The government should develop specialist microfinance measures to support small charities in deprived areas, according to a report published today by IPPR North, the northern arm of the Institute for Public Policy Research.
The report, called Taken for Granted, says that austerity and a move from grants to contracts will have an especially adverse effect on small charities and social enterprises serving deprived communities, and that funding initiatives such as Big Society Capital are not well targeted for helping smaller organisations.
"Nick Hurd, the Minister for Civil Society, has said the ‘big society’ will ultimately be judged on its ability to take root in the poorest places," the report says. "This is an important test, and one the government is at risk of failing.
"There is a risk that organisations serving deprived areas will struggle and even fail in this environment. The state ‘getting out of the way’ will not result in these organisations flourishing."
The report says that fewer organisations exist in deprived areas but that they have a greater influence. It says they have less skilled volunteer support to draw on, and that they rely more on state funding.
It also says that they are less able to win contracts because of a lack of scale and specialised bidding capacity, or because contracts are not a suitable source of funding for them – and that as a result the government needs to take steps to offer specialised support to these charities.
The report calls for the establishment of microfinance funds "tailored to the needs of the very smallest organisations", and says that government should aim to deliver these services through community development finance institutions and credit unions.
The report also calls for greater focus on grants, as well as changes to make grant giving more intelligent, including single-application portals, standard application forms and proportionate monitoring.