3 Reasons to Invest in Social Enterprise in 2017
Driving to work this morning, I spent some time reflecting on the good intentions we all tend to return to the desk with at this time of year. Remembering both a recent blog by Responsible Finance colleague, Matt Smith, CEO of Key Fund, who wrote very eloquently about this plight of social enterprises in 2016, and a report by think-tank Civitas, predicting the wider plight of SMEs in 2017, I committed to sharing my thoughts on both. My intention is to raise awareness about where perceptions on enterprise finance need to change.
So in this, the first of two blogs this week, I share three good reasons to invest in social enterprises. Later this week I will share at least three good reasons the UK government needs to set aside a new pot of money to plug a looming SME funding gap.
Reason 1: Social enterprises are not as high risk as you may think
We invested in 7 social enterprises last year; we’ve heard how many of these have had loan applications turned down by mainstream banks due to being ‘too high risk.’ Experience has taught us that these arguments are wrong.
Key Fund’s CEO, Matt, explains what we’ve come to know very well in his blog, ‘Social enterprises are not just for Christmas, they’re for life, give them a chance’:
“We all know that people are what drives organisations to succeed – their commitment, drive and desire to carry on when all about them is going wrong. This is what community and social enterprise people have in buckets, because for them the consequences of failure for their beneficiaries are just too high.”
There is plenty of evidence to support this theory. In fact, government statistics identified 70,000 social enterprises in the UK contributing £24 billion to the economy and employing nearly a million people in 2015, with 73% of them earning more than 75% of their income from trade.
Whilst figures for 2016 are not yet published, it makes sense they will be higher, and will continue to increase through 2017, due to a growing awareness of the benefits of the social enterprise model and associated commitments to buy social (read on...).
Reason 2: Social enterprises do business in a way that means everyone profits
In the last two years, we have invested £461,000 in community and social enterprises. Last year alone we invested £147,000 in 7 social enterprises, creating and safeguarding many jobs and associated public purse gains in the form of corporate and income tax paid (instead of benefits claimed). The social and economic impact of these figures more than justifies the loss rate we are prepared to absorb because we understand that social enterprise is about business where everyone profits.
Take a look at these Foundation East social enterprise success stories from 2016 and consider the positive social, economic, environmental, community and personal well-being impacts our loans enable:
- Harry Specters Chocolates: creating work experience and employment opportunities for young people with autism;
- Recovery Hub Ipswich: community hub, providing residential accommodation for people recovering from addictions;
- Arjun Technology Ventures: improving decision making for farmers, enabling them to grow more crops for less resources, delivering numerous positive economic and environmental impacts.
Reason 3: The social enterprise movement is growing
The social enterprise movement is growing with many organisations and individuals committing to buy social via Social Enterprise UK’s Buy Social Corporate Challenge.
Our social enterprise clients all enjoyed strong corporate support last year, with longer established enterprises, such as Harry Specters, clocking up strong media support too.
As shock results proliferate the political landscape globally, many commentators are reasoning that such changes are the outcome of too many ordinary people not feeling the benefits of strong economies and finding themselves on the margins of society.
It is our new year hope at Foundation East that the UK government will wake up to this reality and start to put measures in place to address it. Not only is its public service programme inadequate (we agree with Social Enterprise UK’s CEO Peter Holbrook on this), its Regional Growth Funds are due to run out this year, despite a huge growth in demand (more on this in my next post).
If, in the meantime, you feel inspired to take action, please share my post, or, even better, share my post and become a member so that you can help us to help more social enterprises in 2017. Or, if you’ve got a business idea that suits a social venture framework, then why not register for Cambridge Social Ventures’ next Social Venture Weekend from 24-26 February 2017?