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BANKING

Social enterprise funding: Fallow deposits may bear fruit

By Zach Fuchs

For all its boldness, the idea is quite simple. Round up all the assets lying fallow in abandoned UK bank accounts and create from them an independent financial institution to drive growth in social enterprise.

The social sector, comprising private enterprises working to better the community, suffers from chronic undercapitalization. Social enterprises are averse to borrowing but lack the profit stream that would make equity financing attractive. How to bridge the financing gap?

Enter the Commission on Unclaimed Assets. The independent body chaired by Sir Ronald Cohen, the Apax venture capital legend, has busied itself with the question of what to do with the hundreds of millions of pounds trapped in the UK’s dormant accounts.

With a nod from the UK Treasury, the commission has proposed the creation of a Social Investment Bank whose capital would be drawn from the dormant accounts – leveraged to perhaps £1 billion or more.

Funding streams

“What the community sector needs is differentiated financial instruments and a sustainable funding stream for the long term,” says Bernie Morgan, chief executive of the Community Development Finance Association. As an adviser to the commission, she was able to hint at how exactly the Social Investment Bank could mobilize capital for the sector.

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