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Just how useful is the Big Society Bank going to be?

The announcement that the Big Society Bank
was to receive £200m funding
“on a commercial basis”, rather than £1bn as a
gift, surprised a lot of people, including, it appeared from some conversations
I had yesterday, some people in the banks and the Treasury themselves.

It leaves the third sector in a different,
less useful place than expected. There is less money, on worse terms, with much
more uncertainty attached to it, than anticipated. This may sound familiar to
some readers.

The trouble we have now is that we have
little idea how useful this money is. “On a commercial basis” covers a
multitude of sins. If that £200m is to be lent once and returned six months
later, all at 50 per cent interest, it will not receive a lot of takers.

The banks, at the moment, don’t seem to be
thinking that way. Their representatives don’t seem to be anticipating much
return from their cash, and are viewing it as a semi-philanthropic endeavour.

Nonetheless, there’s still much to play
for. The banks don’t know, or at least aren’t saying, how long the money will
remain under the control of the Big Society Bank. They’ve made no promise about
the terms on which they’ll lend it. They haven’t even promised that they will
lend it. The money is contingent on the “objectives, business plan and
structure” of the Big Society Bank.

Still, while it’s worth remembering that
deals with the bank have a habit of getting worse the more you look at them,
it’s also worth remembering that some money is better than no money, and no
money is what the Big Society Bank has today. Perhaps it’s ill-mannered to cavil too much over the terms on which the high street banks’ cash is
provided.

If they commit £200m, if they leave it in
the Big Society Bank for several years, and if it can be lent out at reasonable
rates, then the fact they themselves make a bit of profit is far from the end
of the world.

That, of course, is still a lot of ifs.

  • Robert Ashton

    My view is that Govt should use Big Society Bank investment as a challenge fund, encouraging local investors to support local CDFI lenders. This both increases the money avaiable and connects borrowers with potential local mentors.