Community: trade not aid can regenerate inner cities

Interest in the community

A new type of ‘community interest’ company has been created, bringing together voluntary sector expertise and private sector entrepreneurialism, it was announced by the government on March 26. Community Interest Companies are designed for enterprises that want to use their profits and assets for the public good. CICs will report to an independent regulator on how they are delivering on their commitment to delivering benefits for the community, and how they are involving their stakeholders in their activities. A consultation on the subject is currently open, and will close on June 18. Contact Patrick Barry, DTI social enterprise unit, on 020 7215 5000 (http://www.dti.gov.uk)

CDFIs are a big issue…

The Bank of Scotland‘s community banking arm is to invest in a new £10m social development loan fund, launched by The Big Issueon March 25. The fund will invest in community development finance institutions, large social enterprises and development trusts, and will take advantage of the five per cent community investment tax relief introduced on January 23. The scheme is one of the first community development finance institutions to be accredited under the new tax break system. The group, which comprises of eleven organisations, will now be able to offer private investors a tax relief of five per cent for five years. They also include PRIME, which specialises in assisting the over-50s to start new businesses, and the London Rebuilding Society, which provides finance to social entrepreneurs in inner-city areas. Contact Sarah McGeehan, Community Development Finance Association, on 020 7357 7356 (http://www.cdfa.org.uk)

…big answers

The Big Issue is also involved in a social sector fund, working in partnership with Catalyst Fund Management & Research, which aims to invest £50m in businesses that produce a social return as a by-product of their operating activity. The advisory board of the initiative, announced on February 28, includes the founder of The Big Issue, CIO of Catalyst, CIO of Morley Fund Management, the cofounder of Planet 24, the co-founder of The Body Shop, and the deputy chairman of Morgan Stanley. Contact Jo Fox, Catalyst, on 020 7747 8642 (http://www.catfund.com)

Fresh business

Clifford Chance, KPMG, PricewaterhouseCoopers, Merrill Lynch, Bloomberg and Deloitte & Touche are contributing to a new initiative from the Prince’s Trust which aims to support around 1,000 young entrepreneurs around the UK, it was announced on March 14. The Prince’s Trust, which is recognising corporate donations to the Enterprise Avenue scheme with the planting of a row of trees along a London street, aims to raise £3m through corporate donations. The Royal Bank of Scotland, meanwhile, celebrated UK entrepreneurship as sponsors of the Business of the Year awards, announced on March 19. The support is part of the bank’s three-year, £10m partnership with The Prince’s Trust, which includes a £6m loan to support long-term funding for 18-30 year olds facing challenges to raise the capital to start their own businesses. Contact Sarah Barclay, RBS, on 0131 523 5659(http://www.royalbankscot.co.uk); Rachel Faulkner, The Prince’s Trust, on 020 7543 7411 (http://www.princes-trust.org.uk)

Social upstarts

Centrica sponsored the New Statesman 2002 Upstarts Awards, announced on March 12, which aim to reveal the stars of social enterprise and spread the idea ofsocial entrepreneurs as a dynamic force for change. Award recipients included Liam Black, chief executive of the Furniture Resource Centre Group, for success in expanding his Liverpool business into a social enterprise with a £7.5m turnover. (See Briefing’s interview on page 25; for a full transcript, go to http://www.ccbriefing.co.uk)

The Ethical Property Company took the award for Best revenue model, recognised for its very innovative approach to the issuing of shares to expand their growing portfolio of commercial property. Contact James Cully, New Statesman, on 020 7828 1232 (http://www.upstarts.org.uk)

Inner city life

Entrepreneurs in deprived parts of London can access up to £10,000 toward the costs of developing their business and management skills, through a £1m fund launched by Inner City 100, the Development Agency and the New Economics Foundation on February 26. The Inner City entrepreneurs fund is designed to give inner city businesses the opportunity to access courses to increase their knowledge and skills. Inner City 100 is supported by The Royal Bank of Scotland, NatWest and the Financial Times. Contact Jessica Bridges-Palmer, on 020 7089 2856 (http://www. theinnercity100.org.com)

UK bites from Big Apple

Businesses are being invited to partner with councils to solve local problems, as part of a new government initiative to promote New York-style town center revitalisation schemes in the UK. Business improvement districts will aim to improve city centres, attract new business and encourage people to remain in urban areas. The government claims the districts will deliver measurable benefits to businesses, such as increased customer levels, lower costs as a result of better security and higher asset value for retail property. BIDs will be in operation from April 2004. A formal consultation on draft guidance for business and councils will be held later this year. Contact the Office of the Deputy Prime Minister on 020 7944 3042 (http://www.odpm.gov.uk)

Opening the account

The Bank of Scotland is working with the charity, Community Links, to provide bank accounts for low-income families in Newham, London. Through the partnership, the Bank of Scotland’s community banking unit has formed an agreement with branches of the Halifax in Newham, to enable families applying for tax credit to open a basic bank account. At present, one in ten of those eligible for a new child and working tax credit, which is currently being piloted in this London borough, do not have a bank account. The Bank of Scotland hopes the London partnership will kick-start the rollout of community banking agreements throughout England. Contact Alastair Ross, Bank of Scotland, on 0131 243 7055 (http://www.bankofscotland.co.uk)

in brief

A coalition of organisations ranging from Shelter to the National Federation of Retail Newsagents is working together to fight the perceived threat of “ghost town Britain”, supporting the Local Community and Sustainability Bill, presented to Parliament on March 12. Contact Molly Conisbee, NEF, on 020 7089 2800 (http://www.neweconomics.org)

Comment: communities: trade not aid can regenerate inner cities

May 01 2003

by Briefing staff

Echoing the appeal of the developing world, the UK’s inner cities are turning to social enterprises, with growing support from the UK government

Last summer in the pages of Briefing, Andrew Robinson, one of the pioneers of community loan financing in the UK, appealed for CSR professionals to wake up to the potential of the new Community Tax Investment Credit and urged them to support community development finance institutions in applying for accreditation. Today the wait is over and we repeat the call – assuming, that is, anyone can make sense of the jargon.

Try this: some community projects can earn money while providing a social service – running a launderette on a no-go council estate is the classic example. Like any business, such social enterprises need funds to finance their operations and can afford to repay a loan with interest out of their profits, if only they could persuade someone to invest. Step forward CDFIs, who can now offer tax relief at 5% pa for five years to people and institutions willing to entrust them with funds. In a parallel move, the government hopes that changing charity and company law to allow for ‘community interest companies’ will make it easier to set up social enterprises in the first place.

The basic proposition can’t be faulted. Community projects are more sustainable if they can be selffinancing. If eventually repaid, loans rather than grants allow funds to be reused and so expand the total resources available. The business disciplines on funder and recipient alike result in clearer goals, tighter management, stronger performance monitoring.

Evidence from the United States, where the idea originated, bears some of this out. However, although the sector is proportionally three or fours times bigger than the UK, loan development finance hasn’t taken off big time among companies. One reason is that, banks aside, ordinary companies are better at giving money away than lending it. Nonetheless, we think this is a challenge for community affairs managers to seize. It will require new skills and a change in mindset. Looking ahead, we expect most companies will retain their existing three funding streams – pure donations, strategic win-win community partnerships and access to marketing budgets for CRM – and add a fourth, namely loans to CDFIs. For some time, CCI managers have talked about “community investment”, not contributions. The prize in all this is to make a reality of these investment claims.