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Charity Bank

Fund size | £
Big Society Capital investment | £

Charity Bank

Lending to small and medium-sized charities, community groups and social enterprises.

Big Society Capital will invest up to £14.5 million of ordinary shares in Charity Bank in successive tranches between 2014 and 2016. Big Society Capital’s investment provides Charity Bank with additional capital in order to grow its lending portfolio over the next five years, particularly to small and medium sized charities in the UK

Social impact 

While charities increasingly wish or need to borrow money in pursuit of their mission, they can struggle to obtain affordable and simple loans. This is particularly the case for small and medium sized charities, who can find that conventional providers of finance do not understand the motivations and funding streams of an organisation working towards a social mission.

Charity Bank makes savers’ money available to charities and community organisations and social enterprises with charitable purposes working for the common good. It plays a crucial role in ensuring charities and social enterprises can access the finance they need to tackle some of the toughest problems in the UK. Charity Bank tends to finance small but well-established organisations - ranging from youth clubs to smaller or specialist housing associations – looking to improve and expand a proven model. The majority of Charity Bank’s loans are secured against assets, such as housing, land and other buildings.

In making its lending decisions, Charity Bank takes into account the potential social impact of its potential loan on the organisation itself and the beneficiaries of that organisation. They work with their borrowers to establish key social impact performance indicators for each loan at the time of approval. After the loan has been made, Charity Bank monitors and reports the social impact of its loans, with aggregated data for each social issue available on their website. Charity Bank also publishes an annual portfolio report describing the impact of its loans across a range of social outcomes.

Financial rationale 

Charity Bank has a successful track record of prudent lending to charities and a strong core lending business that has resulted in low default rates. Charity Bank isn’t driven solely by profitability, but it does need to be sustainable in order to allow it to serve the needs of ambitious charities and social enterprises. Prior to our investment, Charity Bank’s ability to meet the significant demand for loans from charities and social enterprises was limited by its capital position. Our investment will help Charity Bank grow its lending. This will allow Charity Bank to achieve the scale required for sustainable profitability – and to generate a return for shareholders over a ten year horizon.

Market development

The investment will help Charity Bank become an enduring institution that can respond to the needs of the sector, and allow more savers to put their money to work for the benefit of society. We hope that our investment will unlock ten times more funding for charities and social enterprises through retail savings. Charity Bank has a regional network of relationship managers which allows it to reach many more charities and social enterprises across the country. This also means they understand the needs of their existing and prospective borrowers and the challenges they may face in a local context.

Investment details

  • Big Society Capital investment: £14.5 million equity. The first tranche of £4.5 million was invested in March 2014. Big Society Capital currently has a [35]% shareholding.
  • Key partners: Established in 2002, Charity Bank is a social bank with around £70 million of loans outstanding to charitable borrowers and £80 million of deposits. Charity Bank is a certified B Corporation and also the only UK Bank to be awarded the Social Enterprise Mark. It is PRA and FCA authorised and regulated.
  • Co-investors: Charity Bank’s shareholders are charitable trusts, foundations and social purpose organisations. Many of these shareholders have supported Charity Bank since its inception in 2002.  Big Society Capital is the first of what is hoped to be a small number of significant new investors in Charity Bank over the next five to ten years. The Mercers Charitable Trust invested a further £1 million in 2015 and the Barrow Cadbury trust invested £250,000 in 2016.

  • Big Society Capital and Charity Bank have also entered into a £10 million co-investment facility, where Big Society Capital will invest an equal amount to the financing committed by Charity Bank for loans in excess of £2.5 million.

Last updated | 
20 January 2016