The social enterprise is a business model that is growing in popularity, with some agreed elements, as in the following definition. "Social enterprises are revenue-generating businesses with a twist. Whether operated by a non-profit organisation or by a for-profit company, a social enterprise has two goals: to achieve social, cultural, community economic and/or environmental outcomes; and, to earn revenue."
Unsurprisingly, it is a model that is popular in Scotland, where enterprise of all kinds flourishes. "There is strong political and economic support for social enterprise in Scotland. Scotland has created a world-leading ecosystem of support. It has created the conditions where Scottish social enterprises can thrive. It has also given rise to a growing number of social enterprises with an international outlook and impact." The Scottish government felt, though, that it needed to create a formal vehicle for that political and economic support.
The chosen vehicle for this support was Social Investment Scotland (SIS), which was set up in 2001 by the Scottish government with the participation of four banks, each with a close relationship with Scotland. "SIS was established in 2001 to provide a new finance model for Scotland’s charities and social enterprises." It is itself a charity. "SIS is a charity and social enterprise that provides loans to other charities, social enterprises and community groups across Scotland. They provide funding for social enterprises by borrowing money from a variety of sources, and lending it out at affordable interest rates."
The objectives of the SIS are many and various. "Promote the advancement of citizenship and community development within Scotland and elsewhere for the benefit of the public by supporting the social sector, and in particular widening access to funding for the social sector, identifying needs in the social sector, providing and developing and/or assisting in the provision and development of support and advice for the social sector, all with a view to developing capacities and skills, in improving the financial sustainability and maximise the contribution of the social sector to society."
Since 2008, SIS has acted as the fund manager of the Scottish Investment Fund – the largest social fund in Scotland – on behalf of the Scottish government. In September 2013, "SIS launched its new five-year strategy – A Framework for Growth – which set out a series of commitments for the organisation, grouped within five main themes, aimed at connecting more capital with communities".
The public impact
The mission of SIS is "to connect capital with communities; to make a real, measurable and sustainable impact on people’s lives". So, what impact has it achieved so far? "Since 2001, they have invested over £53 million in over 237 organisations across Scotland, and continue to manage the largest social enterprise fund in the country.” Projects that have benefited from the funding are worth in excess of £60 million and tackle a range of social issues, including employment and training, healthcare, arts and culture and the environment.
This investment is across a number of sectors, such as arts and culture, employment and renewables, while "26% of SIS’s beneficiaries live in the 0%-15% most deprived areas of Scotland... SIS customers are active in all 32 local authorities... SIS has invested in 27 local authorities". Over a million people have benefited from the activities of SIS grantees, while "its activities have helped create 363 jobs and sustained 3,120 jobs".
Public Confidence Good
SIS has commissioned FMR Research, an independent social research consultancy, to conduct an annual social and economic impact survey and analyse its findings. The results of the survey for 2016 indicate that a large proportion of SIS’s customers believe that the organisation has made a significant difference to their capacity to develop social enterprise projects. However, some also believe that SIS's interest rates are too high, and there is inflexibility over these rates. "The Social and Economic Impact Survey conducted by FMR Research in behalf of SIS had a response rate of 98%, and SIS customer service received an average mark of 8+ out of 10. The results of the survey indicate that:
- "59% of the respondents had already recommended SIS to another organisation
- "64% of the respondents said “SIS Investment had made a significant difference to what they were able to do.
- "77% of the respondents believe SIS staff are friendly and helpful, 68% trust SIS and have an open and honest relationship with them
- "41% said interest rates were too high, while 20% said there is inflexibility over interest rates."
Stakeholder Engagement Good
The key stakeholders in the conception and subsequent functioning of the SIS were the Scottish government, which is the main national stakeholder, and the five commercial banks that provided capital for its establishment: the Bank of Scotland (HBOS), the Clydesdale Bank, the Cooperative Bank (which joined the consortium in 2009), the Royal Bank of Scotland, and the Trustee Savings Bank. “The Scottish government, as well as other support bodies within the third sector were also actively involved in our conception.”
There are a number of third-sector funding organisations that are closely involved with SIS, such as Social Growth Fund LLP and Big Society Capital. SIS has also received support from the European Commission (EC), as in the 2014 project, Investing in our Future, which "enabled [SIS] to reach over 750 participants at wide-ranging events and engaging with a range of stakeholders including government, enterprise development agencies, corporates, potential investors and of course social enterprises themselves". Such projects are part of an overall strategy whereby "SIS regularly conducts events and workshops to raise awareness about social investment and impact".
The Scottish government has aimed to extend social enterprise throughout the country and is thus building this strategy in partnership with Scottish Development International, Scottish Enterprise, Highlands and Islands Enterprise, and other representatives from the social enterprise movement in Scotland. The involvement of the British Council is part of the aim to internationalise social enterprise and create an outward-looking approach.
Political Commitment Strong
The SIS was established by the Scottish government, along with the main commercial banks of Scotland, so there has been strong commitment to the venture at national level. "There is strong political and economic support for Social enterprise in Scotland. Scotland has created a world-leading ecosystem of support. It has created the conditions where Scottish social enterprises can thrive. It has also given rise to a growing number of social enterprises with an international outlook and impact."
The government has thus created an ecosystem in which social enterprises can thrive. "The Framework for Growth (2013-18) has been developed using this as a foundation. SIS is committed to using investment capital proactively to create positive and sustainable social impact, supporting organisations, whatever stage they are at in their journey, to unlock their full potential using appropriate, impact-led investment."
This commitment is indicated by support from politicians within the Scottish Parliament, as in the motion from 20 September 2016. "Celebrating 15 Years of Social Investment Scotland - That the Parliament congratulates Social Investment Scotland (SIS) on its 15th anniversary; understands that SIS is Scotland’s largest social enterprise fund and that it has invested more than £4.3 million in over 50 organisations across Scotland in the last year; notes that SIS has partnered with Asda and has launched the Asda Social Enterprise Supplier Development Academy, which continues to allow SIS to invest in early stage social enterprises; believes that SIS’s support to local communities is welcome, and wishes it every success in the future."
Clear Objectives Good
The objectives of the organisation were set out at its inception (see The initiative above) and have been held consistently since its inception, being broadly to connect capital with communities. "The sole focus of SIS is to support growth in Scotland’s communities by providing a range of financial products. Currently, it is supporting local job creation, community engagement and economic development in almost every city, town and region nationwide."
In defining its mission, SIS specifically stated that the qualitative outcomes of the objectives could be measured: "to make a real, measurable and sustainable impact on people’s lives". The amount of capital invested (see Public impact above) is the most tangible quantitative measure, but this does not in itself guarantee that the objectives are met.
In order to maintain this focus on its objectives, SIS publishes an annual report to assess the general social and economic impact of its work, the latest being the Social & Economic Impact Report 2016. It has also commissioned an annual survey to assess the public's perception of its work (see Public confidence above).
No evidence is available on the Scottish government consulting similar existing organisations around the world, or rolling out policy pilots before establishing SIS.
The financial feasibility of SIS was initially guaranteed by the involvement of the country's major banks. "We were established in 2001 by the Scottisgh Government and the main commercial banks who each provided capital: RBS, Bank of Scotland, TSB [and] Clydesdale. In 2009 further capital was provided by the Co-operative Bank." It also receives injections of capital from other sources for individual projects, for example an initial grant of €65,227.20 from the European Union for a 2014 project (see Stakeholder engagement above) with a final grant of €59,476.38.
SIS has a strong senior management team with relevant backgrounds in community banking and accountancy as well as social enterprise and community development financial institutions. "SIS is supported by a strong board and chair, who come from diverse backgrounds, holding a wealth of experiences. Their passion for SIS's impact across Scotland’s communities unites them. In addition, they have six patrons who have supported SIS over many years."
They also have an experienced team to manage the funding side of the organisation. "SIS has an investment team with diverse investment, managerial and entrepreneurial experience, enabling it to work closely alongside the portfolio of companies SIS invests in to help them thrive and grow."
SIS's annual Social Impact Report provides a summary of its investments and impact. The highlights cover a variety of criteria such as the amount invested, the number of investments issued the number of new customers, the number of loans issued, interest income and year end balances in each financial year and since its inception in 2001.
SIS also commissions outside organisations to measure its performance. "In 2016, SIS was the first Responsible Finance provider in the UK to undertake the comprehensive, third-party credit rating assessment by Aeris." Its commission of FMR Research to conduct a social and economic impact survey is described in Public confidence above.
SIS is well aligned with its financial stakeholders, the five banks which have been involved with the organisation since the start. It has strong political and economic support from the Scottish government and parliament, and from the EC. It has good relationships with local government and local communities, as well as with the wider social investment sector, as in its links with Big Society Capital.
Equally importantly, it has excellent relations with the organisations that it is funding, for example in amateur football. "An example of this is [SIS's] relationship with Spartans Community Football Academy, Scotland's best known amateur football team, which includes a community football academy as a social enterprise. Last year, when the Spartans applied for a second tranche of investment from SIS, we worked alongside them to produce plans for the second phase of their development, introducing them to complimentary funders who were able to provide monies. Because of our relationship, further investment progressed quickly and easily based on simple, though comprehensive, financial information."