Big voluntary organisations will be encouraged to lend money to smaller groups in a bid to increase the loans available.
At a conference in Glasgow last June, David Carrington, the charity consultant and former chief executive of the PPP Foundation, bemoaned an "investment orthodoxy" in the voluntary sector which was stifling the flow of funds into community development finance institutions - the loan funds that support community ventures in deprived areas.
"At the moment, charities' investments are handled by hard-nosed businessmen while their grants are managed by bearded Guardian readers," he said.
Since then, as Carrington notes, the constraints have been loosened.
The Association of Charitable Foundations has examined the alternatives to traditional grant-giving, the Adventure Capital Fund, a Home Office-backed equity investment scheme for social enterprises has been swamped with applications, and Futurebuilders, the Treasury's £125 million fund to facilitate the voluntary sector's involvement in public services, seems destined to include a loan finance element as well as conventional grants.
Into this more receptive environment comes a new report on programme-related investment for charities, the Magic Roundabout, which has been enthusiastically endorsed by the Chancellor Gordon Brown.
Programme-related investment, also known as social investment, involves charities using their funds to advance their charitable objectives by financially supporting other organisations while at the same time receiving a return on their investment. For example, a homelessness charity could invest in a smaller charity opening a refuge or an anti-poverty group could back a venture to provide employment in deprived areas.
Legally speaking, programme-related investment is not an investment at all, since the normal Charity Commission rules on investment do not apply and charities are not obliged to maximise their financial return. Indeed, the prime concern is to further the aims of the charity making the investment.
But in a period of increased pressure on charity income, the financial benefits of programme-related investment should not be overlooked, according to Keith Hickey, the report's co-author and finance director at Help the Aged.
"Charities have always had a duty use money wisely. This is a way of using it even more wisely by moving money on," he says.
"If you give a loan, even if you only get 10 per cent back, you have 10 per cent you can use."
Help the Aged, together with Age Concern, has pioneered programme-related investment by backing Prime, a not-for-profit organisation which helps the over-50s set up new businesses when they can't access finance from conventional sources.
Each charity made a loan guarantee of £50,000 to Prime, which enabled the organisation to secure a larger loan from the bank Lloyds TSB.
Programme-related investment does represent a risk - the recipient charity could default on the loan and the investor might have to consider legal proceedings to recover the money. Hickey says that trustees should be prepared - as a worst case scenario - to lose everything they invest.
But compared to simple grant funding where the charity immediately writes off the entire amount, programme-related investment could be seen as a better use of scant resources.
Charities are not banks and many may shirk from the administrative commitment of monitoring loan deals with other charities. But organisations that want to engage in programme-related investment have the alternative to do so indirectly through community development finance institutions.
There are now around 60 local CDFIs in the UK, handling more than £320 million of investment and some national ones such as Charity Bank.
Housing association the Peabody Trust has deposited £500,000 with the Charity Bank to further its charitable purposes of "helping the poor of London".
"We have chosen to deposit a prudent portion of our reserves on a double bottom-line basis," says a spokesperson for the trust.
"We take 2 per cent return on our investment safe in the knowledge that our funds are being put to direct social use. Also, Charity Bank has a strong record of repayment so this is not only sensible from a social perspective, but it is an extremely low-risk investment."
Ros Boyle, capacity-building director at umbrella body the Community Development Finance Association, sees investment from both operational charities and trusts and foundations as a "potentially strong growth area".
"My feeling is that a lot of charities won't have the capacity to do programme-related investment directly and one way to do it is through CDFIs," she says.
Carrington, a member of the Social Investment Taskforce which called for encouragement of programme-related investment by charities, believes the concept could help redress the funding imbalance. "Established charities can provide assistance to smaller ones," he says. "They haven't looked to bigger charities in the past, just to grant makers."
It might also mean more money all round for a sector struggling with an unfavourable financial climate. Carrington says: "If charities use reserves and in better times equity capital for programme-related investment, it means more money in circulation for dealing with today's problems, rather than being locked away in traditional investments for dealing with tomorrow's problems."
Copies of Magic Roundabout are available from www.bdb-law.co.uk.