What if there was a way for charities to borrow money at more affordable rates? What if, with just a little help, charities generating an income could use it to finance growth? What if the government could see that a small financial subsidy into social investment could be a key lever in delivering its social policy agenda? This approach exists. It’s called blended finance, and it involves subsidising loans to make borrowing more affordable. Since 2015, Access: The Foundation for Social Investment has blended grants with loans to subsidise social investment. At NPC we recently completed an independent review for the Department for Digital, Culture, Media, and Sport (DCMS) into the use and effectiveness of this subsidy into blended finance for voluntary organisations, charities, and social enterprises (VCSEs). Our findings show just how effective it has been, which is why we’re recommending that the government continues to subsidise social investment through blended finance. In doing so, the government can deliver its policy goals by giving charities and social enterprises access to the investment they need to help the people and places who need it.

How does blended finance work?

Blended finance involves a third party subsidising a loan to make it more affordable for investees and less risky for investors. It therefore helps meet the demand for investment from VCSEs who otherwise wouldn’t be able to afford it, and it helps attract investors who otherwise wouldn’t be willing to lend to those organisations. Blended finance can get a lot more complicated, but its aim is almost always to support the growth of VCSEs who have enough income to take on investment as long as it is not too expensive to pay back.