A new financial institution set up by the UK government to replace funding to charities with lending them money that they will be expected to pay back has been launched today.
Big Society Capital has £600m, of which the majority comes from unused cash in bank accounts that the government have decided now belongs to them.
The remainder of the money within the scheme will be provided by organisations who are well known for their selfless genorisity such as Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland.
The scheme, which has been set up after a number of charities have been forced to close because their funding stopped, will back social enterprises that prove they can repay an investment.
Big Society Capital
Venture capitalist Sir Ronald Cohen, who is Big Society Capital’s chairman, said, “Making money is significantly more important than giving it away,”
“The main criteria for lending money will not be the kind of charity work that is being undertaken, but whether or not we’ll get our money back.”
With government cuts to charity funding estimated to be in the region of £5bn, questions have been raised as to the overall effectiveness of the bank.
Dan Corry, chief executive of New Philanthropy Capital, questioned how charities that don’t generate any revenue would benefit from the scheme.
“It’s pretty much like to trying to stop a 10-pint piss with a spaghetti hoop,” he explained.