Social Finance

1

• 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.

2
What is Social Finance ?

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

3
Social Finance Continuum
Grants (Government, Philanthropic bodies,
and/or Community Foundations
Pre-Commercial Grants (Govt, Venture
Capitalists and/or philanthropic bodies)
Social Loan Finance (Specialist banks, credit
unions, CDFIs, Comm. Trusts/ Foundations
Commercial Loans (Banks, Finance companies)
Equity Finance (Asset transfer, Investors
and/or the organisations own funds)
Dependence
Autonomy
4
Why is Social Finance Important?

• 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.

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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)

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Where is Social Finance Used?

• Developed World - United Kingdom, Ireland,
  Europe, Canada, USA and Australia
• Developing world Asia, South East Asia, India,
  Africa, South and Central America.
• 3. New Zealand??

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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)

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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)

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Social Business
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Social Enterprise
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Community Sector Banking
Australian 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)
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Engaging the Sector
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Community Sector Banking cont.

• Achievements
• Started 2002 21 Community partners and the
  Bendigo Bank
• Profitable within two years
• Balance Sheet 2004 A200 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.

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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

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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 governments KiwiSaver scheme (July
  2007)

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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?

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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

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Community Projects
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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.

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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.