Facing Forward – supporting smaller charities to adapt to survive? | Big Society Capital

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Facing Forward – supporting smaller charities to adapt to survive?

Like many other fans of the Lloyds Bank Foundation’s work, I was at the launch of the report “Facing Forward” – it gives a sobering overview of the trends in the environment that smaller charities need to consider to continue to provide essential local services with increasing demand and complexity of need.

Social investment unsurprisingly doesn’t feature beyond a short mention, and it’s right not to overstate the role that social investment can play in addressing big challenges in the economy and commissioning trends, as it won’t be right for many smaller charities. Nonetheless, there are now more relevant sources of investment for smaller charities that are developing income through trading or want to secure an asset, through the Access’s Foundation’s Growth Fund or from individuals using Social Investment Tax Relief (Fareshare South West, a smaller charity, were the first to do this to provide working capital for their social enterprise).

Interestingly, the key recommendations for smaller charities around 1. Planning ahead, 2. Understanding sustainability, 3. Matching income to activities 4. Exploring new income streams, are all likely to reveal whether social investment could be a viable tool and also better position charities to access and use investment successfully.

Reflections on where our work to increase access to social investment for charities is relevant to some of the key messages in the report:

Funders

Firstly, there’s a call for funders to fund core costs and not just focus on new projects. Whilst social investment can’t replace grant funding for core costs, it’s not all about social impact bonds or innovation. It can help with cash flow requirements whilst a charity is adapting its model– for example Direct Help and Advice in Derby obtained a small loan from Keyfund to fund a transition to a One Stop Shop model following financial pressures from Legal Aid reforms. The ability to sustain impact (as opposed to focus solely on scale) is an important outcome, as underlined by IVAR's recent research, and social investors can be well placed to support, if there is a credible longer term plan for the organisation.

Second, a key ask from a smaller charity was for funders to take a “Funders Plus” approach. There are great examples of grant funders already doing this, including CityBridge Trust’s Stepping Stones programme that has helped charities to adapt their business models and diversify income streams.

This also reinforced what I often hear from smaller organisations that have accessed investment for the first time – they’ve valued additional support gained through a trusted relationship with an investor – for example getting an objective perspective on their sustainability and resourcing & access to useful networks.

However, the call to funders to align requirements and reduce onerous demands on smaller charities is a consistent theme in investment as well, and where there’s much more to do.

Capacity

The report highlights the strained capacity of smaller charity Chief Execs. Engaging with social investment places another demand on their time, and this is reflected in our thinking around key projects:

  1. GoodFinance.org.uka site to help charities make more informed choices about social investment, access resources and to be better able to narrow down to relevant options. The new website is coming in early April – the needs of small charity leaders will be front and centre in the user led design underpinning the site.
  2. GET INFORMED – Trustees often play a more hands on role in smaller charities, and we’ve launched a campaign to support Trustees around social investment and related governance issues – most importantly through sharing the experiences of some great Trustees who have balanced and honest insights to share. Informing trustees on this area could help provide a supportive sounding board for the Chief Exec as the charity explores financial options for future strategy.

Collaboration & partnerships

A central theme of the report is around the need for collaboration, and the ability to form different partnerships, including with large charities, to achieve small charities’ mission and to be better able to influence.

Together with Catch 22 and Interserve, we have invested into the Public Services Lab in Liverpool, a vehicle designed to engage with local commissioners around redesigning public services in collaboration with local providers and communities, as well as providing business support services to local charities & social enterprises. The ambition is that local charities will be better placed to develop and deliver the right services for the people they support.

What comes across loud and clear is the deep experience of the Foundation of the issues that smaller charities face. We & Access are working to develop partnerships with organisations that may be better placed to understand the needs of smaller charities (for example housing associations, community foundations or membership bodies in specific sectors). We expect to see more funds for smaller charities supported by these organisations like First Ark in the North West, which can provide wider support and/or blend of grant and small loans.

Finally, I was struck by the sense of a lonely journey for many. Last year we launched regional Let's Talk Good Finance Networks in partnership with local infrastructure bodies. These allow local charities to share experiences good, bad and ugly around social investment, learn, and to connect with investors informally. We’ve had great feedback from these, especially on the power of “hearing from peers” who often offer subsequent support.

We hope we’re heading in the right direction, but still lots more to be done – do get in touch if you’re working with small but vital charities and would like to support them in some way around social investment.

Last updated | 
23 March 2017