Growing the evidence for small scale finance

The first reports from the independent evaluation of the Growth Fund gives an early indication that blended capital is flowing to charities and social enterprises across England to help improve people’s lives.


Written by

Rebecca MacDonald, Managing Director, Head of Investment Management

The Growth Fund is a pioneering programme of blended grant and loan funds that is meeting a need for small scale finance (up to £150,000) for charities and social enterprises. It brings together loan capital from Big Society Capital, grant capital from the National Community Lottery Fund, and is managed by Access – The Foundation for Social Investment. Learning is at the core of the programme, and so we’re fortunate that an independent evaluation will run over the life of the Growth Fund led by Ecorys and ATQ Consultants. Today we see the first two reports sharing some early reflections on the programme: one on the set up of the overall programme; and the other on evidence of delivery from social investors to charities and social enterprises. Reading through the reports, there were three themes that stood out:

  1. The Growth Fund appears to be living up to its aims for charities and social enterprises – At the time of the report, 166 charities and social enterprises had received loans (which has now increased to over 250) which should be celebrated. It was heartening to read that these loans have been flowing to the Growth Fund’s target charity and social enterprises (more than half turn over £250,000), at the size we were anticipating (median investment size is £50,000) and for the purposes it was intended (to support the development of trading income). It’s still too early to understand the effect of taking on blended finance for an organisation’s resilience or their social impact, but the evaluation will be crucial in building this evidence over time.
  2. We continue to test our assumption on how to reach more and different investees – Big Society Capital has played an important role seeding many new fund managers since 2012, and the Growth Fund is no exception. Of the 15 diverse funds outlined in the report, 8 are delivered by first time fund managers and a further 3 are delivered by managers with expertise in a different product type or size. The programme partners believe this mix will reach more, and different charities and social enterprises. This will be a key assumption for the evaluation to test over time including what does and doesn’t work; for example, the report recognises it can take newer fund managers longer to build up deployment than experienced managed with established networks and brand recognition. It’s again too early to draw conclusions, however the report outlines that peer learning is supporting newer managers, and on the whole the Growth Fund’s reach is broadly as intended.
  3. Blending finance is a fine balancing act – different types of capital inevitably come with their own objectives and constraints, and marrying grant and loan capital in the case of the Growth Fund has required, and will continue to require, careful balancing and trade-offs to maximise the effectiveness of the programme. We haven’t and won’t always get that balance right. However, I’m encouraged that it appears from the report we haven’t passed this complexity on to charities and social enterprises, and that we continue to learn from our decisions

Naturally this report reflects that we are in the early stages of the Growth Fund’s delivery, but what excites me is that an increasing amount of valuable data is pouring in every quarter about the charities and social enterprises receiving investment from an increasingly diverse group of social investors. This data, alongside stories of the people and communities supported by the investees, will deepen our understanding and form a richer picture of the impact of blended finance. If you can’t wait until the next evaluation report, Access produces a great quarterly dashboard that gives a snapshot of the Growth Fund’s latest activity. In the coming year, the evaluation will explore two key issues for the Growth Fund:

  1. What are the common business models of the charities and social enterprises that are being supported by the social investors delivering the Growth Fund?
  2. What is the use and nature of subsidy in practice flowing through the Growth Fund, and what might the implications be for future blended finance programmes?

These will be important contributions to be a growing evidence base for small scale blended finance which I look forward to seeing in the coming years.  For more information on accessing investment via the Growth Fund, see Good Finance.   Read the blog from Access - the Foundation for Social Investment.Read the blog from the National Lottery Community Fund.