The UK’s Co-operative Bank aims to create a new asset class providing growth capital for co-operative businesses in the developing world, starting with a new fund, Global Development Co-operative, launched on Monday.
The bank aims to raise $50m, which it will lend at low rates (2-5 per cent) to co-operatives looking to expand. The loan charge would cover operating costs and the creation of a bad debt reserve, said Stuart Coe, fund manager, but was too low to provide any investment return. Investors would gain a social return, and at best the return of their capital.
Mr Coe said if the bank successfully created a new asset class, it would eventually be able to provide a return, by charging higher interest rates.
The fund already has the backing of eight investors around the world, and is seeking support from global investors and foundations interested in international development and investments with a social impact.