The news that government will devote £20m from the latest tranche of Dormant Assets to widening the reach of social investment is welcome and timely news – and an opportunity to channel much-needed support to charities and social enterprises at a time of huge pressure on household budgets and a continued squeeze on the public purse.
Social investment has grown and evolved over the last decade, with more than £6bn now invested in charities and social enterprises in the UK. This is an eight-fold increase since 2012 meaning that it is growing on average at 25% a year, more than twice as fast as mainstream capital markets. More importantly, there is a growing focus on making social investment more accessible.
The Growth Fund, a partnership between The National Lottery Community Fund and Big Society Capital, delivered by Access through a range of social investors, has transformed the social investment market over the last six years. By significantly increasing the supply of smaller scale unsecured loans it has delivered funds to those areas most in need – with half of the Growth Fund invested in the most deprived 30% of neighbourhoods.
Due to make its final investments in 2022, the £50m Growth Fund partnership uses a combination of grant funding, made possible thanks to National Lottery players, and loan finance from Big Society Capital and other co-investors. With an average investment size of £67,000, we know this is much closer to the clear pattern of demand from the sector for smaller amounts of finance than the wider social investment market (Social Enterprise UK research shows that social enterprises are usually seeking median amounts of around £50,000).
Focus on smaller charities and social enterprises based in deprived areas
The new £20m from dormant assets announced last week will fund a new programme which will build on the achievements of the Growth Fund, rather than replicate it exactly. We do know, however, that the scheme will continue to provide the type of finance that smaller charities and social enterprises need – typically smaller pots of money. The successor programme will also have a clearer emphasis on encouraging the lenders we work with to reach minoritised communities and organisations based in more deprived places.
After the last few years, we know that strengthening the ability of charities and social enterprises to withstand shocks or unexpected changes to their income is not just a “nice to have” – it’s fundamental to the future health of our communities. This means supporting organisations like Intraquest Community CIC, based in Oldham. Set up by former addict, Karen Keates, they train professionals, such as social workers and the police and offer accessible and affordable therapy directly to children, young people and adults. Key Fund invested a £16,600 loan and £3,400 grant from its Northern Impact Fund to help working capital costs and grow turnover and enabling them to move to a more sustainable business model.
We’ll be working swiftly and inclusively– consulting over the next month on how best to structure the new programme, ensuring both value for money and real-world social impact. We expect to open applications to social investors in spring and depending on the speed of the other fundraising they need to do, for them to begin making investments in charities and social enterprises before the end of the year.
Time to bang the drum for the sector
This takes place against the backdrop of significant developments on dormant assets – the legislation to expand the scope of the scheme is expected to gain Royal Assent in Parliament before the end of February. Government estimates that a further £800m could be released for investment in activity that is additional to government expenditure and an extensive consultation is expected to follow before the summer.
There is a genuine opportunity to shape the future funding ecology of the sector. If we are to meet the challenge set down by the Adebowale Commission for more “enterprise-centric” finance that is patient and flexible, there is a strong case for continuing to use dormant assets to widen the reach of social investment to smaller charities and social enterprises based in deprived areas. By building on success to date, and being clear about where improvements can come, we can catalyse a new generation of enterprise activity within the sector and drive lasting and tangible change in communities.
Seb Elsworth is chief executive at Access - the Foundation for Social Investment