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Achieving financial resilience

Achieving financial resilience. Margaret Bolton - Nominet Trust Academy 16 th October 2012. A particular perspective. Issue looked at from the perspective of charities and other “ established ” voluntary organisations (large and small) seeking to generate more of their own income.

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Achieving financial resilience

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  1. Achieving financial resilience Margaret Bolton - Nominet Trust Academy 16th October 2012

  2. A particular perspective • Issue looked at from the perspective of charities and other “established” voluntary organisations (large and small) seeking to generate more of their own income. • The objective being to become more financially resilient – defined as having the capacity to withstand financial threats and take opportunities. • Chicken and egg problem – being financially resilient means having resources to invest in your future, but in order to become financially resilient you may need investment.

  3. How social investment can help charities • Investment may be needed to: - increase the yield from existing services and products e.g. by developing a capacity to sell on-line; - develop and pilot new income generating products or services; - meet the set up costs of providing new services perhaps under contract; - buy in new staff/other capacity; - scale up eg social franchise or licensing arrangements; - underpin cash flow (Death Valley curve) • And, it’s not just about enterprise development, it • can support fundraising e.g a membership post or new fundraising initiative; • new fundraising products or mechanisms (Scope Bond).

  4. Some history – the role of charity • Charity Bank est. by CAF in the mid 1990s (charities could not access loans from mainstream banks – lack of understanding of the grant funding model) • Venturesome est. in 2002 by CAF to provide higher risk capital • First Charity Commission guidance on social investment – 2001 (updated CC14 in 2011 ) • Foundations – Esmee Fairnbairn, Northern Rock early provision of loans to charities • Strong tradition of foundation involvement in the US – dates back to the late 60s and the Ford Foundation (seen primarily as a means of building capacity in organisations and communities).

  5. The social investment market – a charity perspective • Grants, loans and quasi equity from across the spectrum (philanthropic to more commercial) • Philanthropic end of the spectrum egs Esmee Fairbairn Foundation, Venturesome • The public sector a major advocate and supporter • Majority secured lending - unsecured risk capital comprises only about 11 per cent • Reports that demand is low relative to potential supply • Not appropriate for every charity or voluntary organisation • Investment readiness a big issue – hence the development of new initiatives.

  6. Social investment - grants • Grants for investment readiness • Cabinet Office, £10m, Investment and Contract Readiness Fund (SIB) • Venture philanthropy (support for core costs plus the provision of expertise) • Impetus (addressing poverty) • Private Equity Fund (work with NEETs) • CAN Breakthrough (helps established social ventures scale up and maximise their impact) • Venture Partnership Foundation (helps to grow charity trading companies) • Mixed packages of grant and non grant finance • Esmee Fairbairn Foundation - Finance Fund • Key Fund (Yorkshire and Humberside)

  7. Non grant financing • Venturesome (established by CAF to provide risk capital to support charitable work) • Big Issue Invest (has supported new trading ventures Barnados and Turning Point) • DoH Social Enterprise Investment Fund – SIB (social enterprises involved in the delivery of health and social care services). • Bridges Ventures (Social Entrepreneurs Fund – for social ventures looking to scale) • FSE Group (pilot Social Impact Co-Investment Fund for SMEs with a social purpose, match angel investing required – charities eligible)

  8. Recent and future developments Funds launched very recently/about to launch: • RBSG Micro Finance Fund (“established third sector organisations”, businesses with clear social and environmental purposes • NESTA Impact Fund (focused on achieving particular outcomes regardless of org. status) • Impact Ventures UK – Berenberg/LGT Venture Philanthropy(described as cross sector impact fund, growth capital for social enterprises). Funds mooted: • Cabinet Office Outcomes Fund (Social Impact Bonds and public sector support ) • Big Lottery Investment Readiness Fund (to be launched next year)

  9. Not to forget other “new” ways of raising funds… • Crowd funding – Justgiving, Kickstarter, Buzzbank, Spacehive • Bonds – SIBs, community bonds, SCOPE bond • IPOs – Crisis • “Charity” Bank Accounts – interest donated. • Endowments – supported by the public sector in the arts. Other – exchange and barter arrangements, sharing staff resources, joint purchasing.

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