The idea of social loans has reached an interesting stage. When I took on the role of the Chair of the Adventure Capital Fund , founded 10 years ago , the idea of loans for third sector bodies was anathema. The general attitude was indifference, yet some organisations did "get it" and took advantage of loans to expand their activities. Interestingly our mission was to support community enterprise- so starting with smaller organisations, not larger or national charities. We wanted to show that loans could work at local level. And our record shows that it can; indeed we are now the biggest social investor in the UK in terms of the numbers of loans we have made.
Making unsecured loans was definitely a minority cause back then. "It will never catch on" they said.
But it did. Indeed it has now become highly fashionable and lauded in high places. The danger we now face is there is too much hype and not enough action, aided and abetted by folk who have now discovered shiny new toys to play with. So we hear about social impact bonds, equity deals and other interesting ways in which the sector is to be enticed. Some of these have their place but not at the expense of the core product.
Meanwhile what the sector really wants is simple, straightforward unsecured loans. The Social Investment Business (group parent of ACF ) regularly asks its investees if they have plans that need more lending. The demand is the ground is quite staggering but there is little supply. This is the issue that needs addressing.
As I said at the ACEVO Gathering of Social Leaders, the coalition government made a mistake when they abolished the future ; the Future Jobs Fund and Futurebuilders. FBE has proved a great success. It stimulated loans that have encouraged the sector to deliver more public services. These loans have enabled more delivery by charities and social enterprises. There is a very low default rate on these loans and already £50m has been repaid.
What we need is less hype on social impact bonds and the like ( Peterborough is a sad example ) and more straightforward loans to encourage and fund the ambitions of our sector to grow. This is what Big Society Capital might look at. This is where the HMT should put to use LIBOR money and other discrete sources of income such as money from the proceeds of crime.
As Civil Society magazine pointed out recently ACF was set up with £4m from the Home Office proceeds of crime. We now need a big push by Government again to put money into loans for the sector. They work. And that's where the action is.