CAF: most charities just want cheap loans

CAF: most charities just want cheap loans
Civil Society


Charities Aid Foundation has published its own report on the future of social investment today, which concludes with eight recommendations for maximising the benefits of social investment for charities.


The report claims that the government is in danger of getting carried away with grand ideas for “exotic” new models that promise commercial-rate financial returns as well as social outcomes, when what most charities really want is cheap loans.


This sort of ‘win-win’ promoted by policymakers is an enticing and laudable vision, CAF said, but can also raise false hopes. 


“Since the majority of social needs we face are ones that hundreds of years of philanthropic activity (not to mention the creation of the welfare state) have failed to solve, it seems optimistic to suppose that we can find new ways of meeting those needs that not only produce better social outcomes but also generate meaningful financial returns.


“The reality is charities are more in need of practical, less glamorous forms of investment, such as affordable repayable finance, and investors should sometimes be prepared to sacrifice financial benefits in order to create a wider social impact,” the paper said.


Returns Policy? What the next decade holds for social investment, also states that social investment shouldn’t just be about wealthy donors, and government should do more to build awareness and encourage charities themselves to use their resources to invest in social impact.


CAF’s eight recommendations to guide policymaking are:

* Grant funding should be used to help charities build skills and infrastructure to become investment-ready
* Payment-by-results contracts need to be designed carefully to work for charities and social enterprises
* Charities and social enterprises should be supported to take advantage of the new rights to challenge local service delivery and buy community assets
* We shouldn’t ignore the philanthropic end of social investment or the need for capital funding with little or no expectation of financial return beyond the capital itself
* Social investors should not be expected to subsidise private gain for commercial investors or public sector commissioners
* Charities and charitable trusts should be encouraged to consider social investment
* Local authorities should become social investors
* Companies should embrace social investment