But the popularity of the funding model indicates a challenge for the fund to become self-sufficient based on future revenues.
Investment in social enterprise by the Department of Health in recent years has helped to “challenge health inequalities and tackle unmet need”, reveals the findings from a new study by the Third Sector Research Centre.
The philanthropy research body has been studying the effects of the Social Enterprise Investment Fund (SEIF), launched by the Department of Health in 2007...
Their report explored the effects of the £100 million fund up to March 2011. The fund was set up to tackle unmet needs and respond to gaps in health and social care...
Whilst it tended to invest in services that targeted disadvantaged or vulnerable groups, including those affected by poverty, mental illness and addiction, the fund’s investments were also used to empower communities and service users who were strongly represented on social enterprise boards, reveal the report findings.
The investments were crucial in enabling new social enterprises to start-up, says Third Sector, that have gone on to have a positive and far reaching impact on communities.
However their study, Start-up and Growth: National Evaluation of the Social Enterprise Investment Fund (SEIF), reveals there was greater interest in grant funding rather than loans, which indicates the importance of independent aid for start-up social enterprises as a platform for future success.
Third Sector Research Centre’s Pete Alcock, explains:
“The Social Enterprise Investment Fund did much to promote organisational development amongst social enterprises delivering health and social care services, in particular those targeted at vulnerable and disadvantaged groups.
“However, the demand for grant funding rather than loans from many organisations raises some interesting questions about the longer term development of social investment in this field.”
He says of the evolving social investment process that “the experiences of these social enterprises will be of particular interest to investors in the years ahead.”
The evaluation of the programme was commissioned by the Department of Health, and was led by the Third Sector Research Centre in partnership with other contributors...
“Our early stakeholder interviews reported that an objective of SEIF was to fill a gap in flexible and appropriate loan finance. However, this view appears to be challenged as we found that the SEIF was primarily a grant fund with only 14 per cent invested as loans,” the report notes.
The main output of investment so far has been structural improvements and business support that has enabled social enterprises to grow, Third Sector says.
The evaluation found that without the SEIF investment, many of the organisations involved would not be around or would be considerably reduced in terms of what they can achieve.
One of the main implications of the report was that the findings suggest it may be difficult for the fund to become self-sustaining through generating a return on loan investments. Some applicants were offered a loan yet turned it down...
In what is still a very embryonic area of the third sector, the research suggests that social investment start-ups, in the absense of grant funding options, may need better reassurance and advice about the outcomes of taking on loans - in order to stimulate growth in this pioneering area of the third sector...