Allia

Allia awarded £180k Big Lottery grant

Allia is delighted to announce that it has been awarded a grant of £180,000 by Big Lottery Fund to develop a capital-protected bond allowing retail investors to invest in payment-by-results initiatives. The grant will be used to launch a pilot in Essex to raise investment for a social impact bond for children in care.

The payment-by-results (PBR) approach – which includes social impact bond models – has the potential to make a significant difference in tackling some of our country’s most entrenched social problems. It can create opportunity for flexibility and innovation in service delivery since payments are made on the basis of the outcomes achieved rather than the activities delivered. It can also unlock more money for the delivery of services where payments can be made out of the savings that are created for the public sector.

However, PBR often relies on securing upfront private investment. This is usually an equity type investment, meaning that investors could lose all their money since they will only be repaid if the outcomes are achieved. With little track record for PBR projects it is very hard for investors to assess this level of risk. Moreover, investments in PBR initiatives are generally not accessible to retail investors.

As a result the investors in such opportunities have to date been largely foundations and philanthropists. However, scaling the social investment market will rely on attracting mainstream finance from retail, and ultimately institutional investors and therefore requires products that offer better certainty of repayment.

Allia will meet this need by creating a fixed-term, capital-protected retail bond. The bond will work by lending part of the funds invested at fixed interest to a very low risk social housing provider to create homes and provide services that meet social needs. The repayment of the loan plus compound interest at the end of the bond will exactly match the amount invested, meaning that investors can have a high level of certainty of receiving back at least what they put in.

The rest of the funds will be invested in the Essex Children’s Social Impact Bond for Essex County Council. These funds will be used to provide interventions to reduce the number of care placement days for 11-16 year olds at risk of entering care or who recently entered care. A successful reduction in placement days will trigger payments by the council and give investors in Allia’s bond an additional return above principal.

Tim Jones, chief executive of Allia, said “These are exciting times in the emerging social investment market, and grants like this are essential to develop the products that will enable the market to grow. Our ambition is not only to raise finance for organisations making a social impact but also to change culture by encouraging retail investors to use their money for social good. This grant from Big Lottery Fund will allow us to take a big step forward in both those aims.”