Big Society Capital Supports Charities and Social Entrepreneurs

A new fund to support charities and social entrepreneurs who have struggled to obtain lending from the traditional banks has been set up by the coalition government.

Money is sourced from dormant bank accounts, which are bank accounts that have been left usused for over 15 years. There is around £400 million in these accounts. The other £200 will come from the Merlin banks.

The funds will support social entrepreneurs and charities. The idea is that the find will offer long-term loans at good rates. The social enterprises will still have to prove that they generate adequate income to repay the loan at the agreed rate, but in theory these loans should be more favourable and easier to obtain than the current source of lending.

Who Can Receive Funding?

The money is specifically for enterprises which make no profits, i.e. Not For Profit organisations, which fall under different rules to charities and often find it harder to receive funding or donations. CharityInsight.com explain the difference here: What is the difference between charity and social enterprise?

Some critics have suggested that some of the enterprises that will be eligible for this funding are not in a position to manage a large sum of money efficiently.

Big Society Trust is Major Shareholder

The Big Society Trust will control 60% of the shares in the fund. The Big Society Trust is a new private limited company that is managed by a team of business leaders from charities, commerce and politics. The chairman is the venture capitalist Sir Ronald Cohen and Nick O’Donohoe, the former head of research at JPMorgan Chase, is the executive officer.

The other 40% of the shares are held by Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland – the Merlin Banks.

Independent Commission on Unclaimed Assets

The idea for the Big Society Trust started to develop in 2005 when a project was undertaken by Sir Ronald to look at how dormant bank accounts could be used to improve society. The policy recommendation was for the formation of a social investment bank, and in 2008 the Dormant Bank and Building Society Accounts Act was passed.

Big Lottery Fund

The Big Lottery Fund manages all dormant funds and is responsible for the distribution and accounting of the bank accounts.

All dormant funds will immediately be returned to their owners should they activate the account at any time.

Big Fund for Big Society

This is a continuation of David Cameron’s Big Society project. David Cameron says that The City needs to support social enterprises just as it supports business. For the economy to grow and the “broken society” to mend, financial support is required.

David Cameron seems to be a prime minister who wants to leave a legacy behind, something that people will remember him for in years to come. Big Society is more than an idea, it his is mission.

Will the Big Society Capital Fund Have Enough Cash?

It is expected that government funding for charities will decline further over the forthcoming years and there is a concern that the Big Society Capital Fund will not even cover the fall in government investment.

However, David Cameron is confident that the fund will provide not-for-profit enterprises with all the funding that they will need. It is still an investment though, and like any investment there is inherent risk associated with it.

Social Performance

The Big Society Trust aims to not only provide a small financial return (it has to make some money to allow it to operate) but also the improve in society, i.e. to make social investments to get a social return. Social returns can be measured by improvements in education, welfare, health and mobility, along with many other measures.

How successful the venture is going to be is hard to predict, and as it is so hard to measure the success it will undoubtedly be hard to determine if this is a failure or success in a few years time. Government spin will ensure that it sounds like a success no matter what the bank balance states.

  1 comment for “Big Society Capital Supports Charities and Social Entrepreneurs

  1. SHP
    April 4, 2012 at 10:45 am

    Big Society Capital presentation about to commence in The City, coverage on #BBCNews

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