It’s that time of year when It’s A Wonderful Life is constantly on repeat.
George Bailey, played by Jimmy Stewart, has given up his dreams. On his way to his honeymoon, he witnesses a run on the bank after the death of his father, and uses his savings to bail out Bailey Building and Loan until the bank reopens. It’s probably the only major movie whose plot depends on finance and loans, and yet is the Christmas movie that endures and endures.
Over time George establishes Bailey Park, a housing development with small houses financed by loans from Bailey Building and Loan, and the community thrives. But when his scatty Uncle loses a sum of money, George realises he’s worth more dead than alive, with his life insurance policy.
You know the rest: George is saved, an angel gets his wings, and we realise no man is a failure who has friends (and puts people before profit!). The bottom line: investors who treat people as human beings, make for a richer man.
The point of me recapping all this, isn’t just around seasonal sentiment. Responsible finance is something we, who work in the sector, do because we believe in those values – backing and supporting people who others won’t. But that warm fuzzy feel-good factor doesn’t hit the mark if the investment is too big a risk. Putting our heads, as well as hearts, into investment is crucial if responsible finance providers are to survive and thrive.
So when its already so hard, why would anyone think about investing in community and social enterprises, when on paper they look just too risky? They have different labels – CIC’s, charities, etc. – and different corporate structures to the norm. They often work in areas of market failure and are also always trying to get right that tricky balance of generating social impact with making a profit. The natural worry is, loans won’t be repaid because such businesses will fail.
But, here’s the rub. We all know that people are what drives organisations to succeed – their commitment, drive and desire to carry on when all about them is going wrong. This is what community and social enterprise people have in buckets, because for them the consequences of failure for their beneficiaries are just too high.
Using Key Fund as an example, in the last fifteen years we have invested over £40m in community and social enterprises. Only last year, we invested £10m in over 200 community and social enterprises, creating almost 300 new jobs and safeguarding over 280 jobs, with 60% of those in the top 30% disadvantaged areas. That investment sustained 178 organisations and created 38 new enterprises. And we’ve done this whilst still maintaining a reasonable loss rate (4.19% last year), just like many of the other social investors in the market. So perhaps not such a big risk after all…
Plus, we know that lots of these organisations are looking for investment. A parliamentary ‘Access to Finance’ report in 2016 stated there was evidence of unmet demand for finance from SMEs, particularly at the scale-up and grow stages. This funding gap is felt more for social enterprise. It stated that access to finance was one of the main barriers to growth. As there’s a shift from grant giving/public sector contracts, more and more organisations are looking at trading to become sustainable, so the need for investment is out there.
What’s more, there are opportunities to partner with organisations like Access – The Foundation for Social Investment to secure new capital.
One example of a social enterprise who has benefited from our support is Barnsley Community Build. In fact, Key Fund has invested in the organisation since 2005, proving long-term support can have powerful impact in the most deprived areas. They are a registered charity with a trading arm, BCB Trading Ltd., who develop and deliver a range of community services and provide employment and training in the construction industry.
Their success is helping the long-term unemployed – those with a poor academic record, or from a troubled lifestyle that prevents them from securing employment, training or to socially engage. Over the last three years, 107 apprentices have benefited, 93% of which have achieved a full NVQ level 2, with a completion rate of 94%. 84% moved into full-time employment. Figures that are well above both local and national averages.
They’ve built a really robust organisation. On the face of it they look different, think differently – and it’s easy to think of them as high risk – but they not only achieve amazing things, they pay back. If you offer the right support, the right money, at the right time, you can make sure a few more angels get their wings, and get that return on investment.
Social Enterprises are not just for Christmas, they’re for life. Give them a chance.
This blog was contributed by guest:
Matt Smith, CEO, Key Fund