New fund aims to change Scotland’s charities

New fund aims to change Scotland’s charities
Jon Moluneux
31.01.08


A new funding initiative, launched today in Edinburgh, is bidding to change the face of charity finance in Scotland and beyond. Inspiring Scotland has been developed by Lloyds TSB Foundation for Scotland, the country’s largest independent grant-making trust.


It will seek to invest between £70m-£100m in a selected number of charities over the next seven to 10 years, by assembling money from a combination of private individuals, trusts, foundations and the public purse.


With promises of long-term funding, support for core costs, minimal bureaucracy and the investment of time, energy and skills – as well as cash – Inspiring Scotland reads like a wish-list for voluntary sector funding.


The man behind it is Andrew Muirhead, chief executive of the foundation. It is based on the concept of venture philanthropy, a new approach to charitable giving which re-invents ‘donors’ as ‘investors’.


Pioneered by super-rich, dotcom-boom philanthropists such as eBay founder Jeff Skoll, venture philanthropy applies the principles of private venture finance to investment in charities – aiming to back great ideas with long-term finance. ‘Investors’ get the promise of a social return on their commitment and regular feedback on how the work they fund is progressing.


An initial boom in venture philanthropy was followed, like its dotcom counterpart, by an inevitable bust, but the seeds of a new approach had been sown across the globe, including in the mind of Muirhead.


It was the US experience, coupled with his own frustrations at the bureaucracy and short-term mentality of much charitable funding, which led him to embark on a six-month overseas adventure investigating venture philanthropy approaches in action, he says.


He credits the trip, which took him to projects in Australia, India, Bangladesh, Sri Lanka and Nepal, with providing the personal and practical motivation for Inspiring Scotland.


In Bangladesh, a day spent with micro-credit lender BRAC (the Bangladesh Rural Action Committee) provided an important eye-opener.


‘I spent a morning with them issuing loans and an afternoon going out on collection visits in the townships. It’s the first time I’ve ever seen debt collectors being cheered and given garlands in the street.


‘What it really gave me was a sense of the scale that social businesses can reach. There are around five million beneficiaries of micro-credit in Bangladesh, a country of 145 million people, and Grameen (the social enterprise founded by Nobel Prize winner Mohammed Yunus) is the country’s second-biggest mobile phone provider.’


If the subcontinent provided the passion, an invitation to work as a visiting fellow of Social Ventures Australia (SVA) supplied the biggest influence on the nuts and bolts of Inspiring Scotland. SVA uses a team of expert advisors to support and assemble finance packages for organisations looking to grow.


It has also developed unique methods of reporting back to investors so they know what difference their money is making. For Muirhead, the early success of Inspiring Scotland will be determined by how well it manages its relationships with investors.


On his return to Scotland, Muirhead set about turning his thoughts into action. The first few months were spent ‘wearing out a lot of shoe leather,’ he says, pitching the model to policy makers, charities and potential investors. Initial goodwill has since been converted into firm cash commitments.


Inspiring Scotland will pool resources from a range of sources to invest in a relatively modest number of charities (‘maybe 20 to 30’) around a central aim of supporting at-risk young people with their transition to adulthood.


The scale of the challenge it seeks to address is set out in its Baseline Summary Report. There are currently 32,000 young people between 16 and 19 in Scotland not in education or work. These figures are among the worst in the developed world and a key aim of the fund will be to improve the country’s global standing.


About half of the private finance required for Inspiring Scotland has now been committed and it also has won backing from the Scottish Government.


The aim is to have all the money in place by July, with the first investments being made within the calendar year, though Andrew exercises caution over firm commitments: ‘This is very much a learning process for us all, and we have to see what proposals come back from voluntary organisations. We are also conscious that, for many organisations, asking them to plan for seven-year timescales is a quantum leap in terms of their previous experience.


We will need to support that process.’


Many interested parties will be following the initiative’s progress. Dr Rob John, advisor to the European Venture Philanthropy Association, has hailed Inspiring Scotland as ‘unique’ and one of the most exciting approaches to voluntary sector funding in the world today.


For one, Andrew Muirhead is relishing being in the goldfish bowl. There is already a buzz around Inspiring Scotland, he insists. ‘Last year we brought people from voluntary organisations together to talk about our ideas and work through some of the issues. There were about 100 people in the room, and when I looked around the vast majority were sitting on the edge of their seats. I think there is a tremendous will for this to work.’