Social Finance Foundation

What is Social Finance?

Social finance is an alternative model of investment. It differs from conventional models in one key aspect: it demands that investments produce both a social and a financial return. There must be a tangible social benefit for any community.

About Social Finance Foundation

The mission of Social Finance Foundation is threefold:

Firstly, to generate a strong social impact by funding, through our lending partners, credit-worthy projects with loan finance; secondly, to realise the full potential of social finance in Ireland; and finally, working collaboratively, to undertake research and deliver initiatives which promote social good, with the Irish Government and the Irish banking industry as our sponsors.

Impact of Social Finance Foundation in 2023

Social Finance Foundation: The Model

Donated and low-cost funding is provided by Irish banks and the Council of Europe Development Bank.

EIF credit guarantees are in place to support riskier lending.

Social Finance Foundation, as the wholesale provider, manages donated funds, credit guarantees and borrowed funds in the social finance sector, and provides these to community lenders.

Community lenders, Clann Credo and Community Finance Ireland, work directly with social enterprises and community groups to fund projects around the country for social benefit.

Benefits of Social Finance to Beneficiaries

1. No personal guarantees.

2. Higher-risk loans can be facilitated with a guarantee from the European Investment Fund.

3. Short-term bridging finance to pre-fund government grants.

4. Long-term loans for longer-term projects.

5. A high level of support during the life of the loan.

Philanthropy and Social Finance

Philanthropy’s involvement in social finance can lead to significant benefits for both philanthropic organisations and society at large. Some key benefits include:

• Amplifies Social Impact: Social finance enables philanthropists to leverage their capital more effectively by supporting sustainable and scalable solutions to social challenges, rather than relying solely on grants.

• Promotes Sustainable Development: By funding projects with a social finance model, philanthropy encourages initiatives that generate long-term social and environmental outcomes while aiming for financial sustainability.

• Increases Access to Capital: Philanthropy in social finance can help attract additional private and institutional investment by de-risking projects and offering blended-finance models, increasing the total capital available for social good.

• Encourages Innovation: Engaging in social finance allows philanthropists to support innovative business models and social enterprises that tackle systemic issues in new and creative ways, often filling gaps where traditional funding falls short.

• Enhances Collaboration: Social finance encourages partnerships between philanthropy, governments, businesses and communities, fostering a more collective approach to addressing global challenges.

• Generates Financial Returns Alongside Impact: Through instruments such as impact investing or social impact bonds, philanthropists can earn financial returns while still achieving measurable social outcomes, allowing reinvestment into further philanthropic efforts.

• Promotes Accountability and Measurable Results: Social finance typically emphasises outcomes and impact metrics, encouraging more data-driven philanthropy, with clear evidence of social return on investment.

• Supports Systemic Change: Philanthropy’s role in social finance can contribute to broader systemic changes by addressing the root causes of social problems rather than simply alleviating their symptoms, driving long-term solutions.