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Report predicts £6 billion funding shift towards social investment

Report predicts £6 billion funding shift towards social investment

Charities are anticipating a major shift in funding models towards as less income comes from grants and donations, a new report by Cass CCE has said.

The research report, Social investment as a new charity finance tool: using both head and heart, by Cass CEE, involved face-to-face interviews with 120 charities, a social investment symposium and an online questionnaire. The results point to a shift away from grants and donations towards social investment and more borrowing in the next five years.

The report found that 60% of the charities were positive about social investment, with 17% saying it could transform their business models. The research estimates that the shift towards social investment could account for approximately 11% of funding: equivalent to around £4bn–6bn capital for the sector.

However, the report highlights a number of barriers to charities using social investment as a funding tool. These include a lack of understanding about it, with some charities feeling conflicted or uneasy about using borrowing or investment tools and others having ethical concerns. 7% were openly negative about social investment and the report found that many charities would not borrow for working capital, fundraising, or for property.

Charities are also concerned about how they would create a revenue-generating model to pay back any such investment, and while trustees were positive on almost all aspects of charity finance strategy, the report found them 20% more negative about social investment compared with the CEO or finance director. The report states that addressing trustees’ risk aversion towards social investment will therefore be critical for social investment to be successful.

Mark Salway, director of social finance and social investment at Cass CCE said:  

“Social investment can often seem overly complicated; however, the reality is that small-value loans are one of the most powerful investment tools to help charities grow and leverage their funding. A mix of grants, donations and social investment funding is now seen as the future for many.

“We believe that charities need to be able to use both ‘head’ and ‘heart’ to overcome traditional reservations about perceived commerciality, and to develop robust financial models that will support social impact and the creation of a sector fit for the challenges ahead.”

Cass CCE has also published a free Social investment Tools for Success guide, downloadable from its site.

Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via www.thepurplepim.com.

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