Co-Operative Capital Units as a Solution to Co-Operative Financing

Abstract

A major issue for many co-operative enterprises is the ability to raise capital to fund growth. Considerable attention has been given to facilitating access to non-member capital sources and managing and accommodating such financing. This paper examines the merits of a new financial instrument known as the Co-operative Capital Unit (CCU), introduced in Australia to increase the co-operative sector’s flexibility in raising capital. Using a Delphi Panel approach the likely attractiveness of alternative CCU structures in terms of ownership rights, profit distribution, market facilitation and governance options were examined. We conclude that a CCU is likely to be of most value as an equity (rather than debt) instrument and propose CCU taxonomy depending on co-op ownership rights. We further propose an equity capital structure for a newly funded co-op to illustrate how CCUs could best be used to address some of the generic challenges facing co-ops.

Keywords: co-operative enterprise, financing, equity, co-operative capital unit, Delphi panel, conjoint analysis