A new financial system, for the people

pile of U.S. currency

There’s lots of money in our economies. But big banks aren’t lending it out.

Over the past four years we’ve been let down by our banks. A better system would be a democratic finance model, thinks British anthropologist Bruce Davis.

After developing peer-lending platform Zopa, Bruce teamed up with renewable energy expert Karl Harder to launch Abundance Generation in the U.K. earlier in 2012. The idea was to go one step further than just lending, and use that finance to build infrastructure, in order to generate personal profit for investors plus civic good for communities.

Abundance Generation allows everyday people to invest as little as £5 (about $8) in microgeneration projects such as wind turbines and solar farms. On average the rate of payback is 8%, and the investment is good for twenty years. During this time the community benefits from affordable energy, which is looking more attractive every time the energy companies hike their prices.

Whether it’s thanks to its illustrated website, or just firm proof that now is the time for democratic finance, Abundance is moving fast. With £1.3 million (about $2 million) investment raised in its first five months, Abundance is the fastest growing platform in the short history of crowd funding.

Because of its online portal, Abundance is extremely easy, and even joyful, to use. Investing feels inviting. Investors have the option of putting money in for themselves, or gifting investments to loved ones. I imagine they would do so either to introduce people to the concept of taking responsibility for their own money, or because 8% over twenty years is a better investment than a bank.

Why does anyone need to learn how to take responsibility for their money? When I interviewed Davis we talked about this kind of thing.

In the words of Abundance’s pre-Christmas press release put out last year,

Given Father Christmas used to wear green until CocaCola convinced us all otherwise, this seems a very appropriate new present to make available. For children and grandchildren, with the ability they will have to monitor the wind turbine and the energy and profits it is producing through our revolutionary website, what a great way to learn about investing as well as green energy production.

Personally speaking as a young man with not much money, the most interesting aspect of Abundance is that I can actually use it. I can invest small amounts of money and build up an investment over time, spread over several Abundance energy projects. This way I can do something traditionally only an option for the very rich — investing in assets.

“Ninety-nine percent of what banks communicate – what they call ‘trust’ – is actually a distrust in yourself. They try to undermine your confidence, to make you reliant on them,” says Davis.

What do we mean by “risk”?

At the present time, Abundance has one wind turbine that is powering a community in the Forest of Dean, and is constructing another. Meanwhile it is in the planning stages of four other renewable energy projects, primarily wind. This is what is meant by “diversity,” insofar that any rare accident that befalls a single investment will not cripple the overall investment portfolio, if you are wise and spread your money around, as Davis explains in a video interview.

Interviewed at The Eco Experts, Davis defines risk and uncertainty in these terms: “When we talk about ‘risk’ what we actually mean is ‘uncertainty’… I would say that risk is a good thing because it’s when you’ve quantified uncertainty… Actually what you need is a mix of risks. We’ve lost the ability to think about risk in terms of managing uncertainty.”

David Thomas writes about cleantech, government policy and energy efficiency for The Eco Experts. You can speak to him @theecoexperts.

— David Thomas, Transition Voice

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