Funding and sustainability are never far from the minds of people running charities and community organisations large and small. Social investment is playing a growing role in the funding landscape, and we’ve seen plenty of community organisations benefitting from this source of funding. In this piece, Geetha Rabindrakumar from Big Society Capital explains what it's all about.
What is social investment?
Social investment is repayable money, invested to help charities and social enterprises deliver more of their fantastic work. Investors expect their money back, but are motivated by the social impact being created. It can scale up work which may have been initially funded through grants, provide funds to get a trading activity going, or help unlock other funding for a development project.
Social investment usually takes the form of a loan, often to help secure an asset for the community – for example Bramley Baths in West Leeds run an Edwardian public bathhouse transferred from Leeds Council. They used a small loan within a larger funding package to turn it into a thriving community health and leisure facility.
Who is it for?
Taking on a loan won’t be right for every organisation – to be worthwhile it needs to fund activity that can generate a large enough income stream and surplus that will enable you to repay the investor as well as support ongoing sustainability.
For example, Broxburn United Sports Club in West Lothian use sport and social activities to engage older people and the wider community. They’ve received grant from People’s Health Trust to support older people in the community in the past, and used a loan to help fund an extension of their community facility. Income from a range of activities, such as clubs, training and holiday programmes will enable them to repay the loan.
Where can organisations get social investment?
Typically, social investment is provided by social banks that provide secured loans, social investment fund managers (such as those that are providing small loans funded by the Access Foundation’s Growth Fund) as well as some foundations.
It is also possible to raise funds directly from individuals through crowdfunding platforms or local networks. In rural Herefordshire, local residents invested into community shares in and loans to Burley Gate Community Shop in order to retain a valued facility that would have otherwise closed. Community shares are a specialist form of share capital issued by certain types of organisations (including charitable community benefit societies) – shareholders are usually people from the local community investing for community purpose rather than financial gain.
What can we achieve through using social investment?
Social investment is only a funding tool, but has the potential to enable social impact that can be sustained. The projects above have created impact for individuals around health, employability and volunteering opportunities as well as wider impact in reducing social isolation and strengthening community ties as residents become involved in decision making over assets and services.
Acquiring an asset that generates income improves sustainability and provides a base for development – for example Southmead Development Trust, run by and for residents in an area of Bristol where life expectancy is over nine years less than the neighbouring area, used a loan to buy solar panels for its community centre – generating an income stream and lowering running costs. The initial investment helped their resilience, and they now deliver a host of projects addressing community need, including plans to develop a housing project to ensure affordable rents for local residents.
People’s Health Trust’s work to address the link between health and the level of control that people have over their lives chimes with what we see in many local projects funded with social investment. These projects are underpinned by locally-driven responses to need and can give a sense of ownership, especially when people are given the opportunity to be investors in the solutions of their making.
How we can help our Boards to consider social investment?
It can be challenging for Boards to consider the opportunities of using repayable finance, when often focused on minimising risk and with limited capacity to explore the possibilities. Big Society Capital’s campaign GET INFORMED provides resources for Board members, the opportunity to hear the real experiences of other trustees, and to get one to one mentoring support to help increase individuals’ knowledge and confidence around social investment and whether it could be relevant for their organisation.
Geetha Rabindrakumar, Big Society Capital
Big Society Capital (BSC) is an independent institution set up to develop the social investment market in the UK. Geetha oversees BSC’s work on social sector and investor engagement. She has a background in charity finance, was previously Finance Director at disability charity Scope, and has held numerous volunteer and trustee roles at smaller charities.
To find out more about sources of investment, click here.
To connect with Geetha, click here.
To sign up to GET INFORMED – Social Investment for Boards, click here.
To read more blogs from the Trust, click here.
