How to build an inclusive impact fund: co-create – and pay people for their time

‘Diverse-led’ social enterprises often miss out on access to social investment. How do we change this? UK social investors UnLtd and Impact Hub Bradford, each leading the design of a new, more inclusive fund, share how they learned from potential investees along the way. It’s not a quick fix, though. 

“The evidence is clear that social investment continues to have a serious problem with inclusion and equity particularly, although not exclusively, in relation to race.” 

The Adebowale Commission’s report in 2022 made for uncomfortable reading: social investment did not reach diverse communities enough, it found, and needed to do more to plug the gaps in accessing finance for underserved communities and their entrepreneurial leaders. 

But while many acknowledged the problem, an odd myth remained: that there wasn’t much demand for social investment from diverse communities. 

Those already working with ‘diverse-led’ social enterprises knew that wasn’t the case. (‘Diverse’ is defined in various ways, but typically refers to underrepresented backgrounds, such as Black and minoritised, disabled or LGBTQIA+ people.) Rather, the problem was in the offer and in the reach. A striking statistic earlier this year bust the myth once and for all: within six months of its launch, the new Growth Impact Fund, which specifically targets diverse social entrepreneurs, attracted 400 applications – while the fund, which targets a £25m final target size, will only be able to invest in 50-60 social enterprises in the coming years. 

Within six months the new Growth Impact Fund, which specifically targets diverse social entrepreneurs, attracted 400 applications

So how did the Growth Impact Fund  – developed by UnLtd, Big Issue Invest and Shift – do things differently? The key is in one word: co-creation.

Over two years, the fund team spoke to social entrepreneurs to understand what barriers they faced in accessing social investment and what would change this. The aim was to put users at the forefront of the design of a new product to build a fund that, they hope, works for them.


Growth Impact Fund: tackling inequality and racial injustice

  • Size: Target £25m (£8.2m equity raised so far, plus several million in grants)
  • Aim: To tackle inequality and promote racial justice in the UK by investing in growth-stage social enterprises that focus on tackling inequality and/or are “diverse-led”. At least half of funding will be allocated to diverse-led organisations (defined as having a minimum of 75% of their board or 50% of their senior leadership team made up of people from underrepresented backgrounds)  
  • What it offers: Patient and flexible capital including loans, equity and quasi-equity, with ticket sizes from £50,000, as well as business support 
  • Number of investees: 50-60 social enterprises in total
  • Investors: Equity: Big Society Capital, Greater Manchester Combined Authority, University of Edinburgh, Scope, Trust for London, Joseph Rowntree Foundation, Charities Trust, Barrow Cadbury Trust and philanthropist Nick Marple. Grants: Access Foundation, Bank of America


Shift, a design thinking agency, led the research, which involved a brief survey and then in-depth interviews with a dozen underrepresented founders; data analysis (for example on success rates of securing investment) helped to triangulate their findings, explains Mathu Jeyaloganathan, investment lead at UnLtd. “This all helped to inform how we created the Growth Impact Fund – from the process to the products we offer and the branding.” 

Mathu Jeyaloganathan UnLtdThen, the fund team put together an advisory group of social entrepreneurs, made up of founders that social investors UnLtd and Big Issue Invest had worked with in the past. (Reaching people they hadn’t worked with previously would ensure even greater diversity, Jeyaloganathan agrees; this was not possible at the time due to limited capacity and Covid-19 restrictions.) Importantly, the advisory group was paid for their time, so that they could “take the time to really participate in this process”, she says. 

Jeyaloganathan (pictured) adds: “One of the big challenges is that it all takes so much time – for us, but also for the social entrepreneurs who are also having to run a business.” Valuing people’s time, particularly if it’s for “lived” rather than “learned” expertise, is still not common practice: “We often don’t budget for paying people to do the work.”

It all takes so much time – for us, but also for the social entrepreneurs who are also having to run a business... We often don’t budget for paying people to do the work


From evidence to action

Four main findings came out of Growth Impact Fund interviews with social entrepreneurs. First, that social investment organisations themselves were simply not diverse enough. “Entrepreneurs found it difficult to find people making decisions that look like them, and that made things very challenging,” says Jeyaloganathan. 

A second, related, issue was that social investment felt inaccessible, at times causing people to feel excluded. Jeyaloganathan says she heard accounts of female entrepreneurs in meetings where investors would direct all their questions to the men in the room – even if the woman was the company’s CEO. Alongside such biases, jargon and complex language serve to shut people out, she explains.

Third, debt did not meet people’s needs: they wanted equity or quasi-equity – a form of investment sharing some of the characteristics of shares but without offering up equity (this is often not an option, partly because many social enterprises and charities do not have shares within their governance structures). 

Diverse entrepreneurs said they needed support throughout the process, and finding a partner who would provide much-needed business support alongside investment was essential to improving access and removing barriers.

All of these factors can make building a trusting relationship challenging.

While these issues are familiar to many, gathering the data was an important step towards action. “I think evidence is really critical… for people to believe you and start putting money behind it,” Jeyaloganathan adds.

Those findings informed the way the fund was developed, and the products it now offers. The fund team made sure to highlight its particular features and differences to investors during the fundraising process too, says Jeyaloganathan: “It was important to get that message out.”


Local solutions

In 2019, Big Society Capital and the Access Foundation launched Local Access, a £33m programme to help charities and social enterprises in England to secure social investment. The programme was to be delivered through local partnerships, and 12 cities were invited to bid for a mix of support, grant funding and repayable investment. 

Kamran Rashid - Impact Hub BradfordSix of them were successful, including Bradford, a city of some 500,000 people in west Yorkshire. Its bid was led by a consortium including Impact Hub Bradford, the local authority, a social enterprise support network, and other voluntary, community and social enterprise (VCSE) bodies and private sector companies.

To design the programme, the new partnership – Local Access Bradford – undertook in-depth consultations with VCSE organisations. “We wanted to co-produce and co-design an offer which responds to community needs, and responds to the communities that are based in Bradford,” says Kamran Rashid (pictured), CEO of Impact Hub Bradford.

Initial desktop research had shown that nearly 90% of organisations receiving social investment were led by white people, in a district where 38% of the population is from an ethnically diverse background. 

To try to unpick this, the consortium ran workshops and interviews, reaching around 100 people from community organisations and social enterprises. One particular priority was reaching organisations in rural areas, as funding often remains focused on urban zones. “We wanted to make sure that the more outlying towns within the district were also represented,” says Rashid. The process was spread over nearly four years – and was impacted by Covid-19 – but the clear lesson was: it takes time.


Sharia-powered products

A major barrier for diverse communities that emerged was interest-bearing loans: Bradford’s population is nearly one-third Muslim, a faith which forbids making money from money. “We started thinking, what can we do to develop a response to that? How can we remove that barrier? That's how we came up with a Sharia-powered product [with an interest-free loan]”, says Rashid.

Another finding was a scepticism of social investment among social sector organisations, as they tend to rely on grants. “In the VCSE sector taking investment is not natural, so there’s a work of education to explain its potential,” says Rashid. Taking on investment to buy an asset makes sense to most people, he adds, but explaining that social investment can boost your organisation’s trading income, and therefore its impact, takes a little more work.

Local Access Bradford eventAbove: an event hosted as part of the Local Access Bradford programme


This is where another element came into play: the need for access to markets – because even with great products you can’t grow your trading activity if the demand for it isn’t there. 

“So we're also thinking about how we can work with local authorities and commissioning departments, for example, to think more about how they can commission and procure from the VCSE sector,” says Rashid. That could include, for example, breaking down big contracts into smaller chunks so that smaller organisations can deliver them.

And, as in the case of Growth Impact Fund consultations, the Bradford partners heard a need for business support, alongside investment.


Local Access Bradford: inclusive social investment for a stronger social economy

  • Size: £6.6m
  • Aim: To deliver “innovative and inclusive social investment in Bradford”; offering training, mentoring and investment to support the VCSE sector to build a stronger, more resilient and sustainable social economy in Bradford
  • What it offers: Business support alongside investment; Sharia-compliant financial products; works with partners (local authorities) to facilitate access to markets
  • Number of investees: to be confirmed (12 in current pipeline)
  • Investors: Big Society Capital, Access Foundation


One additional benefit of involving potential investees during the fund’s design is that it raises awareness among relevant communities – driving applications once the fund opens.

Local Access Bradford is now on the cusp of making its first investment. Half of the 12 organisations in its pipeline are diverse-led, and they include a faith-driven organisation and an arts organisation based in a small town. “They've said that without the offer, and without seeing local, diverse leadership, such as ours, they may not have wanted to access it,” Rashid says.

“It's very easy to sit in a room with a bunch of professionals and do what you think is right,” he adds. “But what you think is right might not be what the community needs and has asked for.” That’s why it’s so important to involve communities from the outset.

It's very easy to sit in a room with a bunch of professionals and do what you think is right... that might not be what the community needs

To ensure it continues listening to communities, Local Access Bradford has appointed four trustees from grassroots organisations to its board – in paid positions.

What is Rashid’s advice to other social investors? “Really listen – don’t do a tick-box consultation… You can't just rush things through. It is not a case of ‘we've seen a funding opportunity, we're going to quickly do a series of things, so we can be ready to apply for that’. I think that's disingenuous.”


Repairing a broken system

Co-creating or co-designing an inclusive fund takes time and money. This is the crux of the issue: social investors usually have limited resources available, says Jeyaloganathan. (Indeed, many social investors are social enterprises themselves.)

Designing and running the Growth Impact Fund will be more costly than a standard social investment fund, she explains. That has only been possible thanks to unwavering support from the organisations involved, and thanks to subsidy via grant money provided by Access Foundation and Bank of America

Jeyaloganathan adds: “You need a dedicated person to do some of this work, to do it really well.” Over the two years it took to bring the fund to life, “75% to 90% of my time was spent on the Growth Impact Fund, whether that’s research, fundraising, development or branding,” she says.

We are trying to address decades of under-investment into diverse entrepreneurs

Similarly in Bradford, involving grassroots organisations in the fund’s design was possible because of additional funding: when the partners were invited to bid, they got a small grant from Access Foundation to start the consultation process for the bid.

All the extra time and resource is worth it, though, Jeyaloganathan insists: “We are trying to address decades of under-investment into diverse entrepreneurs.” The current costs are a drop in the ocean, she says, compared with what would have been spent “if we had done things properly over the past 50 years”.

She adds: “We have to recognise that we're still in a system that is broken, and we're trying to solve a problem with the tiniest hammer for the biggest nail. But at the same time, we have to start somewhere. But we need more – I think there's a real role for foundations and catalytic capital organisations. [To meet demand], there should be 12 or 15 other [funds] that get the same type of support as we do.”

To discuss how your capital could catalyse more investment in this field, please contact Amir Rizwan at Big Society Capital. 

Photos courtesy of UnLtd; Impact Hub Bradford

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