In a series of six monthly articles written by Social Investment Scotland, we take a look at the world of social investment and how it’s becoming part of the funding mix of the sector. In the first of these articles, chief development officer Roger Moors examines the origins and growth of social investment in Scotland.
Social Investment Scotland was established fifteen years ago specifically to bridge a gap in the market left by high street banks who sometimes struggle to provide charities and social enterprises with the type of loan finance and support they need. Until recently, the term ‘social enterprise’ was relatively unknown, and the prospect of charities trading would illicit a confused look, or a raised eyebrow at least.
As there continues to be downward pressure on the availability of ‘free’ public funding and grants, more and more not for profit bodies have turned their attention to developing a more enterprising culture and finding ways to generate their own income. It’s in this space that social investment can work as organisations move from asking to earning.
As a registered charity and social enterprise ourselves, we are not driven by maximisation of profits, instead focusing on financial sustainability and the tangible social impact of our investments
Roger Moors
Unlike grants or donations, organisations taking on a loan will of course be required to repay it along with any interest payments and these costs need to be factored into the planning of a new project or enterprise. But we find that unlike grants, where the use of the funds can be quite prescriptive, loans can be used with more freedom whether it’s to buy an asset, help with cash flow or start a new enterprise. Additionally, loans enable organisations to pursue their own social aims and objectives rather than those of a grant funder. Having said this, it’s quite common to find that a blend of both grants and loans are used together especially in the early days.
In recognition of this trend, the Scottish Investment Fund was created in 2008 which offered a blended grant/loan product to help organisations to improve effectiveness, increase trading and build capacity, with opportunities to have interest rates waived in exchange for achieving social outcomes. SIS manages the fund on behalf of the Scottish Government and it has been instrumental in building the professional capacity and ambition of the third sector in Scotland.
Interestingly, as the movement towards community ownership and empowerment has gained momentum in Scotland, social investment has also come into its own in enabling community enterprises to access flexible finance to invest in their futures, either through community renewables or other enterprising initiatives like running their own cinemas, forests or harbours.
As a registered charity and social enterprise ourselves, we are not driven by maximisation of profits, instead focusing on financial sustainability and the tangible social impact of our investments. This allows us to put the social into investment, supporting a wide range of organisations to fulfil their social or environmental objectives.
Next month, we’ll be looking at the variety of usages for social investment, from the early days of starting a new social enterprise, to more established organisations changing their ways and exploring alternative ways of generating income and impact.
Any questions? Get in touch with us on 0131 558 7706 or [email protected]
Roger Moors is chief development officer at Social Investment Scotland
