Seb Elsworth: Dormant assets money must be used to grow community enterprise

A coalition of social enterprise, voluntary sector and social investment organisations has put forward a plan that would particularly help areas of England that have been deprived of funding

Seb Elsworth

The ability of charities and social enterprises to generate income is too often neglected.

Yet increasingly, not only is our sector continuing to change the world through its services and campaigns, it is also finding ways to develop sustainable income streams through trading – delivering on mission at the same time as becoming more sustainable.

The NCVO UK Civil Society Almanac suggests that earned income and trading makes up just under half of all income.

But the ability to generate income is not spread equally across the sector and those in smaller organisations or traditionally underserved places can struggle to access the investment they need.

That’s why a major new coalition of social enterprise, voluntary sector and social investment organisations is calling for the next wave of dormant assets to focus on growing enterprise in communities around England, particularly in places and communities that have been deprived of investment in the past.

The Community Enterprise Growth Plan would directly address this imbalance – increasing access to capital, scaling up enterprise models and embedding business support in local communities.

Not only would this be a prudent use of precious dormant assets, it would also directly support many shared ambitions to level up communities and drive local growth and productivity, as well as meeting the recent Adebowale Commission on social Investment’s calls for more “enterprise-centric finance”.

Over the summer, the government will be consulting on how the new expanded Dormant Asset Scheme should be used.

With a potential for up to £880m of new funding over the next few years, it is a once in a decade opportunity to grow enterprise in communities.

Dormant assets are the ideal source for this sort of funding, because of their focus on both social impact and long-term transformational change.

The Dormant Asset Scheme is now more than 10 years old and has seen more than £800m utilised for good causes. To date this has come from banks and building societies.

The expanded scheme now also includes other assets such as insurance policies and pension funds. Historically in England dormant assets were restricted to social investment, youth and financial inclusion, much of which has been used for social investment with £425m capitalising Big Society Captial.

Given the focus in the Community Enterprise Growth Plan on further increasing access to capital, it is fair to ask why further support for social investment is needed.

The answer is that over the next decade, further funding for social investment needs to be used very differently to what has come before.

Big Society Capital has had a very significant impact on the sector over the past decade, supporting more than 2,000 organisations, and leveraging its funding so that more than £2.5bn of new capital has been made available.

Through its work with a wide range of social investment partners, it has demonstrated that there are viable investment models in areas such as social housing for the most vulnerable people in communities, high-growth social ventures and public sector markets.

But we have also learned over the past decade that repayable finance on its own doesn’t meet the needs of many social enterprises and trading charities.

As I’ve written about before in this column, blended finance has a unique role to play in building a bridge between the needs of investors and the realities of the business models in much of the sector.

Other interventions such as match trading have also been proven to deliver more financially viable enterprises better placed to achieve their social impact.

The past decade has seen dormant assets build a social investment market and has demonstrated ways in which repayable finance on its own can drive impact.

That money is now being effectively recycled and more capital will naturally flow into these areas. This doesn’t need more funding from dormant assets.

Rather, precious dormant assets should be used to back enterprises in underserved places and communities – especially those unable to access the finance they need.

Helping social enterprises and trading charities to get up and running, grow their services, acquire assets, refine their business models and increase their financial resilience.

In turn, delivering long-lasting tangible economic and social benefits to communities across the country.

Seb Elsworth is chief executive of Access, a foundation that helps to widen access to social investment for charities and social enterprises

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