Big Society Capital – Good or Bad?

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I’ve been reading about Big Society Capital and reactions to it all week, and today it was it was announced that Big Society Capital is likely to invest £50m in its first year, making between 12 and 15 investments, the  majority of which will be in new social finance funds. So I thought I’d try and pull together my thoughts on what I’ve read.

Yesterday Back on 5th April, the Prime Minister launched Big Society Capital, announcing a specific pot of funding to finance social sector organisations. The majority of the ‘up to £600m’ available for investment comes from dormant bank accounts (this was enabled by the Dormant Bank and Building Society Accounts Act 2008), and is earmarked for spending on social purposes. The rest is coming from the top four banks.

Big Society Capital’s aim is “to build a sustainable social investment market to help social sector organisations increase their impact on society”.

Despite the fanfare, details weren’t immediately obvious – Big Society Capital will not be funding social enterprises and charities directly, but loans will come through Social Investment Finance Intermediaries (SIFIs), who have to apply to Big Society Capital for the investment funds.

At first this seems like a great piece of news for social enterprises – more money, specifically for them, even if it is in the form of loans. However, over the intervening days, some concerns have come to light:

Others welcome the idea:

The Guardian Voluntary Sector Network ran a poll asking ‘Will Big Society Capital help your charity?’ Over 87% answered  “No – we need help with running costs now, not capital investment in the future”

One spoof and satire website even quipped Big Society bank to help charities replace funding with debt

So, what to make of all this?

Well, there will eventually be more money available specifically for social purposes, which should theoretically be easier to get than going to an ordinary bank. However, you might have to jump through a lot of hoops to get it, and will need a pretty healthy financial record to start with.

On one hand, if your social enterprise needs capital to grow and you can guarantee that you can pay the loan back with interest, you now have another source of funding.

On the other hand, if you are a social enterprise working in a depressed economy, tendering from year to year, with no way of knowing how changes in the political and social landscape are going to affect you, or have burnt you fingers becoming grant-dependent – then becoming loan-dependent may not be for you.

 

Postscript: ……. and wasn’t there already an organisation doing this, anyway?