Social investment isn’t working, says Access trustee
Steve Wyler, a trustee of Access, the social investment foundation that was set up to make it easier for charities and social enterprises to access capital, said yesterday that: "Social investment isn’t working, at least, as well as it should be."
He made his comments at the launch of the Connect Fund. £1.8m of Access money is being managed by the Barrow Cadbury Trust with the intention of uncovering and funding solutions to the challenge of getting investment to where it is needed most.
Wyler backed up his view by quoting figures from Responsible Finance research, which found that £116m was leant to 555 social enterprises in 2016. The report looked at lending by 48 of its members.
The report differentiates between loans made by social banks (who service organisations looking for investment of £250,000 or more) and responsible finance providers (£250,000 or less).
When lending by social banks was removed, the amount loaned fell to £30m, with 300 social enterprises benefitting. Of that £30m, only 15% was unsecured lending – just £4.5m in total.
A further index in the report provides the detail that only 15% of the total lending was to organisations working in the 35 most deprived areas in the country.
If you are working in a poor community and you require a small scale loan and you can’t provide security, the social investment market just isn’t there for you
Wyler’s conclusion was: “If you are working in a poor community and you require a small scale loan and you can’t provide security, the social investment market just isn’t there for you.”
The fund will offer grants to address gaps in market infrastructure and feasibility grants to test approaches for sectors or places to engage with social investment.
“We want to help other voluntary sector support providers who don’t see themselves as social lenders at the moment to explore ways they could be social lenders, to come up with imaginative ways of doing it,” said Wyler.
Homeless Link was put forward as an example of how this might work. It acts as a membership and lobbying body for organisations addressing homelessness but has recently moved to become a social investor, using £4.5m from Access’ Growth fund.
Big Society Capital’s response
Jeremy Rogers, chief investment officer at Big Society Capital pointed out that Responsible Finance members probably accounted for a quarter of the market and didn’t include vehicles such as community shares or charity bonds.
BSC will be releasing new figures about the size and composition of social investment in the UK in the coming weeks. The organisation has identified £306m of non-bank investments in 2016, which includes unsecured lending, community shares, charity bonds, social impact bonds, equity and social property funds.
Although there may be disagreement about the amount of capital flowing to social enterprises, Rogers agreed that the social investment market needed to improve:
“Regardless of the figures, Steve’s central point – that there’s lots that can be improved in how social investment is working – still holds, and significant parts of the sector don’t feel the current offering works for them.
“Access’s Connect fund is a really great opportunity to address some of them.”
The Connect Fund is inviting ideas for shared resources and initiatives that will fill gaps in social investment market infrastructure. Expression of interest should be submitted before 2 July 2017.
Photo credit: Negative Space