ropea
2. Los múltiples actores implicados, con especial referencia a la Unión Europea
As we noted in Section 3.1 the Bank of England’s May 2003 report on the Financing of Social Enterprises found that
‘Demand for debt finance among social enterprises is limited both by the availability of other, cheaper forms of funding such as grants and by a cultural aversion to the risks associated with borrowing.’
Our survey evidence in Section 3.2 showed that the scale of grant dependence in Northern Ireland is considerably greater than the Bank found amongst English social enterprises and in Sections 4.2, 4.3 and 4.4 we have illustrated the scale of some of the grant funding provided to sub-sectors of the Northern Ireland social economy and provided by particular funding bodies.
4.5.1 Commercial Loan Finance
In this situation it might be expected that there would be a weak relationship between the social economy and Northern Ireland banks. However, this was not what we found – at least in relation to established and successful social economy organisations.
The Northern Ireland banks do not have any special category of lending or products for the social economy and, as a result, no statistics are available in relation to lending to the social economy by the banks. However, sub-sectors of the social economy are highly valued customers of the banks. The Housing
Associations are a clear illustration of this, receiving highly competitive terms for their business.
More generally, most of those whom we interviewed were satisfied with the banking service and offering that they received. They perceived themselves to have considerable opportunity for shopping around between financial offerings while maintaining a core banking relationship with a major bank. This was seen to be largely a matter of personal relationships and was seen to be facilitated by the strong personal and business networks of established social economy
organisations. This is also facilitated by the relatively small size of Northern Ireland banks and the continued availability of decision-makers at local level.
The factors unique to social economy organisations, which were discussed in Section 4.1, however, impinged more on smaller or more recently established social economy organisations. These organisations tended to lack a personal relationship with a decision-maker in a bank. There were more likely to state that their bank did not understand the business they were undertaking and to have had proposals for a loan turned down.
The bankers we spoke to were sympathetic to the needs of social economy organisations – which they tended to classify under the broad heading of ‘charity business’ – but spoke of the complexity of the markets which social economy organisations work in, the difficulty of judging the realism of projections produced by social economy organisations and the unpredictability of receipt of payments from Government bodies. However, they stressed that once a
relationship had been established, lending would be on the track record of that particular organisation and that ‘charity customers’ received preferential business terms as a matter of course.
In discussion with Ulster Community Investment Trust (UCIT – see Section 4.5.2), we learned that on a number of occasions UCIT had worked with a social
economy organisation to prepare a business plan and a well structured loan application for consideration by UCIT’s lending committee but the organisation’s own bank had at the last minute made a more attractive offer (generally a lower interest rate) than UCIT could offer. This illustrates a general point of some importance. Where a business proposition is out of the ordinary run of business it is difficult for a bank to judge its realism. Assessment can much more easily be undertaken by a Community Development Finance Institution (CDFI) like UCIT which has specialist expertise in the sector and provided the CDFI has a strong reputation banks may be prepared to lend on the basis of a recommendation from the CDFI. We understand that the Royal Bank of Scotland is conducting a trial in which some viable business propositions which the Bank would not normally consider as attractive lending propositions, (for example on grounds of low return and high administration costs) are sent for assessment to a local CDFI which either provides the service of making an assessment for the Bank or may decide to lend alongside the Bank but with the CDFI carrying the responsibility and costs of assessment and monitoring of the loan in question. While this Royal Bank of Scotland approach applies to private sector clients, there would appear to be no reason why a similar approach could not apply to social economy organisations.
4.5.2 Specialist Loan Finance – Ulster Community Investment Trust
A number of financial institutions specialise in finance for the social economy, not for profit or charitable sectors. These include for profit and not for profit organisations, many of which operate on a UK-wide basis. The Charity Bank, Triodos Bank, the Co-operative Bank, the Unity Bank and Industrial Common Ownership Finance (ICOF) all seek business in Northern Ireland and many have lent funds to appropriate projects.
The only Northern Ireland based specialist loan fund for the social economy is Ulster Community Investment Trust (UCIT). UCIT is a community development finance institution established to make loan and equity investment in community economic development organisations in Northern Ireland and the border
counties.
UCIT had its origins in the recognition by leaders of urban and rural development organisations that the grant-driven approach to development that had been successful in allowing many community economic development organisations to come into being was not sustainable in the long term. After a long gestation period, by October 1998 a strategy, business plan and prospectus for UCIT had been prepared, a Board had been formed and the International Fund for Ireland (IFI) had offered support to employ a Chief Executive for a two year period. In 1999 a senior banker was seconded to UCIT and began to operationalise the plan.
UCIT began the process of loan approvals in the financial year 2000/2001. It has established a substantial fund from two major sources
• receipts from Structural Funds Programmes, particularly the Peace II Programme totalling £5.7 million
• transfer to UCIT of the International Fund for Ireland, Department for Social Development and Department of Agriculture and Rural
Development community loan books. These loan books had been built up to support community development approaches. The book value of the loans was transferred as a gift from the IFI and the Departments. The book value of the loans transferred to UCIT was approximately £6 million sterling but many of the loans were not making payments of interest or principle and UCIT did not take the value of these loans into its balance sheet at face value11.
UCIT is the largest Community Development Finance Institution (CDFI) in the UK in terms of the size of its fund available for lending.
UCIT has provided us with the following figures for its lending to date.
Year No. Of Applications Approved
Value of Applications Approved
Average Value of Loans
2000 2 £795,500 £397,500
2001 9 £1,056,000 £117,333
2002 9 £1,642,000 £182,444
2003 19 £3,273,740 £172,303
Total 39 £5,971,840 £153,124
In the first 5 months of 2004 UCIT has approved a further 6 loan applications with a total value of £715,000.
While the average size of loan provided by UCIT since its inception is £153,000, UCIT can lend in the range of £25,000 - £500,000 and usually offers term loans for up to 15 years although it has also provided bridging facilities. UCIT interest rates are set at or just above the market rate.
11 It is interesting to note that since the transfer of the loan funds to UCIT many of those who were unable to repay loans to the IFI and the Departments found themselves able to repay to UCIT – apparently because they know that their repayments will be used to fund other community based projects.
At the end of 2003 the Department of Agriculture and Rural Development made a grant of £3 million to UCIT from the Rural Development Measures of the EU Building Sustainable Prosperity Programme to establish a dedicated and focused fund for the sustainability of rural social enterprises. UCIT matched the DARD grant with its own resources and is now in the process of setting this initiative in place.
UCIT has also received funding under Measure 2.3 of the Peace II Programme to put in place a training and mentoring service for its existing clients. The service seeks to enhance the skills and abilities of existing UCIT clients to manage social economy organisations using commercial finance, rather than grants. UCIT has also recently successfully applied under Priority 5 of the Peace II Programme to put in place a cross-border team of mentors focusing on social economy
organisations which are not UCIT clients. Apart from the direct benefit to the clients, the mentoring process should provide a valuable source of information about the financing of the social economy as the work matures.