Big Society Capital will invest £1m in a share underwriting scheme for social investments in community projects, with a quartet of charities also pledging investments totalling £500,000.
In addition, BSC said it could double its commitment to the Community Shares Underwriting Fund if demand was high in the next 12 months.
The scheme was launched in May 2012 by the social finance firm Resonance through its community lending vehicle Community Land & Finance, a community interest company, with an initial investment of £500,000 from the Esmée Fairbairn Foundation.
According to a Resonance report on the scheme’s progress to September 2013, it exists to "deliver both confidence and momentum to community share offers through the provision of an underwriting commitment, effectively providing match funding to communities once 50 per cent of their fundraising target is achieved".
The pilot scheme resulted in £4m of project finance being unlocked, with the fund providing underwriting to six projects, of which three chose to draw down on some of top-up loan funding.
Community shares allow people to become part-owners of local assets and services, or develop new projects including community shops, business hubs, affordable housing, pubs or renewable energy schemes. Since 2009, more than 200 projects have raised finance through community shares, with a total value of nearly £40m, according to BSC.
Simon Chisholm, investment director of Resonance, said: "Community share offers are empowering local community groups around the country to get beneficial projects off the ground, and reconnecting smaller investors with tangible investments in their own communities."
Nick O’Donohoe, chief executive of BSC, said there was an increased demand from local communities for ways to secure community assets. "Many of the larger-scale projects might face hurdles and miss their financing targets," he said. "This fund covers 50 per cent of that funding gap, allowing them to get off the drawing board faster."