This Is How to Invest Locally
Do you know what you’re invested in? Do you know what your bank invests your money in, or what your 401k or 403b or Roth IRA are invested in? Probably not. But chances are pretty good your invested money is not invested near where you actually live. And chances are also pretty good that your money probably isn’t helping make your community healthier or more financially stable.
Enter Slow Money, an investment strategy that keeps your money locally, in your community and in healthy, local food.
Michael Bartner, vice president of the Slow Money Institute, says slow money is both a conversation and a nationwide movement. The conversation starts around how to take some of your money out of Wall Street, and invest it in the local food ecosystem.
Why is that important? It promotes the health of the environment, your own health and your family's, and it naturally promotes vibrant main streets and local economies. And, it addresses climate issues: It takes a lot of gas to move produce from Chile to Ohio.
Food connects a lot of the current issues our world is facing, and that’s what slow money is focused on: Investing in local food systems: farmers, food producers (think bakers, butchers, jam makers, wine and beer producers), farm-to-table restaurants and food distributors.
Slow money isn’t against big investments, or a traditional 401k or IRA, says Bartner. “We’re pro-small, pro-independent. It’s about balance. Why not take a little bit of money and put it into a small business, farmer of food enterprise?”
While it’s all about the money, and where it goes, Slow Money itself doesn’t have any money. They primarily connect people interested in investing in and supporting their local food systems with farmers and other small food businesses. Sustainable flowers, a local butcher, a candle maker, all have need for equipment. Items like a walk-in cooler or a tiller require a lot of money for an emerging farmer or small business. Yet a traditional bank probably won’t make the loan for the small farmer or businessperson. That’s where Slow Money steps in, helping farmers and small food producers that traditional lenders simply won’t help. The investor then vets and makes a loan, usually at a very low interest rate like 1-3%. Slow Money fosters the relationships that make those loans possible.
Why do people lend in this manner? It’s typically money they can afford to lose. For many of Slow Money’s investors, their investment makes sense: It strengthens their community, and has all kinds of non-fiduciary returns, like cultivating access to good, healthy, organic, local food and farm products. According to multiple sources interviewed for this story, the default rate is very low.
Slow Money’s network of local affiliate organizations has invested more than $57 million in 625 local farms and small food enterprises nationwide. The majority of that has been via small loans with very low interest.
Slow Money’s founder and director, Woody Tasch, champions the importance of putting “money to work in things that we understand, near where we live, starting with food.”
While all this sounds good for the bigger investor—someone who can afford to loan a small farmer or food business $5,000 at 3% interest for equipment—what about people who can only afford to put in $250 a year?
“We’ve struggled with how to make a model that is accessible for everyone and is replicable,” says Bartner, stressing that the community engagement the model cultivates brings various income levels together.
One way they are equalizing the investment field is with their new SOIL model, Slow Opportunities for Investing Locally. People put their money into a non-profit, which then makes a zero-percent loan. The person “investing” gets the tax write-off, and each person, no matter how much they’ve contributed, gets one vote on who gets to receive the loan and for how much. A high-net-worth individual and a farmer each get one vote. It’s a way to bring equality to the investors and cultivate community. The money then comes back to the non-profit and is re-circulated.
Carol Peppe Hewitt, author of Financing Our Food Shed, is the Slow Money network leader in North Carolina.
“Our system isn’t set up to finance small business. Traditional lending supports people with assets, and doesn’t support people without them,” says Hewitt. “Farmers don’t have the collateral to back the loans they need to back their businesses, so that ‘s a great place for local people to step in and do friend to friend or peer to peer lending. It’s a relationship between a lender and a small-scale farmer, and so they build a relationship.” Or perhaps it’s a food producer who makes jams or wines, or a baker using local grains, she says. “All of those things help sustain our local food system. They need capital. And they need coaching and support. We provide some of that as well. But the most important thing has been the lending.”
Money, Hewitt says, “if it’s not in your wallet or under your bed, someone is using it. Someone else is making moral decisions about what to do with your wealth.” Slow money is a chance to make your own decisions, with people you know, doing something critically important to the betterment of your community. “You can add meaning to your portfolio. The money you spend every day you know where it goes. But the rest of your assets, your financial worth, what is that money doing? Do you know? Do you care?”
It’s critical, she adds, “that we have a paradigm shift in how we think about money and the impact it can have.”
In North Carolina, Hewitt says over 105 farmers, food producers, and small farm-to-table restaurants have expanded and flourished because people made loans of $2,000-$15,000. Through these loans, Hewitt says, “I’m on a mission to grow more local food, but just as importantly, pull our heads out of the sand on the good our money could be doing. Let’s regenerate finance as opposed to [being] exploitive… People who do this do it because they feel wonderful. If you feel uncomfortable, don’t do it.”
She suggests taking $2,000-$5,000 and make one of these loans, or perhaps taking 1-5% of what your annual investment would be and put that into your local farm economy, rather than a bigger investment vehicle that sucks money from the community.
Jarred Maxwell, a local Slow Money leader based in Austin, Texas, says he got involved with this kind of financial system to counter the “financial colonialism” of the “Walmart model, where you go in and extract financial wealth from a region and centralize it somewhere else. [It’s] the economic ripple effect: If a farmer has to produce something in Dallas, and they have to ship it to Oklahoma, that economic impact disappears from the local economy. The more it can stay, the multiplier effect builds local economy that way.”
According to Maxwell, spending $1 at a big chain store can suck $7 from the local economy. If you spend your money at a local grocery store, all the money they spend on things like accounting and branding, that money stays locally, Maxwell says.
Slow money is the “idea of building a strong local economy by making sure everything in that local economy stays there rather than be extracted and centralized where the corporate headquarters is.”
The people most impacted by the extractive model are those who live in rural areas. That $7 being extracted with every dollar spent—“That becomes a huge deal. Every little bit that’s extracted is that much harder on them.”
Disturbed by the Walmart trend, Maxwell sought a solution. Slow Money, he says, “was the only solution I could find.”
Of course, the model can be applied to other sectors, Bartner says. The nice thing about it is “bringing people together in a new way. It’s a very tangible action someone can take.”
“Small-scale agriculture made rural Texas in the past,” Maxwell says. Small-scale agriculture can bring it back.