The Community Bond Experience in Montreal, Quebec

Community bonds are an easy-to-issue debt instrument that can be emitted by non-profit organizations (part three of the Companies Act in Quebec law) to support community members (users, clients, members, partners) to enable the purchase of a building, to carry out a project, or to contribute to its mission and serve its community. If issued correctly, community bonds are not subject to scrutiny under the Autorité des Marchés financiers (AMF) (Quebec’s equivalent of the Securities and Exchange Commission). Like all bonds, they carry an issue price, a duration, and an interest rate, and the principal is repayable at maturity; community bonds are not to be confused with Social Impact Bonds. Our paper traces the emergence of the community bond in Quebec within a broader context of the vigourous and innovative social economy financial ecosystem, growing capital needs for a movement that has been acquiring property for over a decade following the launch of the Chantier de l’économie sociale’s Patient Capital Fund, while facing major government cutbacks. The paper will also map a multi-year knowledge transfer project that borrowed heavily from Ontario’s experimentation lead by the Centre for Social Innovation, to pilot community bonds issues in Montreal, revealing the process undertaken, some issues raised, winning conditions for a successful issue, preliminary results, as well as prospects going forward. The paper will conclude with a brief overview of emerging crowd-lending platforms that may be coupled with community bond issues, as well as some observations on the applicability of community bonds in other jurisdictions in Canada.