Only a handful of organisations in the UK are ready to take on investment from Big Society Capital, according to a report that it commissioned.
Lighting the Touchpaper: Growing the Market for Social Investment in England, based on interviews with 35 social investment intermediaries, was written by Adrian Brown, a principal at the Boston Consulting Group, and Will Norman, director of research at the Young Foundation.
"As the market currently stands, there are only a handful of organisations – we estimate around 10 – that have the necessary scale and performance characteristics to accept meaningful capital injections from Big Society Capital," the report says.
"This suggests that Big Society Capital will need to help develop the number and size of intermediaries as well as the breadth of their offering."
The study found that social investment remains at a very early level of development, with only £165m lent last year. Of that, 90 per cent was lent by just six organisations.
More than 80 per cent of all lending was secured against borrower assets, and only 5 per cent was equity or quasi-equity – an investment where the return is dependent on the success of the organisation.
However, social investment experts expect funds under management to grow by an average of 35 per cent a year, which would increase the size of the sector by roughly £650m over the next three years, the report says.It says the largest growth is expected to come from small operations that are currently making a loss, which is likely to mean an increase in the amount of lending where investors takes a large share of the risk.