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Round table opens dialogue on Scottish Charitable Bonds

On Wednesday 24th April, Allia Impact Finance hosted a round table in Edinburgh to discuss its Scottish Charitable Bond programme, which provides simple development finance for affordable Scottish housing development.

Senior finance and management professionals from 10 different Scottish housing associations were welcomed with teas and coffees before sitting down to hear from the key speakers. Most attendees have traditionally used banks for their funding, predominantly through revolving credit facilities. Some had utilised aggregator bonds or ventured into private placements, with mixed experiences. Either way, most had development plans they were gearing up for and so were there to learn more about a different option available to them.

The morning began with David Allan, from the Scottish Government More Homes division, who explained how the programme arose from the scarcity of available finance after the financial crisis. So, under the More Homes Scotland initiative (which pledges to deliver at least 50,000 affordable homes by 2021), the Scottish Government sought flexible ways of helping housing associations access funding. The aim was to get new affordable housing developments off the ground and kick-start developments that have stalled.

In 2014, they teamed up with Allia and the unique bond model was agreed – with a key benefit being that it enabled the Scottish Government to re-use the loan interest as grant donations to further housing development. At the beginning of this year, the Scottish Government committed a further £40 million into the 2019/20 programme and significant interest has already been seen.

Daniel Carrico, Head of Origination at Allia Impact Finance, was next up. He talked through how the bonds work, the benefits and the straightforward nature of the structure (as illustrated by this simple animation). Here’s a summary of the key points:

  • Amounts from £1 million – £20 million
  • Terms of 5 – 15 years
  • Fixed interest rate – keep costs down
  • No loan or interest repayments required before maturity – positive cash flow
  • Unsecured borrowing – maintain control of assets
  • Light covenants – uncomplicated to manage
  • Simple documentation – accelerating speed of transaction
  • Interest re-used as grants in the housing sector – no shareholders taking a cut
  • Ability to lock in rates – gives you future certainty

Jon Turner, CEO of Link Group (and formerly Director of Treasury at Wheatley Group) then gave a real-life view on his experiences of the Scottish Charitable Bond. Link Group had completed an £8 million bond whilst Wheatley Group had received the largest bond to date of £16 million – both under Jon’s watch.

Jon highlighted the flexibility of the programme, the cost effectiveness of unsecured lending, with savings on valuation and security costs, simplicity of documents, speed of execution (Link’s bond was completed in 4 weeks), and also the social good the bonds have due to the interest being ploughed back into the sector – making this a unique offering.

Of course, he raised some points that other housing associations would need to consider, such as whether the interest roll-up would work for everyone. But on balance, in his experience, Jon believed the Scottish Charitable Bonds to be a credible funding choice.

Finally, Henrietta Podd, Head of Debt Capital Markets, gave a comprehensive overview of the funding markets. Henrietta commented on how the environment is very different from just a few years ago, with an increased dependence on capital markets compared to banks. The relative costs of different types of funding was also discussed to enable an informed comparison to be made.

See if we can help you

If you’d like to find out how our unique bond programme could benefit you, simply get in touch with Daniel Carrico on 07710 091 899 or

Or take a look at our website: