Social Finance

Workshop presented to the

NZCOSS Conference, October 2006

Presented by

Lindsay Jeffs

Lecturer, Unitec, Graduate Dip. Not-for-Profit Mgt.

Manager, Christchurch Small Business Enterprise Centre

Board Member, Economic Development Assn of NZ

Director, Socrates Investment Fund.

What is Social Finance ?

Money saved, earned, raised, used and/or invested by not-for-profit organisations or individuals for social purposes.

Grants(Government,Philanthropic

bodies, and/or

CommunityFoundations

Pre-Commercial Grants

(Govt, Venture Capitalists

and/or philanthropic

bodies)

Social Loan Finance

(Specialist banks, credit unions,

CDFI’s, Comm. Trusts/

Foundations

Commercial Loans(Banks, Finance

companies)

Equity Finance(Asset transfer,

Investors and/or

the organisation’s own funds)

Dependence Autonomy

Social Finance Continuum

• Promotes different approaches to the funding of NGOs• Provides a new model of dealing with capital • Ensures the Community Sector is part of the solution• Allows the Sector to be proactive• Means of overcoming issues of funder capture• Traditional approaches to overcoming financial exclusion

and poverty relied on grants/donations (normally repairing, cultural, creators of dependency) whereas social finance (credit) is normally developmental, entrepreneurial and a builder of autonomy.

• Stresses self-help, mutuality and sustainability.

Why is Social Finance Important?

How does Social Finance fit into traditional Community Funding Approaches?Traditional Methods (Needs Approach – deficit emphasis)• Memberships, voluntary input & fund-raising (We raise it

ourselves – self-help model)• Grants, donations, sponsorship, bequests, special

events (We are given it – charity and/or private, state and community philanthropy model)

• Contracts of service, trading activities (We earn it – self-help and state delivery model)

Social Finance Methods (Resource Approach – assets) • Social investment, collective buying & collective banking,

(We use our own – cooperative and mutuality model)

Where is Social Finance Used?

1. Developed World - United Kingdom, Ireland, Europe, Canada, USA and Australia

2. Developing world – Asia, South East Asia, India, Africa, South and Central America.

3. New Zealand??

Types of Social Finance• Loans – soft (CCT) and hard (Prometheus)• Loan guarantees (Community Foundations)• Social banks (Charity, Southbank & Triodos), Community

Loan Funds (CDFIs) and in some countries credit unions (VanCity). A developed world model.

• Micro-credit and micro-finance institutions (Grameen Bank). A developing world model.

• Faith based funds (Clann Credo)• Public, private & community partnerships (Invest South)

Types of Social Finance cont.• Dormant bank and insurance accounts (Ireland, NZ)• Social capital raising instruments (Canadian

Development Bonds)• Community Sector Banking (CSB) • Community Sector buying (Community Houses,

Skillshare)• Social investments (Australian Ethical)

Users of Source Finance• Social businesses (wind-farms, community facilities)• Social enterprises (Whalewatch, BCDC)• Not-for-profits that trade (Save the Children, Trade Aid)

Social Business

Social Enterprise

Community Sector BankingAustralian model“By joining together, the buying power of the Sector as a whole will be enhanced, along with the ability to better negotiate the provision of products and services. As a result of the development of the Community Sector Enterprises Model, Community Organisations will be better placed to respond strategically to their future.”(Extract from Community 21 Information Memorandum)

Engaging the Sector

Community Sector Banking cont.

Achievements:• Started 2002 – 21 Community partners and the Bendigo

Bank• Profitable within two years• Balance Sheet 2004 A$200 million• September 2004 - 2259 deposit accounts, 211 loan

accounts, 1696 employee expense payment accounts, 50 micro finance loans

• Supporting social housing, indigenous enterprise, community infrastructure, community facilities.

Community Sector Buying

• Rent (Community Houses)• Utilities (power, phone etc – Joint Ventures)• Office products (GSB)• Insurance (Skillshare)• Property (Ethical Property Company)• Community Super Funds

Community Sector to build capacity needs to:• Exercise its ability to aggregate demand (Aust. 6.8%

employ., 3.3% GDP, bigger commun. = agric. sector)• Enter into partnership with the other two sectors as an

equal

Community Sector Savings & Super Fund

• Exist overseas through credit unions, social banks or specialist funds.

New Zealand Opportunity• Establishment of a community sector owned savings and

super fund that invests its funds in the community sector• Creates a saving mentality in people working in the

sector• Links to the government’s KiwiSaver scheme (July 2007)

Social Investments Where are your funds invested currently?• Cash• Fixed Interest - Term Deposits• Bonds• Property• Shares – Equities• Alternative Investment Classes

New Zealand or Overseas or mix?

Social Investments

Are they invested in?• Ethical Funds (NZ, Australian, or other countries) • Community Infrastructure and Community Facilities• Community projects – social housing, renewable

energy, recycling, broadband, aged care etc• Public/private and community partnerships

Community Projects

Conclusions

Social Finance will help not-for-profits to:• Gain control over our own capital• Build the capacity of the community sector• Stop the need to seek permission from others to fulfill

our social missions• Allow more creative ways to approach social,

environmental and economic issues.• Achieve not-for-profit “happiness” by becoming

increasingly self-sufficient.

Next Steps

• Obtain support from the community sector for the four projects.

• Gain funding from the public, private and community sectors to research and implement the projects

• Establish an Ethical Social Investment Fund• Continue to promote Community Sector Buying Ideas• Launch the Community Sector Savings & Super Fund• Develop Community Sector Banking proposal (Stage 1)• Lobby government to create an Enabling Environment

for social finance organisations and users.