Big Society Capital (BSC) is a social investment bank in the UK that launched yesterday with a £600m investment fund. It was established to develop and shape a sustainable social investment market in the UK. Of the £600m, £400m come from dormant bank accounts of more than 15 years. The rest come from UK’s four largest retail banks – Barclays, HSBC, Lloyds Banking Group, and RBS – who have agreed to invest £50m each as part of the “Merlin” agreement with the British government to promote lending to small businesses, curb banker bonuses, and promote salary transparency.
At the London Stock Exchange, Prime Minister David Cameron explained the shift from helping businesses expand to helping society expand.
“For years the City has been associated with providing capital to help business expand. Today this is about supplying capital to help society to expand,” he said.
The way the program works is that BSC will invest directly in social investment finance intermediaries (SIFIs) who provide finance and support to social sector organizations. These organizations include charities, social enterprises, voluntary and community organizations, cooperatives, and mutuals. SIFIs are categorized in one of three groups: 1) social banks, 2) non-bank social investors, and 3) support providers.
The minimum size of investment BSC will make is £500,000. The maximum initial investment is £15m.
What does this mean for social enterprises and charities in the UK?
Many social enterprises could benefit from the scheme but it would seem that many charities will find it irrelevant. The program is designed to generate both a social and financial return from every investment made. Charities that have no revenue stream have no means to repay the funding.
Yet given the structure of the scheme, where SIFIs directly manage the funds and traditionally provide finance and support to charities, it will put pressure on charities without a revenue stream to think about becoming more sustainable.
In the UK, social enterprises include community enterprises, credit unions, trading arms of charities, employee-owned businesses, co-operatives, development trusts, housing associations, social firms, and leisure trusts. The Social Enterprise Mark attempts to increase the visibility of social enterprises by defining it as a company that earns over 50 percent of their income by trading and spends over 50 percent of profits on socially-beneficial purposes.