Is Social Finance Right for Your Organisation
The Trust's Bill Osborne (right) at the Trust's Punk Finance event in 2012.

Is Social Finance Right for Your Organisation

10 July 2014

We know that most Voluntary, Community and Social Enterprise (VCSE) sector organisations in Northern Ireland will have felt the pinch of the last few years of economic recession. Perhaps you have noticed a drop in donations or maybe you are struggling with fewer grant opportunities being made available.

The work of this sector is absolutely critical, which is why now is the time to think about researching other avenues that could open up access to finance.

Social Finance is a provision of funds to the sector in a way that creates a positive social impact, a social dividend, along with an economic return.

Northern Ireland's VCSE sector organisations are lagging behind the trend of uptake in this area, driven by a historically reluctant approach towards debt.

This model can provide your organisation with a new source of funding. It can open up possibilities for innovation and growth and lead to a more sustainable future.

Where should you start?

Social Investment Finance Intermediaries (SIFIs) are organisations that connect those interested in investing for social impact with social sector organisations that need capital to achieve positive social change.

To date, the government has been the largest source of finance for the social investment market. Various grant and loan funds have been made available, but that is likely to fall going ahead into the future.

Individual socially conscious investors can invest small amounts of money (£10 to £50,000) into FSA-regulated social banks. Higher level wealthy individuals can invest upwards of £50,000 to £2m in a portfolio that will diversify their finances into many social sector organisations.

While banks are beginning to open up opportunities in this investment field, the activity is minimal compared to their mainstream lending.

What type might work best?

Social Finance can be developed in much the same way as standard borrowing for long term investment programmes. A secured loan will require security over a property or asset held by your organisation.

Standby facilities could allow you to fund projects ahead of reaching your own financial targets. Money can be drawn down over a period of time and interest is only charged once the funds are drawn down.

Overdrafts can be offered depending on the money an organisation holds in its current account. Interest is usually paid on the amount of money that is borrowed until it is repaid.

Is anyone else doing it?

As one of the core themes of the work of the Building Change Trust, £2million was allocated to encourage innovation and change in the local funding landscape.

For short term projects, there are other finance options available. The Trust has commissioned Cooperative Alternatives to develop a Community Shares pilot programme in Northern Ireland.

Tiziana O’Hara, the lead on the initiative, says there are over 120 successful schemes already operating throughout the UK:“The idea of community shares should appeal to anyone who wants to collectively address a need in their community which requires capital to implement.

"Community shares can also be used as leverage to attract other investments. Co-operative Alternatives is the only body entirely dedicated to co-operative development in Northern Ireland.

"We are helping interested groups and organisations to set up and grow their co-operatives”.

She continued: “If you are a co-operative, you can sell a share in the community and raise enough money to start or expand a project that will benefit the community around it.

"Members literally buy into the idea and they do so for a small return, a non-speculative interest. Contrary to ordinary shares, the ones that you buy in a company, the principle ‘one member, one vote’ applies and this ensures the democratic nature where everyone becomes a co-owner through their investment".

To find out how Building Change Trust is supporting the growth of Social Finance in Northern Ireland, click here.

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