Cooperative bonds

Most readers will be familiar with government bonds. Bonds are a type of loan, which is divided in multiple pieces which could be traded.

Though governments are well-known also businesses, non-profit organization and even private person can issue bonds. Bonds are loans that do not depend on banks, but on investors who are willing to buy these bonds.

Bonds issued by businesses are known as corporate bonds to distinguish them government bonds. A cooperative bond would be a bond issued by cooperatives.

Bonds differ from shares in that shareholders are the owners of a joint-stock company and usually have voting rights in the share-holders conference. Bonds are loans, which do not give any additional right except receiving interest and return of one’s investment.

Only joint-stock companies can sell shares. All other businesses and institutions need to seek other types of investments, hence that governments and non-profit organization often issue bonds to fund their activities.

Cooperatives are owned and run by their members, and have hence no shareholders. For a (worker) cooperative the issuance of bonds can be an interesting way to fund investments. We favour self-employment and worker cooperatives.

One of the problems cooperatives face is funding, and the government of space settlements could promote worker cooperatives by providing or facilitating funding for cooperatives. Earlier we proposed the establishment of government-owned lease companies which would lease equipment to worker cooperatives.

It is harder stimulate private investments in cooperative such as buying cooperative bonds. However, the government could create a fund that would guarantee these loans. If a cooperative would default on paying its debt, this fund would pay (some of) the principal to the bond holders.

It is not necessary to provide a guarantee to the entire principal, it could be fifty or seventy-five percent. However, such guarantee will reduce the risk of investing in such bonds and would hence make them more attractive to investors.

This fund would be (partially) funded through premiums paid by the insured cooperatives. Of course, cooperative which apply for this service need to submit a credible business plan, in order to prevent unnecessary risks.