A call to action:

Mapping the use of subsidy in the UK Social Investment market: What are the lessons for Access and other potential providers of subsidy to support social investment?

Access has been established to address to specific failures in the social investment in England, namely the lack of small scale unsecured debt, and the need for long term funding of investment readiness work. We are doing this through providing subsidy in the form of grants in two main ways:

  1. By blending grant with debt and making this blend available to social investors wanting to run loan funds offering charities and social enterprises loans of less than £150k; and
  2. By designing and funding grant programmes that provide investment readiness support to charities and social enterprises.

We are a fixed life organisation and it is our explicit goal to share the learning of our programmes so that we may influence other providers and potential providers of grant subsidy to continue or build on our work once we are gone. Developing a significant evidence base is therefore critical to our work.

Our interest in understanding the use of subsidy in the social investment market:

Access is the latest of a number of initiatives which have sought to develop the social investment market and increase the supply of capital to charities and social enterprises over the last few decades. Many of these initiatives have used grant subsidy or blended finance to seek to achieve those goals. While numerous evaluations exist, there is no one single repository of the evidence of how effective these programmes have been and it is not easy to be able to tell a story of what has been learned of how grant subsidy can best develop the social investment market.

We would like to change that. To start with we’d like to bring together those with a keen interest in this area to help us scope how best to consolidate that evidence base and translate it into something which can be useful for us and other providers of grant subsidy as we design future programmes. This evidence base may also serve as something of a baseline to assess our own success during our ten year life.

Defining subsidy in the market to date:

It is not simple to define the sources and uses of subsidy in the social investment market over the last few decades. Initiatives include:

  • Grant programmes which support investment readiness capacity building in charities and social enterprises;
  • Grants provided as first loss or high risk tranches in funds to attract other investors;
  • The provision of “free” capital into funds;
  • Direct support for social investment intermediary organisations, be they fund managers, advisors or others; and
  • Targeted subsidy to support the development of specific products, in particular Social Impact Bonds.

Potential scope:

This project could take a number of forms – and could be overwhelming in scope. Therefore Access wishes to engage with key partners to help define what a realistic project should cover, what would be of most use, and who should participate.

Likely areas of focus include:

  • Mapping the most commonly used structures of providing subsidy in the market over the last 20 years. What problems were they trying to solve? What was the purpose or aim of those different structures? What sorts of organisations were intended to be the beneficiaries and at what stage of development were they?
  • What were the sources of that subsidy and what was the motivation for it being provided?
  • How much subsidy has been provided (reasonable estimate) in each of those structures? Are there trends over time about which sorts of support have been most fashionable?
  • What evidence is there of the impact of this use of subsidy? Did it achieve was it was intended for?
  • What evidence is there of any broader impact on the functioning of the social investment market as a result of this use of subsidy? Has the subsidy solved a temporary market failure or demonstrated a permanent one? Has there been any impact on the price or availability of social investment.
  • What comparisons are there to any similar initiatives outside of the social investment market, or outside the UK?

First steps:

If this is an area of interest then please get in touch. We are keen to engage with providers of subsidy past, present and future; the organisations who have run these programmes, the charities and social enterprises who have benefitted from them; and anyone interested in helping us with the analysis needed to build and consolidate the evidence base.