Just under half of voluntary sector organisations say they are not interested in social investment finance as charitable money should be spent on delivery, not repaying loans, according to new research for the Big Lottery Fund.
The research, which was conducted by ClearlySo and New Philanthropy Capital, surveyed 1,255 voluntary, community and social enterprise sector organisations (VSCEs) on social investment and investment-readiness.
It found 43 per cent were not looking for and not interested in repayable finance, with three-quarters of this group feeling that charitable money should be spent on delivery, not on repaying loans.
Some 21 per cent of the 1,255 VSCEs surveyed had successfully secured repayable finance, while 15 per cent were seeking social investment such as loans or equity. Survey respondents are most interested in investment between £10,000 and £100,000.
However, there is a mismatch between the types of finance that organisations have actually received and what organisations that are looking hope to secure – only 7 per cent of respondents have secured a mixed funding product combining loans and grants – but 49 per cent of those currently looking are interested in securing this type of finance.
Challenges with investment-readiness
As part of the survey, NPC and ClearlySo also interviewed 40 investors and social investment intermediaries. It found investors reported significant challenges with investment-readiness, particularly noting the lack of suitable financial skills among potential investees as a critical barrier.
Investors also noted a general lack of understanding of the concept and the appropriateness of social investment; and the relatively complex deals available for relatively small sums of finance sought.
Social investment intermediaries spoke of the challenge of changing mindsets from the traditional charitable model to a business model.
The research indicates potential demand for investment-readiness support from the VCSE sector to be about 70,000 or more organisations in the next five years.
The research will help to inform BIG’s future social investment support.
