Loanstock is a simple way for members of the public to invest in an Industrial & Provident Society. It is a form of loan repayable in full on an issue’s maturity or ‘closing date’; which means that the society does not need to budget for regular capital repayments. Any investment is for a fixed period of time and may, or may not, pay interest; an investment can seldom be withdrawn prior to the maturity date.
The stock holder decides on the level of interest they want to receive, from 0% to 5% p.a., and does not get any decision making power in the society; so there is no danger of investors taking control over the society’s projects.
Loanstock investment can provide a great deal of stability for an organisation and is ideal for a highly targeted ethical investment because it does not permit any investment other than those which are within the society’s stated objects. It is also unsecured, and this all adds up to a package which is typically not very attractive to financially driven investors. For this reason, it is usually the most appropriate investment form only for socially minded individuals or others with a very strong interest in a society’s projects. At the same time, it does offer some ideal benefits to the investor – a high level of accountability (since you know exactly where your money is invested and what it is being used for), interest to prevent your investment losing value, and a project which you may have a close personal connection with.
Loanstock issues have a clear closing date and maximum rate of interest; this is assessed by the society’s officers (directors) as the rate which is necessary to raise the investment (but no more). Interest is paid annually and can be in the form of further loanstock if required; many issues also specify the maximum size of investment it will accept.
All Loanstock purchases can be made either direct from the society or via an Independent Financial Advisory firm.