Big society bank up and running
Fri, 27/04/2012 - 13:10
This month has seen a much-needed boost to the investment market for social enterprises and charities with the launch of the Government’s “big society bank”, Big Society Capital (BSC).
The bank has been created to make it easier for charities, social enterprises and community groups to access affordable finance. It will do this indirectly, restricting its investments to social investment finance intermediaries (SIFIs) that connect those interested in investing for social impact with social sector organisations that need capital to achieve positive social change.
Jane Pritchard, arc Director, welcomed the news saying “It's good news that more money and investment is going to be available for social enterprise but we know that there is a real challenge in finding social enterprises that are investment ready. arc is setting out to directly address this challenge with the help of mainstream businesses led by BP and Deloitte.”
However, the Government’s recently announced plans to apply its cap on tax relief from charitable donations to investments in social enterprises has been criticised for undermining this increase in social investment.
Peter Holbrook, Social Enterprise UK Chief Executive, described the move to include Community Interest Tax Relief (CITR) in the cap as “creating more barriers to social investment before it’s properly off the ground.”
Launched on 4 April with £400 million from dormant banks accounts and a £200 million contribution from the UK’s four biggest banks, it is the first investment institution of its kind. The new bank will only invest in organisations that will deliver a financial, as well as social return, ensuring that the money remains in the system.
Organisations eligible for investment include social banks such as Triodos Bank and non-bank social investors like Big Issue Invest. They, in turn, will invest in frontline social enterprises that can deliver a return on investment.
Chair, Sir Ronald Cohen said: “What we’ve done for business entrepreneurs we must now do 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.”
Other commentators are concerned that the new bank will fall into the same traps as traditional lenders and that borrowing will be unaffordable for small social enterprises and charities. Work is also needed to ensure that the social sector is investment ready.
BSC is already working with SIFIs to support charities and social enterprises with recent investments in organisations providing help to tackle youth unemployment and renewable energy for deprived areas.
See what stakeholders have to say about the new bank.
Visit the .Big Society Capital website