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Patient capital delivers strong returns

9 July 2009
by
Social Enterprise reporters

'These findings show that by engaging in social enterprise community-based organisations can become more sustainable, and help create a thriving civil society fit for the 21st century'

Stephen Thake, reader in urban policy at London Metropolitan University

Community enterprises in receipt of patient capital are outperforming charities dependent on traditional philanthropy, according to an independent evaluation published today.

The research, undertaken by a team at London Metropolitan University, examined the impact of the Adventure Capital Fund (ACF), which was set up in 2002 to offer patient capital to community enterprises to help them develop new income streams.

The patient capital investments offered by ACF consisted of a combination of low-interest loans, grants and business support. The investments also enabled many organisations to repay loans in the form of social returns, such as the number of jobs a particular enterprise had been able to create or safeguard.

The evaluation found the gross income of organisations supported by investment from the ACF had grown by 160 per cent over the course of their investment period, compared with just 19 per cent for traditional charities over the same amount of time.

The research also revealed the investments had boosted the investees' reserves, assets and organisational capacity, enabling them to withstand pressures from the economic downturn and the decline in grant funding.

But the findings suggested many community organisations would need continued grant funding in order to develop social enterprises capable of generating sustainable income.

The authors warned that the shift towards large scale contracts by local authorities would stifle many organisations' attempts to develop social enterprises.

Stephen Thake, reader in urban policy at London Metropolitan University and leader of the evaluation team, said: 'These findings show that by engaging in social enterprise community-based organisations can become more sustainable, and help create a thriving civil society fit for the 21st century.

'However, it is not easy. Although access to capital has improved, it appears that the revenue income of community-based organisations has been squeezed by a reduction in grant funding coinciding with a shift by public sector commissioners towards larger service contracts.'

The evaluation report can be downloaded at www.adventurecapitalfund.org.uk

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Earlier proof of concept

Submitted by Jeff Mowatt on 9 July 2009 - 5:52pm.

The term 'Patient Capital' comes from Acumen fund established in 2001. Earlier in 1999 a proof of concept project in Russia was able to establish similar indicators of performance. When the pilot ended in 2004, and P-CED established in London, its founder described the achievements in an interview with a diaspora leader. The microfinance bank run by Finca now registers 5 diamonds on the Mixmarket scale.

http://www.iccrimea.org/scholarly/economicdev.html

Continuing from the UK to leverage a national scale implementation in Ukraine, the 2006 microeconomic 'Marshall Plan' proposing an investment fund for social enterprise, was influential in persuading USAID to launch the East Europe Foundation late in 2007 where it now promotes CSR and supports sustainable community enterprise.

http://www.p-ced.com/projects/ukraine/national/

Jeff Mowatt
People-Centered Economic Development

p-ced.com
people-centered.net