The Access Growth Fund was launched in 2015 to offer unsecured loans and grants of up to £150,000 to social purpose organisations. An evaluation of how the fund has performed to date, against the key aims, has just been completed and in this blog we take a look the highlights.
Set up
Social purpose organisations play a vital role in delivering key services to people living in the most deprived areas of the UK. When the fund was launched in 2015, extensive research had shown a need for unsecured smaller loans, so that such organisations could grow or diversify their business models. Given the decline in grant income for social purpose organisations, coupled with rising demand for their services; this support was needed to help them to become more financially resilient and self-reliant. Typically, this type of finance has been harder to provide sustainably. This is due to higher proportionate transaction costs on lower deal sizes, as well as the fact that these loans are used for developing new enterprise activities or revenue streams, which can be riskier for investors.
The Growth Fund was originated and launched by Big Society Capital and The National Lottery Community Fund in 2015, with Big Society Capital providing £22.5 million of repayable capital and The National Lottery providing grant funding of £22.5 million, made possible thanks to National Lottery players. The programme was managed and delivered by Access, through a range of social investors.
Five years on Ecroys, the evaluation partner, has conducted an independent evaluation of the programme (using data collected up to September 2020) and we would like to share some of the key findings with you. The evaluation work will continue, and we will be answering some more questions as Growth Fund partners continue to make investments and support the sector over the next couple of weeks.
Five years on: funding to the sector
Since 2015, 600 grants and loans have been deployed by 14 different social investors, amounting to £40.3 million [1]. The evaluation covers deployment up to September 2020 of 505 grants and loans amounting to £31.77 million. This amounts to a significant share of all social investment deals in the UK – 35% of deals by number in 2019. The grant blended with the repayable investment has made it possible for smaller loans to be provided to smaller scale organisations, compared with the rest of the social investment market. Organisations accessing investment from the Growth Fund are on average half the size (median income of £220,000) and have an eighth of the asset base as those accessing other forms of social investment. Whilst at launch it was assumed by some that many organisations reached by the Growth Fund would not have taken on social investment before, the evaluation suggests that there is more of a nuanced picture which you can read more about here. (page 75).
Five years on: what the investment was used for?
Across the 505 investments there is a real mix in what the money has been used for. There are some common themes:
- 26% used the investment to scale up their existing activities such as buying new premises, equipment or employing more staff. Readipop, an innovative music and arts charity that uses the power of music to bring vulnerable people together and help them communicate, used the investment to purchase a new studio.
- 10% used the investment to cover shortfalls in cash. Redcar Link, a provider of therapeutic interventions for young people and their families who require emotional and mental health support, demonstrates how social investment helped with much needed cash flow. Following the end of a grant it helped them to get back on their feet during a change management and redundancy period.
- 8% used the investment to pursue new revenue streams such as starting up a different service.
Five years on: what effect did the investment have on the organisation?
The evaluation has highlighted that understanding how taking on a loan affects the financial resilience / growth of an organisation is difficult, especially when comparing to counterfactuals (similar organisations that did not take on social investment). It can also take a significant amount of time for the effects of an investment to be realised. At Big Society Capital, we are currently running an Enterprise Level Impact pilot to understand more about how this can best be measured across our portfolio.
The evaluation does however indicate some early positive signs for the impact on the organisation. Almost half of organisations surveyed felt that the investment helped them to “significantly improve” their income and a further 25% said that it “slightly improved” their income. Many of these increases were attributed to diversifying income streams.
Positive Support for You, a Community Interest Company, supporting people with learning disabilities, autism and/or challenging behaviour commented that they were “better organised as a business and more financially sustainable” since receiving investment and that they “wouldn’t be here without Big Issue Invest”. Jennifer Westood, Director of IntraQuest , a provider of accessible and affordable therapy to children, young people and adults, said that the investment “helped us bridge that gap and stabilise us as a company. And it helped us to analyse our business, particularly the CIC that’s more driven by need”.
Further qualitative evidence suggests that organisations have seen an increase in tangible assets due to the investment helping to improve working conditions, upskill staff and to create a better or well-known brand, as well as intellectual property.
Five years on: what impact are the organisations taking on investment having on the lives of people in the UK?
Investment through the Growth Fund is reaching deprived areas of the UK. 26% of all investments, by number, were to social purpose organisations operating in the 10% most deprived areas in the UK. Over 50% of deals were to organisations in the 30% most deprived areas of the UK. The evaluation highlights both qualitative and quantitative evidence suggesting that the social investment is contributing to increased beneficiary reach (including reaching different types of people and people in different areas) and increased quality of provision.
After taking on investment, Readipop restarted their 1-2-1 music mentoring sessions with vulnerable young people. Their ‘AAA’ youth programme was nominated in the ‘AAA’ category of ‘Best Education Project’ awarded at the Reading Cultural Awards. In the financial year 2019/2020, Readipop’s work reached over 43,000 people.
Testimonials from parents using the Redcar Link service, highlight the vital services they provide in one of the most deprived areas in the UK:
”The Link changes lives, not just for the children they help, but for the families too. They give a lot of support and guidance which cannot be gained anywhere else. It is an asset to the area and I don’t know what we would do without it”.
“I’ve noticed a huge improvement in my child’s anxiety problems, things that we as parents were struggling to share”.
Conclusion
Overall, we at Big Society Capital believe that repayable finance blended with grant has huge potential to reach organisations that are having significant social impact in areas of high deprivation. Five years into the Growth Fund we are seeing that change happening. To ensure this continues, we need to see more investment into funds like the Growth Fund, so that social purpose organisations can access this type of capital. Please click here to read the full report.
If you are an investor or grant funder interested in blended investment, please get in touch.
Update as of 8 February 2022
Big Society Capital welcomes the news that Access – The Foundation for Social Investment is set to receive £20 million from dormant assets to extend its support for charities and social enterprises in England. The £20 million from dormant assets will enable finance to flow to charities and social enterprises looking to grow or diversify their business models, particularly those unlikely to have taken on social investment before, such as smaller organisations or those based in deprived areas. The finance offered will principally be in the form of small flexible unsecured loans to organisations seeking to use the funds to create more social impact.
[1] Up to Sep 2021
