Right money, right time: How blended finance has helped communities grow

Matt Smith CEO, Key Fund

Key Fund is a long-standing social investor rooted in the North and Midlands of England, and has supported over 3,600 organisations in its 25 year history. When traditional sources of blended finance dried up, Access stepped in with funding support. This helped Key Fund to offer grants and loans to local organisations, and opened doors for those often shut out of traditional finance.

"When I became CEO a decade ago our major fund had ended and all we could offer community organisations were loans. That meant there was a massive part of the market we wanted to serve that we couldn’t - they just wouldn’t take loans on their own.

"In the most marginalised and disadvantaged communities debt is seen as a sign of failure. And there’s predatory or certainly high cost debt out there that has coloured people’s experience. So by allowing us to offer a mix of grants and loans, Access enabled us to continue supporting communities in our area. They were the only provider of that kind of money at the time, so without them, we simply wouldn't have been able to carry on delivering for the organisations we exist to serve.

"There's a lot of conversation about some of the more academic ways blended finance works. But for the organisations we work with, it's mostly about a comfort blanket of having some of their funding as a grant. It’s a far easier transition from grants to blended finance, than it is from grant to full debt.

“If you’re looking at this world from the inside it all makes a lot of sense. If you’re looking from the outside it’s difficult to navigate. Communities also have a massive issue with trusting financial institutions and that’s why it’s so important that what we do is relationship-based.  We're an institution with power and that is at play, as much as we try to break it down. Understanding how these communities work is really important to our success. 

“Our managers are based regionally and they'll be out there in the communities talking to people and getting to know them. That deep local knowledge makes us genuinely responsive, whether it's jumping in a car to visit an investee at short notice or understanding the ins and outs of a proposal. Building those relationships, along with offering blended finance and other support programmes like Reach, has meant people are starting to trust investment more - and it’s helping them to grow.

"A great example of this is Veterans at Ease - a husband and wife team who came to us in the early stages of starting up their charity. They’d seen the huge issues ex-forces personnel had in getting cognitive behavioural therapy through the NHS, so they decided to offer it themselves. They do this by employing veterans in charity shops and using the income to fund therapy for PTSD. 

"They started with one shop in the North East, and thanks to multiple investments from us they’ve now got a number of different outlets in different areas. When I saw the veterans talk about their terrible experiences and the impact of the therapy they’d had, and people at the charity speaking with such passion about what they've achieved, it was just amazing. That's very much been made possible by blended finance. 

"I talk a lot about the five C's which are vital to social investment - confidence, capability, customers, capacity, and capital. Access has been really good at helping support confidence and capability in particular. And they’ve also started to work on another C - continuity. The ability to invest long-term in places that need it.

"I want Key Fund to be able to keep building on our mission of 'right money, right time’ and to do that we need certainty. One thing that needs to change is currently there’s always an end date to the funds and you don’t know what happens after that. We haven’t yet cracked the way to do this sustainably as it’s still based on project cycles and programmes.

“The worst thing I can imagine is an organisation like Veterans at Ease not being able to come back to us at their next stage of growth because we've built trust, they've grown with us step by step, and we understand their model. If we couldn’t support that kind of journey anymore it’s not just our model that breaks but a whole part of the market that goes with it.

"But there is money in this next phase to build more resilient funds, which I’m very pleased about. That means being able to invest in our team, to be present in the communities we serve, and to know that when organisations like Veterans at Ease are ready to grow, we’ll be ready too.

“As the sector moves forward, I hope others will continue to build on what Access has started - embedding resilience in funding programmes as well as the organisations and communities they’re meant to serve. I'm proud to have been a little part of the journey with them over the years."