Social Investment Scotland set to open a new fund for the private sector - prompting a third sector backlash
A backlash is building over moves to let private companies get their hands on third sector cash.
Lender Social Investment Scotland (SIS) has said it has Scottish Government backing to launch a new fund which will be open to the private sector.
SIS currently provides cash – much of it public money – to charities and social enterprises.
A proviso for funding has been that organisations have an “asset lock” – which means profits are put back into the business rather than going to shareholders or into the pockets of individuals.
Now, however, it seems that SIS is set to bust the asset lock by setting up a new fund for private companies – as long as they use the cash to do social good.
It will still offer funds to charities and social enteprises in the old way, but a backlash is building over its plans to open the new fund – backed by Scottish Government cash – to the private sector.
SIS chief executive Alastair Davis told TFN: “SIS has been awarded funding from the Scottish Government under a programme of early interventions to support the delivery of the new ten year strategy for social enterprise.
“SIS is planning a programme of awareness raising and education with a range of stakeholders… in the future, this work is expected to include the development of a new fund to support mission-led businesses and entrepreneurs.
“Please note that there has been no change to the eligibility criteria for all existing SIS funds and these remain open only to those organisations with an appropriate asset lock. There are no plans to change the eligibility criteria for these funds. SIS will continue to grow its support for these organisations with new programmes of investment and support.”
However, this has caused a furious backlash from leading third sector figures, who questioned whether cash which could go to the third sector is now been offered to the private sector.
Angus Hardie, director of the Scottish Community Alliance, said: “Obviously SIS can do what it wants with its money. But if it's not its own money – indeed if it's public money that was given to it to support the third sector – then it is clearly unacceptable if that money goes to private enterprises irrespective of whether they are mission led or with social purpose or whatever other weasle words are used to get round the fact that they are not part of our sector.
“What's going on here is a deliberate blurring of a line which should be very clear and unequivocal.
“It separates those enterprises that are for private profit and those that aren't. The only reason I can see that people want to blur this line is because it suits their organisation's best interests – and that is irrespective of whether it is in the third sector's best interests.”
Aiden Pia, executive director of social enterprise network Senscot, was equally scathing.
He said: “Some of what we call social investment is too often driven by the pressure on lenders to get money out the door. SIS announced that it is to open products to profit for purpose private businesses.
“However, the third sector is a valuable brand which the general public associates with charities and asset-locked social enterprises – and which both eschew private profit.
“Simply widening eligibility to include unregulated private profit may get more money out the door, but at the expense of third sector clarity.
“SIS can obviously lend the funds it holds to whoever it chooses – but there is the question as to whether or not this activity should be supported by Scottish Government’s Third Sector Division."
A Scottish Government spokesman stressed it is not currently backing a new Social Investment Scotland fund.
He said: “In December 2016, the Scottish Government published Scotland’s Social Enterprise Strategy. This ten-year strategy was fully co-produced with the social enterprise community and aims to build and strengthen the social enterprise sector. The priorities outlined in the strategy will be delivered through a series of underpinning action plans, the first of which is due for publication on 12 April.
“Social Investment Scotland delivers the £16 million Social Growth Fund, which is supported by Big Society Capital and Scottish Government. The fund provides loans of between £100,000 and £1 million to eligible third sector organisations. There are no plans to change the eligibility criteria for this fund."
The Scottish Government announced a £1 million package of support for social enterprise in Febraury this year following the publication of its 10 year social enterprise strategy. Of that £25,000 was provided to Social Investment Scotland to investigate options to attract new private investment to the sector more generally. In addition, £50,000 was provided to deliver a programme of awareness raising activities, events and materials to raise the profile of social enterprise to aspiring entrepreneurs.
"Earlier this year, Social Investment Scotland received support from the Scottish Government to raise awareness about social enterprise to aspiring entrepreneurs and to investigate options to attract new investment for the sector more generally. The Scottish Government has not been asked to contribute to the establishment of any new Social Investment Scotland investment funds.”