Social Investment Business will continue to manage the Futurebuilders and Modernisation Funds for the Cabinet Office for a further three years after a successful contract bid.
The two social investment funds have supported a combined 430 organisations with £150.4m and were fully invested in 2010. The new contract, which was competitively tendered, is for portfolio management only and there are no plans at present to advance any new loans.
The Futurebuilders Fund was established in 2004 to support voluntary sector organisations in building their capacity to deliver public service contracts, and has been run by Social Investment Business (SIB) since 2008.
It was closed by government in 2010 and SIB has managed the relationship with borrowers since then, the majority of whose loans will run for another six years or more.
The Modernisation Fund was established in 2008/09 to provide £8.4m of interest free loans to support organisations facing monetary difficulties in the wake of the financial crisis.
Importance of SIB's investee relationship
Jonathan Jenkins, chief executive of the SIB Group, explained that a close relationship with its investees makes it important for SIB to continue to manage the investments:
“SIB is an engaged investor and we know from our investees that continuity in relationship with their investors is very important,” Jenkins said. “Many have not borrowed before and the environment in which they are operating has changed significantly over the last few years.
"The close relationship we have with our investees helps us to understand the challenges they face and helps us provide support over and above the money.”
Jenkins added that SIB is committed to sharing the learning from the Fund more broadly with other social investors.
“With one of the largest loan books in the sector, there are a lot of lessons for social investors and we will be doing more to tell the stories of social impact, financial return and risk of the investments," he said.
“Here at the SIB Group we are especially keen to build on our experience of running the Futurebuilders and Modernisation Funds as we build new funds with a broader range of non-government investors.”
SIB focused on additional support
In a statement accompanying the announcement, a SIB spokeswoman said that while many of the Futurebuilders Fund investees have been impacted by public spending cuts, there has not been a significant increase in the number of investments which have had to be written off.
The spokeswoman added that SIB is "more focused than ever" on providing additional support, ranging from mentoring and peer support to business planning and governance improvement.
Bubb: 'Futurebuilders shows importance of loans'
The chair of SIB Sir Stephen Bubb highlighted the importance of the Futurebuilders Fund in showing the sector’s demand for simple and often unsecured loans.
“Since the Fund closed there has not been a large source of simple loans for charities and social enterprises,” he said. “What most charities need access to is simple products which support them in delivering for their beneficiaries.
“If Futurebuilders has taught us anything it is that we need to be able to continue to provide access to loans to help the sector flourish.”
Calls for re-opening Futurebuilders
In September 2012, Sir Stephen called on the government to reopen the Fund and use the £28m in loan repayments accrued for more loans to the charity sector.
And not long after, the Early Action Taskforce, which includes NCVO, NPC and Community Links, suggested that loan repayments accrued from the fund should be used to set up a grant and loan fund for early action projects.
