Finance for the Social Economy in Northern Ireland

1. Finance for the Social Economy in Northern Ireland Colin Stutt

2. Our Team • Dr Brendan Murtagh (QUB) and myself • Belden Daniels of Economic Innovation International Inc. of Boston, Massachusetts • Professor Peter Lloyd • Adviser to DTI and the European Commission on the social economy • Local, US, UK and EU best practice

3. Overview of Work • Review of what happens elsewhere • UK & Ireland • US • Survey of 176 social economy organisations • Replicating Bank of England survey of 2003, which covered 200 companies and did not include Northern Ireland • Seminars, workshops, interviews, conversations • Highly interactive

4. Main Findings • Northern Ireland social economy organisations are smaller on average and more grant dependent than their English counterparts but more of them expect to have to increase borrowings in the next few years • Bi-polar distribution of turnover and employments • Lots of relatively young, small organisations • 87% have 10 or fewer employees compared to 53% in England • Few mid size • Smaller number of very well established older organisations often with substantial assets

5. Phase 1 Conclusions (ii) • There is a lack of a clear concept of the sector • Within the sector and outside it • Characterised by lack of debate on key issues and a need for dialogue to enhance mutual understanding • Northern Ireland has most of the kit needed for social economy finance • UCIT, CFNI, Aspire, Credit Unions, Housing Associations • Large, asset rich social economy organisations with strong banking track records • But the various resources are not working together as a system – they are funding projects in isolation • Established social economy organisations can bank on their track records • Its much more difficult for start up social economy organisations • But, do we need more social economy organisations or should we be consolidating and building up to scale those which we already have?

6. Phase 2 Work • Application of BRIAN, a social economy diagnostic tool • Helping to articulate both the social and the business effectiveness of social economy organisations • Supply side work • Establishment of sector-led working groups on • Patient capital • Local bonds to fund local social economy work, and • Centre of excellence on finance for the social economy in Northern Ireland

7. BRIAN

8. 4 Northern Ireland Social Economy Organisations

9. International Perspectives • Our international experts point to Northern Ireland itself as the best practice region of reference, in terms of the policy framework and structures in place and aspects of the financial support for the social economy • The sector in Northern Ireland has considerable resources • Credit Unions • Housing Associations • Enterprise Agencies • Urban and rural development groups • North American best practice is evident in our social economy finance institutions • Ulster Community Investment Trust – financing the social economy • Aspire Micro-Loans for Business Ltd. – providing finance for micro-businesses in areas of disadvantage

10. Formal Findings and Recommendations

11. Findings & Recommendations • No general market failure • Social economy organisations not disadvantaged compared to comparable for profit businesses • Established social economy organisations with track record can receive more favourable treatment than for profit businesses • New social economy organisations face difficulties in accessing finance comparable to other new businesses • But except in relation to community businesses there is no overall policy rationale for new social enterprises • Recommendation that actions should focus on training management of social economy organisations on financial and related issues, networking, mentoring, secondments and development of bank/CDFI links

12. Findings & Recommendations (ii) • The existence of large mature, asset rich social economy organisations in Northern Ireland means that time might be right to apply US double bottom line approach in Northern Ireland • Recommendation that a study should be commissioned • There is more organisational rigidity in social economy organisations than in comparable private firms • Recommendation that InvestNI should work to increase organisational flexibility and sharing of resources • Demonstration project between UCIT and Aspire on how they can share resources • We don’t generally need new social economy organisations, we need to strengthen what we have • Recommendation that future EU support to sector should focus on helping existing social economy organisations to make the transition to market based funding and on strengthening the regional infrastructure of support for the social economy

13. Findings & Recommendations (iii) • We have considerable resources for and in the social economy but they do not work together as an effective, integrated system • Recommendationfor a set of actions to improve functioning of the system - 3 Sub Groups are already in place to devise new, joint approaches to patient capital, local bonds and the development of a sector-led centre of expertise on finance for the social economy in Northern Ireland • Opportunities for the sector to fund its own development are not being realised either at local or regional level • Recommendation for a series of workshops to improve mutual understanding and examine scope for mutual funding • Difficulty in articulating the social impact of social economy organisations • Recommendation commission a review of the range of indicators for the social economy, to better articulate both the business and the social impact of social economy organisations; such a review to include the diagnostic tool BRIAN

14. Conclusion • The social economy is a successful sector in Northern Ireland • Providing real opportunities for further development • Northern Ireland is unique in having a structure such as the Social Economy Forum • The Steering Group which oversaw our work provided a partnership basis for addressing joint issues • In the Report our first recommendation is that a Joint Implementation Group, drawn from the social economy and from Departments, should be established to oversee the implementation of our recommendations • Providing another illustration of the benefit of working together to address joint issues and problems and ensuring that the strategy is jointly owned by the sector, not imposed on it • There is the opportunity to add considerably to the strength and vitality of the sector and to develop an exportable strength in the management and financing of social economy organisations

15. Reflections from US Study Tour

16. Findings from Our Journey • Some of the specifics of the US experience is not capable of transfer • e.g. some of the deals levered by specific tax credits which we just do not have • Although there is a start to tax credits in the UK, we have little experience in using the credits and the market is very immature • However, the fundamentals are very transferable • Strong projects based on sustainable market-based cash flows • Market based disciplines, not public administration of grants • Development and transfer of skills in the sector • Specialisation and collaboration, rather than competition in the sector

17. Comparative Reflection • The projects are much the same • Except that housing tends to be dealt with through different structures • We have recognised the need to integrate housing into our community finance structures • We have much of the kit • An effective commercial banking sector, willing to invest in bankable projects in the sector • Many CDC-equivalents with substantial unencumbered assets • In UCIT a specialist double-bottom line fund • In Aspire an outstanding micro-finance fund with potential to evolve into a leading business investment fund for inner cities • But we are not yet sparking real change • Continued operation of the grant economy • But coming to an end • Lack of strong experience – we are making a start • Failure to work as an integrated, effective system for community investment

18. Proposed Approach • Coalitions-based approach • Making much better use of the institutions which we already have by developing the habit of working together • Comparable with objectives of the Alliance for Economic Development • Learning from best practice • Integrating best practitioners • Integrated

19. Alliance & Coalitions A regional alliance for community investment

20. Alliance & Coalitions Community Empowerment Coalition A regional coalition or alliance for community investment

21. Alliance & Coalitions Community Empowerment Coalition A regional coalition or alliance for community investment Fund Development Coalition

22. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Alliance & Coalitions A regional coalition or alliance for community investment

23. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Alliance & Coalitions Policy Environment Coalition Community Empowerment Coalition A regional coalition or alliance for community investment Fund Development Coalition

24. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Alliance & Coalitions Policy Environment Coalition Community Empowerment Coalition Interaction with government, communities, the private sector and local leaders to increase knowledge & understanding of community investment across Northern Ireland Fund Development Coalition

25. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Alliance & Coalitions Interaction with government, communities, the private sector and local leaders to increase knowledge & understanding of community investment across Northern Ireland Policy Environment Coalition Community Empowerment Coalition Constant iteration and evaluation on basis of results and evolving best practice in Northern Ireland and internationally Fund Development Coalition

26. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Alliance & Coalitions Interaction with government, communities, the private sector and local leaders to increase knowledge & understanding of community investment across Northern Ireland Policy Environment Coalition Community Empowerment Coalition Constant iteration and evaluation on basis of results and evolving best practice in Northern Ireland and internationally Fund Development Coalition Clear time-bound action plans for each coalition and for the overall alliance

27. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Alliance & Coalitions Interaction with government, communities, the private sector and local leaders to increase knowledge & understanding of community investment across Northern Ireland Policy Environment Coalition Community Empowerment Coalition Constant iteration and evaluation on basis of results and evolving best practice in Northern Ireland and internationally Fund Development Coalition Clear time-bound action plans for each coalition and for the overall alliance Developing international alliances

28. Policy Environment Coalition Community Empowerment Coalition Fund Development Coalition Coalitions Interaction with government, communities, the private sector and local leaders to increase knowledge & understanding of community investment across Northern Ireland Policy Environment Coalition Community Empowerment Coalition Constant iteration and evaluation on basis of results and evolving best practice in Northern Ireland and internationally Clear time-bound action plans for each coalition and for the overall alliance Fund Development Coalition Developing international alliances Aiming to be the European best practice region.