Big Society Capital has been launched to boost social investment and make it easier for charities, social enterprises and community groups to access affordable finance. But doubts have been raised about whether it can achieve its aims.
Big Society Capital will be capitalised with a total of £600 million. An estimated £400 million of this will come from unclaimed cash left dormant in bank accounts for over 15 years and £200 million will come from the UK’s four largest high street banks Barclays, Lloyds, HSBC and RBS.
Big Society Capital will grow the social investment market which blends financial return with positive social impact. It will do this through the development of socially orientated investment organisations that support charities and social enterprises that have the ability to repay an investment through the income they generate. This will help those charities and social enterprises to grow and use their expertise to do more good in communities, whether it is supporting troubled families, providing job and training opportunities for young people or working with the homeless.
Crucially, instead of the Government making individual grants which would deplete the £600 million fund over time, Big Society Capital will invest money in organisations that provide affordable finance to social projects on a repayment basis. This means that rather than eventually running out, the money will constantly be reinvested in new projects and in turn generate more cash. All the time this is happening money will be invested in projects that benefit communities across the UK.
But critics argue that tensions between social and economic returns will present a challenge. Professor Cathy Pharoah, from Cass Business School’s Centre for Charity Giving and Philanthropy said: “BSC will face the same fundamental challenge as other top-down initiatives in the history of social investment, namely how to deal with the tensions between social and economic returns”.
She added: “It will not be able to help small innovative social projects dealing with high needs and high risk clients or service areas where social returns may be high and economic returns low. Its main value maybe less in stimulating a new form of investment or asset class, but as a lever for re-configuring mainstream public welfare provision through helping new providers enter the market.”