Big Society Capital – any reason to be excited??

Last Wednesday Simon Frost, CEO from the Parity Trust shared his opinion of the recent announced funding from Big Society Capital and the implications for local community interests at our Viewpoint event. 

Parity Trust provides affordable finance to community enterprises through social investment. They have been selected as a Si-Fi, which are intermediary bodies that receive finance from Big Society Capital and then deal directly with local organisations in search of financial support.

To read the full report of the event please read on!

 

The Big Society Capital funds will be used to build capacity of community organisations to solve local issues.  Of course this finance does have to be re-paid by social enterprises and local groups aiming to use this funding and therefore there are a number of questions and concerns.

Simon’s main thoughts:

• Will the funding be long term enough?  Short term funding will not encourage long term objectives.
• Sustainable investment depends on a low interest rate for smaller enterprises; we still don’t know what level this will be.
• Social impact is being balanced against financial return, which may reduce the potential social impact of investments.
• Is this another project for the big boys? Or an opportunity for smaller enterprises?  This still remains to be seen.
• Will Big Society Capital only carry out low risk funding and miss other opportunities or will it try to invest in new ideas and unique social solutions?
• Is this whole new project about the re-provision of state welfare provision?  Or is it about something else?
• There really isn’t enough detail about the scheme yet and we won’t be able to judge it effectively until there is.

After Simon’s thoughts the assembled group discussed some of their key questions and concerns based on the GOLDEN ENVELOPE questions:

Question1: David vs Goliath, how can small organisations use this initiative to achieve scale?

Not all groups want to benefit from scale and may want to remain small and very locally focussed.  Small charities with no official contract for service delivery may have no assets with which to insure funding and may also not benefit from increasing their assets.  The support needed may not always be financially measurable.    

Questions 2: Affordable? Appropriate? Reliable? Different?

This will depend on the details, such as the interest rates expected, and local circumstance.  The principle of lending to make a profit is unchanged but will be done on a smaller scale.  Will be interesting to see how the financial return balances off against the social one.

Questions 3: The worlds of Si-Fi? Do we need a middle man?

Yes! Because the right local investment vehicle to invest locally in community assets and enterprises that directly benefit the local area do not exist.  This needs better coordination and the ‘middle men’ or Si-Fi’s will help to achieve this.

Questions 4: How can little banks be different from Big Banks?

Smaller financial institutions may be unable to take similar levels of risks to larger institutions and therefore may avoid some of the better social investments because of the levels of risk.  Larger scale banks may also price smaller banks out of the potential market.  Smaller institutions, however, may be more flexible and adapting to local circumstance and be able to better support local enterprises in delivering their service.  There is also concern of investments made to local social enterprises that could potentially adversely affect other local businesses and communities in the surrounding areas, which could undermine community development.

Simon Frost also writes a blog on similar issues.  It can be accessed here:  http://www.paritytrust.org.uk/simons-blog

Viewpoint events are informal gatherings for all those with an interest in community activity and the Big Society agenda.  If you would like to submit an idea for an event or leave your comments please contact haveyoursay@portsmouthcc.gov.uk