Soapbox: Social investment must continue - Alastair Davis

In recent years social investment has continued to rise up the political agenda both at Holyrood and in Westminster. As spending cuts have bitten hard, the third sector has increasingly been viewed as a credible alternative for the delivery of local public services, such as health and social care.

This ‘new’ role for the third sector has, in turn, resulted in a greater demand for funding from organisations which are keen to leverage opportunities for growth and increase their positive social impact on local communities. Yet whilst the demand for funding continues to rise, there still remain a significant proportion of social enterprises, charities and community organisations which are cautious about taking on investment, as opposed to more grant funding.

From our own research at Social Investment Scotland (SIS), we know that the biggest barriers to organisations taking on social investment are a lack of awareness surrounding the availability of finance and fear of what taking on loan finance might mean financially. In order to address these barriers, therefore, we need to make sure Scotland’s third sector understands the range of available funding options and the potential for investment to help an organisation grow, become more financially self-sufficient and increase its social impact.

A year ago SIS was awarded €65,000 of EU funding to help us do just that – deliver an investment readiness programme, aimed at connecting more capital with communities across Scotland. The funding was part of a €1m project to develop the demand and supply sides of the social enterprise finance market across Europe and part of the EU’s ambitious socio-economic strategy, Europe 2020.

Interest in the programme from customers across Scotland has exceeded our expectations, showing just how dynamic and world-leading our third sector is.

We have engaged with 15-20% of all enterprising third sector organisations through a programme of work aimed at demystifying investment finance.  

Over 70 organisations from the Borders to the remote Highlands and Islands have attended one of our investment readiness workshops where we shared our social investment expertise and addressed their concerns and apprehensions.

We engaged with over 130 organisations through one-on-one meetings, enabling mutual learning as we explored investment opportunities together.

We reached a further 750 participants through our engagement at events including government, enterprise development agencies, corporate, potential investors and social enterprises themselves.

Our online hub of best practice including case studies, jargon-free FAQs for organisations considering investment and guidance for investors themselves has become a go-to portal.

Most importantly, we are already beginning to see a spike in demand for social investment in Scotland. The volume of applications to our £16m Social Growth Fund which opened in May 2014 exceeded expectations and £4m has already been committed to organisations in Scotland. The past year has also seen us make £2m of investments from our core lending capital, more than in any other years since SIS was formed in 2001.

This work has been a vital step in moving towards a more socially just Scotland, within a more socially just Europe. The third sector continues to prove its worth in tackling complex social issues whilst making a significant contribution to our wider economic goals. And what is more, the potential of the social enterprise business model goes far beyond merely providing an alternative way to run public services. More and more we are seeing all sorts of businesses establishing themselves as social enterprises, taking decisions that make good business sense and deliver social impact.

By continuing to educate social enterprises, community organisations and charities about the benefits of investment, we will ensure that demand for finance continues to rise, building the case for increased supply from the investor community.