A NewVistas community banking system consists of three of the Human & Financial Capital Department’s 12 agencies, which work together as the capital bank, the community bank, and the venture bank.
Rather than pooling money and dividing it among participants with little accountability on their part, a community’s banking system leverages participants’ combined capital by a factor of 10 or more, creating new money to build the community campus, lease space and equipment to participants, and make business loans to participants. Profits from these activities equally benefit all community members.
Many people think a bank can only loan out what it receives in deposits, but deposits make up only a small percentage of the money a bank loans out. Banks create new money whenever they make a loan, backed up by a central banking system (such as the U.S. Federal Reserve) that “prints” or creates new money for banks to loan out. Banks repay this new money to the government bank at a low interest rate, and they charge higher interest on the loans they issue.
As part of the modern banking system, a NewVistas community banking system follows this same process, with an additional 21 agencies to provide extra safeguards and foster participant success so they can keep current on their payments.
By this means, a community bank leverages $1 billion capital provided by 100,000 community investors into $10 billion, which enables the community campus to be fully built out even as all participants receive a 12% dividend on their investments.
A community’s capital bank receives investments from all participants and pays them a 12% dividend. The capital bank uses these investments solely to capitalize the community bank, venture bank, and additional 21 agencies as needed. All these agencies pay 15% interest on capital they use, which enables the capital bank to pay the 12% dividend to investors and cover other costs, including services from other agencies such as audits and legal services.
The community bank is where community participants maintain their personal checking and savings accounts. In addition, the community bank gives loans at 4–7% interest to community agencies and mature participant businesses for things like tooling and fixtures, leasehold improvements, work in progress, finished inventory, and accounts receivable.
To construct a NewVistas campus, a community’s physical-plant agency borrows a 20% down payment from the capital bank at 15% interest, and the community bank leverages this down payment to finance the other 80% via loans to the physical-plant agency.
The venture bank makes loans to newer participant businesses that are growing but not yet profitable, charging from 8% to 18% interest according to risk. However, the venture bank never funds an initial business startup, which must be funded with the individual participant’s own capital. If an individual has already invested their personal capital into the community, they can reappropriate some or all of this capital to start their own business.
NewVistas community leverage is similar to what already happens in today’s economy, but it remains focused at the community level and is equally accessible to all participants. The econonomic system keeps all the right incentives in place for individuals, but the capital is owned and managed by the community as a whole, through its two departments and 24 agencies.
- For more insights on how banks create new money by making loans, see, for example, “How Banks Create Money.”
- All participants must always maintain at least a $20,000 investment in the community capital bank.
- If a participant doesn’t have enough community investment to launch their business idea, they keep investing and receiving the 12% dividend until their investment grows large enough to finance their business startup. Thus, startup speculations are common, but any losses come from the individual participant’s own surplus. Once a business opportunity is further along, the community’s venture bank can loan that business the growth capital that is needed.