Charities wary of social finance

The results are in from an Imagine Canada survey on social finance for charities – and unsurprisingly, it turns out that it’s not going to work for a lot of charities.

Social finance is basically like getting a loan from someone who likes what you’re doing but still wants to be paid back. “The key difference is that social finance is intended to be easier to access and repay, and charities will be expected to use the loan to deliver a social, cultural, and/or environmental impact,” says Imagine Canada in this infographic.

But how do non-profits with tenuous and notoriously short-term revenue streams and a constantly changing financial situation take on debt? And how do mission-driven organizations that in many cases are working in areas that don’t readily show rapid “results” produce the hard evidence that investors want as proof that their money is funding social good?

And therein lies the problem.

As the findings make clear, one in five charities face barriers to even being approved for a loan, and even more show “weakness in abilities” important for accessing and repaying social finance. Of course they do – charities run on grants, contracts and fundraising, none of which allow us to spend money paying off loans.

Only 28 per cent of those surveyed “consistently and persistently generate an operating surplus.” That’s hardly surprising either, given that they call us non-profits specifically because our goal is to spend every penny we have on the causes we’ve committed to in our missions, not generate a profit.

Only 38 per cent of the charities responding even have a credit card. Only 28 per cent “draw on existing assets when needed.” Twenty per cent don’t even have assets.

We’re particularly puzzled by the conclusions in the infographic, which seem to be suggesting that what needs to happen is more training and skills development so that charities will understand and embrace social finance. Mightn’t it be better to provide them with more stable and consistent sources of revenue to do the good work they do?

Another conclusion is that more charities need to start earning their own income. But if they are expected to figure out how to earn money to realize their missions, isn’t that basically just pushing the responsibility for social care straight onto charities and away from governments?

More questions than answers! Here’s the infographic – what do you think?