Tag Archives: banks

Are you being served?

The recent state of social enterprise research, by SEUK, The People’s Business has reported that more than ever social enterprises are needing appropriate investment ‘Twice as many social enterprises (48%) as SMEs sought finance in the past 12 months and 39% cited access to finance as the single largest barrier to their growth and sustainability – the most common barrier experienced.’

This mirrors the findings of our work with Social Enterprise Mark holders who cannot access the right resource level for their growth – ‘The median amount of finance sought by social enterprise was £58,000’ – below the minimum thresholds of many specialist social investment vehicles. This supports other research identifying the need for smaller-scale, patient, risky and unsecured lending for social enterprises. David Floyd in ‘That Shrinking Feeling’ provides good commentary on this issue, although he argues that what social enterprises need most is more customers, but I would say it’s chicken and egg, without investment a social enterprise can’t grow to reach its full potential and access new customers.

At last the penny is dropping that social enterprises cannot access the finance they need through social investment channels – but where are the solutions? Indeed, small scale lending where it does exist, is so risky that it has to be backed up by very high interest rates to justify that risk, which puts social enterprises at a double disadvantage – not only do they have to demonstrate social impact, but also, this is not taken into account on the bottom line by the social investment sector, which in turn charges high interest rates to make its own business model work. The social enterprises then become financially uncompetitive with the private sector which can access cheaper equity and do not have to demonstrate social value. This unlevel playing field and to represent certified social enterprises are two of the factors that led me to volunteer for the HM Treasury Working Group on tax relief for social investment in social enterprise and the argument that I put forward for lower than commercial rate of return for investors. I urge all social enterprises to respond to the consultation and share responses with me.

Another investment channel is the banks. The ‘Banks and social enterprise’ article by Claudia Cahalane shows how much banks are courting social enterprises for current accounts but the unsecured lending offers are very thin on the ground. Why is it not possible to look at some kind of blended product from the banks? I know that there are banking rules that have become more onerous, but why can’t banks’ CSR programmes look at working with others to develop a CSR stream that provides such patient capital which does take into account social value and mission? We seem to be looking into a very small box with everyone saying why it can’t be done. Could this be a great publicity opportunity and chance for the banks to put their house in order and demonstrate their social credentials?

Meanwhile the social enterprises will struggle on with no investment and certainly no grants (now a dirty word). The upshot, as David Floyd says, is that we may not be shrinking in numbers, but we are shrinking in size (turnover). Isn’t it time to do some re-thinking? Who will dare to take this challenge on?


Banking on learning the lessons

This week I listened to an interesting investigation into the changes in culture and practice that led to the downfall of the banks.  The presenter talked about the personal relationship that he used to have with his bank manager who agreed loans for his first car and his first home.  He then went on to describe how all this changed when centralisation took place, computers took over and the selling culture became king:

all staff had targets to hit in selling personal protection insurance, which turned out to be mis-sold on a massive scale, but with huge profits for the banks as the margins were so high!

There are now genuine questions about how we got to this position when the model that had worked for centuries was perfectly fit for purpose and was delivering good outcomes for the customer. We moved from a situation where customers knew and trusted their banks and local bank manager, to a situation where they have become big anonymous machines where you can’t talk to a human being, unless they are selling you something you don’t need.

The irony is that the questions about the banking crisis seem to go on in relative isolation to the changes in culture that seemed to have gripped the rest of the public and corporate sector.

I was interested to see in the weekend newspapers that SERCO is now in a favourable position to win a contract to deliver the National Citizen Service in partnership with a number of charities. Although there had been good feedback about the delivery of NCS, there were concerns that current providers were not able to scale up to deliver the contact nationally. 

BUT, what is the cost of scaling up?

Big contractors like SERCO have the infrastructure to put the bid together, but will delivery improve and at what price for the charities involved?  On the one hand we are told that localism is the answer, but then huge national contracts are put together risking just the same pitfalls that the banks have encountered.  The little guys are likely to get squeezed to the point of extinction and once they are gone we can’t go back.

We have moved from a nuanced locally-based approach to a bland, one-size fits all where the customer has very little influence in the process and profit is the driver…. I feel a sense of deja vu.