Capital Bank Interactions

The community economic infrastructure is made up of three bank agencies: the Community Bank, the Capital Bank and the Commercial Bank. Together, the banks support the community’s economy, leverage invested funds, and enable other agencies to run by providing capital and banking services.

When limited partners join the community, they invest a minimum of one unit of partnership interest, worth $20,000. These funds are held by the Capital Bank, which issues investors with a certificate showing ownership, and regularly pays them a return on their investment.

The bank invests the funds in other community agencies. The agencies use these funds to set up their operations, and for down payments when they intend to secure loans from one of the three bank agencies. All agencies are designed to run on a profit, by offering payable services to participants. From their profits, they improve their operations, repay loans, and pay a return to the Capital Bank on its investment. The bank uses the return to pay the original investor – limited partners – return for their investment, which, as a share of profits made by various agencies, is more than regular interest income from bank deposits.

How the Capital Bank controls the community’s economy

By easing access to capital, the offers a sustainable and accessible route to prosperity. People also have a high level of social and business support to ensure that their businesses thrive. The Capital Bank is at the center of these efforts.

In modern practice, for a bank to issue loans, it needs to abide by the leverage ratio. The ratio helps banks to manage their risk exposure and is a requirement by banking regulators. The leverage ratio is arrived at by dividing a bank’s tier 1 capital (common stock and retained earnings) with risk-weighted assets (loans to clients). Therefore, a bank’s capitalization is a crucial factor in determining a bank’s ability to issue loans.

The Community and Commercial Bank agencies are capitalized by the Capital Bank. In this position, the bank’s investment is the tier 1 capital. By determining how much money it can put into Commercial and Community Banks, the Capital Bank directly affects how much the banks can give in loans.

The community is an economy by itself. It is highly efficient, with all financial resources being available to power production, since there is no hoarding of money or leaks created by hard cash. Agencies’ automated systems collect extensive data from participants, including their business’s health, social affairs, and health. They also collect extensive information about the economy, the environment, and any other relevant information available.

Using advanced analytical tools and AI, the systems can collate and combine information, providing a powerful help in decision-making. This is especially important for banks, which need to know the risk associated with the loans they give, and therefore, determine the amount of interest to charge, and whether they should lend at all.

With these advantages, the bank agencies can work with very low leverage ratios, to the extent allowed by applicable regulations. This means they can leverage the capital invested by the Capital Bank – which the bank obtains from limited partners, several times over what is possible in a modern economy.

By determining how much money banks give as loans, and in doing so, how much money they can create, the Capital Bank determines the supply of money in the economy. It also controls economic production, since loans are an essential part of how agencies serve participants, and in the process of doing so, how productive these participants are. For instance, providing fewer loans to the Business Operations Agency will force the agency to reconsider some elements of factoring, increase factoring and equipment lease costs, and in so doing, dissuade some from signing up for these services. The ultimate effect will be less economic activity.

Community capitalism and individual entrepreneurship

In capitalism, individuals have the freedom to start a business. The means of production are in private hands, and demand and supply shape the market. In capitalism, everyone is motivated to work harder, since there is a reward in doing so. This competition also forces people to adapt and innovate to have a comparative advantage over similar businesses. This is a great engine of economic growth.

Despite the obvious advantages, the ownership of means of production by individuals means that not everyone has access to these tools. This creates imperfect market conditions and an unfair playing ground for many individuals aiming to break into the market.

Communalism, which was for a while practiced during the Second Great Awakening in the US during the 19^th century, imagined a situation where all could have their resources in common, and where community interest superseded individuals’ wants and freedoms. This however failed because, rather than using these resources as capital to produce, adherents simply consumed the money and ended up with neither funds nor capital.

In turn, the 19th century revivalists had aimed to copy the early Christians. Acts 4:32-34 among other passages in the book of Acts says that “…the multitude of those who had faith was one heart and soul, and not one was saying that any of the things he possessed was his own; rather for them all things were in fellowship. And with great power the apostles were giving their testimony to the resurrection of the Lord Jesus, and great grace was upon them all. For there was not a needy person among them, for as many as were owners of lands or houses, selling [them] they brought the proceeds of what was sold”

The emphasis here is clearly on the need to be of “one heart and soul“, and therefore, shae a common aim, and in so doing, living in an egalitarian, prosperous society. If poverty reared its head, the early christians were determined to stop it, including by selling off their property to give alms. The focus was therefore on living together in prosperity, such that there were no poor among them, as opposed to selling off property and consuming the proceeds.

Having “all things in common” means therefore, that the group of people all had access to each other’s capital, and could get alms if they were poor to get to other people’s standards. However, they were not dividing up what they had to then consume it.

The community’s economic system aims to have the best of both worlds, without the disadvantages. This means unfettered access to capital, and where entrepreneurship is not just allowed, but required. The competition that naturally arises drives innovation, resulting in a highly developed economy with optimal utilization of resources.

The economic system goes further than this. Each limited partner who runs their business in the community is also an investor there, and in effect, a part-owner. As a limited partner succeeds, they save and invest in the community through the Capital Bank, which in turn invests in community agencies.

The more resources the Capital Bank has, the more it can invest, enabling agencies to provide better services and earn more profits. This means that the original investor – the limited partner – earns more returns from their investment. Every limited partner is therefore motivated to achieve not only their success but also the success of fellow limited partners. The desire to have all succeed is akin to the motivation that drives individual players in team sports. Each player is keen to achieve success and yet knows that with the success of other players, their success will be amplified.

Contact with participants

The Capital Bank does not directly engage with participants. All interaction is undertaken through the agency’s automated system, and when need be, through captains. Participants can also hire contractors to help with various aspects of the services that the agency offers.

As indicated above, the investment that limited partners make with the community is done through the Capital Bank. Limited partners do not own any assets, besides personal effects such as clothing, and the business they run. Items such as phones, laptops, bikes, and others are hired from specific agencies. So too is space to live and work. Inventory, including work in progress, and accounts receivable, are factored in by the Business Operations Agency.

The provision of these assets is only possible through the capitalization that agencies receive from the Capital Bank. Through their investment, limited partners own the community and the assets agencies possess. To show their ownership, the Capital Bank issues participants with a deed for every unit of partnership ownership held there.  

Limited partners can take loans for emergencies and business needs from the community or Commercial Banks. As collateral, they use their investment in the community. They can also have their business valued and take a loan against it. In the case of using investment as collateral, the Capital Bank facilitates the process, including any documentation that may be needed to charge the investment. By charging, the limited partner continues to own the investment and earn a return. However, they cannot transfer or otherwise withdraw the investment until the loan is fully repaid.

The following illustrations explain some of the instances where participants interact with the Capital Bank.

Illustration 1: investing and growing investment

Mary’s parents joined the community when she was 10 years old. 3 years later, she started a business, working as a part-time babysitter for a couple who lived in the same apartment block as her family. She quickly learned the ropes of the job, and would soon get other gigs with other families. She opened an account with her mother as her guardian. Her mother could view the account, but could not withdraw money without her consent. Mary also could not withdraw without her mother’s consent.

Over time, she is in a position to accumulate significant savings. The bank opens a savings account for her, where money that she does not need for regular activities, such as hiring the items she needs for her business, is kept. In time, a term deposit is also opened in the bank, with the view of enabling her to save up enough money to apply to be a limited partner.

Mary also needs to save up enough money for her education. As she nears her 16^th birthday, she has saved enough to invest in the community, but not for her education. She nonetheless makes the application, understanding it to be a process that will take some time to complete.

A few months before she turns 17, Mary has saved $30,000. Her application to become a limited partner is approved by the Human Relations Agency. She invests $20,000, which is one unit of partnership interest. She continues to work, with the double aim of growing her investment and saving enough for her education.

After completing her high school education, Mary wants to be a lawyer. She is accepted into a law school which needs a substantial amount of money as fees. She cannot continue with her business as she used to, though she quickly finds other means of supporting herself. Her investment in the community is paying her regular returns, which she uses to get by in university.

After completing law school, she sets up another business, but this time, working as a legal associate for a lawyer who has already established a law firm. She continues to save up, eventually securing another unit of partnership interest after 2 years. She also feels that her experience gives her enough to start her own law firm.

Since the funds she has in her term deposit and savings account are not enough, Mary takes out a $30,000 loan against her investment. She sets up the law firm and pays off her loan with proceeds from her business.

Illustration 2: using investment for income and loans

Daniel and his family joined the community around 30 years ago. He has been running a successful retail store business. He started with a small store in one of the hub buildings. Years later, his experience and investment in the community had sufficiently grown. He wanted to open a bigger store in the storehouse, which would give him access to more customers.

Daniel wrote a business plan, which the relevant agencies approved. He leased the equipment he needed, such as trolleys, from the Business Planning Agency, which also provided him with inventory factoring services. however, He still needed to contract other limited partners who provided packaging, cashier, and related services. He also needed to organize the logistics to get his inventory from suppliers to his store, and storage as well.

Daniel needed a loan. He had already invested 2 units of partnership interest. With his savings, He took out a loan with the Commercial Bank. He used his units of investment as collateral for the loans. The business prospered, and in due time, he was able to repay his loan. He was also able to pay all his contractors comfortably using the business’s profits. He has also managed to invest an additional 4 units of partnership interest in the period since repaying the loan.

Daniel is now nearing 70. He has finally decided to sell his business and engage in a lighter business. He will also take the opportunity to travel the world and interact more with his children.

Daniel sells his business, and invests the money in the community, securing an additional unit of partnership interest. From his investment, he can live comfortably with the return the Capital Bank pays him. He uses the return to learn new hobbies as well while mentoring incoming limited partners, especially those who aspire to run a store like Daniel’s.

Other functions of the agency

Besides investing in agencies, the Capital Bank provides banking services and loans to agencies in the second column. These are agencies that align both functionally and, in the plat, even though they are not in the same bureau. The second column consists of the following agencies Stewardship (2), Life Planning (5), Bylaws and IT infrastructure (10), Legal (14), Data and Publishing (17), Marketing (20), and Community Land and Utilities (22).

The Life Planning Agency provides business insurance services to participants. The agency banks the premiums it receives with the Capital Bank. From these premiums, it receives a return, which it uses to improve services and make them more adapted to needs. The premiums also provide the Capital Bank with additional funds to invest and leverage.