Rolf Novy-Huy, Beatrice Nolte & others
Trias Foundation
2017
The document titled "The Financing of Civil Society Projects" is a comprehensive guide published by the Trias Foundation, with contributions from authors Rolf Novy-Huy and Beatrice Nolte. Initially issued in January 2017 and revised in March 2020, this publication addresses the intricate topic of financing for civil society initiatives, particularly within the realm of housing and neighborhood projects. The guide aims to clarify financial processes and provide practical advice for project organizers as they navigate the legal and financial challenges associated with community-based funding. 🌍 Context and Purpose This guide is designed for civic engagement initiatives that are considering community-based funding models. It offers an overview of the legal framework in Germany, including essential laws such as the Small Investor Protection Act (KASG), the German Banking Act (KWG), and the German Investment Code (KAGB). The publication seeks to empower project organizers with the tools needed to understand financing mechanisms, avoid unauthorized banking practices, and align their projects with regulatory requirements. It emphasizes the importance of community-based financing as a vital component of an overall funding strategy. 💡 Key Findings 1. Financing Challenges and Opportunities: The guide highlights the potential of community-supported funding models, such as crowdfunding, subordinated loans, and cooperative shares, which can complement traditional bank loans and state subsidies. It also discusses the complexities introduced by recent changes in capital market laws, particularly the stricter interpretations by BaFin (Germany’s Federal Financial Supervisory Authority) that complicate financing for cooperatives. Practical examples, including Kattendorfer Hof's "Kuhaktie" (cow shares) and Leipzig Energy Cooperative, illustrate successful community financing models. 2. Legal Framework: The KASG aims to protect small investors by imposing stricter requirements while allowing exemptions for social projects. The KWG defines deposit-taking and lending activities, requiring community projects to navigate these regulations to avoid being classified as unauthorized banking businesses. The KAGB regulates investment funds but exempts operationally active companies like cooperatives. 🛠 Tools for Financial Planning The brochure offers a step-by-step guide for creating effective financial plans, including project conceptualization, cost calculation, equity and debt exploration, and banking engagement. It also promotes transparency within groups regarding financial discussions. 📋 Exemptions for Civic Projects Charitable organizations can raise funds through subordinated loans with fewer compliance obligations under certain conditions. Social projects, such as affordable housing initiatives, benefit from similar exemptions but need to prepare an Investment Information Sheet (VIB) instead of a complete prospectus. 📈 Recommendations for Project Organizers The document advises building financial literacy within groups for informed decision-making, engaging in dialogue with BaFin to clarify legal uncertainties, and emphasizing transparency and risk disclosure when seeking community support. In summary, this guide acts as an essential resource for civil society groups aiming to finance socially beneficial projects while navigating Germany’s regulatory landscape, highlighting the necessity of strategic planning, legal compliance, and community engagement in achieving their initiatives.
Die Finanzierung zivilgesellschaftlicher Projekte - Unerlaubtes Bankgeschäft?
The document titled "The Financing of Civil Society Projects" is a comprehensive guide published by the Trias Foundation, with contributions from Rolf Novy-Huy and Beatrice Nolte. It was issued in January 2017 and later revised in March 2020. The brochure addresses the complex topic of financing for civil society initiatives, particularly focusing on housing and neighborhood projects. It aims to demystify financial processes and provide practical advice for project organizers navigating legal and financial hurdles.
Context and Purpose
The guide is designed for civic engagement initiatives considering community-based funding. It provides an overview of the current legal framework in Germany, including laws such as the Small Investor Protection Act (KASG), the German Banking Act (KWG), and the German Investment Code (KAGB). The publication seeks to empower project organizers by offering tools to understand financing mechanisms, avoid unauthorized banking practices, and align with regulatory requirements. It also highlights the importance of community-based financing as part of an overall funding strategy.
Key Findings
1. Financing Challenges and Opportunities
- Community-Based Financing: The guide emphasizes the potential of community-supported funding models, including crowdfunding, subordinated loans, and cooperative shares. These methods can supplement traditional bank loans and state subsidies.
- Legal Complexities: Changes in capital market laws have created uncertainties for civic initiatives. For instance, stricter interpretations by BaFin (Germany’s Federal Financial Supervisory Authority) have complicated financing for cooperatives.
- Practical Examples: Case studies such as Kattendorfer Hof's "Kuhaktie" (cow shares) and Leipzig Energy Cooperative illustrate successful community financing models.
2. Legal Framework
- Small Investor Protection Act (KASG): Introduced to close regulatory gaps and protect small investors, this law imposes stricter requirements but includes exemptions for social and charitable projects.
- German Banking Act (KWG): Defines deposit-taking and lending activities. Community projects must navigate these rules to avoid being classified as unauthorized banking businesses.
- German Investment Code (KAGB): Regulates investment funds but exempts operationally active companies like cooperatives focused on their own business activities.
3. Tools for Financial Planning
- The brochure provides step-by-step guidance on creating viable financial plans:
- Conceptualizing projects
- Calculating costs
- Exploring equity and debt options
- Engaging with banks
- It also offers insights into fostering transparency within groups when discussing finances.
4. Exemptions for Civic Projects
- Charitable organizations can raise funds through subordinated loans without extensive compliance obligations if they meet specific criteria.
- Social projects, such as affordable housing initiatives, benefit from similar exemptions but must prepare an Investment Information Sheet (VIB) instead of a full prospectus.
5. Recommendations for Project Organizers
- Build financial literacy within groups to facilitate informed decision-making.
- Engage in dialogue with BaFin to clarify uncertainties around legal interpretations.
- Emphasize transparency and risk disclosure when seeking community support.
Conclusion
This guide serves as a vital resource for civil society groups aiming to finance socially beneficial projects while navigating Germany’s regulatory landscape. It underscores the importance of strategic planning, legal compliance, and community engagement in realizing ambitious initiatives. By combining practical advice with real-world examples, it equips project organizers with the knowledge needed to overcome financial barriers and implement sustainable solutions.