Social investment bank Big Society Capital is investing £1m in a fund designed to support community projects if there is a funding gap. It is hoped the investment will allow community groups to be more ambitious in the scale of share offer they launch.
Big Society Capital launched in 2011 and aims to grow the social investment market by investing in organisations that provide finance to the sector. It’s backed a wide variety of organisations with different missions, including supporting families adopting vulnerable children, providing affordable properties and community owned renewables.
The Community Shares Underwriting Fund (CSUF), which will be managed by Resonance, has also received a further £500,000 from the Esmée Fairbairn Foundation and £500,000 from the Barrow Cadbury Trust, Panahpur, Friends Provident Foundation and Golden Bottle Trust. This makes it the largest fund of its kind in the UK and if demand exceeds expectations in the next 12 months it will receive an additional £1m from Big Society Capital
The CSUF will provide an ‘underwriting’ facility that will top up finance if the target amount of share offer is not reached. The finance is provided as a flexible, interest-only loan, which can be repaid from future community share issues once the project is up and running.
It is hoped that this opportunity will encourage more people to participate in community projects because they will have more confidence that it will go ahead.
Nick O’Donohoe, chief executive of Big Society Capital, said, “Around the UK there is an increasing demand for local communities to work together to secure important community assets. Many of the larger scale projects may face hurdles and miss their financing targets, this fund covers 50% of that funding gap, allowing them to get off the drawing board faster.”
Community shares allow local people to become part-owners of their local assets. Investments in this way allow projects to meet the needs of individual communities. Since 2009, over 200 projects have raised finance through community shares, reaching a value of almost £40m.
Interest in community shares has been growing and the government’s energy strategy, released in January, aimed to encourage shared ownership of renewables projects.
Simon Borkin, programme lead at the Community Shares Unit, commented that the fund would support the “valuable form of finance” that offers locals people a real and meaningful ownership of valued assets.
He added, “Funds like this can play a valuable role by ensuring projects go ahead when timescales are tight, as well as giving supporters the confidence to participate in often pioneering social ventures.”
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