A bond that enables investors to save and give to charity has been launched by charitable investment company Allia.
Charities sign up to the scheme and then approach any potential donors about investing their savings in the bond. The scheme costs up to £500 in Allia shares and has an annual retainer fee of £250 for large charities and £100 for smaller charities.
Savers can choose to receive either 0, 1 or 2 per cent interest after five years. Allia then lends most of the money to the social housing organisation Places for People as a commercial loan, which generates interest on the investment.
The remaining money is given to the charity as a grant, minus a small administration fee. The interest repayments on the loan to Places for People enables the bond to repay the grant money.
Martin Clark, deputy chief executive of Allia, told Third Sector the bond helps open up funding from people who have capital reserves that they want to be able to get back.
"It is useful for getting money that would not be available as a straight donation," he said.
Speaking at the Raising Funds from the Rich conference in London this week, Robin Thomas, director of business development at the consultancy Action Planning, said the bond worked particularly well during a time when people were feeling less financially secure.
"I find it to be one of the most exciting developments in philanthropy," he added.
Charities involved in the first round of the bond include the children and young people's charity Step Forward and the employment charity Tomorrow's People. Charities can sign up from next week for the next round of bonds that are set to open in April.