Blended finance combines grants and loans to make borrowing more affordable for voluntary, community, and social enterprises and to attract more money to invest in these social sector organisations.
VCSEs prioritise impact over profit, which makes margins tighter. Traditional lenders therefore consider smaller VCSEs too risky to lend to at affordable rates. This makes traditional finance unaffordable for VCSEs, which means less money is available for achieving a social impact.
Grant subsidy into blended finance helps offset risk. This allows lenders to lower their rates, thereby making financing for VCSEs available and affordable.
The Department for Digital, Culture, Media, and Sport (DCMS) commissioned NPC to independently review the future of grant subsidy for blended finance to support the growth of charities and social enterprises. You can read the executive summary of this report here.
Our report reviews the use and impact of blending grant funding with investment capital as a subsidy to support lending to civil society in England and reviews potential options for how to deliver it in the future. This included reviewing what would happen if the government were to stop subsidising blended finance.
We reviewed the literature and analysed data from blended finance funds, interviews and roundtables with social investment intermediaries, social investors, foundations, and social enterprises.
This review finds that there is an ongoing need for future public policy interventions by government to support the social investment market through the provision of grant subsidy into blended finance for VCSEs.
Without subsidy, blended finance for VCSEs would not happen. Blended finance supports VCSEs to grow and deliver a social impact that would not occur without this funding. The government is currently the only viable provider of subsidy for blended finance at the scale required to meet the needs of the sector. What’s more, blended finance is an effective mechanism for directing money towards ‘left-behind’ places. We think the government should continue to provide grant subsidy as a way of directing funding towards social needs as part of the ‘levelling up’ agenda.In this report on blended finance, @NPCthinks found that blended finance is an effective way to help small VCSEs take on social investment and grow, become more resilient, and help more people. Click To Tweet