Need money for your social venture? Try the banks...
A new report for RBS written by social investment and social enterprise commentators Dan Gregory and David Floyd has found that social investment by mainstream banks could eclipse that of the social investment sector.
RBS reported to the authors that it has around £250m in outstanding lending to the social sector. If this figure was replicated across all the mainstream banks, the total figure would be more than £3bn. This is significantly greater than the £1.5bn that Big Society Capital reported in its Size and composition of social investment in the UK report, published earlier this year.
Thom Kenrick, head of community programmes at RBS, said: “There is a widespread perception that banks are reluctant to lend to social sector organisations. But we found that mainstream bank lending to the sector significantly exceeds lending from the social investment market.”
David Floyd is head of Social Spider, a publishing, training, writing and research social enterprise based in London. He is also a well-known blogger in the social enterprise sector. Dan Gregory is head of policy at Social Enterprise UK and also works to support social investment and social enterprises. Their research, The Forest for the Trees, was commissioned by RBS and published on 21 July.
The RBS report also stated: "There is no evidence that mainstream banks perceive a greater level of risk in investing in social sector organisations compared to mainstream businesses." It does concede, however, that "banks are unlikely to lend relatively small amounts of money to smaller organisations".
Citing CAF’s In Demand report, which stated that 53% of finance from charities was from high street banks, the RBS report also finds "there is little, clear evidence that banks discriminate against charities or social enterprises on the basis of their organisational type".
It goes on to suggest that the establishment of the social investment market, based on the assumption that banks wouldn’t lend to social businesses "may be having the unintended consequence of making it harder for social organisations to access repayable finance as they may be more likely to dismiss the possibility of approaching mainstream providers who may lend to them."
Whilst encouraging other mainstream banks to be transparent about their social investment data, David Floyd also took the opportunity to urge the major players in the social investment market to consider what their role should be.
He said: “Social investment policymakers and experts should consider what specific gaps publicly supported social investment is intended to fill in order to avoid replicating, competing with or undercutting mainstream finance with public subsidy.”
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