Golden Lane Housing, a subsidiary charity of Mencap that provides housing for people with learning disabilities, is pioneering a new way of raising money by launching the UK's first charity bond issue this month.
In partnership with ethical bank Triodos, Golden Lane Housing's bond issue opened on 12 April and aims to raise more than £4 million to buy homes for people with learning disabilities.
Investors will put money into the scheme for a fixed term of 10 years.
Every year they will receive interest, calculated as inflation plus 1 per cent, up to a maximum of 6.5 per cent. At the end of the 10-year period, their initial investment will be returned, and rents paid by the tenants of the housing will go towards investors' income.
The bond issue will be open to both private and institutional investors, including trusts and charities. Marketing of the bond will focus on Mencap supporters and Triodos customers, although the partners anticipate that there will also be wider interest as more people become interested in social investment.
Triodos spokesman James Niven said: "In the past year or so, there seems to be an increasing appetite among UK consumers for this sort of ethical investment opportunity, particularly with the recent volatility of the financial markets."
Mark McGoogan, head of Golden Lane Housing, said the charity's dozen staff could not devote the time to raising £4 million through conventional fundraising and borrowing the money as a bank loan would be more expensive.
Earlier this year, Triodos bank launched a £4.2 million share issue for the Ethical Property Company. The bank is also pioneering a mini-ethical stock market for investors in social businesses called Ethex, to be launched later this year.