Big Society Capital’s model should change, says Charity Finance Group

Big Society Capital’s model should change, says Charity Finance Group
Civil Society, by Gareth Jones 
06.05.16

 

Big Society Capital is not delivering the right types of funding and should change its operating model, the Charity Finance Group has said.

 

Writing in the May edition of Charity Finance magazine, CFG’s head of policy and engagement Andrew O’Brien criticises the requirement for Big Society Capital to be self-sustaining and to secure match funding for all its own spending.

 

O’Brien also says that more than half of BSC’s investments end up as conventional loans made via social banks, stating: “Arguably, this doesn’t need any support from BSC or government.”
By contrast, he says, “equity-like” deals should represent more than just £32m of the £1.5bn social investment marketplace.

 

Relaxation of rules

 

O’Brien acknowledges that BSC has been “very successful at championing social investment within government and raising awareness around the world”.

 

However, he says that in order to improve the supply and cost of capital flowing to charities, BSC’s profitability should not be seen as “a litmus test” for social investment as a whole.

 

“In the long term,” says O’Brien, “when the charity sector’s finances pick up, there will be a chance to replenish BSC’s capital.

 

“In the meantime, government may need to consider whether it needs to use its balance sheet to support BSC when the sector is struggling, in the same way that it has supported SMEs.”

 

Match funding

 

O’Brien is also critical of Big Society Capital’s attempts to secure £1 of outside investment for every £1 it spends, and its even more ambitious aim of securing a 4:1 ratio over the long term.

 

This, he says, “makes it harder to get money out of the door and partly explains why there hasn’t been a flood of capital into the sector to help it restructure and transform for the future”.