Big Society Capital has established a programme of initiatives with partners around community investment to support local businesses to improve lives and the communities where they operate.
The national £30 million Community Investment Enterprise Facility, established by BSC and managed by Social Investment Scotland (SIS) will provide capital to CDFIs to meet the demand they are seeing from underserved small businesses often located in disadvantaged communities. By increasing the number of small businesses that can access finance to sustain or grow their activities, it will support more employment opportunities for local people and drive economic activity in the more disadvantaged places where the small businesses operate. This in turn has a range of social impact outcomes from more prosperous communities to increased wellbeing for individuals.
For community investment in the UK to further develop and best practices to emerge, there needs to be a robust and meaningful evidence base of social impact and financial performance built. This will help better articulate the social impact outcomes CDFIs support, but also lead to better CDFI lending practices, better investment decisions into CDFIs and policy making to support the sector. BSC is committed to supporting learning, especially of social impact, and in particular promoting increased transparency of data and lending performance. To support this aim, the Centre for Regional Economic and Social Research at Sheffield Hallam University has been commissioned to evaluate the Facility over the long term.
The Community Investment Enterprise Facility will act as a match facility, providing some initial unmatched capital to the CDFIs to meet the immediate demand from underserved small businesses they’re currently unable to fulfil, and providing further capital at a later stage to match co-investment the CDFIs secure. The aim is to leverage a further £30 million into the sector alongside the facility, with the CDFIs and investors benefiting from the use of available initiatives such as the Enterprise Finance Guarantee and Community Investment Tax Relief. Aeris Insights, an independent rating for US CDFIs, will be piloted in the UK for the first time and offers the opportunity to increase sophistication and standardisation in the sector.
The facility will invest in up to five CDFIs across the UK to lend to underserved small businesses that have a positive impact in the communities where they operate.
The Community Investment Enterprise Facility will act as a proof of concept facility, with the aim of building a better understanding of the financial and social impact performance of CDIF lending, and test new models of funding for CDFIs that could attract other socially motivated investors and be replicated. BSC has also partnered with Citi to convene the Community Investment Steering Group, bringing together interested stakeholders to set a collective vision and routes to achieve capital at scale for CDFIs.