A particular issue that has received much attention recently is the difficulty of getting loans. One sector that has found this especially hard is those organisations that are part of the so-called ‘social sector’. Organisations that try to do some good in society while achieving a financial rate of return often find finance impossible to obtain and, as such, the economy is allegedly losing out on billions.
The Big Society is an integral part of the Conservative’s mission and the launch of the Big Society Fund is a key stepping stone in ‘supplying capital to help society expand’. Sir Ronald Cohen, who is Big Society Capital’s Chairman said:
“It will allow an organisation which today is trying to deal for instance with prisoners who are being released and ending up in unemployment then back in prison… to get the capital to increase the size of their organisation and to improve the lives of these prisoners.”
It is hoped that this innovation will help the economy grow through new investment, but will also bring wider benefits to society. One such example is Social Impact Bonds in Peterborough, which aim to help prisoners return to work once they are released from jail. The idea is that rather than being left to their own devices, the scheme helps them integrate back into the community, such that they don’t re-offend, which does tend to be a big problem and creates a big cost for the local community and society at large. In essence, this new bank will simply be providing loans to new social enterprises that demonstrate they can generate an income stream and also provide societal benefits. The financial return will encourage investors, as will the idea of doing some good for society. The following articles consider this new social innovation.
Unclaimed bank cash to fund ‘Big Society’ Sky News (4/4/12)
Big Society Fund launches with £600m to invest BBC News (4/4/12)
’Big Society Bank’ to start providing capital Financial Times, Sarah Neville and Jonathan Moules (4/4/12)
David Cameron unveils Big Society Bank to help savers invest in good causes Telegraph, Rowena Mason (4/4/12)
David Cameron launches £600m ‘big society fund’ Guardian, Nicholas Watt (4/4/12)
The Big Society Promise that has yet to deliver Independent (4/4/12)
Questions
- Where is the finance for the big society bank coming from?
- Do you think the financial return from investments through the big society bank will have to be equal to the financial return on business investments?
- Explain the relevance of externalities to this new social innovation.
- To what extent do you think funding through the big society bank is simply a way of replacing direct government funding of the welfare state?
- Do you think the amount of money this bank is enough to make any difference?
- Why do you think social projects find it difficult to obtain funding through traditional lending?