Social Finance is a not for profit consultancy organisation that partners with governments, service providers, the voluntary sector, and the financial community to find solutions to social problems. They focus on tackling issues that affect people in the UK and beyond. Their projects address issues such as income inequality, poverty, and climate change. They also help organisations to secure financial resources for their projects.
Their Pay for Success model is one example of an effective social finance program. It helps low-income individuals find jobs through training at the Jewish Vocational Service. In 2011, the Boston Foundation provided Social Finance with $250,000 for the initiative. The Foundation has funded a wide range of nonprofits and businesses that are using catalytic capital to improve the lives of people in need.
Unfortunately, social enterprises often lack access to capital. While some social enterprises generate enough profit to be funded by investors, many cannot. This is largely due to a lack of market mechanisms that evaluate social risk and return. The financial-social return gap can deprive good organizations of funding and leave investors with no choice but to focus on financial returns.
However, social finance has the potential to deliver acceptable returns to financial markets. In fact, many investors are now interested in making later stage investments. While many investors prefer to invest in later-stage companies, social enterprises need early-stage capital to grow and become financially viable. Additionally, some companies need financing while they are developing their business models.