The government’s levelling up agenda can be ramped up by offering charities greater access to blended finance, that combines grants and loans, according to a report.

Small charities and those in areas of deprivation could particularly benefit from blended finance options, it says.

The report by New Philanthropy Capital and commissioned by the Department for Digital, Culture, Media and Sport (DCMS) states that: “Blended finance can support the government’s levelling up agenda by targeting funds towards left-behind communities and enabling organisations in those areas to grow, employ more people, and help more people.”

In addition, this form of funding “offers the potential to unlock non-governmental sources of funding into the levelling up agenda”.

It found that blended finance used so far has successfully “funnelled capital to smaller organisations and lower socio-economic areas of England”.

This includes the Growth Fund, which blends Lottery funded grants and loans through social investors Big Society Capital and Access - the Foundation for Social Investment.

However, blended finance needs to be property resourced though, says the report.

It warns that if ministers withdrew grant subsidy in blended finance it “would have short- and long-term negative effect” on the social investment market, charities, and their beneficiaries.

It calls for the creation of a specialist wholesaler for blended finance for charities and social enterprises backed with £300m of government investment.

“There is an ongoing need for future public policy interventions by government to support the social investment market through the provision of grant subsidy into blended finance” for charities, says the report.

It adds: “We recognise that for this to work, it requires a significant capital outlay, exceeding what has been given to blended finance as grant subsidy to date.”

The report has been welcomed by Access chief executive Seb Elsworth.

“Arguably, the detail of how this is delivered is not as important as the acknowledgement of the vital role that government can and should play,” he said.

“The most important conclusion – and the one I hope will be taken to heart – is around the important and long-term role for government in enabling charities and social enterprises to access the finance they need, particularly for those in underserved areas of the country.

“Providing grant for blended finance structures is a critical way of this being achieved.”

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