The disability charity Scope is launching the first leveraged, private equity-style financing for use in the voluntary sector today.
In a scheme that the charity describes as "venture philanthropy", 100 wealthy people will be invited to make a £1,750 donation, and provide another £7,000 in a three-year, interest-free loan. Using the donation and the soft loan, plus tax breaks and additional commercial loans, the initial sum can be ramped up to £18,000, according to the Grangewood Venture Philanthropy Project (GVPP) put together by Scope with help from supporters familiar with private equity.
A number of banks – including Charity Bank, Tridos and Unity Trust – have already expressed an interest in the £750,000 commercial loan element of the scheme. Russell Chambers, the Credit Suisse adviser once dubbed "Tony Blair's favourite banker", is already backing the plan as a donor.
Karren Brady, the vice-chairman of West Ham United football club, is another high-profile backer. "What's unique about venture philanthropy is that it allows business people to invest in a great cause in a much more efficient way," she said. "As the majority of the capital is repaid, people can make donations work even harder by re-investing in other causes."
The first phase of the scheme aims to raise £1.8m, which will be used to develop 15 new flats for disabled adults who would otherwise have to be cared for in nursing homes geared towards the elderly. "A future in a nursing home when you are aged 19 means you are parked on the 'hard shoulder of life' – isolated from your peers and living in unstimulating environments that stifle development and create greater dependency," Scope said.
If the GVPP pilot proves successful, the concept could be extended to the charity's £18m asset base, potentially financing more than £40m-worth of new developments.