Today’s announcement of an additional £10m grant to Access and £25m social investment to BSC, beyond the £100m committed to them in 2012, is significant.
The grant to Access represents the first time that funds from dormant accounts have been used in to support blended capital approaches. It is encouraging to see that the bold move which the Big Lottery Fund made in 2015 to support the Growth Fund, and those commitments made by many other foundations, is now being followed by government.
This new tranche of grant funding will allow us to build on what we have learned through the first phase of our work, specifically the Growth Fund. We will blend this £10m with funds from Big Society Capital to focus on providing the sort of finance that many charities and social enterprises, in particular smaller and medium sized ones, most need. We will focus our work in disadvantaged communities, learning how the tool of social investment can most usefully help in those places.
In addition to this £10m to support blended finance, as part of our new strategy we will also commit resources from our existing endowment to those places in which we work to fund the development of social enterprise models and other capacity building initiatives. These will help organisations working on those communities utilise investment. As part of this work we want to build more understanding within the sector about the types of business models which are working, how they help build more resilient charities and social enterprises, and the investment which is required to support those models. To learn how best to do this over the next year we plan to start by initially looking at the models in the youth sector and homelessness.
The most recent data from SEUK is that 24% of social enterprises are actively applying for finance, with a median financing requirement of £80,000. Our data from the Growth Fund so far suggests that blended finance is able to meet this need. Of the 73 loans made through Growth Fund partners by the end of September, the average investment size is just under £66k. The median annual turnover of the organisations supported is £285k and the median number of employees is six FTE.
We are still in the early days of growing the supply of blended finance. This £10m is a foot in the door with government – but we will need more to follow if we are to help more charities and social enterprises to develop enterprising models, build their capital base, become more resilient and grow or sustain their impact. Government growing its role as a provider of first loss capital in social investment was a primary recommendation of the recent report, Growing a Culture of Social Impact Investing in the UK.
In addition to delivering blended programmes ourselves, Access will focus on building learning and understanding what works, in particular around how best to construct blended finance models, so we can demonstrate the value of this sort of approach to transform how social investment works for charities and social enterprises working with people and communities most in need.