A provocative but important @PioneersPost blog from @richardlitch on the role of @BigSocietyCap : "The problem is that healthier orgs will find #socinv rates uncompetitive... while those who cannot access mainstream £ will struggle with affordability": pioneerspost.com/news-views/201…
@PioneersPost @richardlitch @BigSocietyCap This is thoughtful and well argued piece that I'd like to respond to at greater length but will probably not get time to - so just going to give a few broad reflections...
@PioneersPost @richardlitch @BigSocietyCap (i) Whether cost of capital is the biggest factor in whether a #socent will choose to take on #socinv or not will vary a lot based (in particular) on the size of the social enterprise but also the sector they're operating in. It's definitely a factor for some social enterprises..
@PioneersPost @richardlitch @BigSocietyCap ... who are big (by #socent standards - in the sense of turning over £500k or more) and seeking #socinv for relative low risk activities where cost of finance will be a factor in deciding whether a business activity is worth pursuing. I'm less convinced it makes much difference..
@PioneersPost @richardlitch @BigSocietyCap ... to smaller #socent seeking small unsecured loans - where the decision will be 'can we get to the point where we can afford to repay x amount per month based on our trading income?'. In this case, a bit more interest means those repayments last a bit longer but the essential..
@PioneersPost @richardlitch @BigSocietyCap (ii) Whether or not cost of capital is putting of lots of potential investees (and it's definitely likely it is putting off some) it's definitely true that @BigSocietyCap 's rates are the biggest single factor affecting the UK #socinv market that is under the strategic control...
@PioneersPost @richardlitch @BigSocietyCap .. of anyone operating in the market. And whether or not these rates make #socinv directly unviable for large numbers of #socent they definitely have a significant and negative effect on the business models of intermediary social investors. Very significant resources are being ..
@PioneersPost @richardlitch @BigSocietyCap … expended based on the theoretical position that @BigSocietyCap has to be a sustainable commercial enterprise but it's clearly & unequivocally not a sustainable commercial enterprise - it requires huge subsidies to even attempt to fulfil its social mission but these subsidies..
@PioneersPost @richardlitch @BigSocietyCap ... are required to be sought off stage by other parties.
@PioneersPost @richardlitch @BigSocietyCap (iii) The bulk of the subsidy currently provided for the UK #socinv is above all else a subsidy for @BigSocietyCap 's notionally commercial business model. Previous investment readiness funds - ICRF and Big Potential - simultaneously subsidised #socent who would otherwise not ...
@PioneersPost @richardlitch @BigSocietyCap ... have had a commercial case to do so to bid for #socinv from BSC-backed funds - and also enabled some intermediaries to cross-subsidise investment activity with lucrative consultancy activity. More clearly and directly, though, the Access Growth is a direct subsidy from ...
@PioneersPost @richardlitch @BigSocietyCap ... National Lottery Community Fund to enable intermediary social investors to make BSC money available to most #socent without going bust in the process. BSC is in effect receiving a 50/50 blended finance deal to enable it to do the job it was set up to do.
@PioneersPost @richardlitch @BigSocietyCap (iv) The issue here is not necessarily the fact that subsidy is being applied. Many believe that there is significant potential for blended finance to fulfil a useful role (or roles) in #socent business development beyond the role that can be played by grant funding. The issue ..
@PioneersPost @richardlitch @BigSocietyCap ... is that BSC-rates act to fundamentally distort the application of subsidy within the market.
@PioneersPost @richardlitch @BigSocietyCap (v) As we consider the future of subsidy of the UK #socinv market, it would be really useful to get to a point where the primary consideration is how we use subsidy to create positive social impact, rather than how we use subsidy to sustain @BigSocietyCap 's wholesale function.
@PioneersPost @richardlitch @BigSocietyCap In the event that this became the case, it seems likely that subsidy would be applied very differently to how it's applied now - both in terms of who receives subsidy and the functions it fulfils.
@PioneersPost @richardlitch @BigSocietyCap (vi) The alternative view is that a permanent #socinv wholesale function-located within an institution with (by the standards of the sector) a very large staff team- provides such a high level of additional social value that this justifies the orientation of most subsidy within..
@PioneersPost @richardlitch @BigSocietyCap ... the market to supporting its sustainability. This view is an entirely legitimate one: some people who I like and respect hold it - and would be able to make an articulate case for it.
@PioneersPost @richardlitch @BigSocietyCap (vii) The injustice - which @richardlitch 's post brings to the fore - is that this discussion has never happened. At a board level in particular there is no sense that @BigSocietyCap have any perception of the knock-on impact of their model on the wider social economy -or any ..
@PioneersPost @richardlitch @BigSocietyCap ... social impact based justification for it, over and above other approaches that may deliver more positive social impact but would not result in the perpetual existence of a #socinv wholesaler.
@PioneersPost @richardlitch @BigSocietyCap (viii) None of this contradicts my view that @BigSocietyCap is an organisation staffed by intelligent, hard-working people who - in the case of all those I've met - seek to do the most social good they can based on the constrains they operate within and/or their perception of ...
@PioneersPost @richardlitch @BigSocietyCap As an example of this, I have nothing but admiration for the team who went through the lengthy & tortuous process of setting up Access. It definitely is a positively intentioned, pragmatic response to the situation they were faced with. But - for the long term - if BSC is going..
@PioneersPost @richardlitch @BigSocietyCap ... to continue exist and seeks to support the mainstream of the social economy, it's not desirable (and probably not possible) to replicate this kind of fudge. @BigSocietyCap has to take a strategic decision to change the starting point. And it has the power to do so.
@PioneersPost @richardlitch @BigSocietyCap So, that ended up being quite a lengthy series of 'broad reflections' but definitely not exhaustive and apologies if not entirely coherent at all points!
