The UK is looking to Canada as a model for successful social finance initiatives, according to an article that appeared in the Guardian. Specifically, Canadian social innovators are turning to community bonds, which allow lenders to earn back the principal amount lent plus interest within a set number of years.
The Centre for Social Innovation (
CSI)'s community bond program, which promised lenders principal plus four per cent interest returned within five years, is looked at as a prime example. When CSI was expanding to a new location, it was able to secure the bulk of its financing through loans, but still needed to cover an additional $2 million. This is where the bond came in, allowing the organization to raise the remainder of the funds.
"Based on the success of the community bond and a desire to mobilise money for socially innovative projects, other organisations have created their own bonds," the article says. "In December of 2011, the YWCA Toronto issued a $1m community bond to fund 300 affordable housing units for women and children. Purchased by the Muttart Foundation, the bond carries a 10-year term and pays 4% interest annually. Community bonds are also used for financing local solar energy projects and food markets."
The article also goes into some detail about recent Canadian government initiatives that have inspired UK Prime Minister David Cameron to help similar projects move "full speed ahead" in the UK. He recently made numerous related announcements, including tax breaks for social investment, the Social Stock Exchange, and more than the equivalent of $400 million in funding to help "communities buy local assets such as pubs, shops, and community centres."
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Original source: The Guardian