Sector cool on plans for social investment bank

Funds from dormant accounts should be used to finance small grants as well as equity finance, according to the NCVO.

Responding to last week's proposal by the Commission on Unclaimed Assets to set up a social investment bank using dormant funds, Stuart Etherington, chief executive of the NCVO, said that if the purpose of taking this money was to bring social change, it should be put to wider use than simply establishing a bank.

"Social investment is increasingly important, but we must keep in mind that different organisations need different funding tools for different activities," he said.

"In particular, the funds from dormant accounts should be used to support a small grants programme and programme-specific initiatives, as well as providing equity finance through the social investment bank."

However, the voluntary sector has been warned that any dissent could jeopardise its chances of receiving money from dormant accounts.

At last week's launch of a report on how the bank would operate, Sir Ronald Cohen, chair of the unclaimed assets commission, said the sector's reaction would affect the Government's decision on whether to go ahead with the scheme.

Speaking at the same event, Geraldine Peacock, former chair of the Charity Commission and adviser to the assets commission, said: "What we need is a united response to this idea. If you don't like it, come in and help us form this bank in the way that you want."

Gavin Smith, head of business banking at ethical bank Triodos, said he was concerned that a bank would increase competition for private investment in the social investment market.

"There needs to be wholesale funding for organisations that already exist, and for building capacity, but the application of large funds into the market can be disruptive and destructive," he said. "The bank should not try to compete against organisations that are already there."

Referring to the sector's existing sources of loan finance, such as Futurebuilders, Smith added: "The social investment bank will be a new intermediary, but the recent history of developing these bodies shows they are unproven and have not been tested for merit."

However, Bernie Morgan, chief executive of the Community Development Finance Association, said a bank would "prove an invaluable tool in unlocking capital flows into the sector".

She added: "That it proposes a range of innovative financial instruments is good news for the long-term sustainability of the sector."

The commission has proposed that the bank operate in four key areas: building capital in the market, providing advice and support to develop the market, encouraging the progress of sustainable funding and working with existing and new intermediaries.

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