Big Society Capital launches to fund social enterprises - Spear's Magazine

Big Society Capital launches to fund social enterprises

Big Society Capital – a groundbreaking £600 million institution – will be launched by the Prime Minister today. Its mission is to grow a new market – social investment – and so make it easier for charities, social enterprises and community groups to access affordable finance. In turn, this will help them innovate, expand their services and develop better solutions to social problems

Big Society Capital – a groundbreaking £600 million institution – will be launched by the Prime Minister today. Its mission is to grow a new market – social investment – and so make it easier for charities, social enterprises and community groups to access affordable finance. In turn, this will help them innovate, expand their services and develop better solutions to social problems.

The unveiling of Big Society Capital is an important milestone in the Government’s drive to grow the economy and build a bigger, stronger society.  This is about applying business principles to tackle social problems on a sustainable basis – the institution’s innovative funding structure carries no cost to the taxpayer and represents a new partnership between banks, government and the social sector.

Read about social investment in Spear’s

Big Society Capital will be capitalised with a total of £600 million. An estimated £400 million of this will come from unclaimed cash left dormant in bank accounts for over 15 years and £200 million will come from the UK’s four largest high street banks Barclays, Lloyds, HSBC and RBS.

Big Society Capital will grow the social investment market which blends financial return with positive social impact. It will do this through the development of socially orientated investment organisations that support charities and social enterprises that have the ability to repay an investment through the income they generate. This will help those charities and social enterprises to grow and use their expertise to do more good in communities, whether it is supporting troubled families, providing job and training opportunities for young people or working with the homeless.

The Prime Minister said:

“For years, the City has been associated with providing capital to help businesses to expand. Today, this is about supplying capital to help society expand. Just as finance from the City has been essential to help businesses grow and take on the world, so finance from the City is going to be essential to helping tackle our deepest social problems.

“Big Society Capital is going to encourage charities and social enterprises to prove their business models – and then replicate them. Once they’ve proved that success in one area they’ll be able – just as a business can – to seek investment for expansion into the wider region and into the country.

“This is a self-sustaining, independent market that’s going to help build the Big Society.”

Sir Ronald Cohen Chair of Big Society Capital said:

“What we’ve done for business entrepreneurs we must now do for social entrepreneurs. We must give them the resources to innovate in the way we resolve social issues. Big Society Capital aims to transform the flow of capital into the social sector and to boost significantly its ability to improve people’s lives.”

Minister for Civil Society Nick Hurd said:

“This is a time when we need to be doing more to back our social entrepreneurs. For many years, charities and social enterprises have been telling Government how hard it is to access long term capital. We have listened and within two years have delivered a new institution that will make it easier.

“The social investment market is embryonic but it is real and we intend to grow it. As a result, savers in this country will have more opportunities to invest for good and back charities, social enterprises and community groups who want to make a positive difference.”

Big Society Capital is an organisation run independently from the Government with decisions around investments being made by an impartial investment committee. It will play a critical role in speeding up the growth of the social investment market. The majority of the money it makes will be reinvested back into the social investment market so it can be constantly reused for the good of society.

It will be chaired by Sir Ronald Cohen, the pioneer of venture capital in the UK who has been using his skills and expertise to champion social investment over the last 12 years. Nick O’Donohoe, former Global Head of Research at JP Morgan, is Big Society Capital’s Chief Executive.

Through the open public services agenda Government will be creating more space for social enterprises and charities to help deliver better public services. Through localism Government is giving community groups more opportunities to take on projects in their local communities such as running their local library, playgroup or shop.  Big Society Capital will support both agendas by growing the market in social investment thereby making it easier for people to access finance to make their plans a reality.

Crucially, instead of the Government simply making individual grants which would deplete the £600 million fund over time, Big Society Capital will invest money in organisations that provide affordable finance to social projects on a repayment basis. This means that rather than eventually running out, the money will constantly be reinvested in new projects and in turn generate more cash. All the time this is happening money will be invested in projects that benefit communities across the UK.

Alongside Big Society Capital the Government is also announcing a range of groundbreaking initiatives to help grow the social investment market in the UK. Later this month Government will launch a £10 million Investment and Contract Readiness Fund which will provide grants and support to ambitious charities and social enterprises that want to grow and deliver more services for communities but just need that extra help before they are ready to take on a loan or bid for a contract to run public services.

The Government is launching a programme called Inspiring Impact, to accelerate social impact measurement, co-ordinated by New Philanthropy Capital, to enable frontline charities and social enterprises to deliver better outcomes for society. We will also be conducting a review into the financial barriers to social enterprise to substantially increase investment into frontline organisations.

Research last year estimated that about £165 million of social investments were made in 2010. The Government’s aspiration is to grow the social investment market so that its size is measured in billions rather than millions.

Read about social investment in Spear’s



 

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