The role of Government Guarantees
James Burrows, Senior Investment Director at Big Society Capital, led the first session which focused on the use of government guarantees. A particular focus was on our work with the British Business Bank, trying to secure long term usage of guarantees to increase access to social finance. The discussion really came alive when Rob Benfield, Director of Enterprise, Social Investment Business took over to explain how guarantees work in the structure of the Recovery Loan Fund.
Two heads are better than one
The Solutions Collective is open to any individual or organisation that has an active interest in the area we are exploring. Our first session saw representation from fund managers, sector membership bodies, representatives from The Adebowale Commission on Social Investment and individual consultants and researchers who are interested in building capacity and/or improving the range of borrowing products available. What was clear was that regardless of our starting interest, our shared goal was to better understand how we can shape and influence systems and networks to improve access to finance. It is always the case that ‘two heads are better than one’ and in this case many more than two.
Sharing learning
As someone who is not an investment professional, I learned lots: from the fact that government guarantees have been a long established 30 + years lever in supporting SMEs to access affordable finance, to recognising the importance of where the guarantee actually interacts in the investment process. Simply put, it guarantees a proportion of any losses that the investor might face, therefore enabling them to take more risk with their lending. This helps to make lending to social enterprises and charities possible, as some investors may not have the risk appetite to invest. The guarantee is almost unseen by the frontline investee but certainly not unfelt.
James says of our work at Big Society Capital "Our work relies on the insights and inputs from others, and it was fantastic to have the forum like this for two-way sharing and learning. We really appreciated the open dialogue, and it was a chance for productive challenge and collectively shaping of our work on Guarantees in such a timely manner."
In order for this to be time well spent we are committed to sharing key takeaways and any resulting updates and progress. We will do this is a series of Insights Papers the first of which you can find below.
What’s next
Future topics include the use of tax reliefs and catalytic capital, as well as suggestions to explore the role of non-government guarantees. You can register your interest for future sessions and suggest discussion material to inform our social lending work here.
We need to collectively find solutions to the gaps that exist in demand and supply. It won’t be easy but together I am confident we will make progress and that is progress in itself.
