Thursday, 11 July 2013

Social Enterprise

Saw Peter Holbrook at the Provider Forum yesterday. He runs Social Enterprise UK which has been at the forefront of promoting the brand and concept and he gave me a copy of their recently published State of the SE sector survey. There is a good indication of the work of these organisations and the challenges faced. But some odd media reporting of it.

One report concentrated on the fact that the overwhelming majority of social enterprises are looking for grants rather than loans. The survey, which analysed responses from 878 UK social enterprises, found 48 per cent had sought to raise external finance in the past 12 months. The most common type of finance applied for – by a considerable margin – was grant funding, with 89 per cent of respondents applying. Of those, 70 per cent succeeded in their application.

Odd that this is the case as the whole point of a social business is that it should be profitable. Obviously we all want grants we don't pay back but the point of loans is that we can recycle the money repaid into new ventures and projects.

The case for social finance is still to be made in some areas. We need a diversity of funding streams. Grants will always be a mainstay of the third sector. You can't make a social impact bond for campaigning or advocacy. But where you can bid for and win contracts for delivery it is entirely appropriate to look for a loan not a grant.

Clearly grants can play a role, for example in development work on a new concept or initial stages of a new project. The Social investment business has always made grants as well as loans but only as a small par of what we do.

An interesting reflection from my impact Investing Conference today. A spokesperson for the Hong Kong Government told us when the new administration was sworn in they said they wanted to allocate money for the sector in their strategy on poverty. They talked initially about grants but it was the third sector who responded by saying they wanted social finance not grants. They argued that grants are bureaucratic and controlling and tie organisations into what the State wants. Loans are liberating. So they are developing a social finance initiative and looking at various models and looking to develop intermediaries.

Inevitably we get caught up in terminology. What is the difference between a social enterprise and a charity or a community body? Many do trading for profit they reinvest whatever their title. Many social enterprises are registered charities. Many charities have thriving social enterprise arms. The Scope bond is a brilliant example of an old charity being innovative and dynamic. The name debate is tiresome and unproductive.  "Whatever" should be our response as it’s what is delivered matters, nor what nomenclature we adopt.

I agreed with Nick Hurd MP who spoke on this that we must value diversity in our sector- in terms of names and funding types. He was right to warn about the proliferation of terminology which then baffles the outsider. 

One of the first post war social enterprises was the charity shop- invented by Oxfam- as I reminded the conference after one young chap had been extolling the virtues of new young dynamic organisations!  As an oldie I thought he needed reminding not all that is shiny and new is good. Not all that is centuries old is bad. So for example there is much hype on social impact bonds. Will they work?  It’s too early to tell. I think they have a place but the danger is we are seduced by the shiny new product and forget the boring old unsecured lending.

After all social finance is not new either. They were doing loans to what we would now call social entrepreneurs in the 16th century In London.

So put aside the terminology and the hype. We need social finance as part of the funding mix for a diverse and thriving sector; charities, social enterprises, voluntary organisations, community bodies or whatever we choose to call ourselves.

As someone In Stratford on Avon once said, “a rose by any other name would smell as sweet ".

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