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Understanding the demand and supply of social finance

Understanding the deman and suppy for social finance

The Big Society Bank (now Big Society Capital) aims to aid the growth of the UK’s social investment market, playing a central role in government plans for the voluntary sector. In 2011 NPC carried out research to inform the design of the bank.

NPC was asked by NESTA—an independent organisation working to make the UK more innovative—to investigate the demand for social finance, helping to understand the mix of financing the Bank will need to support. Prior to this research much had been written about the social finance market, but research into the demand for capital was lacking. NPC considered this demand in three markets: social finance, financial inclusion, and social housing. We interviewed intermediaries and umbrella bodies to provide insights into the demand, and looked at published accounts to quantify the scale of the demand.

We found that the Bank could make a difference in the social finance and financial inclusion markets, where there is a demand for capital and there are organisations capable of using that capital effectively. But the Bank needs to provide the right type of capital. Our research found most demand is for soft capital, which means the Bank should not expect to achieve commercial returns on many of its investments. Plans for the Bank imply that these recommendations have been taken on board.

Big Society Capital will launch later in 2011, and will be capitalised with up to around £400m from dormant bank accounts, and an additional £200 million from the four largest UK high street banks.

To find out more about Big Society Capital visit NESTA’s website.

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