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June 01, 2006
Wainwright Bank and Equal Exchange Partner to Offer the First Branded Certificate of Deposit
    by Bill Baue

This new branded CD model is particularly suited to socially responsible banks, companies, and investors, as the increased social returns can counterbalance the slightly higher financial risks.

In the 1984 cult movie classic Repo Man, Emilio Estevez and Harry Dean Stanton get laughs when they drink from cans that says "Beer" and eat from cartons that says "Food" in deadpan mockery of the generic labeling of products. Applying this gag to the banking industry, certificates of deposit might as well say "CD" on them, as they are generic products--until now, that is. Wainwright Bank, known for its social responsibility, recently launched the "Equal Exchange CD" in partnership with the Fair Trade coffee and chocolate cooperative company.

"To our knowledge, the Equal Exchange CD from Wainwright Bank is the first 'branded' CD where the money from the sale of it is dedicated to a specific use--namely, Equal Exchange," said Rodney North, whose title of "the Answer Man" gives a sense of Equal Exchange's laid-back culture. "Normally, the funds raised from the sale of a CD would go into a general account and might be used to help build a condo in Miami or a casino in Las Vegas or a shopping mall in New Jersey--in this case, you know where the money is going to be used."

For Equal Exchange, funds raised from CD sales go into an account that becomes a line of credit for the company at a lower rate of interest than it otherwise would be able to access. For Wainwright, exposure to Equal Exchange's brand reputation and customer base allows it to offer a lower interest rate in return for this marketing. For investors, the CD has a three-year term, a $1,000 minimum (but no maximum), and currently a rate of 4.45 percent annual percentage yield (APY).

"The rate is connected to the prime rate; the risk is attached to the fate of Equal Exchange," Mr. North told

As with other banks, Wainwright is covered by Federal Deposit Insurance Corporation (FDIC) insurance, shielding investors from the risk of Wainwright going under. However, while most CDs are FDIC-insured because they capitalize the bank's own activities, this CD capitalizes Equal Exchange exclusively, thereby exposing investors to the risk that the company might default on the loan.

Equal Exchange addresses these concerns by pointing to its strong financial track record--it has grown all 20 years it has been in existence; it has turned a profit 16 of the past 17 years; and it has never defaulted on a loan. Perhaps more importantly, the social benefits associated with capitalizing the Fair Trade system distinguish this CD from others, which are ecumenical. For social investors, high social returns can counterbalance financial risk.

"Every economic system needs to be capitalized, and the overall system can only get as big as the capacity of its weakest link, so we need to grow every part of the Fair Trade model simultaneously," said Mr. North.

Neither supply nor demand pose problems, says Mr. North, as there are more farmers lined up to join the Fair Trade system than there are active buyers (as opposed to those waiting on the sidelines for Fair Trade to further flourish), and the consumer market is growing by 50 to 75 percent per year. Also, mainstream outlets like McDonald's and Dunkin' Donuts are now offering Fair Trade coffee.

"So most of the different parts of the supply chain are growing, but one of the elements that is probably the least developed is the capital necessary to expand the Fair Trade system," said Mr. North.

Equal Exchange raises capital through private offerings, which are limited to 500 investors by statute. The company places a minimum of $5,000 for investment in its Class B stock to prevent hitting the 500-investor ceiling with smaller investments. The branded CD allows Equal Exchange to publicly advertise its investment opportunities (which it cannot do with private offerings) while simultaneously creating a market for these smaller investments.

"We think there's probably a lot of people out there who would want to put one or two thousand dollars into our model," said Mr. North. "It takes about $2,000 to buy the average production of one family farm--when someone buys a $2,000 CD, that gives us the funds to buy the harvest of one more family."

Equal Exchange and Wainwright see this branded CD model as replicable, particularly in the social responsibility arena, where going public opens companies up to being bought out by larger corporations, which has happened for the Body Shop and Ben & Jerry's.

"There's something special about a socially responsible company working with a socially responsible bank to give socially responsible investors one more option for their portfolios," Mr. North concluded. "And this is a way of raising capital for growth while at the same time maintaining our independence."


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