In the present business climate, it might be possible to take a 10 percent productive loan for granted. But in Berkshire County, Mass., the SHARE program (Self-Help for a Regional Economy) has been administering 10 percent loans to small businesses since the high interest rates of 1983. Not only are SHARE loans low interest, they are targeted to entrepreneurs with no other source of credit. That is, without established collateral or previous credit record, in most cases. And presently the group has plans to administer such loans at 3 percent through issuance of local currency. ``The scale of financial institutions does not work for the creation of small businesses on a regional level,'' says Robert Swann, president of the E.F. Schumacher Society and one of the prime movers behind SHARE. ``All we've done is create an economic institution complementing the small businesses in this area.''
SHARE itself has no financial assets. Instead, it serves as an adjunct loan department to the Great Barrington Savings Bank, one of the last community banks in the region. Depositors at the bank must first designate their accounts as SHARE collateral. They receive 6 percent interest, while the bank charges a 4 percent service fee on the loans. Thus the 10 percent rate.
Both depositor and banker agree that the differential in return over other investments and standard loan interest rates is made up by the positive impacts of the program. One of SHARE's most important criteria for recipients, after demonstrated need and productive potential, is that the business be locally based -- employing local people and material, selling to a local market. When SHARE designers first approached the board of Great Barrington Savings, bank president George Adams responded, ``These people are doing the job we used to do.''
Dave Whitcomb, an executive vice-president who now oversees the bank's role in SHARE, remembers being similarly impressed: ``We're Great Barrington's only hometown bank, and we thought it was a very worthwhile venture. We didn't know if it would bust or go well. But we gave it a try.''
Since SHARE's inception, more than a dozen local businesses have been given loans. While depositors agree to share the burden of default, all loans thus far have been repaid. Moreover, from the banking side, SHARE has attracted some 70 new accounts.
A few of the SHARE loan recipients:
Sue and Wayne Sellew of Rawson Brook Goat Farm needed to upgrade their cheese-making equipment to meet state guidelines. Their product, known in stores as Monterey Ch`evre, was viable; but without credit history a loan looked difficult. SHARE loaned $3,000 to Rawson Brook, which has since expanded production considerably.
Anson Rutherford-Olds contacted SHARE several years ago needing to update sound equipment for his guitar. He said he earned enough performing at clubs to pay the loan. SHARE officers needed proof. He returned 18 months later with a well-documented list of gigs and payments. His small loan was made and duly repaid.
Nick and Sallie Van Sant produce high-quality kites in the barn a few steps from their home. A few years ago a major fabricmaker went out of business, offering a 50 percent markdown on stock. SHARE saw the productive potential of the loan, which was paid back in six months. This past year Kites of Four Winds nearly doubled profit rates due to the low-cost fabric.
Bonnie Nordoff knits specialty clothing at home. Her first SHARE loan ($4,000) bought wool and established credit with a wholesaler. Her second loan ($1,000) upgraded a knitting machine. When Bonnie began to receive work contracts and needed an employee, she approached SHARE for a third loan. She was directed to the bank. Because she had an established credit record, her bank loan was duly processed.
While SHARE loan recipients do not know which depositors have signed up for the program, a monthly newsletter advises depositors on the progress of SHARE-loaned businesses.
``It becomes a sort of cultural experience,'' says SHARE administrator Susan DeWitt. ``People begin to have a sense of the businesses in this area. They might take their kids to see the goats at Rawson Brook Farm or find recipes for goat cheese. So it's connecting at more than financial levels.''
The philosophy behind the SHARE program might best be described as ``decentralist.'' It can be found in the thinking of architects Jane Jacobs and Buckminster Fuller, and in the economics of J.K. Galbraith and E.F. Schumacher. The reasoning goes that a centralized banking system with a predominantly urban concentration of capital leads to chronic underdevelopment in rural areas, where inflation, interest rates, and joblessness are not readily soaked up by increased economic activity. The Berkshires and western Massachusetts would seem to be a case in point, having far higher unemployment and lower per-capita income than industrial and high-tech eastern Massachusetts.
``Because all banks put large amounts of deposits in money pools,'' explains DeWitt, ``a local borrower is competing with international corporations to borrow money at our local bank. All we've done is extend the Grandmother privilege -- whereby Grandmother used to help the next generation get started in local business.''
In part due to the success of the SHARE program, several other such loan programs have sprung up around the country, mainly in rural or inner-city areas. Most developed of these are ARABLE of Eugene, Ore., and Three Rivers SHARE of Pittsburgh. Getting started on a similar model are programs in Cascady, Wis.; North County, N.Y; the PICK program for Midwestern farmers; and the Jubilee fund in Minneapolis-St. Paul.
But in Berkshire County, SHARE's founders view the existing loan program as the first step in a more ambitious plan to promote regional economies. The second and more difficult step will be the issuance of local currency planned for this January. The currency, called ``Berkshares,'' will be readily redeemable in dollars but tied directly in value to a cord of firewood, a plentiful source of energy in Berkshire County. Thus, in periods of inflation or rising energy costs or both, Berkshares would be the preferred currency.
``The key point is that energy is the common denominator of all productivity,'' explains Robert Swann, who organized a similar experiment with economist Ralph Borsodi 15 years ago. (That experiment took place in Exeter, N.H., and successfully issued a currency tied in value to a basket of commodities.) ``The logic then is that you can always count on the value of a currency based on energy remaining relatively stable in value.'' If all goes well, the plan will take effect this January.
In the long run, Swann and DeWitt hope the experiment might spread to other regions. But for the present, the experiment should have immediate benefits to Berkshire County. Foremost of these will be 3 percent loans SHARE will offer in Berkshares to local businesses for local costs. As Berkshares are redeemable or usable only in the region their usage marks a movement toward self-sufficiency.
``What we envision will happen,'' says Swann, ``will be more and more necessities produced locally because there will be incentive to do it.''