1. Demanding social investment
Professor Fergus Lyon
Middlesex University
Social Investment: promise and possibility
27th November 2012
ESRC/TSRC Policy Seminar in collaboration with Nesta
Funded by:
Hosted by:

2. What does ‘access to finance’ mean?
• Confusion of
– Repayable or loan finance,
– grant finance
– income
• Demand for
– grants
– Innovation funding
– £50-£250K long term capital

3. Current use of repayable finance
• 13% social enterprises
successful in seeking loan
finance (SEUK, 2011)
• 18% of social enterprises
get bank loans
– but 60% of those over
£1m (SEC- State of SE
2009)

4. • 21% of VCSE successfully
secured repayable finance
(ClearlySo and NPC, 2012)
– 47% had to provide security
to back the finance

5. Unsuccessful loan seekers
• 12% of SE were unsuccessful when seeking loans
(SEUK, 2011)
• 13% of all SMEs unsuccessful or get less than
requested (BIS,2011)
• 8% of National Survey of Charities and SE (2010)
were dissatisfied with access to loan finance
• 7% of VCSE had tried but had not yet been
successful in securing loan finance (ClearlySo and
NPC, 2012)

6. Emerging demand?
• Is there an emerging demand for loans?
– 30% of VCSE seeking or interested (ClearlySo and
NPC, 2012)
• Challenge of having business models allowing
for a surplus
• The debt burden on those that ‘inherit’ from
investment friendly social entrepreneurs
• Will it lend where others will not? Should it
lend in these cases?

7. Investment readiness
• Strength of business propositions
– 1 in 4 of those borrowing said they did not
generate surpluses to repay finance (ClearlySo and
NPC, 2012)
• Presentation and pilot testing of propositions
• Capacity building and confidence
• Networking and relationships especially in
early stages
• Demonstrating both financial and social
returns

8. Measuring the social returns
• How can social investment use social impact
metrics?
– can you compare project versus project?
– Use of social impact reports to show legitimacy
• Competition forces organisations not to
publicise their social impact or to down play it

9. “I am not sure what value it brings, I
am suspicious, I told …..(consultant)
to be conservative … we downplay
the financial figures”
“We are often in competition when
tendering… models may allow
organisations to cherry pick clients that
will support their claims…. potentially
there are lots of areas to make claims of
financial value which can be overstated”

10. Challenges reported by
those measuring their impact
• Working with indicators set by funders
• Deciding what data required and which method
• The cost of measurement in applications
• Balancing setting indicators with innovation
• Allowing SEs to use discretion in measurement
• Interpreting (and trusting) the results
• Dangers of comparing the uncomparable
• Encouraging the reporting of smart failure

11. Ensuring trust in approaches
to social accounting
• Search for a common approach but still
competition between approaches
• Use of trusted professionals for social
accounting
• Under- reporting to ensure no loss of
legitimacy and trust
• Auditing procedures – but these are open
to interpretation

12. Conclusions
• Social investment can provide finance for
delivering social benefit …..
• …however it is not a substitute for other forms
of support and capacity building
• What is the gap it is filling?
• Suitable to those organisations that can make a
surplus
• Continued challenges of showing a social return

13. Six questions you should ask
about any impact measurement
1. What indicators?
2. Who was asked?
3. How many people asked or what data used?
4. How has the value been measured? How
monetised?
5. Has it looked at what would have happened
without activity?
6. What reported (and what left out)?