Its customers will be able to bid for grants and then vote on which bids receive the money.
New chief executive Peter Burrows, who was appointed in September, said he wanted to reward its customers and let them share in the success of the business.
The Harrogate-based company will use surplus capital to fund the projects. “It’s important to say that we are not doing anything that will threaten the financial stability of Engage Mutual,” Mr Burrows said.
He added: “This isn’t a charity fund, nor is it some CSR (corporate social responsibility) programme controlled by the organisation. We will be true to our mutual principles and mutual heritage because this is our customers’ money. We want to ask them how they want to use the money for the benefit of themselves and the community.”
Engage has spent the last few months consulting its customers about how to invest some of its capital in the wider community.
“The desire was to make individual grants available but to spend most of the money on community-style projects,” said Mr Burrows.
Individual grants could include a customer who has been made redundant and needs to pay for a training course to get a new job.
Community projects could include a village hall which needs a new roof.
The ideas will be put on Engage’s website throughout the year and customers will vote on which ones they wish to fund.
The fund, called the Engage Foundation, builds on previous initiatives, but this time it is on a much bigger scale.
This year, the company made six £5,000 grants available to projects voted on by its members through its Engage With Your Community scheme, which is now in its second year. Last year, the company gave out three grants.
“The most significant way the new scheme differs from what we’ve done before is that previously we have said let us know which projects deserve funding and we will decide. This time its is the customers who are deciding,” Mr Burrows said.
The name of the scheme is still being decided. Engage is also looking to set up a panel of customers who will be responsible for the fund and how it works. There will be two categories of funding available: up to £5,000 and up to £25,000.
“It would be nice to think the projects will be spread across the country,” said Mr Burrows. “There is a small bias towards Yorkshire in our customer base but we are reasonably well spread across the country.”