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Data-driven: How a new database can help us get social investment to charities and social enterprises that need it
We often hear anecdotally of the number of charities and social enterprises that could take social investment and know many social investors are busy trying to find them. But given the hundreds of thousands of organisations in the social sector, it can often feel like trying to find a needle in a haystack. So how can we better connect the right investors to the right charities and social enterprises?
Today, NCVO has launched the report Understanding the Capacity and Need to Take on Investment within the Social Sector, which was supported by the Social Investment Research Council. The report tries to do just that. It was commissioned as a first attempt to uncover the true nature of current financing of the social sector – to understand exactly how many charities and social enterprises may be able to take on social investment, including who they are, where they are and what finance they might need.
To do this, NCVO did a deep dive into new company statistics recently publically released by Companies House and matched this against their own in-house data. Whilst the data has proven trickier than expected, it is an important first start in peeling away the layers to understand the overall landscape of financing the social sector. Some of the things that we found particularly interesting were:
- Social sector size: There are almost 100,000 incorporated organisations across the social sector, comprising approximately 32,000 charities that are incorporated (20% of 160,000 charities), 10,000 CICs, 10,000 registered societies and 45,000 other social companies (CLG). Clearly, many of these organisations may end up being too small or inappropriate for investment, but it’ useful to reflect on this size and composition.
- Scope for further borrowing: Whilst there has been some investment into the social sector already, there is scope for further borrowing, particularly by around 9,300 charities and 6,000 social companies that have stronger asset bases.
- Small organisations’ needs: Smaller charities and social companies do not appear to currently be taking the same asset-backed finance as larger organisations. This is because of their lower asset bases, and therefore many may favour a different type of finance product.
- The broader social sector is broader: The broader social economy may provide new opportunities for social investment, as there could be over 45,000 active social companies limited by guarantee that aren’t charities, CICs or BenComs. These have not been picked up before in reported sector statistics and are not covered by existing government support, such as Social Investment Tax Relief (SITR). Given their substantial £6.5 billion turnover, this could be a big opportunity.
But these insights are really just the start. Until now, data about individual charities and social enterprises has been largely disconnected and still largely untested. That is why we have previously called for more coordinated approach to data through establishing a new institution, the social economy commission.
The most valuable outcome of the project is that there is now a database [link] that can be freely accessed. It brings together the key organisational company data fields of the social sector and is searchable and usable by others.
We are sure there are many more questions that the data could be used to answer, such as looking at the difference between financing of different social issue areas, understanding how many organisations are eligible for SITR, looking at how financing differs across emerging forms of CICs and charities, applying typical financing benchmarks to stress test the social sector’s ability to take finance for future interest rate rises, and using the information to identify individual charities and social enterprises that may be the best candidates for social investment.
We’d love to see data experts, researchers and practitioners investigating the new database and coming up with new ways of using and analysing it to better understand how to connect social investors with the charities and social enterprises that may need finance.