loan committee. “With a regular savings account to a money market fund, your money is going ­who knows where? Out of the region, out of the state and maybe even for arms manufacture or a polluting industry.”

Witt agrees that this is the main motivation for joining SHARE. “We have a motto: ‘What is your money doing tonight?'”

But SHARE isn’t intended just for those with substantial savings or investment capabilities. The minimum deposit is only $100. The fund now has more than 50 members, with $15,000 total on deposit.

SHARE depositors are encouraged to view their accounts as long-term investments in their community. Frequent withdrawals are discouraged to keep service costs to a minimum. While deposits are used as loan collateral, they are as fully insured against other loss as a regular savings account.

In the case of the loan made to Sue Sellew, 34, depositors can actually taste the results of their investment. Rawson Brook Farm now produces 80 pounds of French-style chèvre (goat cheese) each week, thanks in part to the SHARE loan.

As SHARE’s first, and so far only, loan recipient, Rawson Brook Farm is enjoying local newspaper publicity, and demand for the cheese is brisk. Customers come to the farm, which is located in hilly Berkshires County, in western Massachusetts, or buy the cheese at local stores. Sellew has included repayment of the $3,000 SHARE loan, which is due in one lump sum in 1985, in the farm business plan. Monthly installment-type loan repayment schedules are available at 13 percent, which reflects the higher paper work costs.

Because she had never borrowed money before and because making goat cheese is such an unusual venture, Sellew says the farm couldn’t get a regular commercial loan. But the SHARE loan committee was open to her ideas, she says. Also, some loan committee members belong to the local food co-op and know that chevre is in demand. Loan committee members volunteer their time and are members of SHARE. The committee is set up so that an outside expert on the subject of the loan application may be brought in to help make a decision

“SHARE is good for the bank because it can make small, local loans that it couldn’t touch before,” says Witt. “SHARE is food for the community because our savings stay here, work here, and we all benefit.”

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Democratizing Monetary Issue: Vision and Implementation in the Berkshire Region of the U.S.
What is a Work of Art in the Age of a $120,000 Art Degree? “Entrepreneurs of the Self” in the New Economy
Excerpt about Susan in Local Dollars, Local Sense
Excerpt about Susan Witt in People Money
The Mystical Quality of Money