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Working Party on the Future of Small Grants and Micro-Finance

IPPR North , communities , finance , local government , public services



Small voluntary and community sector organisations are the life blood of a thriving civil society.  Their work in advocacy, campaigning and service delivery helps to weave the social fabric of our communities.  But many organisations are facing a challenging context. 

The economic downturn and cuts to public services are resulting in increased demand for services, while many of their traditional sources of funding are under severe pressure, and in some cases being withdrawn entirely. 

The Government’s Big Society agenda places a heavy emphasis on the role these organisations play in society.  The policy agenda has three objectives, encouraging social action, empowering communities and opening up public services to a diversity of providers.  Much of the debate has focused on commissioning and how to open up contracts to more voluntary and community sector organisations and social enterprises.  But this agenda is out of the reach of many of the smallest organisations, and many do not regard their role to be deliverers of mainstream public services. 

For these organisations, the government is introducing the Community First Fund.  This will provide £30million in match grant funding, and £50million in matched endowment funding, targeting neighbourhoods with low community capacity.  The Big Lottery Fund will also continue to play an important funding role.  But some traditional sources of funding, most notably local government small grant funding, have declined sharply, leaving some organisations with funding shortfalls.  And while grant making trusts and community foundations have been a traditional source of support for these organisations, their funds are also under pressure as a result of increased demand and low interest rates. 

An alternative source of income for some small groups is loans and finance through credit unions and community development finance institutions (CDFIs).  However the sustainability of some of these organisations is also in question, particularly CDFIs that have relied on public sector subsidy.  In response they need to diversify their loan books, improve referrals and increase staff and organisational efficiency.

There is a need for innovation to reduce the transaction costs that surround small scale grant funding and micro-finance, and to improve donor and lender efficiency. 

Aim and key issues

IPPR North proposes to establish a time-limited Working Party on the Future of Small Grants and Micro-Finance with the aim of sustaining and enhancing investment in small voluntary and community sector organisations.

The Working Party will meet on three occasions to explore a number of key issues including:

  • The challenges and opportunities facing small voluntary and community sector organisations;
  • The role of small grants and micro-finance in relation to the Coalition Government’s Big Society programmes.
  • Opportunities for innovation within the small grant and micro-finance sectors, including the evolution of new small ‘investment products’.
  • Steps to improve transparency and efficiency in the small grant and micro-finance sectors.
  • Opportunities for partnership working to improve the operation of small grants and micro-finance.

Working Party meetings

The Working Party will be made up of no more than 8 experts in this field including representatives from:

  • IPPR North
  • Voluntary and community sector
  • Community Foundations
  • Credit Unions
  • CDFIs
  • Local government
  • Central government
  • Project partner

The first two Working Party meeting will invite external experts and practitioners to provide evidence and insight on the questions being explored by the Working Party.  In particular, those at the forefront of developing new and innovative grant and micro-finance tools and investment ideas will be sought.

This work is generously funded by AllPay.