Category Archives: Economic Thought

Social Finance – a breakfast revelatory…

July 17, 2014Community Economics, Economic Thought, Events, Impact Investment, Social Financebusiness model, community economics, enterprise growth, funding, innovative funding, investment effectiveness, SEEM, social business, social enterprise, social impactThe SocEntEastMIds Team

Investment socially focused... — Investment socially focused…

To the Galleries of Justice in Nottingham this morning, 17th July 2014, for a massive double espresso shot of Social Finance. Two hours of concise advice, proven experience and excitement for a sector under change.

Hosted by our own Roger Moors of SEEM, the assembled audience convened for coffee and muffins at 7.45am, more about the venue at the bottom of this article, all looking forward to a series of key speakers on expanding, developing and capitalising on our growing sector, courtesy of Big Society Capital.

Councillor Nick McDonald – Nottingham City Council:

Cllr. McDonald was delighted to announce to the gathered social finance bankers and intermediaries that the City now had a new Nottingham Social Impact Fund. This new source of funding for the enterprising small business comprises a pot of £1 million pounds, which, argued Cllr. McDonald, coupled to a revised City Procurement Policy, would heavily lean the city towards a paradigm shift in its industrial base, as well as building on existing entrepreneurial energies in the city. A new fund is always welcome for the business sector, particularly at very good rates.

You can discover more about the life and career of Cllr. McDonald here.

Geetha Rabindrakumar – Social Sector Lead, Big Society Capital:

Big Society Capital image — New research, new ideas…

Geetha began by offering the audience a classic definition of social investment, and underscored research that indicates, whilst societal problems will magnify and public sector funding will continue to diminish, it is the social sector, with its thirst for new forms of finance that will drive the sector forward in the next few years.

Underscoring the role of Big Society Capital as a finance wholesaler, Geetha stressed the importance of intermediaries in process, and that BSC will be looking to exhaust its coffers on innovative projects, which give investors their money back, provide a return on that investment and achieve social impact and delivery.

A clear presentation of roles and responsibilities in the sector, now and in the future.

Discover Big Society Capital on-line here.

Sam Tarff – CEO of the Key Fund:

Sam delivered a pacy and detailed analysis of the work of The Key Fund for his audience. Outlining the Fund’s history, but also encouraging intermediaries with the news of the quality of relationships the Fund enjoys, it’s flexibility and pace in moving from application to decision. A refreshing approach in a finance oriented sector, we believe.

The Fund also illustrated how innovative and enterprising communities and individuals can be. Sam offered the audience examples of Fund development clients as diverse as a Therapeutic Comedy Training Academy, a Virtual Human Body for drug testing, community wind farms and and solar photo-voltaic energy installations on community buildings.

The Key Fund deserves it’s key player status as a driver of fiscal energy for projects across the North of England. Discover The Key Fund on–line here.

Peter Ware – Partner at Browne Jacobson LLP:

Peter gave the assembled audience a very informative over-view of Public Sector Mutual’s development. Organisations that move into the social business sector, ofen with existing customer bases and public sector ethics and philosophy.

Reminding us that the sector could see demand for social finance rise to £500 million by 2015, Peter, nonetheless, did not shy away from some of the issues to be wrangled with in creating Mutuals in a local authority setting.

If you have clients looking to enter this business environment, discover Peter’s practice, Browne Jacobson on-line here…

Matt Smith – Fund Manager, The Big Lottery:

Matt explained the heavyweight nature of The Big Lottery, and how it was looking to develop agile, relevant and timely funding solutions in the future, particularly to benefit the social finance sector.

Working across three strategic layers the Fund is looking at how demand, intermediaries and the supply side of funding can all be tempered and flexed to respond to the needs of risk capital with a social mission at its centre.

Find the Big Lottery on-line here…

Richard Nicol – CEO of Midlands Together

Richard gave us a ‘rally cry’ speech, moving across his own initiation into social business, after being a banker for twenty years and finding himself re-tailoring a hotel group in an area of social need.

Raising £3 million pounds, only a year ago, using the social business’s innovative model of housing development, coupled to partnerships in the social enterprise sector to provide training and skills support for ex-offenders.

So successful has Richard’s ministration been that profits are reported, funding need has been reined back, temporarily, and the business is set fair to exceed it’s targets of 15 property renovations undertaken per annum and with 150 clients supported through their training process into employment by the end of this five year bond period.

Midlands Together, using a revision of the ‘Together’ model developed in Bristol, describes its work as property development with a heart. Real asset development, care for people and delivery of profits. We were inspired.

Find out more about this exciting, innovative development process here…

The Venue?

We had our breakfast convocation at the Galleries of Justice in the Lace Market quarter of Nottingham. In the heart of the city’s creative area, this museum, educational service and charity offers a fascinating series of spaces for events.

We met in the courtroom. You can see from the narrative above, all our star witnesses for the defense of Social Finance were sparkling. The verdict? Guilty of enthusiasm and expectation for the future.

If you would like to explore the venue on-line and make contact with the corporate hospitality team, see more here…

Ethical business with a social dimension... — Ethical business with a social dimension…

Big energy Idea – see the winners…

May 2, 2014Economic Thought, Enterprise Start-ups, Social Business Newsbusiness model, energy, funding, Ignite, SEEM, social business, sustainability, winnersThe SocEntEastMIds Team

We recently featured the Ignite Social Enterprise initiative, the Big Energy Idea, which will put over £10 million pounds into the ‘social energy’ sector in the next ten years.

See our original article here.

Below is a short film of the recent Ignite ceremony, where ten passionate and technically informed social businesses won funding and support as the first tranche of winners in the Big Energy Idea.

At the inaugural event held at Centrica’s head offices on 29 and 30 April 2014, the successful Big Energy Ideas were selected. The 10 entrepreneurs will now work with an expert team from the energy sector to raise investment in their ventures in order to grow their companies and scale the social impact of their work.

You can discover more about the winners, and their enterprising ‘social energy’ ideas below…

Brackenburn Ltd is an ethical business established to produce biomass fuels derived from local sustainable resources, primarily bracken,
and to market to domestic customers and public sector, agricultural and commercial users within the region. Read more here…

Energy Box: Based in Soho, Energy Box will deliver a £100 per year cost of energy reduction per household in fuel poverty while employing people from the same communities to manage and maintain the system.

Co-Wheels: Based in North East, UK wide, Co-Wheels is the first registered social enterprise that focuses on making personal mobility accessible for lower income communities while reducing car use. Read more here…

Energise London: In four of London’s 33 boroughs, Energise London operate free energy savings advice helplines and train employees to recognise and address fuel poverty. Read more here…

Energy Solutions Malvern: Based in West Midlands, Energy Solutions Malvern provide renewable energy installations to customers who enjoy return on investments and environmental benefits from a reduction in their carbon footprint. Read more here…

Gower Power: Based in Wales, Gower Power will build solar farms, providing green electricity for households and a local school. Using the
Feed In Tariff income they will grow affordable, local produced food on the farm owned as part of the Co-op structure. Read more here…

GrowUp Urban Farms: Based in London, GrowUp Urban Farms will create urban farms that use sustainable technology to grow food for local communities that lack open spaces in a way that is energy efficient. Read more here…

Health Squared: Based in North Yorkshire, Health Squared sell wood briquettes as a commercial venture for public good. Working with local health partners, their public
good is providing renewable energy to all customers and free briquettes to targeted older peopel to keep them warm. Read more here…

Rekindling: Based in London, Rekindling will support the rehabilitation of offenders by making what would otherwise have been waste wood into bags of firewood and kindling which will be sold commercially.

Sust-It: Based in the South West, Sust-It is a customer focused energy use comparison and
advice website that assists low income individuals and improve energy literacy. Read more here…

It is great to see the vibrancy and enterprise in this newly emergent sector. The project winners are innovative organisations with a social mission, whose work provides change and efficiency both up and down the supply chain.

We wish them well and look forward to the next cohort of Big Energy Idea winners.

Winner narratives for this article courtesy of Ignite

Economics, Education and Unlearning

April 29, 2014Economic Thought, Social FinanceAdam Smith, community economics, economics, enterprise growth, Manchester, Post-crash Economics Society, SEEM, social business, Teaching, Theory of Moral Sentiments, Wealth of NationsThe SocEntEastMIds Team

There is a new movement afoot in the world of business, namely social finance, and a new concurrency in the ethical, diverse and empathetic way that organisations with an appropriate mission are related to, funded and supported. Both from the world view of the consumer, but also the wholesale and retail social finance sector.

There is also a stirring of new thought and sensibility in the world of economics. How it is taught, how it is understood in terms of social impact and how diversity of viewpoint, model and perception should be just as important as rigid neo-classical dogma.

A challenge to the accepted order.... — A challenge to the accepted order….

In the North West of England this new thought is well expressed by the University of Manchester Post-Crash Economics Society (PCES). Their paper Economics, Education and Unlearning is at once a polemic against the orthodoxy of their present academic tutorial staff and system, but is also a proxy for how a new generation of economics graduates will come to see this diversity and system choice in framing new concepts for the future.

Download a pdf copy here…

Much of the PCES paper is a critique of the detailed processes of tutorials and curriculum delivery at the University. However, there is also much to be gained from a reading by those interested in economic thought in the wider context.

The students argue that the sole focus on the neo-classical mode of economic thought leaves all alternative theories and approaches in the void. The students argue in their paper that to be equipped as economists in a world of variety, choice and new model start-ups, then they should be able to abandon the…

elevated economic paradigm, often called neoclassical economics, as the sole object of study. Other schools of thought such as institutional, evolutionary, Austrian, post-Keynesian, Marxist, feminist and ecological economics are almost completely absent…

In the real world it is these shades or degrees of economic thought which so often temper the real aspirations of economic players, at the local, regional, national and now often, international level.

Interestingly, the forward to the paper is delivered by Andrew Haldane of the Bank of England. In it he describes how the Adam Smith concept of the ‘invisible hand’ in Smith’s 1776 book The Wealth of Nations gave us the prime mover of neo-classical economics. That the ‘…pursuit of self interest, at the level of the household or firm, resulted in aggregate outcomes which could be optimal for society as a whole’. The thesis that greed is good, that competition triumphs all.

Haldane’s argument is that for the 21st Century, for a social finance environment, built on an ethical and socially responsible framework, it is Smith’s earlier work, The Theory of Moral Sentiments, published in 1759 that should now become our principal text, ‘…it places centre stage concepts such as reciprocity and fairness, values rather than value’.

Whatever your originating position on economics, from neo-con to Marxist- feminist and all hues in between, we hope you can be persuaded that the students of Manchester, and other centres of learning, have marshalled a compelling set of arguments to amend and redirect the teaching of economics in the U.K. It bodes well, we would argue, to have a new generation of economic thinkers unafraid to mould theory and practice into a many headed fiscal hydra, in order to eat into the economic disenfranchisement and unfair distribution of so much of the world’s population.

We were uplifted.

Profit – not always the point

March 24, 2014Community Economics, Economic Thought, Social Business News, Social Financebusiness model, Harish Manwani, SEEM, social business, TED TalksThe SocEntEastMIds Team

Harish Manwani, the Chief Operating Officer of Unilever argues that values, purpose and sustainability are, should be, key business drivers.

A short journal entry. The film, the words say it all!

Office of Fair Trading, banks and SME’s

March 17, 2014Community Economics, Economic Thought, Social Business NewsBanks, investment effectiveness, Office of Fair Trade, SEEM, social businessThe SocEntEastMIds Team

Banking review SME 2014 cover pic — Moving very, very slowly…

Published a week or so ago now, the Office of Fair Trading update on their market review of banks and their attitudes and approaches to the SME sector makes for interesting reading.

The report notes that the mainstream banking sector has made some positive movements and improvements to their SME approaches, following the 2002 Competition Commission’s investigation into banking practice.

View, print or download the full report from the OFT here.

However, there is much to be concerned about from an SME perspective ‘...the OFT has received concerns about failure to comply with…undertakings, which prevent banks from requiring an SME to take out a Business Current Account (BCA) in order to obtain a business loan (that is ‘bundling’ of BCAs with business loans). The OFT considers that compliance with these undertakings is important as they are designed to help providers to compete effectively in SME banking’.

Even in 2014 the report finds that…

The provision of business current accounts (BCAs) and business loans remains concentrated among a small number of major banks.
Barriers to entry and expansion may be contributing to newer or smaller providers finding it difficult to enter and expand their business across the core business banking products.
SMEs find it hard to differentiate between providers. There are low levels of shopping around and switching, and low awareness of alternative sources of finance.

More troubling is the aspect of the report which cites new, alternative lenders as being hampered in delivering services to SME’s because, allegedly, the mainstream banks are moving at a snails pace when authorising transfers or in waiving security on current loan arrangements for additional alternative lender charges to be rendered.

Two things occur. The notion of ‘level playing field’ is rendered useless in competition terms, and that the openness and clarity of most of the Social Finance sector, given their strong ethical and community focus, shines like a beacon across the current banking landscape.

Read the full Office of Fair Trading Press release on-line here.

The impact of the CDFI

March 14, 2014CDFI, Community Economics, Economic Thought, SME SupportCDFA, CDFI, community economics, funding, investment effectiveness, SEEMThe SocEntEastMIds Team

CDFI 2013 Report cover image — How CDFI delivered…

Inside Community Finance 2013 from the Community Development FInance Association is an illustrative document to frame the current CDFI landscape in the UK. In the report the Financial Secretary to the Treasury, Sajid Javid MP, declares that there is still much to be done for the struggling SME.

On balance, however, the report shows the emergent strength of the CDFI movement and offers a road map for the immediate future, built on its past success.

Download a copy of the CDFA Report for 2013 here.

CDFI’s lending to social ventures in the 2012/13 period makes for positive reading…although more is always better (Ed.) The community development institutions lent £13 million pounds to 204 social ventures, the report tells us, This created or protected 1,900 jobs and represented a 37% increase in lending over the previous twelve month period.

Lending to individuals was equally impressive. CDFIs lent £19 million to some 40,600 people, which diverted 29,000 people from higher cost lenders, and saved over £7 million pounds in interest payments for those individuals.

Interestingly, the report illustrates that Community Investment Tax Relief (CITR), providing a tax incentive for those who invest om accredited CDFIs, was not a major driver of capital growth for the CDFI industry. Perhaps the delivery of the Social Investment Tax Relief scheme (SITR) this year will drive more money in from the cold for social based lending?

You can also gain insights into the reach of the various CDFI initiatives in the document.

In 2013, 93% of CDFI business loan recipients had been turned down for finance by a bank. Fifty seven per cent of loan recipients had previously been unemployed.

The report, in terms of potential reach, also has something interesting to say about the engagement of CDFIs and Local Enterprise Partnerships (LEP). CDFIs are hopeful, that with the roll out of the 2014-2020 European Structural and Investment Funds (ESIF), that CDFI/LEP partnerships can become active and effective.

You can see development and delivery guidance for ESIF here.

At eighty pages Inside Community Finance 2013 is a lengthy document. But it is structured with data, forecasts and case studies that make the CDFI story a telling one. Whether you are looking for evidence of the CDFI impact at local, region, national or European level – there’s something of interest here.

The SME graduate?

March 7, 2014Community Economics, Economic Thought, Enterprise Start-ups, SME Supportbusiness model, enterprise growth, Nottingham Business School, Nottingham Trent University, SEEM, social businessThe SocEntEastMIds Team

Amy Simmons and Emily Ward, two final year undergraduates at Nottingham Business School have just delivered an interesting research paper on …why are so few graduates working in SMEs within the UK?

Having worked in small business in their University placement the researchers had noticed how graduates appeared to be missing from the SME human resource landscape. The SME economic landscape is important. As their research states…

SMEs are the driving force towards the recovery of the economy as they account for 99% of the UK businesses. They also provide 67% of private sector jobs and contribute to 50% of the UK’s GDP.

Their research indicates that SME’s do not understand and have a lack of knowledge about graduates. What are their qualifications worth? What impact can a graduate have on my business? Graduate skills, even from major corporates clearly focus, their research shows, on ‘traditional’ skill sets. Team working and communication, team players required and a strong can do’ attitude.

A key reference in the Simmons and Ward research is the difficulty of actually connecting SME’s with graduates. Private sector ‘soft development’ of business often takes place outside of normal working hours in the UK. Key careers fairs and ‘meet and greet’ graduate events are traditionally mainstream day events.

Overall we warmed to their thesis, and find echoes in our worry about Social Business awareness, which we have written about in the past. How to enable graduates to recognise the Social Business sector as positive career progression path? The Simmons and Ward research seems to indicate that the issue is of an even more fundamental nature.

How to make graduates aware of the SME sector opportunities for dynamic personal and professional growth? Leaning towards social or community enterprise is probably the second, more subtle step to take in our raising awareness campaign?

Discover the Nottingham Trent University web article in full here…

Is the economy broken?

March 5, 2014Community Economics, Economic Thought, SME Support, Social Financebusiness model, community economics, finance innovation, investment effectiveness, SEEM, social businessThe SocEntEastMIds Team

Although it has been around for a month or two now, we thought it was worth revisiting the Transforming Finance film from the pages of The Finance Innovation Lab.

Even at the start of 2014 we are burdened by news of multi-million pound loss making institutions paying multi-million pound aggregate bonuses. The schism between the ‘real economy’ in communities and the netherworld of internal trades in the financial markets is well illustrated in the film below.

The core message of the film is a critique of the current banking environment. Interestingly the voices heard and the opinions expressed are voiced by significant players in the finance innovation sector – what is not heard is the voice of disorganised fiscal radicalism, rather a careful, reflective and pointed analysis of the current financial situation.

The unstated, yet telling counterpoint, to the argument expressed is a positive acclamation of the Social Finance sector. The notion of financial institutions trading with each other, the making of money out of money, seriously impedes the fiscal health of communities and small business.

The delivery of innovation, profit and community welfare in the broadest economic sense is not impossible. We heard about it in this film.

Discover the Finance Innovation Lab here.

The money illusion – explanations

November 6, 2013Community Economics, Economic Thought, Explanations, Social Financecommunity, economics, Irving Fisher, money illusion, SEEM, social businessThe SocEntEastMIds Team

Illusion image — Thinking about money and society

Put simply money illusion is the propensity to respond to changes in money magnitudes as if you were were responding to changes in real magnitudes.

For example, if we increased your income by 100% from now, but also increased the cost of all the goods and services you used or purchased by 100%, and you were already buying the optimum goods or services for your needs, then you could go on acquiring these at previous rates of consumption. (Any goods or services that you previously couldn’t buy, you still could not afford).

However, the money illusion, in essence, is when your income rises and you ‘feel’ richer, consequently you purchase more luxury or non-standard goods or services because of that feeling and purchase less of the staples you previously bought.

Individuals fail to grasp that their real income has not risen. (Your real income is measured by dividing your money income by an appropriate and consistent index of prices…see below…).

You can see therefore in mainstream economic practice that the banks ability to quite literally print money, to increase it’s own money magnitude at will – remote from real lives and economic behaviour, or for an individual to regularly value and revalue their property portfolio on a rising market, can lead to financial disaster for the individual.

The economist Irving Fisher deliberated long and hard about the high value of stocks immediately before the 1929 Wall Street crash, ands produced many of the indices of value that we still use to measure, or second guess, market ‘fluctuations’ today. This thinking has not prevented economic juddering in recent decades either.

We would wish to argue that a rational social economy, based on business outputs that are focused on social outcome, not individual wealth or shareholder value as a predominant driver, are one way to counterbalance the money illusion.

Taking out the thirst for dis-proportionate personal wealth and dedicate outputs to a wider social good – replacing the feeling of ‘riches’ for the feeling of ‘community’ – is a perfect way to achieve a new economic equilibrium.

Boost the social business market, starve the illusion!

Explanations is an occasional Mining the SEEM piece to explain economic and financial thinking in a clear and understandable way. If you have a term to be explained, or even to tell us when we haven’t been clear, then contact the Editor at Mining the SEEM and let us know.

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