A new financial institution set up by the government has been launched today; with the aim to help finance charities and communities.
The Big Society Capital has £600m, with around £400m coming from bank accounts which have lain dormant for over 15 years. The other £200m has been contributed from the UK’s largest retail banks (Barclays Plc, Lloyds Banking Group Plc, HSBC Holdings Plc, and Royal Bank of Scotland Plc). The money will be used to invest into charitable and social causes that are able to make repayments through earned income.
Prime Minister David Cameron has said “This is about supplying capital to help society expand,” and went on to add that “This is about supplying capital to help society expand,” Cameron will say in a speech in London’s financial district, according to extracts released by his office. “Just as finance from the City has been essential to help businesses grow and take on the world, so finance from the City is going to be essential to helping tackle our deepest social problems.”
The investments could run from community bus services, to keeping children in school or helping people return to work, the scheme would expect the money to be repaid – but at lower interest rates than they would have received in the open market.
Some critics have warned that the rates of interest charged by some of the individual social investment funds may be too expensive for charities due in part to the high risk nature of these investments, also there are the concerns that the Big Society Capital will have so much cash (and so few established places to invest) the money could end up being wasted.
“Big Society Capital is going to encourage charities and social enterprises to prove their business models – and then replicate them,” said David Cameron, the aim is to find and support the business models that do work within these areas.
What do people think of this and do we think it will work?