Charities Aid Foundation creates social investment fund
Howard Lake | 20 June 2011 | News
The Charities Aid Foundation (CAF) has launched a social investment fund, the CAF Social Impact Fund, to enable philanthropists to invest in providing loans for charities to help them become stronger and expand. Once loans are repaid the funds will be recycled enabling philanthropists to support more charities. In this way a £50,000 investment could result in over £150,000 being loaned to charities over three years, or over £220,000 over five years.
Since 2002, the Charities Aid Foundation has, through its social investment arm CAF Venturesome, provided over £22 million in loans to over 280 charities, community groups and social enterprises. Traditional lenders would not have been likely to make these kinds of loans.
These loans have been financed by grantmaking organisations, businesses and a small number of individuals. The CAF Social Impact Fund widens this potential pool of funders, allowing all major donors to use their philanthropic capital for a social return.
Donors who already hold or who open a CAF Charitable Trust will be able to make an investment into the fund of £10,000 or more for a fixed period of between three and six years. When the term is completed, CAF Venturesome expects the funds to be returned to the investor’s charitable trust in full for them to either reinvest in the CAF Social Impact Fund, or to donate to charities in the traditional way.
So far CAF Venturesome has experienced less than four per cent of defaults on its loans across the risk spectrum. The CAF Social Impact Fund will provide loans to the lower end of this spectrum.
A £50,000 investment by a higher-rate tax payer returning their tax relief to their CAF Trust account, could mean £83,898 becoming available for the CAF Social Impact Fund to lend to charities. Assuming loans are recycled, CAF’s anticipates that a £50,000 investment could result in over £150,000 being loaned to charities over three years, or over £220,000 over five years.
John Low, Chief Executive of the Charities Aid Foundation said: “Through CAF Venturesome, the Charities Aid Foundation has for many years been at the forefront of innovation in social investment. The CAF Social Impact Fund marks a new stage of development in this area, by enabling some of our major donors to invest their philanthropic capital, many more charities and social enterprises will have access to affordable loans.”
www.cafonline.org/socialimpactfund
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.