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Welcome to SCRT's November 2016 bulletin focusing on social finance; social investment and social banking.  SCRT aims to harness the collective financial reserves of the third sector (organisations and personnel) and use it to provide social investment that is relevant, appropriate and in tune with the needs of the sector. JOIN US...If you are interested in our work then why not join our 150+ members and take out SCRT free membership or associate membership. 

One of the Chancellor Philip Hammond's Autumn Statement announcements of relevance to social enterprises are the changes to Social Investment Tax Relief (SITR). SITR gives 30% tax relief to UK tax payers who invest in social enterprises. Any profit on the investment is not subject to Capital Gains. The changes now allow £1.5m to be invested in social enterprises less than 7 years old. According to a recent BSC report the amount of SITR money invested in social enterprises during the period April14 to July16 was £3.4m.

Third Sector must brace itself for large cuts in budgets.
According to TFN as local authorities across Scotland continue to experience austerity and make cuts to their budgets, third sector organisations are going to be badly effected by these decisions. These cuts will not just impact upon organisations that receive grants from local authorities, it is clear particularly from social care organisations, that organisations with public sector contracts will also be effected as councils pass on cuts to service providers. Organisations will also be stretched by the Scottish Government promotion of the living wage for low paid employees...Read More

What will the Scottish Government's Social Enterprise Strategy do for social investment?
The Scottish Government's new ten year Social Enterprise Strategy is likely to be launched before Christmas. Like many, I am waiting to see what's included in the social finance section of the strategy. A few of the stories in this bulletin (SITR opener and BSC story below) highlight that to-date the focus has been on the supply side. In particular growing the number of social finance providers and the number of 'social' investors.  Where there has been much less attention is increasing the demand for social finance and addressing the issues and barriers stopping organisations from accessing finance, such as lack of understanding of social investment; lack of blended finance; lack of available low cost risk and patient capital etc. Until the Strategy is available, have a re-read of the sector's SE Vision document that came out in 2015...Read More

    How is Big Society Capital(BSC) performing.
The issue about the high cost of social investment continues to rumble.  At a recent interview Cliff Prior of BSC was very frank when questioned about the cost of social investment. He stated that BSC needed to charge 4% in order to remain sustainable. He also argued: “There is a balance between the low cost of capital that charities and social enterprises need and the higher cost of capital to draw in co-investors. At the moment we’re finding it equally difficult to do both". Currently BSC has £793m available to lend to charities and social enterprises. To date only £286m has been lent out. Clearly demand for loans is significant below supply. So is it time for BSC to switch focus to generating demand?  If so this involves getting the cost of money right and this has to do with finding genuine 'social' investors and not just any investors...Read More

The debate about the role of 'Profit with Purpose' business models continues.
The debate about the role of companies that distribute profit whilst addressing social issues continues unabated. Are profit with purpose approaches just about making money from poverty?  Is it possible to properly address social problems and keep investors happy?  Are most social problems so entrenched and problematic that only mainstream businesses can resolve them?  These are some of the thorny issues that the social enterprise sector is grappling with as it gains a higher profile with governments around the world and with the general public. This recent article by Rodney Schwartz of ClearlySo summarises some of the arguments..Read More

UK CDFI's too weak and too dependent on EU monies.
Community Development Financial Institutions (CDFIs) offer microfinance loans to small businesses and social enterprises operating in regeneration areas or other areas of need. Cliff Prior of BSC has recently expressed his concern for the UK Microfinance sector in light of Brexit and in particular the dependence of the sector on EU subsidies. 
He also claims that the sector has not done enough to challenge the Government's short term thinking about microfinance or the impact Brexit is going to have upon it. The implications for job creation and social enterprises in our more excluded communities will be dramatic unless something changes...Read More

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