Finance: 'Kick-start' outfit is considered

The voluntary sector's leading providers of loan finance are to investigate whether they should set up a financial intermediary to kick-start demand in their products.

The Social Investment Market Group, which includes Futurebuilders, Charity Bank and Venturesome, has commissioned Julia Unwin, a former Charity Commissioner, to conduct a study into how borrowers and lenders in the sector's nascent new finance marketplace can be brought together more easily.

"The market is new and demand is not so great, but that's what you'd expect," she said. "We want to look at what you can do to stimulate the right sort of demand and reduce people's costs."

Unwin, chair of the investment panel for the Adventure Capital Fund, will examine whether an intermediary is needed and how it would operate.

Options range from a virtual organisation that signposts charities to appropriate funders, to a body that would assess applications, and to a capitalised intermediary that would make investments of its own.

Social investment in the voluntary sector has grown in recent years but still remains small in scope. Risk capital fund Venturesome recently reached the landmark of funding 100 charities (Third Sector, 12 April), but says its potential market is as large as 25,000 fundraising charities.

John Kingston, director of Venturesome and chair of the Social Investment Market Group, said: "In many other financial markets, there has been massive growth of management buyouts in the corporate sector, and finance intermediaries have played a very important role in ramping up growth. We want to test out whether such an intermediary would help both charities and social enterprises on the one hand and suppliers of social investment on the other."

He said any intermediary would need to operate for two years to demonstrate that it was needed. "The issue is whether such an intermediary would add value, both to the demand side and to the emerging supply side, and kick-start a spurt of growth," he added.

KEY POINTS

- The Social Investment Market Group has commissioned a study into how the sector's borrowers and lenders can be brought together

- The study will be carried out by Julia Unwin, former Charity Commissioner

- She will examine whether an intermediary is needed and how it would operate

- Social investment in the sector has grown in recent years but remains small.

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