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Favabank as a Cooperative?

Posted by John Durrant on Wednesday 11th April 2012, 9:27PM

Until now, Favabank has been 100% self developed with the aim of producing a fully working prototype, laying the foundations of a platform which can be launched, and built on by others, to eventually create a widely used social bartering network for local communities.

I'm now at the stage where I'm looking to assemble a small team to get behind the launch, but since Favabank is a bit of a radical idea, with its own peer-to-peer transaction currency, I'd like to take radical approach to how Favabank will be owned and operated. To this end I'm considering a cooperative legal structure, spreading ownership to those who contribute to its development, governance, and day to day administration. There are guiding principles for co-ops which can be built into a formal constitution. Essentially co-op members are involved in the flow of information about its activities as well as certain rights to influence decisions, according the how the constitution is set up. The cooperative status will make a statement about Favabank's values and hopefully create a sense of engagement and community, which in essence is what Favabank is all about.

I've referred to the cooperative structure as 'radical', but there are already mainstream organisations who successfully run as cooperatives - names like John Lewis and the Cooperative Group which are co-owned by their employees and enjoy good reputations for customer service and profitability. So it's not really a radical structure but to my knowledge it is rare in the realm of social networking and complements the ethos of Favabank. If Favabank is promoting trust, collaboration and engagement then it makes sense for the business structure to be based around those values too.

I've no previous experience of running an organisation as a co-op so am currently taking advice about setting up the legal framework as well as the realities of its day to day operation and will provide further updates as I proceed.

In addition to using the cooperative structure to issue shares to team members, there may be opportunities to offer cooperative memberships to Favabank users for a small subscription fee, or for those users making a significant contribution to the platform, especially in the early days when it will be extremely important to recruit new members to ensure there are enough users in geographic regions to increase the likelihood of trades between one another.

Funding Favabank is an issue which will need to be addressed at some point as Favabank needs to create revenues to pay for itself and for its further development. The aim is to offer services free of charge for all standard peer-to-peer bartering and networking activity and eventually offer premium
(paid for) services for more advanced features as will as offering business memberships and advertising opportunities. It could be some time before these services can feasibly introduced, but when the time is right the aim is to introduce them via consultation with the membership, so people will be able to offer viewpoints on implementation. Favabank also needs to be considered 'investable' to external funding sources (e.g. Venture Capital).

Of course Favabank is a risky project, a large scale neighbour to neighbour bartering network has yet to make an appearance on the Internet. The Favabank currency, the Fava, is potentially disruptive technology. The currency is formed through promises to pay one another, rather than a promises enforced by the state. It is a 'bottom up' currency, created through neighbourly good-will, rather than issued 'top-down' by governments and banks. The Fava can be as abundant as community good-will, as opposed to the scarcity associated with conventional currencies. This is all ground-breaking stuff and its adoption is inherently uncertain. One of the biggest risks could be failure to recruit a large enough user base to reach a critical threshold whereby people are able to find other local people with whom to exchange favours.

Having said that, my admittedly ambitious and ridiculously naïve aim is to eventually attract a couple of people from every street in the UK. In talking to people about the concept of Favabank, the reaction is overwhelmingly positive but it will be a huge challenge to create enough exposure to be able to convert warm reactions into signed up users who are willing to take part and trade favours.

I'm sure there are those who would say what Favabank is trying to achieve simply can't be done, and of course that may be true. For the meantime I'm taking heart from comments attributed to Mervyn King, Governor of the Bank of England who reportedly said 'There is no reason products and services could not be swapped directly by consumers and producers through a system of direct exchange – essentially a massive barter economy...' (see more of King's comments at

4 COMMENTS | [ Login or sign up to reply to this post ]


Reply by Susan Hayward on Saturday 7th July 2012, 6:45PM

Hi John, so sorry not to have spoken for some time but have been working on things locally. I will be inviting people who have joined the Redbridge Residents' Network to join Favabank. Residents Associations in the UK is also working with (similar to streetlife but easier to use). Speak soon.

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Reply by John Durrant on Sunday 8th July 2012, 10:13AM

Thanks for the neighbourblog link Susan, I'd not heard of that before so I'll take a look.

Thanks for your support for Favabank too, we have around 150 sign ups at the moment and are aiming to have 500 on board by the time of our official launch in September so everyone's support is really appreciated.

The people who have signed up early will get first notice on how the cooperative will work and the first opportunity to become members and co-own the platform so I'm looking forward to getting to the point when we can officially announce all that...

All the best...

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Reply by John Durrant on Thursday 3rd May 2012, 10:06PM

Perhaps I should position the above proposition as an antidote to Zuckerbergism?

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Reply by John Durrant on Friday 4th May 2012, 2:10PM

Here's a short update on where I am in pursuing the idea of setting up a cooperative structure around Favabank...

I've been taking advice from people who know a thing or two about setting up coops and who would be able to take care of the legal and administrative side of its creation (not a straightforward process, but one for which funding may be available via the Co-op Group at

Cooperatives can be quite flexible in their set up, according to the goals of the organisation and the cooperative itself. This leaves a number of options to consider, particularly in view of the need for Favabank to remain an attractive proposition for Venture Capital (VC) funding, once the platform is launched and active. This may leave the option of perhaps splitting Favabank into two entities - a UK Coop for members, collaborators, and administrators and a holding company for developing and marketing and licensing Favabank - thus remaining viable for investment.

I still need to seek further advice on the investability side of a Coop before any decisions can be taken especially from anyone in the VC or Cooperative worlds...

If anyone can help, please contact via

Many thanks...

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