Abstract

An increasing number of small and medium-sized enterprises in the German organic agri-food sector involves citizens through different community financing models. While such models provide alternative funding sources as well as marketing opportunities to SMEs, they allow private investors to combine their financial and ethical concerns by directly supporting the development of a more sustainable food system. Due to the low level of financial intermediation, community financing is characterized by close relations between investors and investees. Against this background, we apply the proximity concept from economic geography to explore spatial and relational aspects of community financing in the German organic agri-food sector. Based on a qualitative multiple case study approach, we find that the relevance of proximity is twofold. While different forms of proximity between SMEs and their potential investors are key success factors, proximity is also considered as one desired outcome of community financing. Furthermore, our results reveal that the extent to which SMEs rely on particular proximity dimensions distinguishes two different approaches to community financing.