Unlocking Local Prosperity: Rethinking Financial Systems Through Community Wealth Building

Yesterday I had the privilege of attending the fourth event in EDAS's Community Wealth Building (CWB) series, which focused on how finance systems can be reshaped to better serve local economies. This online session brought together experts from across the finance spectrum to explore how we can better connect financial systems in to the communities they serve.

The Finance Pillar: Why It Matters

As Neil McInroy, Chair of EDAS and Global Lead for Community Wealth Building at The Democracy Collaborative, highlighted in his opening remarks, finance is frequently viewed as the most complex of the five CWB pillars. Traditional financial systems often extract wealth from communities rather than helping build and retain it locally. The finance pillar focuses on increasing flows of investment within local economies by harnessing wealth that already exists locally but isn't being leveraged effectively.

Neil emphasised that the current financial system isn't working for many communities across Scotland. Too often, capital flows out of areas that need investment most, and traditional financial institutions aren't structured to prioritise social outcomes alongside financial returns. In essence, we need a financial virtuous system rather than the extractive one that commonly operates.

Independent Philanthropy: Beyond Grant-Making

Jim McCormick , Chief Executive of The Robertson Trust , offered compelling insights into how progressive philanthropy can contribute to community wealth building. The Robertson Trust, Scotland's largest independent funder, has been evolving its approach to move beyond traditional grant-making.

He explained that modern philanthropy needs to do more than simply provide grants; it must take a thematic approach to deep-rooted problems and commit to longer timeframes. The Trust has shifted to a decade-long focus on key themes, including fair work pathways, with the recent work on Edinburgh regeneration fund being a notable example.

What struck me most was an emphasis on finding opportunities "where public policy and markets can't reach." By targeting these gaps, philanthropy can help seed innovation and leverage additional investment into communities. Rather than creating passive grant recipients in the third sector, effective philanthropy builds capacity for transformational change and community ownership.

Democratic Finance: Empowering Communities Through Financial Innovation

Pauline Hinchion Director of Democratic Finance Scotland , delivered perhaps the most radical vision of the session. Her presentation challenged fundamental assumptions about how financial systems operate and who they serve.

Pauline's approach starts with understanding the wealth already present in every community. The concept of "democracy" extends beyond voting to include financial decision-making power. Her work promotes community shares and bonds as practical tools for channelling local investment into community assets. She flagged current discussion around the distribution of Community Wealth in energy through a national fund.

Particularly inspiring was her description of Scotland's longstanding history of financial innovation, including the first cooperative store. She stressed that avoiding passive recipients of grants in the third sector requires building financial literacy and confidence among ordinary citizens. Through democratic finance initiatives like community bonds, ordinary people can become "citizen investors" and collectively drive change locally.

Development Investment: Building Financial Architecture for Inclusive Growth

Graham Watson , Head of Public and Government Partnerships at The Scottish National Investment Bank (SNIB), presented the bank's mission-driven investment approach. As Scotland's first development bank, SNIB aims to balance commercial investment with delivering on missions including net zero, place-based regeneration, and innovation.

Graham explained that while commercial investment isn't always applicable to community needs, grant capital alone isn't sustainable long-term. The bank's approach provides more secure investment models while maintaining flexibility to adapt to community needs.

SNIB has already invested in 41 projects totalling £712 million, ranging from small local projects to transformational national initiatives eg. XLCC at Hunterston. Graham emphasised the importance of connecting these investments to both global capital markets and local Scottish economic priorities, particularly in the energy sector.

One point that resonated strongly was the observation that true community ownership goes beyond paper; it's about creating sustainable success that "locks people in" through genuine engagement. While acknowledging that not enough inclusive and democratic business models (IDBMs) are currently seeking investment through SNIB, he noted growing interest in this area.

Reflections: The Path Forward for Community-Led Finance

The discussion illuminated several crucial pathways for developing more progressive, community-centred financial systems:

1. Bridging the Financial Ecosystem Gaps

What became clear throughout the session is that no single financial approach can deliver community wealth building alone. We need a connected ecosystem of philanthropic foundations, social investment vehicles, development banks, and democratic finance initiatives working in concert. The current disconnect between these elements creates gaps where potential community wealth is lost. There was also consideration of where bodies such as credit unions could help progress this agenda.

2. Building Financial Literacy and Confidence

Pauline Hinchion's point about ordinary people lacking understanding of economic systems resonated deeply. For community-led finance to truly flourish, we need significant investment in financial education and confidence-building. When communities understand how finance works and believe in their capacity to influence it, they become active participants rather than passive recipients.

3. Rethinking What "Return" Means

All speakers touched on the need to measure success differently. While traditional finance focuses narrowly on financial returns, community wealth building demands we consider social, environmental, and local economic impacts as equally important outcomes. This requires new metrics, patience, and recognition that the highest "returns" may not be visible on a traditional balance sheet.

4. Creating Patient, Place-Based Capital

One recurring theme was the importance of long-term, place-based investment horizons. Whether through The Robertson Trust's decade-long thematic focus, SNIB's mission-oriented investments, or community bonds for localised energy projects, the message was clear: transformational change requires patient capital committed to specific places and purposes.

5. Scaling Success Through Policy Innovation

For community-led finance to reach its potential, supportive policy frameworks are essential. The upcoming Community Wealth Building legislation in Scotland presents an opportunity to hardwire these principles into our economic system. As McInroy noted, we need to hold up a mirror to ourselves and our sector, challenging current practices while seeding innovation.

Conclusion: Finance as a Force for Transformation

What I took from the event was a renewed conviction that finance, often seen as the most challenging pillar of Community Wealth Building, may also be its most transformative. By reshaping how money flows through our communities, who controls it, and what it's used for, we can fundamentally alter power dynamics in local economies.

The financial virtuous system that Scotland needs isn't just about more money flowing into communities - it's about different types of money, controlled by different people, with different priorities. As we move forward with the Community Wealth Building agenda, ensuring that local people have meaningful stakes in how finance operates in their communities will be essential to creating truly resilient local economies.

As Graham Watson aptly noted, this isn't just about ownership on paper, but about creating systems where people are genuinely invested, emotionally and financially, in shared success. That, ultimately, may be the true measure of community wealth.

Capital That Stays

In Orkney, money moves like tide - not out to distant shores never to return, but circular, persistent, local.

Where once wealth trickled upward like rain falling in reverse, now eighteen million flows through hands that know the contours of these islands.

Patient capital, they call it in boardrooms in Edinburgh, but here we name it differently: the wind farm part-owned by fishermen, the community shares in the old pier, bond certificates hanging in kitchen windows.

Seven, eight times the benefit when pounds stay where they're planted. Not alchemy, but democracy - a word we've narrowed to ballots when it should encompass our pockets.

This is Scotland's legacy reconstituted: the cooperative store reimagined, civic confidence reborn in pounds and pence.

The mirror we hold reflects not just our faces, but our potential: ordinary people becoming citizen investors while traditional markets gaze elsewhere, blind to the virtuous circles forming.

Consider how power shifts when investment means more than return, when decades replace quarters, when place matters more than profit.

This is transformation written in ledgers, the most difficult pillar becoming cornerstone. Not finance as we've known it - extractive, distant, disinterested - but finance as midwife to community strength.

From Orkney to the Borders, capital that stays, building wealth that remains.