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A paper outlining the role of social investment in building a ‘Big Society’

Over the past twenty years, civil society has moved from being fuelled solely by grants and goodwill to a more sophisticated funding ecology. There are a growing number of funders and investors, using a variety of financial products to support community groups, charities and social enterprises – referred to here as civil society organisations (CSOs).

In 2010, there is an emerging social investment market with a track record, a number of independent players and a body of expertise. The coalition is building on this and has big ambitions to grow civil society further in the UK, fuelled in part by social investment.

1) Making it easier to run a charity, social enterprise or voluntary organisation

Funding is often cited as a major barrier to charities delivering on their mission. Providing access to capital, and choice in doing so, can free up organisations to focus on the things that matter, ie, delivering effective services to beneficiaries. Critical issues like strategic direction and impact too often take a back seat to the incessant drive to secure funds.

2) Getting more resources into the sector: strengthening its independence and resilience

Access to capital provides civil society organisations with greater flexibility, freedom and independence, providing financial room for manoeuvre.

3) Making it easier for sector organisations to work with the state

Contracting with local or central government often requires access to capital, to provide the freedom to engage in the tendering process and bridge between receipts of income.

The government has committed itself to the creation of a Big Society Bank, which will use unclaimed assets to leverage additional, private capital with which to capitalise retail social investors. We welcome this as a big step towards the shaping and expansion of this fragile space.

As well as development of infrastructure to support the sector, the critical task is to stimulate long-term private investment into the space from individuals, companies and charitable foundations alike. By channelling this investment through retail funds, civil society organisations will be provided with the access to capital needed to deliver tangible social impact.

Social investment can play a central role in transforming the UK into a Big Society, empowering more local communities, enabling more social enterprises to deliver public services and establishing more financially resilient charities.

But there are a series of challenges, particularly in this age of austerity. This paper outlines the key opportunities and challenges.

Last updated | 
1 September 2010