Charities Aid Foundation launches new social investment fund
Interest in philanthropy is at an all time high and with many major donors looking for new ways to help charities and achieve the maximum impact with their donations, the Charities Aid Foundation (CAF) has launched a new social investment fund, the CAF Social Impact Fund.
Philanthropists can invest their charitable capital in the fund which will provide loans for charities to help them become stronger and expand. Once loans are repaid the funds will be recycled enabling philanthropists to support more charities.
In simple terms, social investment means using funds to achieve both a social and a financial return. Since 2002, the Charities Aid Foundation has, through its social investment arm CAF Venturesome, provided over £22m in loans to over 280 charities, community groups and social enterprises. The funds have provided working capital, underwriting facilities and bridging loans to charities, which traditional lenders are unlikely to provide because they are perceived as too risky. To date those who have financed these loans have been grantmaking organisations, businesses and a handful of individuals. The CAF Social Impact Fund widens this potential pool of funders, allowing all major donors to use their philanthropic capital for a social return.
Donors who already hold, or open a CAF Charitable Trust will be able to make an investment into the fund of £10,000 or more for a fixed period of between three and six years. When the term is completed, CAF Venturesome expects the funds to be returned to the investor's charitable trust in full for them to either reinvest in the CAF Social Impact Fund, or to donate to charities in the traditional way.
CAF Venturesome has an excellent track record with less than four percent of defaults on their loans across the risk spectrum. The CAF Social Impact Fund will provide loans to the lower end of this spectrum.
Each application will go through a thorough due diligence process with an independent investment committee reviewing every application. Before a charity formally applies, CAF Venturesome will also spend time with them ensuring they are both "investment ready" and that the investment will achieve a significant social return and has a clear charitable benefit. Investors will be sent regular reports describing the impact their money is having.
A £50,000 investment by a higher-rate tax payer returning their tax relief to their CAF Trust account, could mean £83,898 becoming available for the CAF Social Impact Fund to lend to charities. In the past CAF Venturesome has used funds twice over three years and around three times over five years by entering into new loans once the initial loan has been repaid. We anticipate that in this way a £50,000 investment could result in over £150,000 being loaned to charities over three years, or over £220,000 over five years.
John Low, Chief Executive of the Charities Aid Foundation said, "Charities often find it difficult to get finance from mainstream lenders. Yet finance is key to helping charities build a strong and stable position and grow to meet increased demand, or expand their services.
"Major donors are becoming more interested in the innovative ways in which they can help charities and achieve a greater social impact with their charitable donations. I hope that through the CAF Impact Fund hundreds of charities will be strengthened and donors will enjoy seeing their money help many more charities and social enterprises."
How social investment helps...
Kids helps thousands of disabled kids and their families by providing a range of direct services from specialist nurseries and crèches to short breaks for disabled children, playgrounds and play schemes. In October 2009, Kids transformed itself with a CAF Venturesome loan by eliminating its loss-making contracts with local authorities, refinancing its property assets and exceeding its fundraising targets. By January 2010, Kids was making healthy surpluses and decided to repay its entire loan.
Kevin Williams, Chief Executive of Kids said, "Kids owes its very existence to the support of CAF Venturesome at a critical moment in the charity's development. After two years of stability, Kids is now growing fast with an increase of income year-on-year of 18 percent. Without CAF Venturesome none of this would have been possible."
FareShare is a national charity that redistributes quality surplus food from the food and drink industry to organisations working with vulnerable people in the community. Thanks to its investors, CAF Venturesome provided a loan of £50,000 in 2008 to underpin the charity's cashflow which is now fully repaid. When FareShare decided to expand the number of depots around the country, CAF Venturesome was able to offer a loan facility of £200,000.
Lindsay Boswell, Chief Executive of FareShare said, "CAF Venturesome worked with us to strengthen our business model and this gave us the confidence to implement growth plans while also making us more attractive in the eyes of the other supporters. The rigour and focus that they bring made them feel more like a partner than simply a funder."
Donors and those Interested in the fund can find out more at: cafonline.org/socialimpactfund