The government has got it wrong by financing the Big Society Bank, says Gordon Hunter; civil society needs grants not loans.

What's so difficult to understand about Big Society? The object is less top-down more bottom-up. The method is to transfer public service delivery from the state (the NHS for example) to the people (a practitioners' collective working as a social enterprise). To make it happen, Cameron is offering (primarily) access to loans.

The fatal flaw is that 99 per cent of civil society groups don't want loans. The cunning plan makes more loan funds available to a wholesale banking and lending market that already finds it very difficult to get charities to take on loans. It's only the big, national charities that need an injection of cash to build their business and, thereby, pay back the loans.

Grassroots civil society groups (little community transport schemes, arthritis support groups, disability sports and so on) don't want or need loans. What they often need is a small development grant and some help with getting to a point where they can (through local online giving, for example) be self-sustaining.

I may sound like a broken record, but the solution is obvious: put more money into local endowment to stimulate local volunteer-led groups and to develop local funding solutions. 

We can learn something from USA foundations: 35 per cent of workers give direct from payroll (ten times the UK rate); on avarage they hold £500m per million of population and give £15m a year away in grants. 

And there are some really practical solutions being trialled here in GB:

• the grassroots endowment challenge where the labour government doubled every pound donated to endowment;
• green burials: low carbon, low maintenance, making donations to community groups. 

What about dormant accounts? Why transfer them from high street banks to wholesale banks simply to create loan instruments and charge interest? The logical approach is for the banks to identify dormant accounts and transfer them to geographic communities of interest (foundation grant pots, key funds) thus returning them to the intended beneficiaries.

Gordon Hunter is director of the Lincolnshire Community Foundation and champion of localism