The Social Investment Business and Social Enterprise North West will today launch the UK’s first Local Impact Fund in Liverpool, piloting an innovative financial product expected to channel more than £100 million to charities and social enterprises that meet local needs throughout England.
The £2 million Liverpool City Region Impact Fund will offer business support and simple finance to local charities and social enterprises, providing unsecured loans of up to £250,000, helping them to grow and scale up the impact they make in their communities.
The Social Investment Business, one of the UK’s leading social investors, has developed the Local Impact Fund as a financial product designed to grow sustainable local social economies anywhere in the world.
Ten further cities and regions, from Devon to Cumbria, have plans to set up their own Local Impact Funds.
Sir Stephen Bubb, chair of the Social Investment Business, said: “There is a ground-breaking opportunity to use Local Impact Funds to attract over £100 million of new social investment in the next couple of years, enabling charities and social enterprises to create new jobs and improve services in their communities.
“We believe that about 15 to 20 Local Enterprise Partnerships will want to launch a Local Impact Fund by 2016, and we are already recruiting our next wave of partners.
"We expect these funds to be between £5 million and £10 million initially, and they will be a critical first step in bringing social investment to
communities anywhere in the UK.”
Nick Hurd, minister for Civil Society, said: “Local Impact Funds are an exciting opportunity to support organisations that can bring both economic and social benefit to an area. Britain leads the world in developing the idea of social investment.
"It is fantastic that Liverpool leads the country in developing a
Local Impact Fund. Where Liverpool leads, I hope that others will follow.”
Sir Stephen, Hurd and Joe Anderson, Mayor of Liverpool, will give keynote speeches at the launch before 150 guests, including representatives of charities, social enterprises, local councils, Local Enterprise Partnerships, local business support providers and social investors at the city’s St George’s
Mayor Anderson said: “We are proud that Liverpool is launching the world’s first Local Impact Fund, and we are confident it will show how communities anywhere in the country can benefit from social investment.
"Liverpool has a strong tradition of social entrepreneurship, with people taking the initiative to improve life in their communities, and this innovative product will help deliver the finance they need to achieve their ambitions.”
Val Jones, CEO of Social Enterprise North West, added: “Three in four social enterprises tell us that lack of finance is preventing them scaling up the good work they do. Local Impact Funds will give them the scale of funding they need to realise their ambitions, creating jobs, growth and improved services
tailored to the needs of their communities.”
The Social Investment Business has developed Local Impact Funds as a financial product to attract funds from the EU, national and local investors, and use them to stimulate a local social enterprise economy, creating jobs in organisations delivering vital services in their community, such as housing, health and care for young people, the elderly and disabled.
The Liverpool fund will provide a package of support and finance to charities and social enterprises at all stages, from start-ups to established organisations expanding their work.
It will make unsecured, affordable loans of £50,000 to £250,000 for up to five years, finance that can be essential for them to scale up their activities rapidly but which they find hard to access from other lenders.
The Government is encouraging social investment as a means to grow the economy and improve delivery of public services.
In a recent report, it says social enterprises add at least £55 billion a year to
the national economy, support more than two million jobs and 82% reinvest their profits locally.
Social sector organisations often understand local needs and problems better than larger, commercial organisations, and can provide more tailored solutions, it adds.
The Liverpool fund is financed by £1 million from the Social Investment Business, through its parent charity the Adventure Capital Fund, and £1 million from the European Regional Development Fund’s 2007-13 programme.
It expects to complete investments in about 20 charities and social enterprises by the end of 2014.
In parallel, SENW will provide mentoring and “investment readiness” grants from its existing Big Enterprise in Communities programme to help investees make the best use of their money and develop activities that can pay it back.
Local Impact Funds are designed to make use of the EU structural funds for economic development from the EDRF and the European Social Fund, which are controlled by Local Enterprise Partnerships.
The EU’s new funding programme runs from 2014-2020, and 11 of England’s 39 LEPs are considering setting up a Local Impact Fund in their draft strategies.
All five LEPs in the north west of England have committed to setting up a Local Impact Fund and will take part in a round table with Nick Hurd and the Social Investment Business before today’s launch: Liverpool City Region; Greater Manchester; Cheshire and Warrington: Cumbria; and Lancashire.
The other LEPs include Coventry & Warwickshire; Heart of the South West (which covers Devon and Somerset); Humber; Leeds City Region; and Northamptonshire.
The Social Investment Business plans to hold a further round table for LEPs in London at the end of March.
Local Impact Funds will use EU money to attract matching funding from national and local investors with an interest in developing the local economy and services, such as Big Society Capital, social investors like the Social Investment Business, local authorities, Clinical Commissioning Groups and other public bodies, and institutions like universities and housing associations.
The funds are intended to finance an on-going cycle of support to help charities and social enterprises scale up their activities and take on public sector services.
EU money will provide a permanent local endowment so that when loans are repaid the money will be lent to new organisations creating social impact.
Co-funders can choose to withdraw their money at the end of the commitment period or reinvest it for a further term.
However, the model will also work without EU funding.
The Social Investment Business plans to invest £1 million (through its parent charity) in a second Local Impact Fund pilot in Northamptonshire, due to launch in early summer 2014, working in partnership with the University of Northampton.
A group of local public and private investors has committed an additional £2 million in principle.
The Liverpool and Northamptonshire pilot projects will help the Social Investment Business develop a model which will allow Local Impact Funds to be set up anywhere in England within a few months, by standardising application and reporting procedures.
The model could also be adapted to set up Local Impact Funds in Scotland, Wales and Northern Ireland, which do not have LEPs.
In developing Local Impact Funds, the Social Investment Business has drawn on more than 10 years’ experience providing simple finance to organisations that create the strongest social impacts.
It has invested over £320 million in over 1200 charities and social enterprises, proving that capital can be used to create positive social change in communities throughout the UK.
Britain is a world leader in social investment and is developing an export market of innovative services and intellectual capital.
Local Impact Funds are expected to attract global interest and could be adopted to support social economic growth anywhere in the world.
Charities and social enterprises will be able to apply for investment from the Liverpool City Region Impact Fund on the Social Investment Business website from 1 April 2014.
They should submit an expression of interest before the 28 February in order to be eligible to apply when the Fund opens.
The Fund may reopen for further expressions of interest later this year subject to available funding.
The first investments are due to be agreed this summer.
Charities and social enterprises in five areas will be eligible for investment: Knowsley, Liverpool, Sefton, St Helens and Wirral.
Halton is excluded from the Merseyside allocation of ERDF funds in the 2007-13 programme.